Sylvamo (SLVM) 12 Nov 242024 Q3 Earnings call transcript

Good morning. Thank you for standing by. Welcome to Sylvamo's Third Quarter 2024 Earnings Call. [Operator Instructions].

As a reminder, your conference is being recorded. turn Relations. over to Vice Hans like Investor President, now the to call Bjorkman, I'd floor yours. the Sir, is

Thanks, Audra. Good our third morning, and thank XXXX call. you earnings quarter for joining

Officer; Jean-Michel Our morning Officer. President Ribiéras,Chairman and Financial John and and speakers Chief Sims, are Chief this Vice Senior Executive

Slides X information, contain including legal disclaimers. X and important certain

subject and uncertainties. example, call, will we risks For make forward-looking to during this statements that are

available GAAP in information. also appendix. Reconciliations GAAP of financial present measures to figures will are We financial U.S. the certain those non-U.S.

Our like website of copies Jean-Michel. the earnings today's presentation. release as also contains the to as With to over well that, call I'd turn

Thanks, Hans. We call. X. had our Good a really joining quarter. morning, thank for strong begin Slide you I'll on third and

and Our teams operational executed performance. very commercial well, strong delivering

ran to input continue system mill see we and costs. well, stable relatively Our

with We streamline to manufacturing reduction to good continue make Horizon, our cost chain program Project and costs. supply overhead, progress

exceed savings to million on $XXX year-end target are rate million. to $XX run We up our by goal

Lastly, cash flow our these outstanding quarter. earnings the teams very strong combined resulted in and in performances by

million, cash X generation proud move We care per of a our next impressive while Free our the delivered of slide. results shows to I'm we and with taking operating of adjusted adjusted earnings Slide million of XX%. EBITDA key earned financial $XXX of Let's was generated share. $XXX margin metrics. flow $X.XX our teams customers.

before to at people commitment More the day. team's each paper ensure importantly, of everyone I'm of proud home end putting to returns safe our

for to create involving our on safety by team every member a everyone proactively a day. risk efforts resilient eliminate focused are every and building safer environment We in culture

performance detail. will in review our Now John more

mix adjusted prior and and $XXX X million versus $XXX and higher the third to morning, quarter. of million than and EBITDA were Volume driven good earnings by of was unfavorable million and The quarter. mill in contains quarter. by costs by operations Jean-Michel, planned $XX than had other maintenance was decreased and major better by bridge our $XXX $X million outages than better costs our America. $XX mix. solid outlook North Price outages million, million Slide million America you, we stable our Thank no the as across driven the second Planned quarter system. reflecting everyone. almost increased Operations by North $XX projected,

Input team strong America. in positive $X transportation offset transportation a million costs all-around negative very Latin and in like by costs increased that for as I'd their fiber resulted margin. performance North in more America energy our commend in also and to than XX%

move Slide Let's to X.

fourth million $XX We project mix due $XXX effect pulp in EBITDA million expect to to We price to million. mix Europe, decreases Latin price America. and higher export paper and to North in This be deliver mix in and to $XX $XXX of unfavorable million. quarter adjusted America is by customer

million We $XX in expect volume by stronger mainly to due to improve volume America. million, $XX Latin to

event at $X a operating maintenance in Eastover This partially economic less XX-year Xther slightly our are and offset projected downtime by to increase North Operations million turbine cost to be expense absorption better due mill. America. will with planned fixed an from generator costs

as projected to quarter. costs mostly transportation at seasonally to to million, outage to are planned Eastover have maintenance by transportation $X Planned $XX increase outages by we and energy. this increase input expect million due higher million a We and $XX

initiated last year, of Let's producer. we This An go Project part a streamline to is reduction costs. important Slide strategy program be to chain cost Horizon, and time to supply overhead X. low-cost manufacturing our

provide us rate moving more by be continue details up run million. focus exceed million our we This wrap a inflation, year-end before up to we earlier, XXXX. to on As earnings will will call to we're when $XXX Jean-Michel on for target $XX savings goal forward, next mentioned and

Let's Slide X. move to

agreed that the year. by Paper end X will Sylvamo International and Georgetown mutually to cease has ago, terminate announced the also the was Georgetown the weeks mill December. of supply As production announced have International agreement Paper in

have plans transition support find We this to as customers they through suppliers. alternative

costs, approximately the we sorry, earnings -- this Georgetown most about a expect profitable to We exit XXX,XXX change operating will i.e., Of supply the impact, et tons, in $XX about no roughly negative margin, This will retained XXX products. prices, million XXXX year, XXX,XXX tons. costs, assuming of XXX,XXX tons I'm we have input cetera. negative

which of products optimizing business. and mills, will to and mitigate of our our loss reduce will footprint have us qualified of in Ticonderoga help largely efficiencies transitioned North from customers downtime products, leveraging a mix while and economic Eastover volume. our America simplified These been combination the The segments

efficiencies the our a As the closure, we Also and growth. continuing earnings result are become on of America productive. strategic business will more unlock leaner Georgetown initiatives North to drive simplify focus and business, to

