Release Date: May 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Rayonier Advanced Materials Inc (RYAM, Financial) reported a solid performance with an adjusted EBITDA of $52 million, a $1 million increase from the previous year.
- The High Purity Cellulose segment saw a $6 million increase in EBITDA, driven by higher prices for cellulose specialties and decreased costs for key inputs and logistics.
- Corporate expenses improved by $4 million, largely due to a favorable foreign exchange impact.
- The company successfully sold the rights to its softwood lumber duty refund for $39 million, enhancing financial flexibility and aligning with strategic debt reduction goals.
- Rayonier Advanced Materials Inc (RYAM) reaffirmed its full-year EBITDA guidance of $180 million to $200 million and raised its full-year adjusted free cash flow guidance to $80 million to $100 million.
Negative Points
- The Paperboard segment experienced a $1 million decrease in EBITDA, primarily due to lower sales prices.
- The High Yield Pulp business saw an $8 million decrease in EBITDA, largely due to lower sales prices, despite increases in sales volumes and reduced logistics expenses.
- Total debt at the end of the quarter was $798 million, although it was a reduction of $54 million from the previous year, it still represents a significant financial burden.
- The indefinite suspension of operations at the Temiscaming HPC plant, while expected to provide marginal EBITDA benefits, introduces uncertainty regarding future operations and market positioning.
- The company faces ongoing challenges with its High Purity Cellulose commodity exposure, impacting profit margins and earnings stability.
Q & A Highlights
Q: Could you provide more details on the ethers market, particularly in the European construction market, and the ongoing destocking in acetate?
A: DeLyle Bloomquist, President and CEO of Rayonier Advanced Materials, explained that it's unclear whether the uptick in ethers volume is due to restocking in anticipation of improved construction markets in Europe or an actual increase in demand. The destocking in acetate, concentrated with major customers in China and Asia, is expected to continue through the first half of 2024 and normalize in the second half.
Q: Can you discuss the requalification process for CS volumes historically produced at Temiscaming?
A: DeLyle Bloomquist noted that the requalification process is proceeding as planned, with all targeted CS customers taking product from other plants. While some customers may move to competitors, Rayonier expects to retain most of its important, higher-margin business.
Q: How will the indefinite curtailment of the Temiscaming HPC plant affect your wood chip and residual fiber supply agreement with GreenFirst and other operations?
A: Bloomquist assured that Rayonier intends to honor its agreement with GreenFirst. Although the suspension means Rayonier won't consume chips, they plan to work with GreenFirst to resell the chips in the market. The co-generation facility at the site will also be part of the suspension.
Q: Regarding the softwood lumber duty refund sale, can you clarify if this was a sale of all duty refunds expected, and under what circumstances might you receive additional future proceeds?
A: Bloomquist confirmed the sale included all duty refund rights, not just receivables. However, due to confidentiality agreements, he could not provide details on potential additional proceeds.
Q: Could you provide more insight into the $7 million energy benefits expected later this year?
A: Bloomquist mentioned these are CO2 credits from the Tartas facility in France, typically recognized in EBITDA in the first or second quarters. However, due to delays by government authorities, these are expected in the third quarter of this year.
Q: Can you elaborate on the market conditions in China affecting your high-yield pulp business and your expectations for this market?
A: Bloomquist described the excess supply of high-yield pulp in China due to new capacity, expecting this condition to persist through the year. However, pricing in other regions remains strong, and Rayonier is adjusting its sales strategy accordingly to improve average pricing.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
