Rayonier Advanced Materials (RYAM) 28 Feb 232022 Q4 Earnings call transcript

Good morning and welcome to the RYAM Fourth Quarter and Full Year 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 Treasurer Walsh, President Relations. of Mickey you, Mr. Thank Walsh.

You begin. may

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

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

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

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

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

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

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

and businesses. Mickey, our highlights After good today on Marcus' to for Marcus for you, I turning before guidance will the questions. to XXXX the of with call I update, for provide start Thank and morning. financial call before opening details outlook an XXXX provide each up will additional

prior specialties, driven our across demand $XXX million half our of on majority and products, prices five. year Let's a our from revenue start increased represent and XXXX significant revenue all of including turning EBITDA. We with finished XX% billion and Revenues cellular of by $X.X EBITDA. to momentum which slide to strong by or positive

EBITDA, year million cost from to were price Adjusted The increases $XX more or nearly as prior extraordinary offset the which from inflation. our cellulose delivered $XX high $XXX the EBITDA year purity increased of million than XX% million year. segment, up realized adjusted or led prior by a for increases $XXX X%

solid higher an up $XX by and significant as this yield of a million pulp prices. packaging strong quarter delivered of or $XX driven fourth High for we capture demand $XX million of for sustainable to high contributed Paperboard in XX% advantage additional took prices value segment. EBITDA the EBITDA, million

currency Corporate valuation expenses in year year from million improved $X offset change which higher impact, variable by compensation. full favorable GreenFirst partially $XX last by of million the the a to were the and for shares driven

Marcus XXXX. XXXX ask to through the like an I'd Now financial to outlook provide I for for take us before details

by De Thank purity the cellulose for for XX% driven sales Starting XX% Lyle. prices you, to increased or a the $X.X sales on billion million in non-CS slide $XXX increase CS both year and high segment with six, products.

Sales to volumes by improved reliability $XXX,XXX tons metric logistics. increased driven X% and

average to compared mix in As sales selling expected, products, a quarter which as lower price a to of fourth of higher XXXX volumes the led in commodity by the of driven XXXX quarter the XX% to same were third XXXX. greater X% in current quarter compared period the

by improved Net and sales sales, energy inflation. significant prices EBITDA partially cost higher sales the to biomaterial biomass and year by of of $XX included driven lignin. the from million impact million for primarily for the Overall, $XXX segment volumes, $XXX offset million

sales pulp, EBITDA sales for increased prices impact offset sales increase grew $XX volumes. $XX seven. partially grew lower the prices than to segment decline million chemicals, XX% Paperboard or sales for more million by a and as of in XX% by volumes. X% sales million purchased costs $XX segment this Turning a to slide offset driven logistics, in higher

quarter was a third price sales in weaker from mix. sales in fourth driven The decline by slight the the quarter

to in for million XX% Sales offset $XX by prices, from Turning pulp were and impacted year by a partially prior high the slide yield year logistics driven by volumes. in on sales volumes sales increased timing. by segment Sales a eight. the X% decline

sales fourth million to quarter to were year. the prices to amid fourth quarter the a able million as year, $X in strong However, we the including improved million finish rose quarter. the in for deliver volumes to demand, the EBITDA Overall, $XX strong increase $XX segment for

than $XX to more each of inflation volume improved demand costs to and price a strong year. $XX the million basis, Sales $XXX higher Turning driven CS, operating driven On slide XXXX segment million. XXXX improvements by for nine. consolidated improvements million persistent throughout across offset income from HPC in by

and and other by severance variable SG&A offset stock rates. $XX higher favorable by primarily compensation partially million FX driven expenses increased

to XX. quarter $XX declined to as we million Turning slide repay debt in to $XXX continue Net debt. the

million XXXX, $XX company still ended million $XXX in million The debt reduced gross of the liquidity. $XXX cash. while by including preserving year at solid Liquidity

focused repayments, XXXX increased improve In the reliability in reduced investments on to debt to CapEx allocation addition years. after capital through were maintenance pandemic

primarily business. the also high refinance $XX debt-to-EBITDA to provide opportunistically XXXX. which capital June at four prepared which of notes, X.X are turn metrics, year immediate X.X% With times, and nearly Net will lower million on to return strategic of ended benefits projects, on We a unsecured improving continue markets focused invested from XXXX. debt, an our capital, improvement to credit senior in monitor mature we and the