XX. Slide to move Let's

mill addition the right-hand end Georgetown are of the December, And effect to to by Consistent With investment respective position XX%. will of of capacity side, in these all reduced can uncoated North thesis, areas. and our been our you the the The be positioned approximately the help announced on business the are this by year. this the our supply uncoated half with very after freesheet see win On left-hand in the earlier reductions. removed. announced side, and reductions as customers well have of strategy their first to you freesheet capacity have closing capacity of shows we reductions the the view capacity the committed America end year, slide,

conditions freesheet America, as industry and on Let's slide. this Slide Uncoated improving North seen XX. are in go to Europe

to demand European estimated is Next X%. year, decline

freesheet America later demand However, after expected supply stable X% be supply is to in Latin by to expected drop X uncoated are year. this both closures XXXX.

demand to estimated America is North X%. decline Lastly,

However, XX%. drop by supply is expected to

footprint. long brands run for our team, through As industry customers iconic the the global well conditions our positioned evolve, our to low-cost we are talented serve and

XX. a Court court Regional encouraging comments up Brazil some ruled want dispute. disputed I case the in wrap covering to our Slide as Federal I'll conclude on of on X/X relates Brazilian a favor it news Last the amount. to goodwill tax my month,

As we lenders the several a with currently requirement the are million of ruling, XXXX. be our this is resolution The the we and on escrow discussing of eliminating in task funded there will that a $XX court final it matter. this, possibility could appeal result years before Brazilian authorities

we on have of As that's all report this. to now,

you We on back call now as any we changes is in turn appendix. to Jean-Michel. and the the there material I'll will progress, detail also more keep posted over

on our XX. creating a is story, flow strong of care disciplined choice. Slide Sylvamo value the to cash to I to I'll we and and are cash allocation. as we work supplier be John. comments capital teams customer with remain take Thanks, of my our needs impressed continue shareholder conclude and generation

quarter. pipeline will outstanding the in reducing of structure and the third projects are grow cash high-return years. free capital cost coming We flow and enable in cash our us generated to which a in earnings We're reinvesting our with great business flow

are earnings agile become and more simplifying leaner America our We business growth. to drive to North

retail to to flow XX% are We this at cash year. shareholders committing of our least

our and the by in that uncoated Looking are ahead. the opportunities confident by we motivated regions. encouraged freesheet lie across future forward, We're our conditions

I'll that, Hans. the With turn call to back

you, John. Thanks, Jean-Michel, thank and

take ready we're questions. to Audra, the Okay,

Daniel from take first [Operator Harriman question Company. our Sidoti at We'll & Instructions].

the announced or then about any of IP, you how at With think company? you that comment on you capacity provide that have Georgetown forward the the and can, the has upcoming changes about how extent closure you the impact Riverdale going the strategy with could to any ideas reduction agreement

Yes.

joining for call. the thanks started the we been Sylvamo, Daniel, So for that. we've of IP started and spin-off since preparing

it know we So will happen.

produce prepared. anything. one to noticed thing is We've understand which is is not our in mills. Riverdale other Riverdale, different have grades we're than We on The information But no with grades when. are Georgetown, which been of important we

to down, Riverdale we if to earnings. mitigate will potential believe negative at will the realize we impact going any our margins that mix essentially improvement, So current go was

with it have benefits if it. be for prepared. us, the we're we're happen, would we Riverdale was So to probably from ready, a will And breakeven it

Perfect. And still ongoing? your that Or been is footprint? over retaining XXX,XXX has existing that you that all tonnes then are that business, with the transitioned of to

ready. Yes, it's been transferred. all It's

to Staphos Bank at America. of George We'll move next

Congratulations et tons. cetera, footprint, My talk two you guys. what impact Can to tightening if quarter, offset those would from Georgetown XXX,XXX strong about a start. help the questions have that the, from very offset the on and you gross will, may you

margins So based given current or margins. $XX million on be the other you operating What working in number XXXX, on? all else That's do net of you're things that question equal all would think said the differently, one. the currently

tax to Could affecting or the that talk good we million free singular very EBITDA fourth since in story reasonably its that? elsewhere. has where I that's to there's be around look here certainly up When $XX for a flow a is to flow. should on Sylvamo know interest cash been on then strategy slides in other based things we're you don't coming been flow two, free $XX and in credit, for comment a that estimate number cash executing the million Question we you at with something whether about? that, expense based around it's terms and thinking and and CapEx if been your cash quarter of

