Q1 2021 Rayonier Advanced Materials Inc Earnings Call
[music].
Good morning, and welcome to the Rayonier advanced materials first quarter 2021 earnings conference call. During today's presentation, all parties will be in a listen only mode. Following the presentation. The conference will be opened for questions with instructions will follow at that time as a reminder, this.
Conference is being recorded.
I would now like to turn the call over to your host Mr. Mickey Walsh Treasurer, and Vice President of Investor Relations for Rayonier advanced materials. Thank you. Mr. Walsh you may begin.
Thank you operator, and good morning, everyone. Welcome a gander Rainier advanced materials first quarter 2021 earnings conference call and webcast.
Joining me on today's call are Paul Boynton, our President and Chief Executive Officer, and Marcus Molnar, Our Chief Financial Officer, and senior Vice President of Finance, our earnings release and presentation materials were issued last evening and are available on our website at rayonier.
Dot com.
I'd like to remind you that in today's presentation. We will include forward looking statements made pursuant to the safe Harbor provisions of Federal Securities laws, our earnings release as well as our filings with the SEC for some of the factors, which may cause actual results to differ materially from the forward looking statements. We may make they are also referenced on slides two and three.
<unk> of our presentation materials today's presentation will also reference certain non-GAAP financial measures as noted on slide four of our presentation. We believe non-GAAP measures provide useful information for management and investors for non-GAAP measures should not be considered an alternative to GAAP measures a reconciliation of these measures.
For their most directly comparable GAAP financial measures are included on slides 18 through 22 of our presentation.
I'll now turn the call over to Paul.
Thank you Mickey and good morning, everyone I'm pleased to report that we generated significantly improved EBITDA in the first quarter.
Both compared to prior year as well as on a sequential basis and note. We continue to see strong momentum in all of our end markets as we enter the second quarter.
Starting on slide five EBITDA improved by $64 million from prior year to $91 million driven by a surge in lumber prices.
In high purity cellulose commodity prices and demand for cellulose specialty products.
Along with the strong EBITDA, we generated $21 million of free cash flow as we captured higher prices across all key products to overcome our typical seasonal uses of working capital as well as certain logistic constraints.
Importantly, shortly after we finished the quarter in April we announced the strategic sale of our lumber and newsprint assets.
The sale allows the company to first capture significant value from these assets, partially due to the surge in lumber prices.
<unk> allows the company to pay down debt and third to allow us to build upon our core high purity cellulose businesses bio future.
As part of that bio future we see.
Which we see is leveraging our key assets to create new sustainable bio based products.
We are also formally have formally announced yesterday, an exciting strategic investment and Ana mirror, a startup company that will be producing and marketing carboxylate cellulose narrow crystals for CNC.
Which are fundamental natural building blocks that have widespread consumer and industrial applications.
In a mere zero crystals are patented biodegradable products to be produced at our <unk> site from our cellulose specialties products.
The emerging business will be supported by a recently signed distribution agreement with Croda, a global leader in sustainable high performance ingredient formulations.
So now I'd like to ask Marcus to take us through the numbers for the quarter, and then I'm going to come back on and provide additional perspective on the asset sale as well as highlight some of our key opportunities to invest in growth for the company.
<unk>.
Thank you Paul.
Starting with high purity cellulose on slide six.
First quarter sales held flat at $250 million driven by a 9% increase in sales prices on.
Set by an 8% decline in sales volumes.
As expected.
CS prices were down slightly.
While higher commodity prices drove the combined increase.
<unk> sales volumes increased a strong 6% driven.
Driven by sharper demand in acetate tire cord and engine filtration.
Commodity volume declines were driven primarily by logistics constraints.
EBITDA for the segment improved $9 million to $35 million.
Pricing improvements and more favorable mix of C S and lower operating costs helped drive profitability gains.
Looking forward to the second quarter.
We expect commodity prices to increase further.
CS prices are expected to remain slightly below prior year.
