RICHMOND - Tredegar Corporation (NYSE:TG, also the 'Company' or 'Tredegar') today reported fourth quarter and full year financial results for the period ended December 31, 2023.
Fourth quarter 2023 net income (loss) was $(35.6) million ($(1.04) per diluted share) compared to $(3.9) million ($(0.11) per diluted share) in the fourth quarter of 2022. Net income (loss) from ongoing operations, which excludes special items, was $(0.1) million ($(0.01) per diluted share) in the fourth quarter of 2023 compared to $0.5 million ($0.02 per diluted share) in the fourth quarter of 2022.
Full year 2023 net income (loss) was $(105.9) million ($(3.10) per diluted share) compared to $28.5 million ($0.84 per diluted share) in 2022. Net income (loss) from ongoing operations was $(4.7) million ($(0.15) per diluted share) in 2023 compared to $39.5 million ($1.17 per diluted share) in 2022. A reconciliation of net income (loss), a financial measure calculated in accordance with U.S. generally accepted accounting principles ('GAAP'), to net income (loss) from ongoing operations, a non-GAAP financial measure, for the three months and year ended December 31, 2023 and 2022, is provided in Note (a) to the Financial Tables in this press release.
Fourth Quarter Financial Results Highlights
Earnings before interest, taxes, depreciation and amortization ('EBITDA') from ongoing operations for Aluminum Extrusions was $8.0 million in the fourth quarter of 2023 versus $8.9 million in the fourth quarter of last year and versus $5.1 million in the third quarter of 2023.
Sales volume was 32.9 million pounds in the fourth quarter of 2023 versus 37.2 million pounds in the fourth quarter of last year and versus 32.5 million pounds in the third quarter of 2023.
Open orders at the end of the fourth quarter of 2023 were approximately 14 million pounds (versus 17 million pounds at the end of the third quarter of 2023), which is below the quarterly range of 21 to 27 million pounds in 2019 before pandemic-related disruptions that resulted in excessive open orders, which peaked in the first quarter of 2022 at approximately 100 million pounds.
EBITDA from ongoing operations for PE Films was $4.5 million in the fourth quarter of 2023 versus negative $2.6 million in the fourth quarter of 2022 and $4.0 million in the third quarter of 2023. Sales volume was 8.5 million pounds in the fourth quarter of 2023 versus 5.6 million pounds in the fourth quarter of last year and 7.2 million pounds in the third quarter of 2023.
EBITDA from ongoing operations for Flexible Packaging Films (also referred to as 'Terphane') was $2.3 million during the fourth quarter of 2023 versus $7.0 million in the fourth quarter of 2022 and $0.5 million in the third quarter of 2023. Sales volume was 22.8 million pounds in the fourth quarter of 2023 versus 24.5 million pounds in the fourth quarter of 2022 and 22.2 million pounds in the third quarter of 2023. The Company believes that unfavorable variances throughout the fourth quarter of 2023 versus the fourth quarter of 2022 were primarily due to lower sales volume and lower margin, driven by global excess capacity and intense competition in Brazil from imports from multiple origins.
John Steitz, Tredegar's president and chief executive officer, said, 'Results for the fourth quarter were better than expected and improved compared with the third quarter of 2023. There are signs that the downturn at Bonnell, which we believe is a residual impact of the pandemic and started in the second half of 2022, has hit bottom and that a recovery is underway. In addition, U.S. authorities have made favorable preliminary determinations regarding a trade case backed by a coalition of members of the Aluminum Extruders Council. At PE Films, EBITDA was $8.6 million during the second half of 2023 compared with $2.7 million during the first half. We expect that this positive recent performance will continue in 2024.'
Mr. Steitz further stated, 'We continue to make progress on our corporate strategic initiatives. The process to complete the sale of Terphane is advancing as planned, including the review required by competition authorities in Brazil. In early November, we settled our pension plan. In late December, we executed an amendment of our credit agreement and conversion to an asset-based lending facility to support us during what has been an unprecedented cyclical downturn. Furthermore, favorable operating results have improved our outlook for our financial leverage.'
Mr. Steitz continued, 'I'd like to express my sincere appreciation to all of the employees at Tredegar and its operating divisions for coming together as a team to meet head-on our significant business challenges in 2023.'