you mill, on other to out We're And your not joining first question net have capacity next the occurred. to But project as the going terms we that it's put pricing closure, a anything On careful. of Georgetown I'm that, George, be the going it's year. of we John the impact of Sims. with going positive the be for in to industry. certainly, should for have Thanks closures that top will, call. if

we impact margins. So have $XX XXXX again, on based the projecting margins is not million XXXX

that. there's could course, of other other pricing things cost impact that the like things impact and than Of other that

we Project I also talked though, to mention Horizon. want about

you is we We of inflation of $XXX inflation, target before year. of running ahead exceeding million estimated we're our are $XX And that. this million. Remind about that slightly

we think Georgetown. we that also in did Horizon anticipation of So that,

mitigate impact also so us that And helps the Georgetown. the of

my help what is downtime, you could understand. I other the million, hard else say to holding improved million? that reduced I we And or maybe John, why does constant, to everything or question. $X $XX and add too need about then SKUs, million think the modest it's guess mix saying economic back with you just we us should streamlining understand do $XX I'm that enough that,

downtime. reduction the simplification understand the and your in now. question factored I of lack-of-order Yes, business reduction That's the of of

Okay. the And on free quarter? fourth flow cash for

possibility. Yes. Free that's the cash I program not of I you say that, flow out for the million of said $XX would think estimated about fourth Yes. that's quarter, approximately

sorry. Go ahead

I'm saying wrong flow. on I little just we anything bit see with cash don't a that's hesitant, I'm your estimate. No, an but usually outlook give don't

at RBC Markets. McKellar Matthew [Operator to We'll Capital Instructions]. go next

outages maintenance I I'd like planned think will costs outage which how in be year. Nymolla. XXXX, $XX to Could then million fall in guiding in will assume your you're across and first those expect the of to $XX about just you've ask largest the to is Europe moving maintenance the the to do communicated part Europe million XXXX? to in maybe you year-over-year, you remind where total Saillat but us range million 'XX compared in I'd $XX in And

speaking. Matt, So Jean-Michel

small Then year. $XX ones at We will the year is Nymolla, year, next and probably you XX-month year. this because That's But don't on and are precise outages X with we a the Saillat and thing there here we means mills next the our some have directionally, estimate in outage more are deliver year, and impact -- earnings. will that's both there, cycle, outages with cost. change mills, other mostly a million be which but cost the have on biggest our European

we exact inform So have we'll number, I when to budget, say you. I don't them finish would the the but

you and European have on will directionally, year, first Post-outage, outage. will we've that would that be -- the million by and what you be done But half the X way, the take be $XX good. historically the the of

Okay.

on what affect European -- implementation of out will Europe particular? markets uncoated the Union the which Next, your and pushed the has its view Regulation, I'd been implementation into eventual how a ask in year. to freesheet Deforestation maybe is imports about But European like

of the ] So, yes, I is Intention EUDR think same a good it's always thing. [ one. the

leads sure in with deforestation. all improvement the very appropriate time, are the and We've use we of still got understanding it. that to And making We always done Specific wood I've what controlling favor and wood in is no do clarification. of rules expecting. the Europe we some

to will to it's be I don't not things impact think It's because going the some potential which details producer. don't little really. Considering import we it know to moved. a that's we why an every it But could be clear bit I say. positive a need would think it's the how been do it's of because do law being which have on us it. want to people for the It's early Because in ruling. will Europe, we of on depend day, be, the impact, European

if any repurchases think be I one updated on you just one where evaluating dividend. share capital resumption with here And you could of how last you allocation. today are shares may can Great. sneak special how share perspective on the potentially versus about a in

changed of a capital allocation. terms strong balance haven't our strategy maintain We in sheet. We

do on say occasions, we find lot onetime, share. our repurchase is would a a of on share we've of strong the still a will long back. special And we And foundation opportunities which got have dividend, -- attractive, could I return. it as We cash repurchasing be price we but as share a

looking but XX% we're at to return look other committed So shareholders. to it we're back this for like we year at elements, our

And Staphos we'll follow-up George take at Bank America. a of from

So do consider unfavorable 'XX as but does your X, for that about not on nonetheless, work now. that us. right the quarter to bridge Slide Are little what mix of year pressure see first into we we waterfall, half based bit the recognizing into year-on-year, of on of at for can the particularly stay quarter, price and as things you thanks particularly have any continuing worry a look versus sequential that first doing should fourth third there half on that we

lower. curve we've how in Europe. markets cost what's but the terms And pulp the then you your have on in of doing Certainly, of been particularly secondly, heading seeing some developing are prices generally effect and to sales merchant pulp, that paper

