Magnera Reports First Fiscal Quarter Results - Provides Outlook for Fiscal 2025

Rhea-AI Summary

Magnera (NYSE: MAGN) has reported its Q1 fiscal 2025 results following its merger with Berry Global Group's nonwovens and hygiene films business with Glatfelter on November 4, 2024. The company posted net sales of $702 million, representing a 35% increase, though it recorded an operating loss of $22 million. The adjusted EBITDA reached $84 million, up 27% from the previous year.

For fiscal year 2025, Magnera projects comparable adjusted EBITDA of $385-405 million and post-merger adjusted free cash flow of $75-95 million. The company maintains a strong focus on debt reduction, with current total net debt at $1,781 million and a leverage ratio of 4.0x. The merger contributed $186 million in revenue and $16 million in adjusted EBITDA since closing.

Positive

• Net sales increased 35% to $702 million
• Adjusted EBITDA grew 27% to $84 million
• Merger contributed $186 million in revenue
• Favorable price/cost spread impact of $6 million

Negative

• Operating loss of $22 million, increased from $12 million loss in 2023
• High leverage ratio at 4.0x
• $14 million unfavorable impact from foreign currency changes
• Negative operating cash flow of $58 million

Insights

Financial Analyst

Magnera's Q1 FY2025 results reveal both opportunities and challenges in their post-merger landscape. The 35% year-over-year revenue growth to $702 million appears impressive, but the organic growth of 2% on a comparable basis tells a more nuanced story. The operating loss of $22 million versus last year's $12 million loss indicates integration costs are weighing on near-term profitability.

The debt structure requires careful attention - with $2 billion in total debt split between a term loan and two tranches of secured notes. The 4.0x leverage ratio is concerning, though management's commitment to deleveraging through projected free cash flow of $75-95 million provides a pathway to improvement. The $215 million cash position offers some flexibility during the integration period.

Regional performance shows diverging trends: The Americas segment benefited from $70 million in merger-related revenue but faced currency pressures in South America. The Rest of World segment's stronger performance, with $116 million in merger revenue and better price/cost dynamics, demonstrates the value of geographic diversification.

The projected adjusted EBITDA guidance of $385-405 million suggests management expects synergy capture and operational improvements to accelerate through 2025. However, execution risks remain high given the complex integration process across 46 global facilities and the need to maintain service levels for the expanded customer base.

First Quarter Highlights

CHARLOTTE, N.C., Feb. 06, 2025 (GLOBE NEWSWIRE) --

• Completed the merger of Berry Global Group, Inc.’s nonwovens and hygiene films business with Glatfelter Corporation (“GLT”) on November 4, 2024
• GAAP: Net sales of $702 million, Operating Loss of $22 million
• Non-GAAP: Adjusted EBITDA of $84 million
  

Fiscal Year 2025 Outlook

• Full year comparable Adjusted EBITDA of $385 - $405 million
• Post-merger adjusted free cash flow range of $75 - $95 million
• Committed to near-term debt reduction
  

Magnera’s CEO Curt Begle said, “I am honored to be leading Magnera, a global nonwovens leader, with a broad platform of product solutions for the specialty materials industry. Our diverse business and valued customers are proudly supported by more than 9,000 employees across 46 global manufacturing facilities. We expect to build on our expanded experience to approach every challenge with a proactive and results-driven mindset. Magnera's commitment to innovation, while delivering unique solutions to solve end users’ problems, enables the trusted partnership we enjoy with our customers.

Magnera's solid fiscal Q1 results were better than prior year despite currency headwinds and reflect our ability to remain focused on day-to-day business execution, while managing the post-transaction integration activities. Our financial profile remains strong and will continue to be enhanced as we realize synergies and prioritize an improved product portfolio. We remain committed to increasing our free cash flow to support deleveraging and increase shareholder value.”

Key Financials

						December Quarter
GAAP results							2024			2023
Net sales						$ 702			$ 519
Operating income						(22)			(12)

			December Quarter				Reported		Comparable(1)
Adjusted non-GAAP results			2024		2023		%		%
Net sales			$702		$519		35%		2%
Adjusted EBITDA (1)			84		66		27%		8%

(1)  Adjusted non-GAAP results exclude items not considered to be ongoing operations. In addition, comparable change % normalizes the impacts of foreign currency and the recent merger with GLT since the closing on November 4, 2024. Further details related to non-GAAP measures and reconciliations can be found under our “Reconciliation of Non-GAAP Financial Measures and Estimates” section or in reconciliation tables in this release. Dollars in millions.

