Sylvamo (SLVM) - 2025 Q2 - Quarterly Results

Earnings Release Overview Q2 2025 Performance Summary Sylvamo's Q2 2025 results aligned with outlook, with net income and Adjusted EBITDA declining due to increased maintenance and FX impacts, but cash flow improved Q2 2025 vs Q1 2025 Financial Highlights (in millions) | Metric | Q2 2025 | Q1 2025 | | :--- | :--- | :--- | | Net Income | $15 | $27 | | Diluted EPS | $0.37 | $0.65 | | Adjusted Operating Earnings | $15 | $28 | | Adjusted EBITDA | $82 | $90 | | Adjusted EBITDA Margin | 10% | 11% | | Cash from Operating Activities | $64 | $23 | | Free Cash Flow | $(2) | $(25) | - Key performance drivers compared to Q1 2025 include: favorable price and mix improved by $12 million, operations and other costs were favorable by $23 million, unfavorable planned maintenance outage expenses increased by $39 million, and volume decreased by $9 million[6] - The company successfully navigated its heaviest planned maintenance outage quarter in over five years while overcoming a $13 million unfavorable foreign exchange impact[2] Q3 2025 Outlook The company forecasts Q3 Adjusted EBITDA between $145 million and $165 million, driven by reduced maintenance expenses, stronger demand, and improved operations Q3 2025 Outlook vs. Q2 2025 (Projected Changes, in millions) | Metric | Projected Change | | :--- | :--- | | Adjusted EBITDA | $145 - $165 | | Price and Mix | Decrease by $15 - $20 | | Volume | Improve by $15 - $20 | | Operations and Other Costs | Favorable by up to $5 | | Input and Transportation Costs | Stable ( $(5) - $5 ) | | Planned Maintenance Outages | Decrease by $66 | - Sylvamo is positioned for a stronger performance in the second half of the year, with 85% of full-year planned maintenance outages completed[2] Management Discussion and Analysis Management highlighted navigating a challenging quarter with heavy maintenance, focusing on long-term value through strategic investments and shareholder returns, amidst varied regional market conditions - The company returned $38 million to shareholders in Q2 through dividends and share repurchases, and a third-quarter dividend of $0.45 per share was declared[8] - Strategic investments at the Eastover, SC mill, including a $100 million paper machine speed-up and a $45 million sheeter replacement, are expected to generate over $50 million in incremental annual Adjusted EBITDA[12] Uncoated Freesheet Industry Conditions (H1 2025 vs H1 2024) | Region | Demand Trend | | :--- | :--- | | Europe | Down 8% YoY, sluggish | | Latin America | Down 2% YoY (Brazil up 6%) | | North America | Apparent demand stable, driven by ~40% increase in imports | Financial Performance Analysis Consolidated Financial Statements Consolidated financial statements reveal year-over-year declines in net sales and net income for Q2 and H1 2025, with increased total assets and equity but decreased cash and operating cash flow Consolidated Statement of Operations Statement of Operations Summary (in millions) | Metric | Q2 2025 | Q2 2024 | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $794 | $933 | $1,615 | $1,838 | | Cost of products sold | $640 | $684 | $1,302 | $1,400 | | Income Before Income Taxes | $20 | $113 | $53 | $173 | | Net Income | $15 | $83 | $42 | $126 | | Diluted EPS | $0.37 | $1.98 | $1.02 | $3.00 | Consolidated Balance Sheet Balance Sheet Summary (in millions) | Metric | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Cash and temporary investments | $113 | $205 | | Total Current Assets | $977 | $1,063 | | Total Assets | $2,668 | $2,604 | | Total Current Liabilities | $635 | $682 | | Long-Term Debt | $767 | $782 | | Total Equity | $959 | $847 | Consolidated Statement of Cash Flows Statement of Cash Flows Summary (Six Months Ended June 30, in millions) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Cash Provided By Operating Activities | $87 | $142 | | Cash Used for Investing Activities | $(114) | $(113) | | Cash Used for Financing Activities | $(76) | $(95) | | Change in Cash | $(92) | $(75) | Segment Performance In Q2 2025, North America was the sole profitable segment, improving to $66 million operating profit, while Europe and Latin America saw declines due to increased maintenance and unfavorable foreign exchange impacts Segment Results Q2 2025 vs Q1 2025 (in millions) | Segment | Net Sales Q2'25 | Operating Profit Q2'25 | Net Sales Q1'25 | Operating Profit Q1'25 | | :--- | :--- | :--- | :--- | :--- | | Europe | $181 | $(38) | $190 | $(24) | | Latin America | $207 | $2 | $199 | $26 | | North America | $419 | $66 | $438 | $42 | - North America's earnings were higher due to lower operating and input costs, favorable price and mix, and lower unabsorbed costs, which more than offset lower volumes and higher planned maintenance[23] - Europe's earnings were lower due to higher planned maintenance outages, unfavorable foreign exchange impacts, and lower volumes[21] - Latin America's earnings were lower due to higher planned maintenance outages and unfavorable foreign exchange impacts[22] Non-GAAP Financial Measures Reconciliation The company provides reconciliations for key non-GAAP measures, with Q2 2025 Adjusted EBITDA at $82 million and Free Cash Flow at $(2) million, showing sequential improvement but year-over-year declines Reconciliation of Net Income to Adjusted EBITDA (in millions) | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Net Income | $15 | $27 | $83 | | Adjustments | $67 | $63 | $81 | | Adjusted EBITDA | $82 | $90 | $164 | Reconciliation to Free Cash Flow (in millions) | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Cash Provided By Operating Activities | $64 | $23 | $115 | | Cash invested in capital projects | $(66) | $(48) | $(53) | | Free Cash Flow | $(2) | $(25) | $62 | Q3 2025 Outlook: Net Income to Adjusted EBITDA Reconciliation (in millions) | Metric | Q3 2025 Estimate | | :--- | :--- | | Net Income | $59 - $74 | | Adjustments | $86 - $91 | | Adjusted EBITDA | $145 - $165 |