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

Thank Marcus. you,

XX. Turning to Slide

senior XXXX priority our for June notes, in top refinance XXXX. Our which opportunistically mature to is

noted, expect of us terms than position end further Marcus the X.X the quarter. declined in debt to XXXX attractive leverage earlier more As saw year. by times first refinance This our to this we to well will to the X at as times decline we our end of it and

experienced Building EBITDA on areas. in key we the XXXX, our through will momentum growing continue XXXX two in

First, investments and to improve benefits our sales cost. unit realize started to reliability, the fixed we increased have from including lower

and demand. meet a demand softness pockets Currently, market in leader, our to matching of are as we are market we experiencing production some

sales us improvement will allow the While reliability in impact better this volumes, temporarily our control to cost. may

capturing we are for a our products. Second, higher value

expected prices increase the high XXXX our surcharge. are As digits of cellulose cost of XXXX a versus to a result inclusive levels, percentage our by specialties negotiations, single

also capture for solutions We paperboard remain as our these for fluff markets businesses value sustainable high. continue in and demand to

capacity our that the came in this we experienced XXXX The viscose quarter market impact. not modestly new significant exposure into have pricing XXXX. fourth XXXX a given and market, to the in But viscose impacted of minimal

towards XXXX for high this to allocation $XX free strategic in was will reduction return investments and detail improved free of which cash million. we discuss prioritized projects, The will flow I capital will between significantly improved Capital EBITDA and cash $XX be forecast flow, converted which shortly. million in debt be

XXXX, flow Our targets which benefit intend guidance by $XX achieving working specific capital we from million free inventory, cash in to for receivable and capture assumes payables. a

of $XXX We the million. million also assume to be XXXX total range $XXX in CapEx to

million of of $XX strategic includes $XX was million of financing. during to million which maintenance catch-up deferred and to capital pandemic discretionary This the capital, net million $XX $XX

debt attractive allocation slide how free our strategic million either we to projects. XX, graphically invest capital cash in to EBITDA supports On $XXX $XXX our depict adjusted and and/or to million guidance flow repay decisions of converts

available Our cash, capital allocation repayment debt specific project be on returns. will based commitments and decisions

we and financial summarize for our projects. XX, strategic objectives criteria key Page On

plan Our attain to which and long-term leverage remains debt. by target X.X repaying growing net at times we EBITDA EBITDA,

attractive into capital allocate to expect projects. and high also strategic return We

that to we strategic main three We have use projects. criteria vet

First, than the years. payback three period should be less

project's rate Second, we and increase loans the equity financing low will return To the increased hurdle the project. exceed risk including ROE, cost to though with XX%, strategic depending the on needs this for may on cost look low grants. be associated options,

review impact specifically it on emissions. our Then to the our employees planning, project would lowering We greenhouse three. commitments, the gas the for improving each impact including our and our for safety have sustainability

For XXXX, investments capital our focused key will be in strategic four areas.

world-class previously contract. investment have This generation multiyear will Tartas purposed plant under will discussed an initially second take-or-pay large be a project. to a We produce which fermentation that a be is petrochemical company sold bioethanol, Bioethanol to the in

ethanol gas cost loans the such XXXX. with from be total corn. substitute and II This this grants. [ph] produced certified be automobiles million by $X greenhouse low sources food million in Red The spending will investment will of to of in and million $XX as is bioethanol for financed emissions reduce project bulk green traditional $XX for used The

to total from is RYAM investment $X benefit EBITDA cash million expected be this annual will already to next early expected year. an ground The starting $XX be and This and broken for provide million is completed million XXXX. project to XXXX project has through in $X early XXXX from of