Despite stronger demand as we fulfill our annual contracts.
Total high purity cellulose volumes are expected to remain stable for the full year.
However, we expect a more favorable mix toward cellulose specialties.
Turning to slide seven sales in our forest products segment improved by $65 million from the first quarter of 2020.
Driven by a 118% price increase on.
Offset by a 3% volume decline for lumber products, mainly due to logistic constraints.
EBITDA for the segment increased $62 million to $63 million driven by the stronger sales pricing.
As a reminder.
EBITDA results include $7 million for duties paid in the quarter.
Since the start of softwood lumber duties on shipments into the U S. In 2017.
We now have paid a total of $98 million of duties and have also accrued interest of approximately $5 million.
Based on the results of prior trade disputes.
Canadian producers have historically recovered all or a vast majority of these duties upon resolution.
And Ryan will retain the rights to these duties.
After the sale of the lumber business later this year.
Looking forward with the continued strength in the lumber market robust repair and remodeling and very little incremental available new supply. We expect sales prices to remain very strong in the second quarter with higher prices likely sequentially as our order book now extends into June.
We are focused on ensuring reliable operations and capturing the benefits of these higher prices through the completion of the asset sale in the back half of the year.
Turning to slide eight.
Paperboard segment sales declined $2 million driven by a 7% decline in sales volumes.
EBITDA for the segment increased $1 million to $10 million driven by lower operating costs.
Looking forward, we are seeing announced price increases stick in the market to help offset rising raw material pulp costs.
Turning to our pulp and newsprint segment on slide nine.
Sales declined $8 million from prior year, driven by a 38% decline in newsprint volumes, which primarily resulted from our decision to only operate one of our two manufacturing lines.
High yield pulp volumes declined 15% due to logistic delays.
Newsprint and high yield pulp prices increased 12% and 2% respectively.
EBITDA for the segment held flat at a $4 million loss driven by lower sales volumes offset by the higher prices and cost reductions.
Looking ahead, we expect increased prices for both newsprint and high yield pulp, while we manage through global logistic constraints, including the recent Montreal Port strike.
Turning to slide 10 on a consolidated basis operating income improved $67 million from prior year to $55 million, a significant price improvements in lumber and commodity high purity cellulose contributed to the vast majority of the increase.
Volume impacts were related to the lower newsprint volumes and logistic delays, while cost improvements helped offset noncash costs in the corporate cost segment.
Notably the quarter reflects a $64 million book tax expense.
There are a few key drivers of this high rate.
Firstly the company generated significant income in Canada during the quarter.
Second the company is required to recognize a double taxation for our Canadian earnings due to guilty taxes in the U S.
In Canada Nols are available to offset the amount and Ryan does not expect to pay any cash taxes. However, a smaller amount of taxes in the U S could be payable, which will be applied against existing credit amounts.
We are required to account for both of these amounts.
However, we only expect to pay the smaller U S portion.
Second.
We are on able to fully utilize our interest expense deductibility to reduce our U S taxes, which increases our overall rate in this jurisdiction.
While the book tax rate is high for this quarter, we expect to pay only minimal amount of tax in 2021, and still receive a substantial $50 million refund in the year.
Lastly.
Driven by the strong results and despite seasonal working capital increases liquidity improved $53 million to $268 million, while net debt fell to just below $1 billion.
Along with the proceeds from the sale of lumber and newsprint. The company is well positioned to further reduce debt and make the strategic investments necessary to grow the core H B C business.
With that I'd like to turn the call back over to Paul.
Thanks Marcus.
Turning to page 11 as announced on April 12, we will be selling our lumber mills and newsprint facility to Green first force products for a purchase price of approximately $214 million plus an additional $6 million related to a chip offset agreement.
The purchase price will fluctuate based on the level of inventory delivered at closing.
Which we are currently assuming to be about $74 million.
85% of the purchase price will be paid in cash with the remaining 15% being paid in shares of Green first which has upside potential.
