In the third quarter of 2024, Tredegar Corporation (TG Quick QuoteTG - Free Report) incurred a net loss of 11 cents per share, narrower than a loss of $1.47 per share in the same quarter of 2023. 

Revenues grew to $182.1 million, a 9.5% increase from $166.2 million in the third quarter of 2023, primarily driven by higher sales in the Aluminum Extrusions and PE Films segments.

Net income from ongoing operations was slightly positive at $0.2 million against a net loss of $5.1 million in the prior-year quarter. 

Tredegar's overall quarterly performance indicated positive momentum with increased revenues and slight profitability in ongoing operations. However, management noted challenges, particularly in its Aluminum Extrusions segment, with increased operational costs and competitive pressures impacting margins. 

Despite these hurdles, the company saw significant improvements in PE Films' performance due to increased demand for Surface Protection and efficiency gains. The divestiture of the Terphane flexible packaging films business was also a notable development, with cash proceeds expected to strengthen Tredegar’s financial position.

Business Segment Performance

Aluminum Extrusions

Revenues for Aluminum Extrusions reached $115.7 million, a 5.8% increase year over year, bolstered by a 6.5% rise in sales volume. EBITDA from ongoing operations rose to $6.2 million, up from $5.1 million in the third quarter of 2023. The increase was attributed to higher volumes, favorable variable manufacturing costs, and reduced labor costs. However, these gains were partially offset by challenges such as unfavorable net pricing due to a shift in product mix, manufacturing inefficiencies, increased maintenance expenses, and higher SG&A costs.

The segment experienced continued pressure from competitive imports and excess industry capacity, particularly impacting the non-residential building and construction (B&C) market. Sales volume in the non-residential B&C market grew 4.5%, while residential B&C saw a stronger 50% increase. Despite these gains, automotive sales volume dropped 17.9%, reflecting demand fluctuations in that sub-market.

PE Films

The PE Films segment saw substantial growth, with sales volume surging 33.4% year over year, driven mainly by increased demand for Surface Protection and overwrap films. Revenue in PE Films rose to $24.9 million, a 24.8% improvement compared to the third quarter of 2023. EBITDA from ongoing operations for PE Films jumped 45.6% to $5.9 million. This improvement was attributed to increased contribution margins and cost savings, although there was some offset from unfavorable pricing and a slight increase in SG&A expenses.

Surface Protection volumes, which had shown robust performance in early 2024, moderated somewhat in the third quarter. Still, this segment remained a significant contributor to PE Films' positive performance, with further benefits from manufacturing efficiencies and favorable cost management.

Cost Management and Challenges

Higher metal costs impacted Aluminum Extrusions, which was mitigated by efficient cost management and the pass-through of some expenses to customers. Despite these efforts, margins were pressured by a competitive pricing environment and rising labor costs, reflecting the ongoing challenges Tredegar faces with input costs and industry dynamics.

Balance Sheet Position (As of Sept. 30, 2024)

Tredegar reported cash and cash equivalents of $2.7 million, a significant decrease from $9.7 million at the end of 2023. 

Total assets were $442.5 million, slightly lower than the $446.5 million reported at year-end 2023. 

Long-term debt remained steady at $20 million as of Sept. 30, 2024, unchanged from December 2023. Short-term debt totaled $1.4 million.

Stockholders’ equity rose slightly to $158.4 million from $155.7 million at year-end 2023.

Cash Flows

Net cash from operations in the first nine months of 2024 amounted to $6.1 million, lower than the $44.2 million generated in the comparable period of 2023.

Management Guidance

Management commentary highlighted expectations for ongoing cost pressures and competitive challenges in the Aluminum Extrusions segment. The company is implementing stringent capital expenditure controls, projected to be $8 million for 2024 in Aluminum Extrusions and $2 million in PE Films, reflecting cautious spending amid challenging market conditions. Management emphasized that post-Terphane sale, the focus would shift toward optimizing its Aluminum and PE Films operations while reducing leverage.

Other Developments

Tredegar completed the divestiture of Terphane, its flexible packaging films business in Brazil, on Nov. 1, 2024. The transaction yielded an immediate $60 million cash inflow, with an additional $7 million expected from escrow funds within 120 days of closing. The sale has streamlined Tredegar's business focus on its core Aluminum Extrusions and PE Films segments, improving its leverage position and strengthening the balance sheet.

Additionally, Tredegar faced an adverse ruling by the U.S. International Trade Commission (USITC) on a trade case that aimed to impose tariffs on imported aluminum extrusions. Despite preliminary findings from the U.S. Department of Commerce indicating unfair subsidies, the USITC's final decision did not establish material injury to the domestic industry. This decision poses ongoing competitive pressure from imports, a factor that Tredegar's Aluminum Extrusions segment will have to navigate.