Rayonier Advanced Materials (RYAM) 2 Nov 222022 Q3 Earnings call transcript

Good morning and welcome to the RYAM Third Quarter 2022 Earnings Conference Call.

During today’s presentation, all parties will be in a listen-only mode.

Following the presentation, the conference will be open for questions with instructions to follow at that time.

As a reminder, this conference is being recorded.

I would now like to turn the call over to your host, Mr. Vice Investor and for Treasurer Walsh, President Relations of RYAM. Mickey Mr. you, Thank Walsh.

may You begin.

good again everyone. quarter you, morning, Thank and Welcome conference and XXXX call to webcast. earnings third RYAM’s

our Marcus Moeltner, Chief today’s De call of Joining Vice and our Chief Finance. me and Lyle Financial on Bloomquist, Officer; Executive President Senior are President Officer and

Our are website our available and at materials issued were presentation release on earnings last and evening ryamglobal.com.

the statements safe that in provisions today’s we made to pursuant laws. like forward-looking to securities remind you federal I’d harbor will of presentation, include

Our SEC of earnings are They to statements factors presentation our cause release with as forward-looking well as X make. results lists which also material. our filings referenced actual differ the the may the materially on from some Slides of we and may X

measures, but of also measures. on non-GAAP financial considered be Today’s reference are noted Slides of presentation. not for financial information non-GAAP should investors, of GAAP XX useful financial non-GAAP certain through directly our management included reconciliation We as our an to will measures on and measures XX to measures GAAP their believe X most comparable presentation. A these Slide presentation alternative provide measures

the I’ll to now call De turn Lyle. over

turning I Marcus’ today morning. call would opening good the to come before and each business Marcus After before questions. market our and near-term Mickey, you, to update, Thank a an outlook for the will like by on provide provide additional perspectives and details to back update as businesses. as the I call the some quarter, additional for on of third start well providing initiatives our on financial highlights

to turning by start Slide X. Let’s

initiatives. our good very against We have near-term made progress

position which probably the accomplish June, our to senior mature as possible this in us Our top in refinancing the objective. of best priority you remains XXXX. Put know notes,

third reducing reduction. net to net our to to X.X metrics we debt I’m our by improved We times by be leverage $XX $XX growing million EBITDA and and are working in have credit pleased EBITDA quarter. debt the that by growth improve report million

maintain in order to to on debt an our becoming refinance We best net our intense improving prior will focus XXXX. in give current the to opportunity these us leverage notes metric

success growth has by driven areas. EBITDA been in three Our

discussed update, of we completed our we facilities our at maintenance the year. half in all as outages First, planned last in extensive first this of

results to productivity As lower likely leading improved our unit will we that now future. cost. performance which better of believe realizing and We opportunities the a to result, improve are facilities, fixed in we have reliability the even generate further

focus offerings. for capturing of is our unique value area fair our for product products next strong. Our Generally, remains demand

We are products commodity capturing value strength. market the from current our for

cost specialty products, price we and as maintained effective ton and cellulose a our have Regarding $XXX inflation implemented surcharge negotiated per and increases metric we X inflationary for accelerate, April surcharge the saw as significant continued. volume we XXXX pressures

fully More volume customers under XX% a specialty implemented pricing small value products. to our with capture the with X Currently, specialties effective increase contract. August the we in the recently, cellulose XXXX these are not of negotiations fair of for we are cellulose objective that on sales

to approach multi-pronged Our and to pressures. while environment help we these the final area responding inflation have remains targets chain current persistent, a supply mitigate challenges, inflationary

cost surcharge offset we inflation. noted, already extraordinary a As implemented to help this

reduce and also managing material our decreasing the discretionary spending We leveraging our are to input cost. scale, usage

and our utilizing in cost. carriers, transportation, reliable shipping wood, reduce chemicals shipping alternative we manage to including shipment to multiple and customers, and delays, service are logistic our supply Additionally, options seeking improve channels, modes

now financial turn X to Let’s our for an performance. Page overview of

increase cost strong a for demand increases XX% segments, for our specialty our inclusive $XXX products. as in million our XX% price and result, revenues paperboard increase products, from cellulose XX% a reflecting of increased to Our all prior across year a a surcharge,