It is important to note that Ryan will also retain all earnings of these businesses up until closing.
Which is not expected to incur until sometime in the second half of the year and is expected to provide a substantial amount of incremental value.
Ryan will also retain all rights to duties paid into the U S Department of Commerce up until closing, which we estimate will be around $110 million.
In total we've captured significant value for our shareholders on this transaction.
As our investors know the lumber business is very cyclical in the newsprint business is in secular decline.
Just a year ago at this time all of these assets for shut down due to lack of demand and we've stated that with an appropriate valuation we would considered further portfolio optimization and divest the company of these businesses.
Over the past three years EBITDA has averaged $34 million for these businesses.
Based on our $214 million purchase price, we are capturing on enterprise multiple of over six times through the cycle.
We plan to use the proceeds for the sales of the lumber and newsprint businesses to both repay debt and invest in key strategic opportunities on our high purity cellulose business, which over time has had higher margins that investors tend to reward with a higher enterprise multiple.
As such looking forward on slide 12, the bio future of Ryan will center around opportunities to leverage bio based solutions out of our for manufacturing locations in Quebec, Georgia, Florida, and France, along with our World class R&D centers.
We are a leading manufacturer of cellulose specialties across all grades from acetate plastics, Houston crashing and SKU driver handles to cellulose ethers, Houston, many food and pharmaceutical additives.
We are also a producer of differentiated commodity products, such as fluff, viscose and lifestyle and more environmentally friendly textile.
Additionally, we also continued to produce a unique quality, leading kolyma branded three-ply paperboard and in mechanical hardwood pulp.
With tailwind supporting prices on our commodity products and strong demand for our cellulose specialties, we are well positioned to capture value with the upswing of the market.
Turning to slide 13, we also have the ability to invest in our businesses to capture even greater volume and helps smooth out smoothed out the peaks and values of commodity markets. These investments into our bio future will add to our product diversity and our financial growth.
At the core of our manufacturing processes are are on our cellulose pulp products.
But we know that much more can be done with these assets, we've already invested in producing new weakness sulfonate at each of our three softwood sulfate facilities in Florida, France, and Quebec. We've also invested in Green energy projects in these facilities, including last year's New biometric turbine addition into our test.
And we look and we're exploring opportunities for similar bioelectric investments in our Georgia facility.
Other area the area of explorations are in their second generation bioethanol.
As well as bio materials, such as natural prebiotics, which we believe can further diversify revenue streams coming from our assets and drive more value for our shareholders.
Looking at page 14, as I noted at the beginning of the call and additional investment into our bio future is the investment in a mirror and entire new opportunity for growth.
This investment price a technology platform that expands our core competency of cellulose chemistry and.
On their produces the highest quality cellulose Nino crystals sustainably sourced from our <unk> cellulose specialties.
NATO crystals can be formed into a variety of building blocks, including micro beads are biodegradable natural alternative for plastic cosmetic texturing powders.
As well as.
Products that can enhance performance properties and cements.
Paints and coatings and composites adhesives agricultural medical pharma and life Sciences.
<unk> is headquartered in Montreal with a team of nearly 20 scientists and 17 patents.
And is currently in the process of developing a specialty manufacturing facility on our property in <unk>, which can produce over 500000 kilograms nano cellulose per year.
Since 2017, we have invested a total of $8 million of NATO mirror through the end of this first quarter.
Right Ryan is the largest shareholder with 44% voting interest and we expect to make additional investments over the next five years.
We are excited about the future for I am.
Our reputation as the market leader in cellular specialties with differentiated commodities within fluff and viscose markets positions us well for the future on.
Our diverse assets allow us to service all the cities, especially as market segments, while our leading R&D platform and bio future investment opportunities will further broaden our presence.
We have proven that we can control costs and manage cash to drive stronger liquidity and a more flexible balance sheet.
Now if the market conditions are in our favor we are well on our way to capitalize and grow our business. So with that operator, let me open up the call for questions.
