Rayonier Advanced Materials(RYAM) - 2025 Q2 - Quarterly Results

Second Quarter 2025 Performance Highlights The company's Q2 results were significantly impacted by extraordinary and largely non-recurring challenges, including tariff volatility, operational disruptions, and a major non-cash deferred tax asset write-off - The company's Q2 results were significantly impacted by extraordinary and largely non-recurring challenges, including tariff volatility, operational disruptions, and a major non-cash deferred tax asset write-off[2][4] Q2 2025 Key Financial Metrics | Metric | Value (in millions) | | :--- | :--- | | Net Sales | $340 | | Loss from Continuing Operations | $366 | | Adjusted EBITDA from Continuing Operations | $28 | | Total Debt | $746 | | Net Secured Debt | $688 | Revised 2025 Full Year Guidance | Metric | Guidance Range (in millions) | | :--- | :--- | | Adjusted EBITDA | $150 to $160 | | Adjusted Free Cash Flow | $(10) to $(25) | - Despite short-term headwinds, the company's long-term plan remains on track to deliver over $300 million in run-rate EBITDA by the end of 2027[3][4] Financial Results The company experienced a significant Q2 2025 financial downturn, marked by decreased sales, operating losses, and a substantial non-cash tax write-off Overall Financial Results Q2 2025 net sales decreased 19% to $340 million, leading to an operating loss and a $366 million loss from continuing operations, primarily due to a non-cash tax write-off Net Sales by Segment (in millions) | Segment | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Cellulose Specialties | $208 | $201 | $241 | | Biomaterials | $6 | $7 | $8 | | Cellulose Commodities | $59 | $75 | $85 | | Paperboard | $47 | $49 | $60 | | High-Yield Pulp | $29 | $31 | $33 | | Total Net Sales | $340 | $356 | $419 | Operating Income (Loss) by Segment (in millions) | Segment | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Cellulose Specialties | $29 | $31 | $50 | | Biomaterials | $1 | $2 | $1 | | Cellulose Commodities | $(9) | $(13) | $(21) | | Paperboard | $— | $(2) | $12 | | High-Yield Pulp | $(7) | $(7) | $1 | | Corporate | $(15) | $(26) | $(15) | | Total Operating Income (Loss) | $(1) | $(15) | $28 | Q2 2025 vs. Q2 2024 Profitability Comparison | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net Income (Loss) | $(363) million | $11 million | | Diluted EPS | $(5.44) | $0.17 | | Loss from Continuing Operations | $(366) million | $8 million income | Segment Performance Analysis Most segments experienced year-over-year declines in performance, with Cellulose Specialties, Paperboard, and High-Yield Pulp facing significant operating income drops or losses Cellulose Specialties Net sales decreased 14% to $208 million due to a 15% volume decline from tariff uncertainty and a labor strike, leading to a 42% drop in operating income - Sales volumes decreased 15% YoY, primarily due to a pause in customer orders driven by tariff uncertainty, strong sales in the prior year quarter, and a labor strike at the Tartas plant[8] - Operating income decreased by $21 million (42%) compared to the prior year quarter, driven by lower sales volumes, higher key input costs, and lower production from operational challenges[9] Biomaterials Net sales declined 25% to $6 million due to production issues and raw material supply constraints from a labor strike, while operating income remained flat at $1 million - The sales decrease was driven by lower production due to operational challenges and the impact of the labor strike at the Tartas cellulose plant, which limited feedstock for the bioethanol facility[11] - Operating income was flat YoY as higher shared service costs were offset by lower production costs resulting from reduced feedstock availability[12] Cellulose Commodities Net sales declined 31% to $59 million on a 33% volume drop, yet the operating loss improved 57% to $9 million due to lower non-fluff commodity losses - Sales volumes decreased 33% YoY due to lower non-fluff commodity sales and a labor strike, partially offset by a 7% increase in sales prices for fluff[13] - The operating loss improved by $12 million (57%) YoY, driven by lower non-fluff commodity losses, lower indefinite suspension charges, and lower key input costs[14] Paperboard Net sales decreased 22% to $47 million with volumes down 23% due to tariffs and competition, resulting in a $12 million decline in operating results to breakeven - Sales volumes and prices decreased 23% and 3% respectively, driven by tariff uncertainty and increased competitive activity from EU imports and new U.S. capacity[16] - Operating results declined by $12 million (100%) YoY, driven by lower sales and the impact of net custodial site costs from the suspended Temiscaming operations[17] High-Yield Pulp Net sales fell 12% to $29 million due to weak demand and oversupply, causing the segment to swing from a $1 million operating income to a $7 million loss - Sales prices and volumes decreased due to lower demand, particularly in China, continued oversupply, and the timing of shipments[19] - Operating results declined by $8 million YoY, driven by lower sales, higher logistics costs, and the impact of Temiscaming net custodial site costs[20] Corporate and Other Items Corporate operating loss remained flat at $15 million, while a significant $337 million non-cash tax expense was recognized due to a valuation allowance on Canadian deferred tax assets - Corporate operating loss was flat YoY as lower variable compensation and ERP implementation costs were offset by unfavorable foreign exchange rates[21] - A valuation allowance was required against Canadian deferred tax assets, resulting in a non-cash tax expense of $337 million in the quarter[24] - Interest expense increased by $2 million YoY due to a higher average effective interest rate on debt[23] Cash Flow and Liquidity The company generated $10 million in operating cash flow for the first half of 2025, ending Q2 with $202 million in global liquidity and a 3.8x net secured