Adjusted which quarter delivers quarter, year, The segment, from more of $XX high adjusted purity EBITDA the XX% offset price million XXX% volume by increases prior improvement cellulose million, third in our increases million cost year. up prior $XX than EBITDA an of the for the from the as and $XX prior inflation. year was from were led or

and which $XX by contributed million valuation of delivered impacted prior Corporate GreenFirst adjusted High-yield expenses shares, results, EBITDA. of results of which was to by last results a $X $X Paperboard driven year by million in from million or improved favorable strong million pulp year million. with adjusted year, driven negatively to change positively EBITDA, XXX% $X the prior prices. demand higher $X

for financial now strong year to exceed increase and the quarter are $XXX an we quarter, third EBITDA, these the results increasing With guidance. adjusted $XX of XXXX million million prior guidance outlook in fourth full a from solid of our

Now, I’d ask take quarter, Marcus? us through for to the financial like Marcus to the details

De with you, Starting purity segment Lyle. Thank on high the cellulose Slide X. company’s

to sales to metric XX% XX% logistics. total by million, in X% and prior increased in a which XXX,XXX $XXX increase Third XX% prices sales includes prices, for quarter driven the Sales quarter, productivity CS driven increase improved million increased volumes or a tons from $XX year. by

inflation. $XX Net of for prices and other were lignin. which million partially driven the impact $XX primarily and sales, million by included from EBITDA cost energy significant the segment also $XX million volumes, by of improved sales bio-based offset to higher

pulp, million, Turning for as by segment sales volumes. sales the the grew our $X logistics, in volumes. as EBITDA of well XX% decline $XX partially million a chemicals driven Paperboard by sales to X% impact $XX grew by than sales and increased million Slide more segment for increase lower higher prices, pricing X, to as costs offset purchase a in offset

in Sales chain XX% to for driven $X pulp pulp. demand by volume, declined prior by XX% challenges in quarter from our productivity of a prices the year, and segment due sales Sales to market million Slide high-yield Turning supply on congestion. X. an increased result global decrease strong as

for cost for volumes and chemicals quarter, million to to $X due EBITDA logistics as $X the inflation. partially lower only million prices the for increases the and higher segment offset declined

Turning across more volume increases and higher SG&A each million. to key a inflation year improved than on stock persistent in increased on and of offset constraints. cost operating HPC from Slide income to prior higher million $XX Sales logistic $X primarily and $XX expenses other by inputs segment consolidated by price basis, XX million driven variable costs $XX improvements driven million, compensation.

reduced declined $XXX million debt. million while Turning Slide ended debt $XX repay our Liquidity to still by of company net continue million, preserving debt cash. XX, to adequate million, as October, $XXX including at million we $XX has $XXX Through the liquidity. quarter the to

stated of million end the to of debt net We $XXX continue year. goal towards the make solid by our of progress

mature notes June and and we that debt of the appropriate time confident are lower credit to at We company remain to our senior obtain monitor XXXX. in With the opportunistically prior to improving continue in will an refinancing and XXXX. metrics, mid capital X.X% becoming prepared the notes, which acceptable current markets refinance

Lyle. like that, With to I’d to turn the over back De call

Marcus’ Thank reducing Marcus. debt a in have X.Xx Expanding you, we five achieve three net target about debt, to on years. to to point leverage the next EBITDA

goal. toward made significant progress We this have

reducing from our million to X.X% debt the see Slide end We to XXXX of By increasing our $XXX as can XX%. our third at balance this XXx of year. the Turning that X.Xx leverage we by EBITDA reduced from margin and of to quarter XX. adjust

XXXX. get we net debt. ratio our ratio leverage focus margins, that leverage We X.Xx To of while year achieve increasing will by a to we on pay X.X our will also our continuing expect further to EBITDA end goal, down

$XXX EBITDA to three over and five the next increase is million. Our to margins by years to another range XX% debt objective the XX% into reduce

now turn XX. shareholder Let’s plan We Slide four margin to addressing of total goal deliver our to EBITDA by drivers return.