Thank you at this time, we will be conducting a question and answer session. If you'd like to ask a question. Please press star one on your California keypad, a confirmation tone will indicate your line is another question for you you May press star two if he'd like to remove your question for me Kim for participants using speaker equipment, it may be necessary to pick up your handset.
For pressing the star keys.
Our first question is from John Babcock with Bank of America. Please proceed with your question.
Good morning, and thanks for taking my questions.
You know first I just was wondering if you might be able to quantify the impact of the volumes lost.
I'd say with the freight challenges in high purity cellulose.
Apologize if I missed it but if you could just kind of go through that that'd be helpful.
Yeah, Hey, good morning, John This is Paul.
Look we said that.
Volumes were off a bit.
We didn't quantify that out there.
But we have had and across the business and I think I don't think we're unique in any way a lot of logistical challenges.
Part of that is related to logistics and we had the port of Savannah actually.
For a lot of product for us on everybody else, who moves out of the second largest port there on the eastern seaboard.
A lot of fog for a few days in February create a lot of backlog. So that was certainly an impact to.
Our business, we also had.
Issues with trucking availability of truck drivers.
So we've had that hit not only our HBC business, but also our lumber and our high yield.
Businesses as well so it kind of across the board, we think the challenges well will ease up but we still see in the second quarter delays as well. So it may take us two third quarter back half of this year to kind of get all that leveled out and then again I don't think we're unique in that way.
Ross the industry or even outside our industry.
Okay.
Oh God, yes.
Yes, John you're most likely noticed that there was back to work legislation in Canada for the Montreal, Port, which which is a good development, which speaks to Paul's comments, where we should see some of that ease up.
And John as a benchmark on the volumes, we've guided the Hec volumes will be stable for the year with really Inc.
Kris and benefit the mix towards cellulose specialties.
Okay. That's helpful.
And so based on that commentary I mean, it sounds like you should get some of those volumes back on the second quarter or is that kind of fair you know obviously it sounds like you know I'll say Charles will continue to be a challenge, but it sounds like youre not losing as volume necessarily.
No. We don't we don't see the volume is going out of the year at all I think we state we remain kind of again consistent with our comments last quarter that year over year volume should be.
Stable and we actually see at this point see us volumes potentially stronger than we had originally anticipated and up slightly from last year.
Okay.
And then actually on that last point there could you just talk about the demand trends youre seeing on commodity viscose and I'll also cellulose specialties with a focus on assets meters.
Yes, I think I got your question John Yes for what we're seeing out there on demand on the <unk> as well as commodity side.
Right.
Looking at Marcus made the comments on it we're seeing good strong demand on a lot of our <unk>.
Markets for the CFS acetate, probably a lot of that going into acetate plastics automotive related products that we sell right engine filtration media tire cord. We're also seeing it nitrocellulose, which goes into a lot of construction products in paints and coatings. So some good fundamental demand we've had a lot.
Conversation with our customers around this.
Think some of it certainly is just a catch up on a bit on inventories they got thin, but we actually see some some real fundamental demand pull through on that so.
Hence our for our thoughts for the year that see us volumes will be up year over year.
And then with.
This goes in fluff pulp look we're continuing to see very strong demand for those products, we've been commenting on.
On the market pricing increases out there and as you probably know John when our prices have lagged and probably most peoples, we'll have lagged the overall market certainly fluff pulp.
The market prices up Q1, 10% over Q4.
For for MBS, Kay and already in April I see out there and be SK is pushed up about 19, 20% relative to those Q1 prices. So we're probably.
Quarter behind that so youre going to see some good strong push up in our second quarter and fluff pulp prices.
And similar viscose prices, which are a bit ahead of that already.
We noted.
And the last chart in our in our deck there.
Those prices up 34% in Q1 relative to Q4, just as just market index prices.
Again, we're seeing April already up about 20% relative to those Q1 prices and were probably about six to eight week lag on that for us. So again youre going to see a strong second quarter on our commodities.
