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WIKI ANALYSIS
Glatfelter (GLT) manufactures specialty papers, composite fibers, and airlaid materials that are used in various products including books, furniture, and baby wipes. The company has three divisions: Specialty Papers, Composite Fibers, and Airlaid Materials. These divisions produced a range of products for extremely different markets: specialty papers has seen decreased demand as the book industry and envelope market have contracted, yet has been able to grow its market share and revenues; composite fibers is growing thanks to its uses in tea bags and single-serving coffee products; and the newly acquired airlaid materials division has a leading market share in materials for female hygiene and adult incontinence products.[1] The company will continue to face pressure in its specialty papers division with consumers and producers increasingly moving transactions and products online, decreasing the need for the company's credit card receipt paper and book publishing paper, however the composite fibers division should benefit from an ever-growing market for single-serving tea and coffee products as well as highly technical paper products.[2] The new airlaid division adds an entirely new dimension to the company, allowing it to compete in the female hygiene and adult incontinence product markets.
Business Segments[3]
- Specialty Papers - 57.9% of net sales (6.4% increase)
- Composite Fibers - 28.8% of net sales (6.9% increase)
- Advanced Airlaid Materials - 13.3% of net sales
Glatfelter acquired Concert Industries in early 2010, which accounts for the entire Advanced Airlaid Materials division.
Business Growth
FY 2010 (ended December 31, 2010)[4]
- Net revenue increased 22.4% to $1.47 billion.
- Net income decreased 56% to $54 million. This is after the company's purchase of its new airlaid materials division.
In 2010, revenue growth was driven by increased sales for carbonless and form papers (credit card receipts, forms, security papers) and increases for every product line in composite fibers (Food & Beverage, metallized, and laminates used in furniture and construction). The company acquired Concert Industries in early 2010.[5]
Trends and Forces
Transactions and Products Moving Online
Glatfelter's largest source of revenue is sales of carbonless and form paper. However, as commerce and communication increasingly migrates to online formats, Glatfelter's main revenue stream may suffer from decreased demand. A large part of the company's sales are also derived from paper sales for books and envelopes, both of which are also vulnerable to a shift away from paper goods.[6] The company's second largest sales product, for food and beverage, is more insulated from these forces. And the company's newest division of Airlaid materials is completely insulated from the online movement, however it is exposed to a unique set of forces stemming from its specific market and concentrated sales to a few large customers.
Pricing Wars and Maintaining Their Niches
Glatfelter has aggressively pursued a strategy of competing in smaller, niche markets, especially its Composite Fibers segment with metallic papers, food and beverage products, and composite laminates. However, the company's largest product lines are still in more traditional forms (envelopes, carbonless paper, etc), and as such, the company must compete in ongoing price wars with larger competitors. The rapid rise in raw materials costs over the past few years has forced the company to enact multiple price increases in order to maintain profit margins. The company's continued success will depend on its ability to remain competitive against its larger competitors in more traditional markets, while also expanding its presence and operations in niche markets.[7]
Competition
The company's three divisions include papers and fibers used in a variety of products in various markets. Each specialized product line has different competitors and responds to different market forces. The company's largest competitors in the broad Paper market are listed below.
- Domtar (UFS) is a large producer of uncoated paper. They compete with Glatfelter's carbonless and forms, book publishing paper, and envelopes.
- International Paper Company (IP) is one of the largest paper manufacturers. They are Glatfelter's largest envelope competitor.
- Ahlstroem (HEL:AHL1V) is a Finnish company that produces food and beverage paper products (and other specialty papers) that compete with Glatfelter's products.
References
- ↑ GLT 2010 10-K, p. 1-4
- ↑ 14 Growing High-Dividend-Yield Companies Trading at Attractive Valuations, SeekingAlpha, 3/25/11
- ↑ GLT 2010 10-K, p.1
- ↑ GLT 2010 10-K, p. 13
- ↑ GLT 2010 10-K, p. 15
- ↑ Growing High-Dividend-Yield Companies Trading at Attractive Valuations, SeekingAlpha.com, 3/25/11
- ↑ Glatfelter Announces Price Increase, Marketwire, 5/16/11
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