products. for the fair we First, on focused are capturing value our

already As objective. toward actions positive taken we have this earlier, mentioned

increases with increase we cellular into price negotiated products top XXXX. saw cellular led Then cost specialty a for specialty and all the on our specialty accelerate, recently for non-contract we XX% cellular a Specifically, business. surcharge coming double products, market it off, digit to inflation we we implemented as our

pulp for board Beyond have led products. specialty our increases cellular we core price paper and products, our high-yield also

is our XXXX, further to realize for increases. price objective As

will We increase. demand ahead and additional renewable sustainable as our the specialties for and on of capturing years also improving products cellular in plan value mix market

to reduction. Recently position around we’ve us area cost shareholder taken actions key to for is success. second several The value drive

invested in this yielding year we our significantly assets improve First, to results. is investment reliability this and

million of benefits $XX as fixed further realized. cost $XX is to million absorption additional expect We in reliability improvement

expenses reducing as Second, efficiently production. we our key spending more discretionary as consuming by closely in inputs are managing our well

objective, X% per new a ourselves labor improved productivity we through for annum production via set reliability, can have increased automation. products realize which and we forward, Looking

shipping on-time allow are and diversifying improve shipping constraints the order reduce points. our cost, our freight in we our bypass capital. logistic of our of reduce couple a will channels to to us This Third, working experience

value to next debt. area shareholder The improve reducing is

the debt reduced of our year, refunds. by of have primarily $XX million proceeds by we tax collection ownership $XX using from cash this sale discussed, the in and in As GreenFirst million equity the

plan the operations years from Looking capital. in next cash and reduce to free few the we fourth working then repay debt further debt quarter additional and forward, flow in with reduced

capability of on specialized area plan experience sustainable by last Our products. is focus leveraging developing We RYAM’s deep on and innovation.

green our primarily expected will low second-generation million, that XXXX. note in France to bioethanol the is online $XX example, important come cost strategic loans. be with to It’s For project in facility to cost expected though is it financed

bring to compete market control our niche In high such to to ethers odor cotton as intrinsic class non-compressible are products very and working fluff products. with labs world viscosity linter unique value-added addition, R&D and

Slide will wood renewable compelling company and products related XX sustainable A and come, not forests. XX. to the and world world but the manufacturing harvested. that renewable sustainable a offers RYAM harvested today, managed tree. has from harvested for for to from supply then profitably generations demand fuels, forests years. fossil made of new to utilize and full forests proposition. the trees are I value the wood planted from for process very away current are a moves inherent more working Turning of as We only RYAM products. more And are that believe as starts been are our Working that investment is with the crop products, over

much the shifts our greater In cellulose and renewable developed opportunities these sustainable and constituents future, to the have quality as from products needs. extractives fuel many own energy highest demand the products. much fossil away extract wood world’s lignin, internal near current products believe new we to we produce from for based value will utilize we customer Today, and sugars that of

We know-how also believe that very are assets replicate. RYAM’s and hard to

have our have part its do few market. to over the product to $X.X technical businesses RYAM impact. cellulose invested compete committed its demanding assets reduce in very capabilities to know-how and specialties this and billion is We in also environmental

just In have XXXX. to greenhouse from our emissions by emissions have We total reduce to first X%. committed year, by our we gas XX% XXXX reduced

and the our some our products, in are sustainable Regarding the renewable specifications industry. of most demanding

filtration, plastic, used products consumers including pharmaceuticals, baby LCD every Our are acetate, screens, food, products. and textiles by day, eyeglasses,

in for products exacting customers, products our success many our long-term that global we exposure to no of into revenue. we years. XX with Given meet XX our and that than developing of diversity Consequently, sell geography our our specification the customers span our over our over XX% accounting potential countries enjoy one country mitigate relationships, markets We that including some recession. in more of believe help

an Page will with our to on Turning segments. update I of each conclude XX,

decline strong as experience quarter to Average logistic production modestly sales greater of albeit fourth are mix cellulose forecasted improve. commodity is and tempered We high-purity for a this segment our sales slowing by constraints economy. as continue the in to prices a expected products, demand for

that forecast prior year. be also in key decline still slightly to coming We persist. inflation well expect we will Consequently, the raw quarter, above material but will EBITDA

to board, drive Volumes paper and expected are print which for In costs higher demand hold prices the strong continue, and fourth expected products steady. will is in commercial packaging to quarter.