For both fluff pulp and viscose on a majority of our product is the fluff pulp.
Okay, that's great.
And then next question on just Pat and I think there's probably a relatively.
A common question. These days, but overall how are you thinking about the impact of inflation across your business through the remainder of the year.
Yes, John Marcus here.
You know, we're seeing signs of inflation in a couple of spots.
Certainly some of the sulfur based chemicals.
Uh huh.
Energy inputs, such as diesel fuel.
So we're starting to see signs of that and certainly that then migrates into the logistics supply chain as well.
It's probably not is as strong as.
Some might have thought at the beginning of the year, but we are definitely seeing signs of it coming through our across our business units.
Got you and so on so labor inflation I mean should we just assume that as you know the standard kind of 2% to 3%.
Labor is certainly more tied to the.
To the labor agreements that we have in place.
So some marcus well, it's a bit of a lag on those commodity is right and when it comes to inflation for our for our business.
But you should see it coming through.
We probably anticipate pretty muted inflation for the year, originally and maybe were up kind of mid single digits. You think overall, yeah that'd be a good number okay.
Alright.
So on and then just last question before I turn it over I was just wondering if you could.
Talk about any potential impacts on some of the tax proposals that are making its way through Congress.
Yes, we're keeping a sharp eye on that John.
It's somewhat fluid still there's there's moving parts there certainly the guilty taxes that have been referenced.
That could present some.
Some additional tax leakage, but again, we feel good about our NOL position up in Canada and in the U S. We still have some credits to mitigate any near term impacts.
But we're staying close to it.
Okay, great. Thanks for the help.
Thanks, Sean.
Thank you. Our next question is from Paul Quinn with RBC. Please proceed with your question.
Yeah, Thanks, very much morning, guys.
Listen you guys referenced the strong pulp markets that we're currently seeing just wondering how that sets you up for.
For your negotiations around that the high purity.
Business and when do those negotiations start.
Hey, Paul Thanks for the question look we've said actually the last couple of years that those weak commodity HBC markets are not typically helpful. As a backdrop to our discussions on cellulose specialties.
So.
To your question real gain on the strength of those commodity markets is actually I think a helpful backdrop.
Right now we know that some of our competitors are far more advantaged to sell the commodities in this market than they are on a cell.
Selling cellular specialties.
All of that I think just fuels some tightness across the market again, which we think are helpful backdrop drop that we haven't had for a couple of years.
Those discussions usually kick off in earnest.
In the next couple of months and as you know kind of kicked into the fall time frame.
Okay, and then just on net sale of the lumber business is relative to newsprint mill.
Got a 15% equity position in.
And green for what.
Are there restrictions around that what's your intention with that that position.
Yeah.
Marcus.
Paul the so the rollover Youre correct think of 32 U S.
Current exchange rates would be about a 40 million rollover into.
Green first as equity.
Again, we feel we're well positioned to.
To participate in upside in the lumber market with that vehicle.
And.
The nice thing is our views on the hold is measured in six months.
So again after that time period, we would be free to monetize it at our at our option.
And and you know as you are sitting now in looking at the lumber markets. I mean, obviously there their record highs are well above past peaks, but.
Is that something that you anticipate are.
Taking advantage of let's just say six months holding periods up or is that something do you think this lumber market has got some legs.
Look we're going to watch it just like you Paul.
As Mark just said I think there's some upside to that 15% that rolled over.
Well, we'll gauge that and we'll monetize.
We sold the assets with the plan not to be in that business in the long term so that will be our plan, but we will certainly make a play on the short term opportunity too.
The lumber market out as long as it stays strong everything we see out there is it's going to be strong for a while so we're really excited we're actually think on excited for green first products is a great way for them to start off.
As we noted that that transaction will come too.
Completion in the back half of this year. So we're going to have a good opportunity to capture a lot of the value that's created in 2021.
And then again, we'll be able to write some of the upside in Green first and we'll just have to make the call at the time.
