APPLETON, Wis., May 8, 2017 -- Appvion recorded first quarter operating income of $6.6 million compared to operating income of $9.6 million for first quarter 2016. A reduction in prices and shipment volumes for the Company's paper products, primarily caused by the ongoing strength of the U.S. Dollar against other major currencies, caused an $11.7 million decline in operating income compared to first quarter 2016. Those negatives results were partially offset by improvements in manufacturing costs and lower selling, general and administrative and related costs that produced an $8.7 million increase to operating income.
Appvion's first quarter 2017 net sales of $166.7 million were $13.8 million lower than first quarter 2016. Thermal papers net sales were $95.0 million, a decline of $6.9 million compared to first quarter 2016. Carbonless papers net sales of $71.7 million were $6.9 million lower compared to first quarter 2016.
Current quarter shipment volume for thermal papers dropped approximately 4% compared to first quarter 2016. Shipments of tag, label and entertainment papers (TLE) were approximately 1% lower than in first quarter 2016, while shipments of receipt paper were down approximately 7% compared to the same period in 2016.
Shipment volume for the carbonless papers segment in first quarter 2017 was approximately 2% lower than first quarter 2016. Specialty papers continued its strong growth with a volume increase of more than 38% compared to first quarter 2016. Sequentially, all carbonless product lines posted increased volume, with specialty papers posting a nearly 13% quarter-to-quarter growth.
"During the first quarter, we were successful in extending our strong operational performance and expanding the scope and benefits of the rigorous profit improvement process implemented in 2016," said Kevin Gilligan, Appvion's chief executive officer. He added that the Company exceeded its first quarter 2017 target for savings from implemented projects and is ahead of plan to achieve its $25 million savings target for full-year 2017. "We continue to focus on the elements of our business over which we have the greatest influence in an effort to counter the recent negative impacts of market factors such as competitive pricing and currency exchange rates," Gilligan said.
Sustained downward pressure on prices for thermal and carbonless products was the most significant factor that negatively affected the Company's operating income for first quarter 2017. Operating income declined by $10.0 million compared to first quarter 2016 due to unfavorable price and product mix, with lower sales of thermal receipt paper accounting for approximately half of that decline.
The prolonged strength of the U.S. Dollar against major currencies compounded the impact to operating income of lower market prices for thermal and carbonless papers by making those Appvion products less competitive in international markets and causing the U.S. market to be more attractive to international producers.
During first quarter 2017, Appvion announced a 5% to 7% price increase for its thermal receipt papers. Other global thermal receipt paper producers have issued similar announcements. The Company also implemented a 6% price increase for its carbonless rolls and security products in March 20 and a 6% increase for carbonless sheet products on January 30.
Gilligan also noted that working capital rose during first quarter 2017 as the Company completed an inventory build to accommodate the historical seasonality of certain elements of its business segments. As a result, net debt increased approximately $7.0 million during the quarter.
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