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Xerium Reports First Quarter Results

Stocks in this article: XRM

YOUNGSVILLE, N.C., May 8, 2014 (GLOBE NEWSWIRE) -- Xerium Technologies, Inc. (NYSE:XRM), a leading global provider of industrial consumable products and services, today announced its Q1 2014 results.

Q1 2014 roll sales were weaker than expected in North America and Europe

Weather conditions and a market inventory correction in containerboard drove weaker than expected roll sales in the quarter in North America and Europe. We expected and planned for sales to be weak, and they were. We believe these market conditions were temporary, and indeed orders were as expected in the quarter, growing 5.8% to $146.0 million. Rolls sales were in line in the rest of the world, outside North America and Europe. Constant currency machine clothing sales declined 0.9%, while machine clothing Adjusted EBITDA increased from $18.1 million in Q1 2013 to $19.1 million in Q1 2014. See "Segment Information" and "Non-GAAP Financial Measures" below.

The Company's sales growth and cost reduction programs are on track to deliver expected results for the year

The Company is underway with a balanced program of sales growth and cost reduction. The cost reduction programs are comprised of a plant repositioning program and operational excellence programs. The plant repositioning program will dramatically reposition our assets to mirror forward growth activities – geographically and by product type – and at the same time increase our competitiveness by being leaner and more nimble. The plant repositioning program includes:

  • 6 plant closures – 5 are underway
  • 11 plant expansions – all 11 are underway
  • 2 new greenfield plants – both are underway

The operational excellence programs involve all 28 Xerium plants globally. Every single plant has a site specific program to address the following initiatives:

  • Waste reduction
  • Bidding out procured items and finding new low cost suppliers
  • Implementing throughput best practices
  • Installing a new lower cost logistics network
  • New safety program
  • Capital projects to lower costs

These programs have been centralized globally in order to spread best practices uniformly across all regions. Implemented in parallel with these foundational moves is an equally sized set of sales growth programs. The programs are comprised of new people, industry specialists with additive knowledge to Xerium's current commercial team, a new R&D program, new R&D tools, new machines with capabilities the Company has never had, and a new product program with 11 specific programs. The first wave of new products (4 in total) is rolling out right now and they are:

  • EnerVent – a brand new highly engineered and machined roll cover optimized for tissue machines
  • Smart 6.0 – the industry's first load sensing roll cover for suction box applications
  • Shoe press belt – the Company has received its first order for a very innovative approach to this application
  • TAD (through air drying) fabrics – the Company's first offering for high-end tissue machine applications

The Company is shifting with the market – a smaller market in the global printing & writing market (now just ~23% of the global pulp & paper market), and a larger position in the growing markets for tissue, packaging papers, boxboard, fiber cement, non-woven belts, rolls for the flexible packaging industry, and rolls for the film production industry. Xerium continues to advance its position and increase market share globally in the growing non-paper markets such as fiber cement and nonwovens, with a dedicated team, allocated resources, and advanced product offerings. Fiber cement demand in North America alone is forecast to rise 8.5% annually through 2017, driven by recovery in residential construction. Global growth also is benefiting from a shift from asbestos based production to fiber cement based production. Global demand for nonwovens is forecasted to rise at least 5.4% annually and demand in developing countries is forecasted to increase even higher at 7.2% annually through 2017.

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