Paper our quarter. EBITDA is to strong in As the Board business deliver expected coming such,

$XX realize million productivity anticipated In logistics to previous high-yield full $X are strength as expect and approximately expected the pulp, for peaking, higher sales is to of price driven be expenses timing favorable due be EBITDA which is to Corporate to improve. though year, U.S. prices the million appear we indices expectations the the increase lag. to by dollar. to our

our year. capital our managing Lastly, million $XXX $XXX full committed we million guidance the within original to to for expenditures remain

to open With that questions. please call the operator,

from Instructions] Staphos Thank our America. go question we’ll George. of Bank And Please you. ahead, George [Operator take from first

details. the morning. Thanks, over. Hi, Thanks questions I’ll turn Good operator. and everyone. Hi for guys. A it couple

are say. time the you to reviewing? vary extent can, issues kind can and customer negotiations realize all, of of from how But you’ve that discussions can are that going perhaps of much might you year past that First this had going there’s the this not year? you’re you negotiations comment, what where I How they your key back?

just This much changing the we some do is end them. inflation. value of as XXXX, still at we experienced But George. have that full our XXXX sustained much. to the morning, De that Really be got to because got we in We them, of such say can’t before room than still the few we’re for It the Good there is given go that starting that started. we discussion. to softening Other we in we for into drivers Lyle. momentum believe really see But still many aren’t go cover the we’ll some products economy. we fair and believe are that substitutes believe that day, capture

some XXXX. price in we for will increases be continue pressing So to

Understood.

to again, On on their call. product? in your to product How fair that live there’s to a the you gap not value? I the are relative final you Are in fair illustrate demonstrating the follow-ons. you and are are you’ll where be value, say of that? But that? realize of terms you mic trying value you to cost feel terms the then much doing customers capturing that demonstrating in able a quick of your there’s to couple of And of what maybe market How

there’s way rest go I just my room look margin world. is Well, that with at that. look right and I the to it primarily the respect now at that I to believe And to compare the of EBITDA

So metric. principle that’s my

would’ve a And We effort. rounds any Okay. you’re you just of Would a slow do CS out? that seeing then that in next bit should Thank there X%? some situation continuing X%. How of about driven that the where talking well ahead wish sustainability be pricing volumes of about we might think that at growth that you that of recognizing as rate? there increased that in be the you How feel pre-buying now pace, economy pointed you. we’re about

pre-buying, With some Through respect there third that of that I quarter, QX. the yet. to may in of as don’t end we’ve think seen of be the

probably probably folks wouldn’t build suspect would to I cash, trying are Although conserve want that much to they inventory. so

So play be think XXXX. that’s I year going don’t big a this to going into

our our respect of say impact the general specialty respect good economy on demand, of resistant. With cellulose going demand a With forward. recession and to would the that is GDP business to largely I two-thirds

into example, that is to For what’s that going one to segments And by the impacted tow largest see of – is be right to with going applications. our much don’t is economies respect going to acetate be now. that much demand goes I on going

a respect be there’s roughly fluff and business particularly there’s don’t with economy. ethers being and our be. And a will said, third impact our into decline that to any of with that number That applications pharmaceutical applications, go the of food even in that products, other we in lot there’ll of our expect a

fortunately, on, is good a would what’s say our business chunk somewhat we’re of so going not resistant. immune I but And to that

Understood.

and over. On sales, are I’ll in technology quickie of you effect kind business seeing in screen and a relative to we your turn any Just what acetates it might have headlines? seen negative sales,

That’s I But very a little question. would right now. great suspect

going is minimis. a that small a so So our of again, demand to change in small de relatively business, it’s portion be

Thank you detail. for the

our next from ahead, question Please RBC you. go And Thank take we’ll from Paul. Quinn Paul Capital.

morning, Yes. Thanks very much. Good guys.

