Industry Reports

Deutsche Bank Reports Summaries

080429 Deutsche Bank Report - WPP's 1Q in 100 Words

Deutsche Bank - Equity Research

Wausau Paper {Ticker: WPP.N, Closing Price: USD 7.87, Target Price: USD 17.00, Recommendation: Buy}.

Weak quarter. Reported EPS loss of $(0.14), pointing to $(0.06), net of special items. DB & FC @ $(0.02). Comps: 4Q07 = $(0.04), 1Q07 = 0.05. Sharply rising input costs & sluggish markets combined to squeeze margins.

Towel & Tissue (Bay West): EBIT = $6.1MM, -$3.6MM y/y, -4.8MM q/q. Fiber & energy costs rose $4MM+ y/y, more than offsetting price/mix gains of 6% y/y & 2% q/q. 9% price hike announced at end of Q1 should help restore margins.

P&W: Excluding Groveton charges, EBIT = $(4.9MM), -$3.1MM y/y, +1.2MM q/q. Vol's fell 16% y/y, mainly due to Groveton mill closure. Prices rose 10% y/y & 5% q/q, but fiber & energy costs rose $6.5MM y/y & $3MM q/q.

Specialty: EBIT = $(0.4MM), -$3.1MM y/y, +$2.3MM q/q. Vol's -5% y/y, 50% due to exit of roll wrap business. Prices rose 7% y/y & 3% q/q, but fiber & energy costs rose $6MM y/y & $3MM q/q. Increasing focus on food service/packaging markets.

Other: (1) Sold 1,300 acres for $1,800/acre. 20K acres remain in sale program. (2) Repurchased 553K shares at a cost of $4.5MM, and 2.5MM shares remain on repurchase authorization. (3) Capex = $45MM, $20MM of which will go toward the $31MM needed for Middletown towel machine rebuild (adding 16K tons/year of capacity). (4) Pointing to breakeven in 2Q.

View? Disappointed. P&W and Specialty improved slightly from dismal 4Q levels. Whether current initiatives can really "fix" business remains unclear. Meanwhile, T&T posted weakest result in 3+ years. Trimming estimates: '08 goes from $0.20 to $0.05 (2Q = $0.00), and '09 goes from $0.60 to $0.25.