Mativ Holdings, Inc. — 2023 Form 10-K Summary
Business context and reporting period
Reports the fiscal year ended December 31, 2023. Mativ manufactures specialty materials for filtration, protective solutions, healthcare, release liners, industrial applications, and premium packaging and specialty papers. The results reflect the full-year contribution of Neenah, acquired in July 2022, while 2022 included Neenah only from the acquisition date. Engineered Papers (EP) is presented as a discontinued operation for all periods.
Mativ sold EP on November 30, 2023, for $620.0 million cash, subject to customary closing adjustments. The sale ended the Company’s participation in tobacco-related products. For 2023 reporting, continuing segments were Advanced Technical Materials (ATM) and Fiber-Based Solutions (FBS); the Company announced new segment reporting for 2024.
Financial performance and liquidity
| Metric | 2023 | 2022 |
|---|---|---|
| Net sales from continuing operations | $2,026.0 million | $1,636.9 million |
| Gross profit / gross margin | $355.8 million / 17.6% | $306.0 million / 18.7% |
| Operating loss | $413.9 million | $40.2 million |
| Continuing-operations net loss | $507.7 million | $68.9 million |
| Consolidated net loss | $309.5 million | $6.6 million |
| Cash from continuing operations | $76.6 million | $124.6 million |
| Cash and cash equivalents at year-end | $120.2 million | $101.1 million |
| Total debt | $1,104.6 million | $1,690.0 million |
- Continuing net sales rose 23.8%, primarily reflecting the full-year effect of the Neenah merger; management also cited lower volumes, partly offset by higher prices and favorable currency translation. ATM sales increased 15.3% to $1,610.0 million; FBS sales increased 72.8% to $416.0 million. These comparisons are affected by the acquisition and are not like-for-like.
- The 2023 operating loss included a $401.0 million non-cash goodwill impairment in ATM. Excluding that charge, the filing does not present a single adjusted operating-profit figure. Interest expense was $62.2 million, up from $57.3 million; the weighted-average effective debt rate, including hedges, was 5.98%, versus 5.11%.
- Consolidated results included $198.2 million of income from discontinued operations, including a $176.3 million gain on EP’s sale ($170.0 million net of tax). The continuing-operations tax expense was $26.8 million; the effective tax rate was negative 5.6%, affected by valuation allowances and non-deductible goodwill impairment, among other items.
- Cash from operations was $106.6 million including discontinued operations; continuing operations contributed $76.6 million. Continuing investing activities used $61.4 million, while total investing activities provided $547.2 million, largely reflecting $608.6 million of discontinued-operation investing cash inflows. Financing activities used $662.9 million, including $834.6 million of long-term debt payments.
- Year-end net leverage under the amended credit agreement was 3.93x against a 4.50x maximum; the Company reported compliance with its debt covenants. The $600.0 million revolving facility had $333.6 million of undrawn capacity. The nearest stated debt maturity is the 6.875% notes due in 2026; substantial term and revolving debt maturities are in 2027.
Material changes versus the prior comparable period
- Revenue increased, chiefly because 2023 included a full year of Neenah, compared with a partial year in 2022. Gross margin declined 1.1 percentage points, while gross profit rose.
- Operating loss widened substantially, principally due to the $401.0 million goodwill impairment. The impairment followed weaker projected volume expectations, macroeconomic conditions, competitive pressure, and a lower share price.
- Debt declined by $585.4 million year over year. In December, $641.2 million of EP-sale proceeds was used to repay portions of several credit facilities.
- Continuing operating cash flow fell by $48.0 million, with management citing working-capital movements and merger- and divestiture-related costs. Working-capital changes used $19.8 million in 2023, compared with providing $63.1 million in 2022.
- The continuing FBS business reported $4.6 million operating profit, down from $15.0 million. The filing cites $9.5 million of impairment at its Eerbeek, Netherlands facility amid revised expectations for pricing and volume recovery.
Outlook, management commentary, and risks
- The filing provides qualitative, not numerical, sales or earnings guidance. For 2024, Mativ plans two segments: Filtration & Advanced Materials, which management expects to grow faster than long-term broad economic growth in the U.S. and Europe, and to some extent China; and Sustainable & Adhesive Solutions, for which management expects growth generally in line with long-term broad economic growth in the U.S. and, to some extent, Europe and China.
- A January 2024 organizational realignment is intended to streamline complexity, improve customer support, and reduce overhead. The Company expects $15 million to $20 million of 2024 restructuring and related charges, primarily severance and termination benefits. Separately, it expects about $4.7 million in additional 2024 restructuring costs related to previously announced ATM facility closures.
- Key risks include integration and synergy execution after the Neenah merger; realizing the strategic and financial benefits of the EP sale; debt service and covenant headroom; raw-material and energy costs and limited pass-through capacity; competition and demand cycles; foreign exchange and interest rates; tax valuation allowances; environmental and legal exposures; and cybersecurity. The filing also notes geopolitical and supply risks, including the Russia-Ukraine war and Middle East conflict.
- The 2022 cyberattack temporarily disrupted some sales transactions and involved exfiltration of Company data, including employee personal information. Mativ says it contained the incident, restored operations, notified affected individuals, and implemented remediation measures.
- The 2023 financial statements received an unqualified audit opinion. Management and the auditor reported effective internal control over financial reporting, with no material weaknesses identified.
Important facts for investors to verify
- How much of continuing-sales performance reflects organic volume, pricing, currency, and acquisition effects, and how those trends develop in the new segment structure.
- The assumptions behind the $401.0 million goodwill impairment and the sensitivity of remaining ATM goodwill to revenue, EBITDA, and discount-rate changes.
- Debt reduction, future cash generation, interest costs, and covenant headroom, particularly relative to the 2026–2028 maturities.
- The sustainability of cash flow after working-capital needs, capital spending, dividends, and expected restructuring charges.
- The final working-capital adjustments to the EP sale proceeds, and the realization of deferred tax assets given the substantial valuation allowance.