Consolidated Overview

The net sales increase included revenue from the merger, which occurred mid quarter on November 4th, of $186 million and increased selling prices of $11 million, which were partially offset by a $14 million unfavorable impact from foreign currency changes.

The adjusted EBITDA increase included contribution from the merger of $16 million since the November 4^th closing and a favorable impact from price/cost spread of $6 million partially offset by a $4 million unfavorable impact from foreign currency changes.

Americas

The net sales increase in the Americas segment included revenue from the merger of $70 million and increased selling prices of $12 million which were partially offset by a $13 million unfavorable impact from foreign currency changes.

The adjusted EBITDA increase included a contribution from the merger of $6 million since the November 4^th closing and a favorable impact from price cost spread of $2 million, partially offset by a $4 million unfavorable impact from foreign currency changes in our South America businesses.

Rest of World

The net sales increase in the Rest of World segment included revenue from the merger of $116 million.

The adjusted EBITDA increase included a contribution from the merger of $10 million and a favorable impact from price cost spread of $4 million.

Free Cash Flow and Net Debt

Magnera is committed to strengthening our credit metrics by paying down debt in the near term.

(in millions)	December 28, 2024
Cash flow from operating activities	$ (58		)
Pre-merger cash flow from operating activities		90
Additions to property, plant and equipment, net		(16	)
Post-merger adjusted free cash flow (1)	$ 16
(1)  Further details related to non-GAAP measures and reconciliations can be found under our “Reconciliation of Non-GAAP Financial Measures and Estimates” section or in reconciliation tables in this release.
(in millions)	December 28, 2024
Term Loan	$ 785
4.75% First Priority Senior Secured Notes		500
7.25% First Priority Senior Secured Notes		800
Debt discount, deferred fees and other (net)		(89	)
Total debt	$ 1,996
Cash and cash equivalents		215
Total net debt	$ 1,781
Leverage		4.0x

Fiscal Year 2025 Guidance

• Full year comparable adjusted EBITDA of $385 - $405 million
• Post-merger adjusted free cash flow range of $75 - $95 million

Investor Conference Call

The Company will host a conference call today, February 6, 2025, at 10:00 a.m. U.S. Eastern Time, to discuss our December 2025 quarter results. The webcast can be accessed here. A replay of the webcast will be available via the same link on our website after the completion of the call.

By Telephone
Participants may register for the call here now or any time up to and during the time of the call and will immediately receive the dial-in number and a unique pin to access the call. While you may register at any time up to and during the time of the call, you are encouraged to join the call 15 minutes prior to the start of the event.

About Magnera

At Magnera Corp (NYSE: MAGN), our goal is to better the world with possibilities made real. We do this by continuously co-creating and innovating with our partners and we will develop original material solutions that make a brighter future possible. With a breadth of technologies and a passion for what we create, our solutions will solve end-users’ problems, every day. For more information, please visit our website.

Non-GAAP Financial Measures and Estimates
This press release includes non-GAAP financial measures including, but not limited to, Adjusted EBITDA, free cash flow, and comparable basis net sales and adjusted EBITDA. A reconciliation of these non-GAAP financial measures to comparable measures determined in accordance with accounting principles generally accepted in the United States of America (GAAP) is set forth at the end of this press release. Information reconciling forward-looking adjusted EBITDA and adjusted free cash flow are not provided because such information is not available without unreasonable effort due to high variability, complexity, and low visibility with respect to certain items, including debt refinancing activity or other non-comparable items. These items are uncertain, depend on various factors, and could be material to our results computed in accordance with U.S. GAAP.

