Company Spotlight - P.H. Glatfelter (NYSE: GLT)

  Small But Solid

January 11, 2008 - P.H. Glatfelter's (GLT-NYSE) specialty papers include products used by book publishers and manufacturers of envelopes. The company's specialty papers segment also makes engineered papers that go into items such as playing cards, postage stamps, and surgical gowns. Glatfelter makes papers for tea bags and coffee filters through its composite fibers business. The company has operations in the Asia/Pacific region, Europe, and North America.

Earnings have been on the mend since 2003 when they dropped to 25 cents a share, down from 90 cents in 2002.  They went to 30 cents, then 39 cents.  Last year they hit 55 cents.  Analysts think the year ended at 65 cents for 2007.  This year look for $1.00.  Over the next 5 years, anlaysts predict earnings will grow annually by 18% on average.  Sales are expected to increase by 9.5% a year, on average, in the same time frame.  Revenues in 2007 should be $1.155 billion and are forecast to be $1.2 billion this year.

Specialty Papers has seen strong improvement lately.  In the third quarter net income jumped by almost 46% on revenues that increased by 3%.  Much of the profitability can be traced to cost reductions at two plants.  It was also aided by higher volumes and selling prices.  Partially offsetting the gains were higher input costs.

Composite Fibers is also ramping with sales and profits turning in double digit gains for 2007.  There were costs cut in this division along with higher selling prices and better-margin product sales contributing to the solid year.  There was an acquisition in 2006 that made a positive difference in 2007.  One of its strong niches is providing food and filter papers globally.  Foreign sales were 27% of 2006 revenues.

The company owns a acres and acres of timberland and is selling some of it.  In the third quarter, 1100 acres were sold for $2.5 million.  Totally, in the first 9 months of 2007, almost $12 million worth of land was monetized.  There were contracts in place for another $67 million to $70 million worth of land that should have closed in the fourth quarter of 2007.

Some numbers: Market cap is $700 million with 45,112,000 shares outstanding.  Return on Equtiy was 6.3% in 2006, most likely 7.5% in 2007 and predicted to reach 10% this year.  Dividends are 36 cents a share for a yield of 2.6%.  Dividends take 55% of net profit.  Net profit margin was 2.5% in 2006 with 2.6% expected for 2007 and 3.8% in 2008.  Current assets are 1.8 times current liabilities.  Debt is 42% of capital.

P.H. Glatfelter is a small company that vacillated in a rather narrow stock price range for the last 5 years.  With renewed earnings growth and sales of land, there might be a catalyst to push it higher.  Of course, if the economy goes into recession, specialty papers may not see much growth.  But the company is selling products globally and isn't dependent totally on the U.S. market.

- Company Web site: www.glatfelter.com

- Ted Allrich