Jesup XXXX. remainder capabilities. and large production million of being made last second million fluff will in was project the be $XX The $XX year with the debottlenecking investment made finishing

year. this million This annualized investment investment the investments other and to We're production focusing projects. company later $X automation on a high benefit also will return starting provide

a very high number between investment annualized $X smaller provide $X investments returns million of in to will to $X EBITDA. on totaling million and million million expected includes This that $XX

the Lastly, a started we to processes and the business all process in increase we XXXX, key our efficiencies will in and onto infrastructure In platform. data investing processes facilities effectiveness. continue to get common corporate of ERP

provide will our of I an on Next, each businesses. outlook

XX. Page to Turning

prices of result our high XXXX. are increase single versus negotiations, expected digit percentages XXXX cellulose our a specialty to As by

business XXXX be demand forecasted is purity for high mixed. currently to our

cord. food in there's We nitrocellulose, ethers, and construction casing, filtration and MCC acetate, strength tire while are for seeing softness in additives

Fluff remains demand resilient.

in experienced slower fourth have pulp fallen of the been has decline XXXX, prices peak markets. quarter the levels to their fluff pricing than more commoditized While off

there the of started Year. the are signs the Chinese soft, since improvement but New demand end Viscose year of

rates the the XX% XXXX. the viscose operating is of which customers XX% are fiber Our to from producers increased range, back end have their which staple at up

for segment expected in at to has are deflation Cost the high remain prices our near purity but term. elevated slowed, input levels our

As I the XXXX in in future noted, from investment projects. uplift high realize will and EBITDA some purity strategic business

will investment XXXX. that the the business on benefit in investments at plan certified that starting are with our II RED demand strategic Our focused biomaterials products bioethanol our will sustainable initially in fermentation produce starting Tartas for from increasing

products we global continues to meet our As this will grow, increase to capabilities demand for sustainable demand.

demand expected improved prices result logistics, pulp XXXX products. improve expected paperboard, costs by In are commercial are Volumes as from driven strong to decline. as are to and to prices of expected a while packaging print increase and for increase levels productivity

logistics the this volumes pulp, improve and improved catalyst a yield to as expected provide to for global Sales the later may productivity. are reopening high improved economy pricing with Chinese A In of expected decline year. economy slows. are prices

the expected Overall, XX% be with XXXX over benefits million expenses higher expected not prior an due XXXX. to to million $XXX FX in to expenses to expect $XXX in we increase than are year. to deliver associated EBITDA XXXX, ERP implementation to repeat and of XX% Corporate are of that

our cellular we our On prices. EBITDA highlight Slide EBITDA XX, highly that to specialty sensitivities impact can the leveraged guidance. is key

negotiated these mostly However, annual prices are basis. on an

addition, event successfully pricing our we specialty in negotiated and contracts cellulose cost flexibility inflation. In renewed the of

business changes that believe on the and on impact little same our guidance. in EBITDA risk specialty smaller non-cellular cellular we change on products pricing specialty have should impact X% the cost Thus, a for XXXX have price. Pricing in

a approximately and of sold year, mix thus further fixed for fixed XX Paperwork under are for prices the XX pricing two-thirds index the products stability with variable guidance. providing

linkage markets middle our believe the recession. aging renewable the coupled a the insulate strong impact of helped We and business annual global from with paperboard us class our growing to as megatrends and with end sustainability packaging possible such diverse contracted exposure fluff to and populations, to

maintain we improve would with and We growth which market volumes, opportunities share our have when to also we improved margins realize demand as productivity resumes. sales

XX. Turning slide to

margins Our drive reflects operational efficiencies both for the XX% XX% to improved value EBITDA outlook and products capture our as reliability. to improved we for and range, XXXX the

free flow Debt will continue to balance sheet. generate our optimize we cash and decline as

the XXXX As goal track result, five net on to expect years. of decline times approximately to next us leverage X toward times to over X.X and in keep a we three X. our

And operator, the open call please to with questions. that,

you. of with Thank of question first Instructions] questions. Spitz Our from [Operator America. your Roger the line Please Bank is with proceed

Thank you good and morning.

start. to wanted So

over of headwinds could softer maybe I prepared demand delve in one You in little QX have inflow but I cadence and do on could thought year also, the potential think, And may QX? of the the some you to called a areas, capital in more. the out you XXXX? what pockets you particular two in expect actually remarks, elaborate or mentioned, into start, the wanted working So

additives bit is our To your which Roger, demand what in maybe -- this Lyle. a really attack affecting is little for and first first a De side. seeing food going question what's Hi, MCC the on construction we're bit I'll the ethers business on what's on little our talk about of demand Europe,

the – through had we're that we will demand Europe, an in our the knows, year. the – on improve ethers. rates that everybody an as higher seeing it that's macroeconomic conditions expect therefore, they are think in on our I though interest Because great, for construction and Europe they aren't impact do impact had construction market, obviously

We with in products their They correcting ether-grade a couple our may we sell they bit little XXXX. have saw that over also are a of to customers overbought – working that capital.