Good Paul. morning,

those what And where on on seeing you’re are products? side to the for are question what demand those want on, HPC one-third Just George’s the of products? on follow-up sensitive, you

Okay.

ethers one-third right Europe seeing particularly we’re You’re in about – yes, the now. or possibly so there is, exposure that’s construction exposed talking

end ethers. in low filtration, some would that operating correlated we’re softness right and So impact demand well obviously having that And Anything pricing. some construction we’re that’s activity. tire related is softness rates seeing to some seeing on in seeing automotive very the including be and expected the GDP viscose as to we’re markets, cord on then, now China as highly and

we’re exposure. So would the some areas probably big that those I suggest seeing that are

that. if something quarter. tons XXX,XXX in the kind just mix the volumes you’re Okay. in for kind on HPC tons of year to then date, Thanks QX? XXX,XXX equal last to you tons of and volumes, that you’re about XXX,XXX which capable it’s Is year, the how last And year the going shift on And for be is doing? that weak

the we year demand XXX,XXX make – we terms again, in for think said full ton you should HPC the XXX,XXX, Well, right? of

Right, did last year. yes. That’s what you

Right, right.

year. QX think expecting mix issue in this a we’ll off business. change commodity number not the in really in fact, EBITDA business a to that drop QX. around we’re our I significant and In QX, would cellulose And The in specialty respect change with exceed versus versus our be demand

I do Okay, I’m that group Based Or going to on that’s just potential. to your background you you’re debt your wanted yes, be, your try good. potential some that are is talking just foresee get issues? where quite net leverage, they there, And saying, to the off the refi any of where of refi? expectation understand you Can help extensively. sure us you good? if you’re

to been Well, this all year. credit our along our strategy improve metrics has

that out you that. believe unsecured markets right go credit we recognize into markets But tell good Xx a obviously of a ratio. position that credit at the XXXX us going And now. And in to we we’re this refinance the year fragile go And notes. leverage we that so, I to to believe pretty puts I’ll the think are

what we open different So a with can keeping looking having all do at our of of of number and there. discussions we’re possibilities options parties,

to but in we’re we’ll We refinance to be discussions. still the are do how it, confident, going notes, able we’re very

a just – was ago, on give years just that. just Okay. how an That’s us investment good. And wondering could an on then couple if you that Anomera lastly, that update

the had were Yes. minimis de customers qualifications. that but commercial sales they our We first that were actually this needed year. Really product product fairly made for to the sales sales we

commercialization of in We breakeven XXXX expect mid go XXXX goal full and into in we’ll with a that XXXX.

Okay. luck. Great. Best guys. Thanks

Okay.

And of Instructions] Spitz [Operator Bank ahead. next Roger go take America. Please from we’ll

good and Thanks morning.

in of that of the million the October, debt repayment with X.Xs? additional First, $X was

facility morning. we Good principal was that our Marcus. in That Roger, paid that cogen Canada on payment. It’s up

inflow about of Got instead XXX now, – it. thinking among you us want capital dollar be at QX? to things kind XXX then can other what XXX. And a I might you’re get you working mean, tell you That’s of to repayment. in

You’ve just done $X million in October.

suggests – there’s – your unless that So be you’re free that take cash cash operating here, to less generating you that going cash flow down, balances CapEx. further some

Yes, Roger, the mentioned, you working as on we’re item. capital focused

year-to-date, changes capital that $XX flow on You statement the disclosed we around million. can see cash in our was working

the We’re on improving going step be our that the that support to focused on receivable accounts conversion next cash to and to cycle XXX target. working

sale that any could to are Got it. And further back there or selling reduce you consider assets lease debt? perhaps a

Lyle. down working to, that going we’re so to cash elements available De – the are the see now. to don’t custodial have right flow other to sell, assets CapEx, capital, Not sure readily is forward. going end we We of make the our monetize any at we’ll down day this and that debt and the pay available to of have Roger, kind manage tighten our have to free

very you Got it. much. Thank

will end the the at questions. the I for you’re thanks be hosting. Roger, of and at that to month the and conference Mickey plan Yes, down

We you. look Thank forward that. to

from take ahead, from you. Please America. question of Staphos Thank And Bank go George. another we’ll George

guys. Thanks very Hi much.