leverage ratio Cash Flow Summary (Six Months Ended June 28, 2025) | Metric | Value (in millions) | | :--- | :--- | | Cash Provided by Operating Activities | $10 | | Cash Used in Investing Activities | $(75) | | Cash Provided by Financing Activities | $1 | - The company ended Q2 with $202 million of global liquidity, comprising $71 million of cash, $116 million of borrowing capacity under the ABL Credit Facility, and $15 million under a France factoring facility[29] - As of June 28, 2025, the company's consolidated net secured leverage ratio was 3.8 times covenant EBITDA[30] Business Outlook The company revised its 2025 Adjusted EBITDA guidance downward due to H1 challenges, while maintaining its long-term EBITDA growth strategy Overall 2025 Outlook The company revised its full-year 2025 Adjusted EBITDA guidance to $150 million to $160 million due to H1 challenges, while its long-term EBITDA target of over $300 million by 2027 remains Full Year 2025 Guidance | Metric | Guidance Range (in millions) | | :--- | :--- | | Adjusted EBITDA | $150 to $160 | | Loss from continuing operations | $(75) to $(65) | - The company expects to meaningfully grow EBITDA over the two years following 2025, targeting over $300 million in run-rate EBITDA by the end of 2027[33] - The process to explore the sale of its Paperboard and High-Yield Pulp businesses is now effectively on hold due to current market conditions and trade-related uncertainty[34] Segment Outlook for 2025 For 2025, Cellulose Specialties is expected to lead in EBITDA, while Cellulose Commodities and High-Yield Pulp anticipate losses, with Paperboard and Biomaterials contributing positively Cellulose Specialties Outlook Full-year 2025 sales prices are expected to increase mid-single-digit, volumes to decline high-single-digit, with EBITDA projected between $232 million and $235 million - Sales prices are expected to increase by a mid single-digit percentage, while sales volumes are anticipated to decline by a high single-digit percentage in 2025[35] - Full year 2025 EBITDA is expected to be approximately $232 million to $235 million[36] Biomaterials Outlook The company is advancing its biomaterials strategy, targeting over $70 million in long-term EBITDA, with $8 million to $10 million projected for full-year 2025 - The company is pursuing investments in bioethanol, lignosulfonate, crude tall oil, and prebiotics, with a long-term goal of generating over $70 million of EBITDA from the Biomaterials business[37] - Full year 2025 EBITDA is expected to be approximately $8 million to $10 million[38] Cellulose Commodities Outlook Facing Chinese tariffs, the segment is shifting production to non-fluff commodities, with an expected full-year 2025 EBITDA loss of approximately $15 million - Production is being actively shifted toward non-fluff commodities until the new DWP fluff product is fully qualified in China, mitigating the impact of tariffs[39] - Full year 2025 EBITDA is expected to be a loss of approximately $15 million[40] Paperboard Outlook Due to soft volumes and declining prices, Paperboard production will be idled for two weeks in Q3, with full-year 2025 EBITDA expected at approximately $20 million - The company is idling Paperboard production for two weeks during Q3 to align inventory levels with demand[41] - Full year 2025 EBITDA is expected to be approximately $20 million[42] High-Yield Pulp Outlook Due to oversupply in China, prices and volumes are expected to decline, leading to a three-week production idle in Q3 and a projected full-year EBITDA loss of $20 million to $25 million - The company is idling High-Yield Pulp production for three weeks during Q3 to proactively manage inventory levels[43] - Full year 2025 EBITDA is expected to be a loss of $20 million to $25 million[44] Corporate Outlook Full-year 2025 Corporate costs are projected at approximately $70 million, an increase primarily due to a $12 million non-cash environmental charge and potential foreign exchange headwinds - Full year 2025 Corporate costs are expected to be approximately $70 million, higher than prior year due to a $12 million non-cash environmental charge and potential FX headwinds[45][46] Financial Statements and Non-GAAP Reconciliations This section provides the unaudited consolidated financial statements and detailed reconciliations of non-GAAP financial measures to their GAAP equivalents Consolidated Financial Statements The unaudited condensed consolidated financial statements present a $395 million net loss for the six months ended June 28, 2025, with total assets decreasing from $2.13 billion to $1.76 billion - The Condensed Consolidated Statements of Operations for the three and six months ended June 28, 2025 are provided[59][60] - The Condensed Consolidated Balance Sheets as of June 28, 2025, and December 31, 2024, are provided[61][62] - The Condensed Consolidated Statements of Cash Flows for the six months ended June 28, 2025, are provided[63][64] Key Operating Metrics This section details average sales prices per metric ton and sales volumes in thousands of metric tons for each business segment across comparative periods - A detailed breakdown of Average Sales Prices ($ per metric ton) and Sales Volumes ('000s of metric tons) for each segment is available for comparative quarterly and six-month periods[66][67] Non-GAAP Reconciliations This section provides detailed reconciliations of non-GAAP financial measures, including EBITDA, Adjusted Free Cash Flow, and Net Secured Debt, to their comparable GAAP measures - Reconciliation of Income (Loss) from continuing operations to EBITDA and Adjusted EBITDA is provided by segment for the three and six-month periods, along with the 2025 annual guidance reconciliation[68][69][70] - Reconciliation of cash provided by operating activities to Adjusted Free Cash Flow is provided for the six-month period and for the 2025 annual guidance[72][73] - Reconciliation of total debt to Adjusted Net Debt and Net Secured Debt is provided as of June 28, 2025[75][76]