Forward Looking Statements

Information included or incorporated by reference in Magnera Corporation’s filings with the U.S. Securities and Exchange Commission (the “SEC”) and press releases or other public statements contains or may contain “forward-looking” statements within the meaning of the federal securities laws and are presented pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such “forward-looking” statements include, but are not limited to, statements with respect to our financial condition, results of operations and business, our expectations or beliefs concerning future events, statements about the benefits of the transaction between Glatfelter Corporation and Berry Global Group, Inc., including future financial and operating results, the combined company’s plans, objectives, expectations and intentions, and other statements that are not historical facts. These statements contain words such as “believes,” “expects,” “may,” “will,” “should,” “would,” “could,” “seeks,” “approximately,” “intends,” “plans,” “estimates,” “projects,” “outlook,” “anticipates” or “looking forward” or similar expressions that relate to our strategy, plans, intentions, or expectations. All statements we make relating to our estimated and projected earnings, margins, costs, expenditures, cash flows, growth rates, and financial results or to our expectations regarding future industry trends are forward-looking statements. In addition, we, through our senior management, from time to time make forward-looking public statements concerning our expected future operations and performance and other developments. These forward-looking statements are based upon the current beliefs and expectations of the management of Magnera and are subject to risks and uncertainties that may change at any time, and, therefore, our actual results may differ materially from those that we expected. These risks and other risk factors are detailed from time to time in Magnera’s reports filed with the Securities and Exchange Commission (the “SEC”), including annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, including our Form 8-K/A filed on January 31, 2024, and other documents filed with the SEC. These risk factors may not contain all of the material factors that are important to you. New factors may emerge from time to time, and it is not possible to either predict new factors or assess the potential effect of any such new factors. Accordingly, readers should not place undue reliance on those statements. All forward-looking statements are based upon information available as of the date hereof. All forward-looking statements are made only as of the date hereof, and we undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.

Consolidated and Combined Statements of Income (Unaudited)

	Quarterly Period Ended
(in millions, except per share amounts)	December 28, 2024				December 30, 2023
Net sales	$ 702				$ 519
Cost of goods sold		631				477
Selling, general and administrative		44				28
Amortization of intangibles		14				12
Transaction and other activities		32				10
Corporate expense allocation		3				4
Operating income (loss)		(22	)			(12	)
Other expense (income)		21				(2	)
Interest expense		26				-
Income (loss) before income taxes		(69	)			(10	)
Income tax benefit		(9	)			(2	)
Net income (loss)	$ (60		)		$ (8		)
Basic and diluted net income per share	$(1.69		)		$(0.25		)
Outstanding weighted average shares
Basic		35.4				31.8

Condensed Consolidated and Combined Statements of Cash Flows (Unaudited)

	Quarterly Period Ended
(in millions)	December 28, 2024				December 30, 2023
Net cash from operating activities		(58	)			(27	)
Cash flows from investing activities:
Additions to property, plant, and equipment, net		(16	)			(16	)
Cash acquired from GLT		37				-
Other investing activities		-				30
Net cash from investing activities		21				14
Cash flows from financing activities:
Repayments on long-term borrowings		1,556				-
Proceeds from long-term borrowings		(430	)			(1	)
Transfers from Berry, net		34				(8	)
Cash distribution to Berry		(1,111	)			-
Debt fees and other, net		(16	)			-
Net cash from financing activities		33				(9	)
Effect of currency translation on cash		(11	)			4
Net change in cash and cash equivalents		(15	)			(18	)
Cash and cash equivalents at beginning of period		230				185
Cash and cash equivalents at end of period	$ 215				$ 167

Condensed Consolidated Balance Sheets (Unaudited)

(in millions of USD)	December 28, 2024			September 28, 2024
Cash and cash equivalents		$ 215		$ 230
Accounts receivable			475		359
Inventories			508		259
Other current assets			140		38
Property, plant, and equipment			1,532		949
Goodwill, intangible assets, and other long-term assets			1,123		972
Total assets		$3,993		$2,807
Current liabilities, excluding current debt			538		457
Current and long-term debt			1,996		-
Other long-term liabilities			353		211
Stockholders’ equity			1,106		2,139
Total liabilities and stockholders' equity		$3,993		$2,807

Reconciliation of Non-GAAP Measures and Estimates
(in millions of dollars)