And they're on softness, their demand that a a working we probably a Again, of terms issue think so and in going get other again, I areas bit? half With second this me again, normalize that going capital. little you respect the on we should see, should to in through start be correction seeing to past of once relatively year. the can that's correction, we short-term help

we softness, of Areas bit little cord a in tire – had Yes.

Yes.

obviously, be also the little afforded access to is the obviously, cord, interest increase the well. tire for automobiles tied in the automobile continue of think, is just to as a chips, but dampen to demand industry. And rates So by to because they I beginning

lot resilient holding in businesses So a very selling that about. that's at, demand. something I that be the to of little to are there we seem would other Otherwise, concerned a we're levels of call,

The was question we question on capital. that, the working second second --

how your Roger? really, year? to was question does around that Is that -- how think is calendarize I the through that going correct,

it's getting things both an right, going QX, million? But -- think, because but the to here. usually go so does the I cadence QX $XX outflow, QX in is -- that, That's but how most particularly for businesses on particularly also is are

Marcus. it's Roger, morning, Good

So an of as set you use mentioned, out objective, we working for us. the $XX million a that as QX certainly, capital is

that So through AR that. QX and across to we get of as inventory related start then target balanced Over of the and XX% should is then year, realize we and it's balance AP. the

that benefit. execute we as capital working we realize should year, and So the through that to start harvest

Thank you. the I will queue. get back in

you, Thank Roger.

you. question [Operator proceed question. with Instructions] with Please comes Paul RBC from The Quinn Thank Markets. next line the Capital your of

Just trying expect digit. specialty high be to cellulose single up understand, it your you to sounds prices like them

Just your expect guess, Could what though, on more bit to sort a you seeing I understand color the pulp looking to I'm side, market? little and of price pulp weakening? you trying guidance, fluff on in you're stay fluff at us viscose commodity in do give that

to we're down to we're on some follow this competitors is couple Hi, going we've assuming noticing is the indices a recent fluff with than that fact again, Paul, that De going it's actually increases. they're Lyle. out our respect generally pricing, expected. And With are of there in slower what fluff, price announced that seen but

may troughing a going we be pricing, ago So viscose the the in days the, we soon. just as for recently into uptick Viscose think here a as softwood market. actually there relatively of situation, couple slight was similar pricing out

in potential of on right and again, that, viscose what we've essentially published. to is the there some be utilization that seeing Again, upside may indices, have been because with capacity we're But guidance the pricing. respect increase forecast that the forecasting we're now, per the but that is indices given the China based in

then Okay. mentioned to higher guys XXXX $XX That was XXXX talking costs million And $XX here. in to $XX or corporate range? million we million in you the in

in increase to we spending we're that ERP now, That's – in correct, year. benefit Again, and think raising the the implementation fact not this that's is Paul. the range. forecasting FX the about right right Yes, tied don't

when expect the you Okay. again? the senior color deal. bit a give attempted you you timing try to us un-secureds that of conclude that more this to didn't little that year, that process And then and on just and re-buy Can earlier

that it market of consider conducive us. we January, indicative just strong we out deal in fairly conditions Well, a felt that get just see weren't turned the what one be a to for I business. we was

we'll metrics think and past that, will forward, that markets that to earnings we time And point. least our And point actually at want that looking just think we get at enter will time, QX guidance to look so is you. at financial we we're at and looking So gave think we we on and we our side patient. improve again, with with possibly be because the the confirm think that

just debottlenecking guess, involved? then get I the And through volume, more going back you've project, what's on got you're just lastly, you fluff Okay. And to on that What's line. do increase process? get adjusted the volume think to

that investment. really additional to of not a I the I putting cans essentially the believe to at the into engineer, so tons That's can't in us XX,XXX allow get the additional we the I'm from capacity enough about increase XX,XXX allowing an specifics Yes. day, really capacity while on end great what question. drying line it to did. is get product. the the up we get that down specifications came to right speed it for And dryer to But

and -- speed got on competitors line, appropriately capability our you've for our our it of up also the then package the of when increase obviously the to -- to you capability customers. side, finishing So for the ability

so also And put line we've the as some investment well. in finishing

all much. All very right. Good had. thanks That's I luck.

