Rayonier Advanced Materials(RYAM) - 2024 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Adjusted EBITDA for Q3 2024 reached $51 million, a$27 million or 113% increase year-over-year, with margins nearly doubling to 12.7% [7] - Year-to-date adjusted free cash flow stands at $99 million, indicating strong cash generation capabilities [7] - Net debt decreased by$90 million from the same period in 2023, ending the quarter at $653 million, with net secured leverage at 2.8 times [18] Business Segment Data and Key Metrics Changes - High Purity Cellulose (HPC) segment saw EBITDA rise by$32 million or 119%, driven by higher specialty prices and volumes [8] - Paperboard segment experienced a $6 million EBITDA decline due to reduced sales prices and increased pulp costs [8] - High-Yield Pulp segment improved by$6 million in EBITDA, attributed to higher prices and productivity, despite a decrease in sales volumes [8][16] Market Data and Key Metrics Changes - HPC segment sales increased by $33 million or 11$325 million, with pricing up 13% [14] - Paperboard sales decreased by $2 million, driven by lower demand, with EBITDA margins reducing to 20$3 million, with a 14% rise in sales prices, although sales volumes declined by 3% [16] Company Strategy and Development Direction - The company aims to optimize its balance sheet and explore the sale of non-core businesses while focusing on enhancing the earnings power of its core HPC business [28] - A key initiative includes reducing commodity exposure, with non-fluff commodity revenue dropping to 4% in Q3 2024 from 14% the previous year [30] - The company is advancing its biomaterials strategy, with the Fernandina bioethanol plant project expected to commence operations in late 2026 [31] Management's Comments on Operating Environment and Future Outlook - Management reiterated adjusted EBITDA guidance for the year at $205 million to$215 million, despite a $10 million impact from a fire incident [33] - The company expects cash interest expense for 2024 to be approximately$93 million, with a projected annual cash expense of just over $80 million post-refinancing [34] - Management anticipates lower overall costs in 2024, driven by reduced key input and logistics expenses, although some costs will rise due to maintenance and recovery efforts from the fire [40] Other Important Information - The company successfully refinanced its debt, raising$700 million in secured term loan financing, enhancing financial flexibility [19] - Corporate expenses increased by $5 million due to unfavorable foreign exchange rates and higher variable compensation [9] - The company received a$15 million IRS tax refund and $39 million from the sale of lumber duty rights, which will be partially offset by the impact of the Temiscaming HPC plant suspension [36] Q&A Session Summary Question: Exposure to China and European Construction Demand - Management noted that approximately 20% of total enterprise sales are exposed to China, primarily in acetate and some commodities [48] - Acetate demand remains stable, while the company is reducing exposure to viscose [50] - There is a modest uptick in ethers demand in Europe, attributed to restocking and underlying demand improvements [54] Question: Demand Environment for Acetates and CS - Acetate is expected to remain stable, while other cellulose specialties may see improved demand due to competitor shutdowns [58] - The company is working on price increases for cellulose specialties, but specifics on implementation are still early [60] Question: Spending on Jesup Repairs - Management indicated it is too early to estimate repair costs for the Jesup facility, as investigations are ongoing [63] Question: Temiscaming Plant Closure Impact - The benefit from bridge sales during the Temiscaming plant shutdown has diminished, but some uplift is expected in Q4 [66] Question: Growth in Biomaterials - The biomaterials strategy is central to the company's ESG objectives, leveraging existing resources to produce renewable products [70]