Okay Fair enough and then maybe just any other portfolio changes that youre anticipating weighted with the businesses that youre currently.
No look we've kind of we feel like we've executed what we wanted to execute when we entered into this transaction, we made that very clear that.
We were really into and focused on the HBC assets of.
Tim back.
We said that over time, we would evaluate.
Opportunities to do that when the market's right.
I think we got some feedback on why not now on why not then and.
Again, I think it's all around of doing it when when the market's strength and we see the market strength, we like the additional businesses in there and as you know, they're they're connected the paperboard in the high yield pulp into <unk> and so we anticipate being longer term owners of all these assets. So I think we're in a good shape right now Paul.
Now, we just got to really leverage what we have invest back in them, but let's get the most out of them that we can and that's why we're talking about more about the <unk> and expanding our portfolio going forward into sustainable bio based products.
Great until I had thanks very much guidance.
Thanks, Paul.
Thank you. Our next question is from Roger Spitz with Bank of America. Please proceed with your question.
Thanks very much on.
On the 2 million U.
U S basis that cash.
Cash sales proceeds.
How much do you expect for years to repay debt and do you have a view of which are which day. It would go after with that.
Yes, good morning, Roger It's Marcus.
As you know within the senior note facility that that we negotiated recently.
We have a option.
For $150 million Paydown within that credit facility.
So certainly we built in that flexibility, we would see that as a natural place to to allocate a paydown.
But again, we will evaluate as we get to a closing what the best option is based on where the markets are but certainly we have that flexibility for us.
Got it on.
You.
Disclose I guess at some point you will be anyway, what Newsprints Q1, 'twenty on tier 121 sales and EBITDA in silicon.
Get our Ltm's right on the pro forma.
Roger.
We put a schedule in the back of the Investor deck page 22 that sets out.
Both for lumber and the newsprint EBITDA.
Figures for those three year periods.
And.
Do you expect to pay any cash as a payable on the sale of.
Although lumber newsprint business.
So do we expect to pay what I didn't get the cash taxes will there be on.
All cash taxes.
Yes.
Very little tax leakage.
We we estimated call it in the range of under $10 million and.
We're fortunate to have our NOL in Canada to help offset.
Any leakage in Canada, and then in the U S. A we have some credit so very little leakage is what we're expecting.
Okay.
Oh last ones on on cash flow.
Last call you can expect for 2021 capex of 85 to 90, obviously that probably it depends on the timing of the sales, but any update on that on the one at 2022 Capex.
Might look like.
Well you heard Paul's comments right with us refocusing the portfolio.
We would then be focused on the right level of custodial capital to maintain the reliability of our HBC assets.
So previously, we said $85 million to $90 million on a net basis.
You saw on the first quarter, we were 20.
Including some strategic capital.
I would certainly see.
US looking in the range of 100 million to maintain maintain custodial capex.
Last for me and ignoring the $10 million tax leakage on the sound low less than $10 million last call. You said you expected 2021 cash tax on the flow of 55 million and you made some earlier comments on on.
On cash taxes.
In the prepared remarks, but I'm I'm wondering should we still think of that $55 million, excluding the on the shelf.
On.
Tax linkage yep.
Roger.
We still envision the cares act refund, which is a 33.
And then we'll couple that with 17 to come in at around 50 now.
We reclassified a portion just based on some some further our audit work that's ongoing but we still feel good about the $50 million.
And the back end of this year.
Was it very much.
Thanks Roger.
Thank you. Our final question is from parents House for me.
With Bang Bang. Please proceed with your question.
Thank you good morning, everyone. So starting off maybe a follow up on the earlier question on C. As pricing for next year I, just maybe wanted to focus on the volume because you're a business you have multiple customers a different contract.
I guess, there's the.
The volume that is coming up for renewal on price reset next year as you know day.
This volume change so just any sense you could give us as to how much volume might be up for a reset as we enter 2022.
Josh I don't think we have that out there and I don't know that that's something we want to put out there right now obviously.