Roger your follow-up Spitz question. question America. next line proceed is with a with Bank the Our from Please of of

very others. A few Thank much. you

that more reverse that? think High-Yield level? on can back talk How last few segment kind XXXX, Pulp guidance any about So we you to the in does should of years the

offset on the question, seeing in pricing we're that going great obviously right the expecting given -- Roger. see volumes a we're to we're made after XXXX, but investments -- on productivity -- last some the increased It's decline That's now, it's year. we that

even I'm going be EBITDA find this can XXXX XXXX, we the but numbers. the for it I'm and actual experienced same, seeing, some high see productivity pricing, versus purity, as the it be should the offset you here. by sales number later looking we overall -- of about to increased I for at lower It's terms though So in year. increased if expecting we're volumes in

Got but you you said was High-Yield think it. And I high I be Pulp just asking on that, and to were answering purity. clear,

sorry. I'm new. purity. I'm high still purity. I meant Yes, high

you I Okay. XXXX in High-Yield High-Yield Pulp And EBITDA How you pricing? Pulp. where do asking was see lower

to I level. to right in be Pulp what million, XXXX equivalent we $XX $XX around saw that's should million was And you, High-Yield talking what that

Okay.

think pricing market, of, year, be it we is for in And Roger, first of it's as pricing is probably cycle, will it given and seeing you're the look the at reverse everybody yield, are following you then high if year-over-year, where stronger the a over that where right, time off product. last coming half

the release, then Got strength talked press in the about it. you acetate CS. And in

you that looking specialty of the there? I it XX% is you're CS whatever call is were pointing -- Now XX%, specialty tow Or non-filter to? demand the filter at that -- -- you tow the are looking at it acetate

So in reiterate your tow Plastics, we Roger, are strength acetate you're right? other just you're to saying. the seeing question, in applications, saying, and

-- press in which in talked the acetate acetate? did referred in when applications XXXX Right, release CS to which I strength about areas

in would much both the is that require tow And Really, and in burn applications and darn mitigated it -- I China been outside heat applications we're are in world. not of steady. Yes. tow United pretty the of growth think, States, developed amount in the being seeing demand tow the typical the use sold which driven seeing smoking products say we're that plastics. that in -- that's, in has significant decline Xx Tow's a being -- or I used with cigarette. the largely

strong. the be on then side, very things to and continue plastic -- So

three want the five-year XX% target one, Great. And to then to last margins I to talk XX%. EBITDA about and going to

presume that are XX% years? margin the XX% or you're big a one on looking XX, be margin? of and main savings number up Is to out to EBITDA I I in five Or three of there other that. EBITDA laid You in that to pricing or guess, component to picture one cost whether things, that also that or the get of component it volumes Slide, that's projects, increase

levers, the all use Roger. to want I

day, just see it. at there's We the projects, terms significant the strategic and the be becoming is value productive. So of an in efficient more which, had component end much important be to of that of

to some capital. that's some take going And of

logistics products. to grows. a see cost deflation better value, to opportunity also capacity new reinvest the that even would we our issues and the that sometime And around But point some fair get call there's into to value additional an demand it future. as just us And to capture reward finally, continue maybe on near pricing in I the for up efficiencies

very you Thank much. it. Got

Thank our you. reached session. closing back of we've to question-and-answer Bloomquist the I'll time, for the turn floor this De At end remarks. Lyle

of to all we on I'm thank Well, you that accomplishments profitability next and execute that our our months. the in and the I And the proud very for next the our today. forward will leverage. of debt very your -- made look time again, confident few have to the business, we our initiatives to improve continue update of improve reduce in couple next

out So us. you help can you please free reach to that with, questions to we out or any have anything feel if