Reconciliation of Net sales and Adjusted EBITDA on a supplemental comparable basis by segment
		Quarterly Period ended December 28, 2024						Quarterly Period ended December 30, 2023
		Americas		Rest of World		Total			Americas		Rest of World		Total	LTM
Net sales		$ 420		$ 282		$ 702			$ 348		$ 171		$ 519
Constant FX rates & acquisitions									57		115		172
Comparable net sales (1)(6)		420		282		702			405		286		691
Operating Income		$ (7)		$ (15)		$ (22)			$ (3)		$ (9)		$ (12)	$ (151)
Depreciation and amortization		33		20		53			30		14		44	186
Transaction, business consolidation and other activities (2)		20		12		32			3		7		10	48
Impact from hyperinflation		-		-		-			15		-		15	-
Goodwill impairment		-		-		-			-		-		-	172
GAAP carve-out allocation (3)		2		1		3			3		1		4	20
Other non-cash charges (4)(5)		8		10		18			3		2		5	26
Adjusted EBITDA (1)		$ 56		$ 28		$ 84			$ 51		$ 15		$ 66	$ 301
Constant FX rates									(4)		-		(4)
GLT Merger									6		10		16
Comparable Adjusted EBITDA (1)(6)		$ 56		$ 28		$ 84			$ 53		$ 25		$ 78
% vs. prior year comparable		6		12		8
PF GLT adjusted EBITDA (3)						8							8	82
Synergies and cost reductions														67
PF Adjusted EBITDA														$ 450

Guidance

	Fiscal 2025				Adjusted EBITDA			Fiscal 2025 Midpoint		Fiscal 2024 Actual
Cash flow from operating activities	$70-$90				Adjusted EBITDA			$387		$284
Pre-merger cash flow from operating activities (7)	90				GLT Pro forma			8		99
Additions to PPE (net)	(85)				Foreign currency					(15)
Post-merger adjusted free cash flow (1)	$75 - $95				Full Year Comparable Adjusted EBITDA			$395		$368
					% vs. prior year comparable			~7%

(1)  Supplemental financial measures that are not required by, or presented in accordance with, accounting principles generally accepted in the United States (“GAAP”). These non-GAAP financial measures should not be considered as alternatives to operating or net income or cash flows from operating activities, in each case determined in accordance with GAAP. Comparable basis measures exclude the impact of currency translation effects and acquisitions. These non-GAAP financial measures may be calculated differently by other companies, including other companies in our industry, limiting their usefulness as comparative measures. Management believes that adjusted EBITDA and other non-GAAP financial measures are useful to our investors because they allow for a better period-over-period comparison of operating results by removing the impact of items that, in management’s view, do not reflect our core operating performance. We define “Post-merger free cash flow” as cash flow from operating activities, less pre-merger free cash flow, less net additions to property, plant, and equipment. We believe free cash flow is useful to an investor in evaluating our liquidity because free cash flow and similar measures are widely used by investors, securities analysts, and other interested parties in our industry to measure a company’s liquidity. We also believe post-merger free cash flow which is useful to an investor in evaluating our liquidity, as it can assist in assessing a company’s ability to fund its growth through its generation of cash because pre-merger cash flow is not indicative of our current structure and operations.

We also use Adjusted EBITDA and comparable basis measures, among other measures, to evaluate management performance and in determining performance-based compensation. Adjusted EBITDA is a measure widely used by investors, securities analysts, and other interested parties in our industry to measure a company’s performance. We also believe these measures are useful to an investor in evaluating our performance without regard to revenue and expense recognition, which can vary depending upon accounting methods.

(2)  Includes $17 million of transaction compensation as well as restructuring, business optimization and other charges
(3)  Consists of estimated parent-allocated charges for the period prior to merger which is required by GAAP as part of the carve-out financial statement process.
(4)  Includes a $12 million inventory step-up charge related to GLT merger in current period and other non-cash charges.
(5)  Includes stock compensation expense
(6)  The prior year comparable basis change excludes the impacts of foreign currency and acquisition/mergers.
(7)  Pre-merger cash flow includes cash from operations prior to the merger and cash payments burdened by the transaction.

IR Contact Information
Robert Weilminster
EVP, Investor Relations
IR@magnera.com

FAQ

What are Magnera's (MAGN) financial projections for fiscal 2025?

Magnera projects adjusted EBITDA of $385-405 million and post-merger adjusted free cash flow of $75-95 million for fiscal 2025.

How much revenue did MAGN's merger with Berry Global contribute in Q1 2025?

The merger contributed $186 million in revenue since its closing on November 4, 2024.

What is Magnera's (MAGN) current debt position as of Q1 2025?

Magnera's total net debt stands at $1,781 million with a leverage ratio of 4.0x.

How did currency fluctuations impact MAGN's Q1 2025 results?

Foreign currency changes had a $14 million unfavorable impact on net sales and a $4 million unfavorable impact on adjusted EBITDA.

What was MAGN's operating performance in Q1 2025?

Magnera reported net sales of $702 million but recorded an operating loss of $22 million, with adjusted EBITDA of $84 million.