Fourth Quarter 2023 Results vs. Fourth Quarter 2022 Results
Net sales (sales less freight) in the fourth quarter of 2023 decreased 13.8% versus the fourth quarter of 2022 primarily due to lower sales volume and the pass-through of lower metal costs. Sales volume in the fourth quarter of 2023 decreased 11.6% versus the fourth quarter of 2022 but increased 1.5% versus third quarter of 2023. Beginning in the third quarter of 2022, the Company observed order cancellations and slowing order input as customers continued to report high inventory levels, which carried into 2023. The Company believes that its percentage changes in sales volume by end-use markets for 2023 versus 2022, particularly for residential B&C and the distribution sector within specialty products, were unfavorable versus the industry as a whole mainly due to surging imports.
Net new orders, which remain sluggish compared to historical levels, increased 55% in the fourth quarter of 2023 versus the fourth quarter of 2022, marking the sixth consecutive quarterly increase in incoming orders. Open orders at the end of the fourth quarter of 2023 were 14 million pounds (versus 17 million pounds at the end of the third quarter of 2023 and 41 million pounds at the end of the fourth quarter of 2022). This level is below the quarterly range of 21 to 27 million pounds in 2019 before pandemic-related disruptions that resulted in long lead times, driving a peak in open orders of approximately 100 million pounds during the first quarter of 2022. We believe that current open orders are below pre-pandemic levels due to higher interest rates, tighter lender requirements and the increase in remote working, which particularly impacts the non-residential B&C end-use market. In addition, data indicates that aluminum extrusion imports increased significantly in recent years, especially during the pandemic, and some of Bonnell Aluminum's customers may have sourced, and continue to source, aluminum extrusions from producers outside the United States.
The Company is participating as part of a coalition of members of Aluminum Extruders Council who have filed a trade case with the Department of Commerce ('DOC') and the U.S. International Trade Commission ('ITC') against 15 countries in response to alleged large and increasing volumes of unfairly priced imports of aluminum extrusions since 2019. In November 2023, the ITC found that there is a reasonable indication that the American aluminum extrusions industry is materially injured or threatened with injury due to imports from 14 countries, including China. The ITC's preliminary determination found that subject import volumes were significant and increasing, and that with regard to pricing, subject imports predominantly undersold the domestic product by volume in each year of the period of investigation. On March 5, 2024, the DOC announced its preliminary finding that the governments of China, Indonesia, Mexico and Turkey unfairly subsidize their aluminum extrusion industries. The DOC calculated a range of affirmative preliminary countervailing duties from each country. A preliminary anti-dumping determination for these four countries and the 10 other countries included in the initial petition is expected in May 2024. The Company expects the final ITC vote to occur in late 2024.
EBITDA from ongoing operations in the fourth quarter of 2023 decreased $0.9 million versus the fourth quarter of 2022, primarily due to:
Lower volume ($3.6 million), higher labor and employee-related costs ($0.9 million), lower pricing ($0.6 million), and higher selling, general and administrative ('SG&A') expenses ($1.8 million), partially offset by lower supply expense ($1.9 million) and utility costs ($0.7 million);
The timing of the flow-through under the first-in first-out ('FIFO') method of aluminum raw material costs passed through to customers, previously acquired at higher prices in a quickly changing commodity pricing environment, resulted in a charge of $0.3 million in the fourth quarter of 2023 versus a charge of $1.7 million in the fourth quarter of 2022 and Inventories accounted for under the last in, first out ('LIFO') method resulted in a benefit of $1.2 million in the fourth quarter of 2023 versus a charge of $2.9 million in the fourth quarter of 2022. In addition, the Company recorded a favorable out-of-period adjustment of $1.9 million related to inventory in the fourth quarter of 2022.
Full Year 2023 Results vs. Full Year 2022 Results
Net sales in 2023 decreased 25.6% versus 2022 primarily due to lower sales volume and the pass-through of lower metal costs.
EBITDA from ongoing operations decreased $28.8 million in 2023 versus 2022, primarily due to:
Lower volume ($29.6 million), higher labor and employee-related costs ($4.5 million), lower labor productivity in the first half of 2023 ($0.9 million), higher supply expense, including higher paint expense associated with a shift to more painted product throughout 2023 and inflationary costs for other supplies ($1.2 million), higher freight rates ($0.8 million) and higher SG&A expenses ($1.5 million); partially offset by higher pricing, primarily in the first quarter of 2023 ($4.0 million), and lower utility costs ($2.3 million); The timing of the flow-through under the FIFO method of aluminum raw material costs passed through to customers, previously acquired at higher prices in a quickly changing commodity pricing environment, resulted in a charge of $1.1 million in 2023 versus a benefit of $0.1 million in 2022 and Inventories accounted for under the LIFO method resulted in a benefit of $1.2 million in 2023 versus a charge of $2.9 million in 2022. In addition, the Company recorded an unfavorable out-of-period adjustment of $0.6 million related to inventory and accrued labor costs in the third quarter and fourth quarters of 2022.