George me that. take let Yes,

and price a at mix, does -- as price the the European a result, two. between pulp and So if that strong correlation from have the you look pricing certainly, the

and volume in by that also And continue Remember to is that will mix that from it throughout somewhat year. be offset quarter lowest expect increases the first perspective. the We a our some things that LatAm. typically then

bit quarter. have going strong Typically, a go we're quarter. very a from little slower into LatAm seasonally first into to volume for So going we the

due in the called in the want I by I a ops both offset this the turbine to fourth inspection colder call shows think XX-day outage. by and a costs, Hemisphere. that burdening little XX-year temperatures to Being quarter your a and is out first and that operating were this our we and from operations do in attention burdened It's the the we quarter more up northern outlook That's generator ops. outage. costs temperatures It LatAm. have. somewhat bit warmer

the million making, we turbine what about into so purchasing that while is repeat be inspected, negative first quarter. And generator is it that energy means being we're normally would and that that's that $X won't a impact

phrase. to maybe And just Okay. a John, sneak I in one if can use

guide an the be the -- than Latin uptick the America flat offset the be and given would LatAm Or have Europe up fair? and differently, it holding us that? you've America fourth is more again, if up would about be to burden, given think overall, that will us how for you North Should said So are of quarter.

Yes.

of the let's up. slightly Brazil America quarter Brazil, fourth in of And in that Latin demand volume. LatAm rest is The is meaning because the the the negative. down, slightly mix say, is where So up is

quarter that's effect the bit So in a little having offsetting fourth outlook.

stronger which in a outlook a our positive you the LatAm. seeing because seasonally bridge impact our can of LatAm, that's in showing but we're mix in up see So negative volume or

follow-up And take Sidoti & a Harriman at Company. from Daniel we'll

system is second was in North think Obviously, comments moving in How about we the reduced which in quarter but call benefit forward? leaves should the one. and America XXXX? not it Europe in from up we Just to the should in unexpected. Georgetown, Europe on capacity was capacity downtime But from as economic both expect going North a same in America Europe quick XQ, based

Jean-Michel. Daniel, it's

X As the -- also. which before, shutting machines you there Europe effect there by year-end. will in be mills, is which In a X we've reduction in total, show to down, is it capacity which are

stronger demand for versus So and we North reduction have decrease. America capacity expect both Europe to

So ] we better less head for have we be net two if volume, have should And in good [ regions. volume. those

Europe. recall around the from and actually North America if statements board, that's our and of in you Daniel, costs, our outlook, fourth the and lack we quarter about across less both order talked downtime operations other

we're of So lack in seeing system. order less the downtime already European

Instructions]. of [Operator George Bank Staphos to We'll at back America. go

from that you're juncture? with you shipments this what above at that flat shipments guarantees in do be But it your both be North you to or if Or see my this looking last track outlook? Europe pitched however certainly. should you if might America I the And know demand demand no so, below? expect and up, are at question, comparable would reasons

we number. think expect the I about same

And forgive I me, misspoke.

America. looking little to Europe be bit and in should in What's for North Shipment same. down a the be that? [indiscernible] You're demand

Yes. sure comments XXXX made. the make I to you're just about talking want we

I'm comparable Slide can America, XX. see Europe With now? shipments on what North demand be in it, you and and down, Correct. right call you X% from expect should X%

Yes.

now for over And back to Bjorkman the the turn session. closing that question-and-answer Hans concludes call comments. I'll

Au. Thanks,

back we wrap up over some closing to Before the Jean-Michel it I'll call, turn thoughts. for

in reinvesting our increase thing not a competitive to and quarter fast accelerate as to intend a going maybe up wanted our we lot to talked to We good everybody, shareholders. business was, but financial We call, which a -- advantages. Thanks, position. continue now, for joining to maintain we've cash progress is we our as And continue said, as quarter. to our it to intend one strong return it's to

$XXX projects. high-return have of of greater we before, than pipeline you told a million we've As

preparing As budget some finalization at we projects work nearing year, even that for preparation approval. more of high-return looking next we are our are engineering are for and

invest able $XXX get So be ultimately this returns to project we and relatively of from to expect million. this the soon for increased some

through cycle. ability in generate we're lastly, earnings flows strong the So to confident and cash our

we're joining of looking for So quite at you all Thank upcoming positive. today. the you to

Once Third in Earnings to thank Quarter for like XXXX your Sylvamos' you participating again, Call. we'd

now may disconnect. You