up to past think has for and quickies come Just this me a couple finish of in I calls. up,

been would and peak high-yield very to gone pulp very, cycle in, a it somewhat, strong As couple obviously through years the up is markets have to the you trough. you a operate more closer going a like probably has a about that seem of Earnings pricing. pricing improved think we’ve but than lot closer

next to you the, bit the markets on say may to to we Thank those like what out pickup then give your when declining you’ve more some pricing what as say you what the could figure us non-cellulose and looking not about this demand we the try color? that’s talked So plateauing, how can one over quarters, you. specialty or incremental had in of probably interplay at earnings a – to few your us are trajectory the let’s be past, quarters. if can You’ve you the just get separately, would kind relative demand once in issues of next latent two resolved that production and over look

can certainly. I yield the Marcus. question on it’s Yes, touch high

Given seeing really a focused packaging, and produce on our very range in is customer our we’re resonates sustainability as products in market. we economy product three in high-yield, which And well the that of you from footprint. ply know, base this board placed that our

we in is there attributes we’re the a position. good a products, positioned of to BK ability capacity future, niche versus mix more but on You’re still perhaps seeing the given a have bulk our will pretty in right, the where be basis

that that address try one second before does George, your answer question we to question?

we move I would be helpful. appreciate it. That you. Why don’t it’s on Thank great. the other ones, guys. to Yes,

Can your question All again to I George. first articulate make right? got right, it just just you sure

the Well, high-yield was outlook, covering, largely I but… thought you which question the really on were first

questions to? what Yes, I referring other the was

once gotten issues one your of demand those to can in next implicitly had production quarters? pickup over get the issues impacted Yes, – have which non-cellulose can What two markets, your resolved specialties you you you’ve kind just demand. you’ve

that your All question? right. our And HPC we’re talking of Is commodity business. HPC, kind about

I also issues think said And there. you you’ve had some Yes. Paperboard,

Right.

will So Paperboard quickly go around addressed about XXXX. business and QX. believe that are got Paperboard, largely We addressed we’ve talk about to will into remain in out be the as sold we issues

prices realize will we our confident for in fact, Paperboard higher very we In business. XXXX are that

believe with business. that mentioned XXXX we year a should So we I have strong earlier, particular very that as in

capacity on down. Pricing fluff you’re to our whether grades a it’s a that the we’ve the HPC going bit. viscose the There’s of commodity already is in excess that think to, market. touched the little respect viscose With I column, lot referring business, business, business

really attractive that to as not targeting that it’s to look And business. capacity particularly right not up business our We But at business is that at fill now. a if we so need mills. we’re business a

The see again by reliability on its are that a of of and business ourselves product we made spent to as can a in differentiate bringing some business And in number XXXX. improve fluff investments money new we lot a characteristics. we that

example, For fluff XXXX. or hoping the control order non-compressible we’re in launch to products that

And so that strategy look as to we that continue a and at differentiation will consider business continue a strategic product take as we’ll to we we go forward there.

or one over you’re last more turn of one, luck and Paperboard, from pricing On on the that basis I On an I’ll average further you Paperboard, quarter. pricing? benefit see it suggesting recognized XXXX XXXX, already the i.e. and to that’s rest pricing, good XXXX, think pricing for you new incremental in can referring been in assume just you’ll have you pricing versus a

it’s Well, higher to too I anything XXXX into the in be think further XXXX, certainly will the we’ll get able XXXX whether pricing be able that momentum early be also in now. press right prices in we’ve tell we’ve – sustained that, to to had that

Understood. you, guys. Thank

ahead. question take we’ll Quinn Paul And Capital. RBC you. Thank from from Please another go

Yes, thanks very much.

one, your HPC stated mix you’re one further improve to Just in that XXXX. trying already you

from ability sitting what’s viscose. really you’re to between are where to and your fluff, are on viscose viscose wonder Where markets weakening. your fluff you mix to switch commodity Just heavy and now

Yes. you may Marcus, insight have better

Well, it’s Marcus.

a at fluff. good even in And know, softened the the market waiting sealine getting you a now. right given larger at certainly to And So on versus fluff Témiscaming, for And as it’s then to market’s viscose, definitely though fluff we’re the the we’re mainly holding bit. it’s so Jessup. pretty still larger softwood, waiting viscose premium hardwood a

Okay. That’s lot helpful. Thanks guys. a

be at Mr. to questions I’d to time. over appear floor turn there remarks. this to further back And closing the like for Instructions] [Operator no Bloomquist

time everybody execute Well, and of will to we past I’m thank to improve made this initiatives near-term proud for on we’ve our our any you quarter to Until you the that very to accomplishments feel confident profitability update. continue today. then, I forward out have debt. and next to so. to our if to And need questions free our or look us, reduce do reach please your