Aluminum Extrusions believes that it has adequate supply agreements for aluminum raw materials in 2024.
FORWARD-LOOKING AND CAUTIONARY STATEMENTS
Some of the information contained in this press release may constitute 'forward-looking statements' within the meaning of the 'safe harbor' provisions of the Private Securities Litigation Reform Act of 1995. When the Company uses the words 'believe,' 'estimate,' 'anticipate,' 'appear to,' 'expect,' 'project,' 'plan,' 'likely,' 'may' and similar expressions, it does so to identify forward-looking statements. Such statements are based on the Company's then current expectations and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those addressed in the forward-looking statements. It is possible that the Company's actual results and financial condition may differ, possibly materially, from the anticipated results and financial condition indicated in or implied by these forward-looking statements. Accordingly, you should not place undue reliance on these forward-looking statements. Factors that could cause actual results to differ materially from expectations include, without limitation, the following: inability to successfully complete strategic dispositions, including the Contingent Terphane Sale, failure to realize the expected benefits of such dispositions and assumption of unanticipated risks in such dispositions; inability to successfully transition into an asset based revolving lending facility; noncompliance with any of the financial and other restrictive covenants in the Company's asset-based credit facility; the impact of macroeconomic factors, such as inflation, interest rates, recession risks and other lagging effects of the COVID-19 pandemic; an increase in the operating costs incurred by the Company's business units, including, for example, the cost of raw materials and energy; failure to continue to attract, develop and retain certain key officers or employees; disruptions to the Company's manufacturing facilities, including those resulting from labor shortages; inability to develop, efficiently manufacture and deliver new products at competitive prices; the impact of the imposition of tariffs and sanctions on imported aluminum ingot used by Bonnell Aluminum; failure to prevent foreign companies from evading anti-dumping and countervailing duties; unanticipated problems or delays with the implementation of an enterprise resource planning and manufacturing executions systems, or security breaches and other disruptions to the Company's information technology infrastructure; loss or gain of sales to significant customers on which the Company's business is highly dependent; inability to achieve sales to new customers to replace lost business; failure of the Company's customers to achieve success or maintain market share; failure to protect our intellectual property rights; risks of doing business in countries outside the U.S. that affect our international operations; political, economic and regulatory factors concerning the Company's products; competition from other manufacturers, including manufacturers in lower-cost countries and manufacturers benefiting from government subsidies; impact of fluctuations in foreign exchange rates; the termination of anti-dumping duties on products imported to Brazil that compete with products produced by Flexible Packaging; an information technology system failure or breach; the impact of public health epidemics on employees, production and the global economy, such as the COVID-19 pandemic; inability to successfully identify, complete or integrate strategic acquisitions; failure to realize the expected benefits of such acquisitions and assumption of unanticipated risks in such acquisitions; impairment of the Surface Protection reporting unit's goodwill; failure to establish and maintain effective internal control over financial reporting and the other factors discussed in the reports Tredegar files with or furnishes to the Securities and Exchange Commission (the 'SEC') from time to time, including the risks and important factors set forth in additional detail in 'Risk Factors' Part I, Item 1A of the Form 10-K. Readers are urged to review and consider carefully the disclosures Tredegar makes in its filings with the SEC.
Tredegar does not undertake, and expressly disclaims any duty, to update any forward-looking statement made in this press release to reflect any change in management's expectations or any change in conditions, assumptions or circumstances on which such statements are based, except as required by applicable law.
To the extent that the financial information portion of this press release contains non-GAAP financial measures, it also presents both the most directly comparable financial measures calculated and presented in accordance with GAAP and a quantitative reconciliation of the difference between any such non-GAAP measures and such comparable GAAP financial measures.
Tredegar uses its website as a channel of distribution of material company information. Financial information and other material information regarding Tredegar is posted on and assembled in the 'Investors' section of its website.
Tredegar Corporation is an industrial manufacturer with three primary businesses: custom aluminum extrusions for the North American building & construction, automotive and specialty end-use markets; surface protection films for high-technology applications in the global electronics industry and specialized polyester films primarily for the Latin American flexible packaging market. Tredegar had 2023 sales of $705 million. With approximately 1,900 employees, the Company operates manufacturing facilities in North America, South America, and Asia.
Contact:
Neill Bellamy
Tel: 804-330-1211
Email: neill.bellamy@tredegar.com
TREDEGAR CORPORATION 