You have some of those businesses that comes up for renewal I don't think this coming.
The period of 2022.
Is anything more.
A substantial than what we've seen over the last few years. So I think it's in line.
So, yes, I think that it's a pretty I think typical rollover type of year, we got a lot of contracts in place for multiple years.
And we do have a bit of volume up for discussion.
Coming forward, but I think it's all on the range of what we've seen in the last handful of years.
Got it that's actually very useful.
Then switching to Tim silk opportunity.
I guess any update in that lifestyle market.
In recent months, that's worth sharing and.
Longer term it just becomes a bigger opportunity how should we think about the pricing is that something that would be priced at a premium to viscose or what kind of discussions are you having on that.
Yeah look.
That market like most textiles was pretty significantly impacted by.
COVID-19, and we saw that we saw a lot of our lifestyle assets.
And Asia slow down or shut down I think they even dip down to probably a $50 55 per cent and capacity there for wildfire Josh.
That looks like it's coming back on nicely.
Behind the viscose market a bit but moving forward.
Our customers in that area are still very optimistic about the five year growth plan and most of them are still all combined when we put it together or still looking at a 300 to 500000 ton type of growth opportunity out there. Obviously, we've got our sights on that some of our competitors have our sights on it we've.
Got a really nice softwood product that feeds into that market. So we're optimistic about that business going forward.
And with that we think on.
Our product will be will be priced at.
Premium and I'd say, probably most products. It takes a more specialized fiber to feed into the <unk> market than it does into the general viscose pulp market. So as we look at what capacity we have available.
And this is say broadly for the viscose market and keep in mind as I already said, we got a good amount available for the fluff pulp market.
We would take a look at driving that Tim cell business.
And then the balance would be remain meaning into the general viscose market, but also keep in mind net.
We have for softwood set of products and I know theres been some notes out there that there is more capacity coming into dissolving wood pulp on the viscose market.
They're all from the southern hemisphere, almost all of that is hardwood.
We've got a nice softwood product and is that hardwood demand moves into the market and.
Supply moves into the market the demand for our softwood product is going to continue to be increasing and we think at a premium over that hardwood. So we think either way whether it's Tim.
Just general this goes with our software product we are in good spot.
To serve the market.
And did you currently have.
Capacity yeah.
To make this much volume 300 to 500000 ton there.
Like how does it compare with your current viscose capacity.
So we don't have the capacity at this time to do three to 500000 tons were saying thats, what the overall market demand looks like over the next five years, what we've talked about this product himself is being made in our <unk> facility.
And we have said that we could see up to and including the majority of our production to Ms. <unk> at some point.
Being made.
Produce Tim self type product. So that's kind of how we're framing it right now Peter Tosh, if that helps you in that facilities.
It has the potential capacity or the boiler plate capacity of let's just call. It 140, <unk> hundred 50000 tons on that range and we can see the majority of that.
Growing into the market for 10 Silke.
And <unk>.
Thanks, Paul Thats very clear enough and maybe a last quick one for Marcus corporate cost, which was I believe $30 million Inc. Q1, how should we think about that as we go into that second half that I had when this transaction closes.
Okay.
Yes paradox the.
Where we do have some.
Not seasonality, but lumpiness to the corporate cost for the side, there but think of.
[noise] of $11 million to $12 million a quarter on the corporate side.
We would challenge ourselves to too.
You know optimize our corporate cost due to the due to the transaction, but it's not going to be a step change it's gonna be on optimization on that run rate.
Got it that makes sense. Thanks, guys. That's all I had.
Thank you.
Thank you ladies and gentlemen, we have reached the end of the question and answer session. I will now turn the call over to Paul Boynton for closing remarks.
Hey, Thanks, everybody for your time today.
With the current market tailwind and significant opportunities, we see to reinvest in our business. We're excited about the bio future of Rayonier advanced materials. So again. Thank you for your time and have a good day.
This concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation and have a great day.