Release Date: August 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Adjusted EBITDA for the second quarter of 2024 increased by 152% to $68 million, driven by higher sales volumes and decreased costs.
- The company successfully monetized lumber duty refund rights for $39 million, contributing to strong year-to-date free cash flow of $69 million.
- Rayonier Advanced Materials Inc (RYAM, Financial) increased its full-year EBITDA guidance to $205 million to $215 million and adjusted free cash flow guidance to $100 million to $110 million.
- The suspension of operations at the Temiscaming HPC plant is yielding positive EBITDA benefits and enhancing consolidated free cash flows.
- The company is making progress on its biomaterials business, with the Tartas bioethanol plant already generating positive earnings and expected to contribute significantly by 2025.
Negative Points
- Corporate expenses increased by $3 million due to higher costs related to the ERP project and variable compensation.
- The high-yield pulp segment faced a decline in sales by $11 million due to reduced demand and market supply dynamics in China.
- The sales process for the paperboard and high-yield pulp assets is ongoing, with offers not meeting the company's criteria.
- The acetate market continues to experience destocking, with potential lower demand bleeding into 2025.
- The company faces challenges in the high-yield pulp market, particularly in China, due to competition and pricing pressures.
Q & A Highlights
Q: Can you provide more details on the sales process for the high-yield pulp and paperboard business? Are the offers not meeting your criteria solely due to price, or are there other factors?
A: DeLyle Bloomquist, President and CEO, explained that the criteria include factors beyond valuation, such as the suspension of operations at Temiscaming and the bumping process triggered by the reduction in force. There are also discussions about shared utilities and assets. The valuation benchmark is the sale of the GP Augusta mill, which sold at 6 to 7 times EBITDA.
Q: What is the current status of the prebiotic initiative, and is the timeline for market entry still late 2025 or 2026?
A: DeLyle Bloomquist confirmed that the timeline remains late 2025. The project is progressing with production trials planned for September. The capital costs are expected to be financed by green capital, with a return on equity target of over 30%.
Q: Could you provide an update on the high-yield pulp markets, particularly in China?
A: DeLyle Bloomquist noted that Chinese paperboard plants are running pulp lines to generate cash flow, impacting pricing. Rayonier is repositioning sales to other markets like India and Europe, but the duration of this situation is uncertain due to consumer activity in China.
Q: Are there any concerns about refinancing before the end of the year, and when is it expected to occur?
A: DeLyle Bloomquist stated that they are working with Houlihan Lokey and expect to receive proposals in early September. The refinancing is likely to be completed in the fourth quarter, with confidence in achieving it before year-end.
Q: What is driving the increase in guidance from earlier in the year?
A: DeLyle Bloomquist attributed the increase to a $10 million CEWS benefit, advance sales due to the Temiscaming suspension, and improved ether sales. The guidance increase is roughly $15 million to $20 million, with contributions from these factors.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
