Forest products have long been cyclical, avoided by investors seeking stable revenues and long-term growth.
Pennsylvania-based P. H. Glatfelter appears to be a forest products company with a growth trajectory. Glatfelter becomes an exception to forest products by producing engineered speciality products from tea bags to feminine hygiene materials and adult incontinence products.
These are essential items with purchase not influenced by pandemics or other socially disruptive situations.
Annual sales of $928 million break down geographically to 57 per cent in Europe, 29 per cent in America and 12 per cent in the rest of the world.
In 2019, feminine hygiene and adult diapers accounted for 43 per cent and 57 per cent of air laid materials.
The company has leading positions in these categories with annual growth rates of six per cent in adult diapers and two per cent in feminine hygiene expected for some time.
The engineered and patented air laid materials are highly absorbent, thin, feel like cloth and have multiple layers to manage fluids.
Glatfelter boasts number one market positions in feminine hygiene, adult diapers, and table top products and number two in wipes.
Number one market positions are also held in tea bags, single serve coffee filters and non-woven wall covers.
Profit margin has improved from 12.3 per cent in 2015 to 14.7 per cent in 2019. A cost reduction campaign hopes to improve margins.
The company will have $360 million US to reduce the $350 million debt or expand with proceeds from the sale of the specialty papers business that makes paper for book publishing, envelopes and packaging. All three are declining markets or highly competitive.
Revenues will be boosted by the 20 per cent expansion of an Arkansas air laid plant and the acquisition of $100 million annual revenues from Steinfurt, which makes table top paper and wipes in Europe.
The market is open for expansion outside of North America and Europe.
One potential downside comes from the movement to reduce single serve use, but forest products are better than plastics.
Debt was reasonable before the specialty papers sale.
At a recent $15.92, the share price is well above the $9.44 low in March and the $19.64 high of the year.
Glatfelter pays a healthy dividend yielding 3.3 per cent. Earnings last year showed a loss of 44 cents a share. For the first quarter this year earnings were 17 cents a share compared with 12 cents last year.
This is a business where engineering technology and investment create difficulties for competitors to start up.
The company is well worth placing on investors’ the watch list.
CAUTION: Remember when investing, consult your adviser and do your homework before buying any security. Bizworld does not recommend investments.
Ron Walter can be reached at ronjoy@sasktel.net
The views and opinions expressed in this article are those of the author, and do not necessarily reflect the position of this publication.
