Sylvamo Corporation Q1 2023 Earnings Call
Yeah.
Okay.
Good morning, Thank you for standing by welcome to silver almost first quarter 2023 earnings call. All lines have been placed on mute to prevent any background noise. After the Speakers' remarks, you will have an opportunity to ask questions to ask a question. Please press <unk>.
One zero on your telephone keypad to withdraw your question. Please press one zero again as a reminder, your conference is being recorded I would now like to turn the call over to Hans Bjorkman, Vice President Investor Relations, Sir the floor is yours.
Thanks, Greg Good morning, and thank you for joining our call today.
Our speakers. This morning are John Michel Riviera, Chairman, and Chief Executive Officer, and John <unk>, Senior Vice President and Chief Financial Officer.
Slides, two and three contain important information, including certain legal disclaimers for.
For example, during this call we will make forward looking statements that are subject to risks and uncertainties.
We will also present certain non U S GAAP financial information.
Reconciliations of those figures to U S. GAAP financial measures are available in the appendix.
Our website also contains copies of the first quarter earnings press release as well as today's presentation.
With that I'll turn the call over to you John Michelle.
Thanks, and good morning, and thank you for joining our call.
I'll begin my comments on slide four.
Our first quarter results were strong and in line with our expectation.
Adjusted operating earnings per share were $2.51.
And we have achieved 288 million and adjusted EBITDAX was at 22% margin.
We maintain a strong financial position with net debt at one one times adjusted EBITDA.
Price and mix as well as input transportation costs were favorable to our outlook.
Oh, the volume reflected continued inventory destocking and the list.
An expected seasonal slowdown in Latin America.
Oh, yeah quite a nomura amid posted a strong quarter the ramp up of cost savings from the recent both me and modernization are on schedule.
We are also pleased with our progress on all the operational and commercial synergies.
We returned 21 million in dividends and share repurchases to share owners in the first quarter.
I am now on slide five.
We remain committed to operating as a sustainable corporation that creates profits for shareowners, while protecting the environment.
Moving to life, Zeus with whom we interact.
With that in mind since the spin out we've been pursuing the formal approval for 2030 goals for greenhouse gas emissions.
We are pleased to announce that we received formal approval before 'twenty said emission reduction goals from the science based targets initiative.
As Mitch I knowledge, and our commitment to reduce our absolute scope one.
Two and three emissions by about 28% is consistent with a well below two degrees scenario.
As this slide shows our ongoing even more ambitious we committed to a 35% reduction in total greenhouse gas emissions really achieved throughout 2019 baseline.
Yeah.
Yeah.
Slide six highlights our key performance metrics for the first quarter.
We achieved sales of 959 million up 3% versus the fourth quarter.
We generated adjusted EBITDA of 208 million more than 20% versus the fourth quarter.
As expected free cash flow was lower than the fourth quarter, reflecting an increase in mill inventories in preparation for its second quarter planned maintenance outages and the payment of annual incentive compensation.
And we posted adjusted operating earnings of $2 51 per share.
And 87% increase over last years first quarter.
The strong performance demonstrated our ability to continue to deliver on our investment thesis.
No John will discuss our first quarter performance in more detail John .
Thank you Joe Michele good morning, everyone and thank you for joining our call, let's turn to slide seven to review, our first quarter adjusted EBITDA Bridge.
As Joe Michelle mentioned, we posted a solid quarter generating $208 million and EBITDA up 38 million versus the fourth quarter and in line with our guidance.
Our EBITDA margin was strong also at 22% 400 basis points better than the fourth quarter.
Price and mix decreased by $8 million, driven by lower market pulp prices in all regions.
With the accounting for the majority of the decrease.
In Europe , we reduced our paper prices as we rolled back.
Energy surcharge announced in the fourth quarter.
Paper prices paper.
And mix was stable in the Americas.
Volume decreased by $34 million.
In addition to the normal seasonal slowdown in Latin America.
Orders for the Brazilian government textbook program were delayed beyond the first quarter.
Volumes in Europe , and North America continued to be impacted by channel inventory corrections, particularly in the commercial printing segment.
Operations and costs improved by $18 million.
Primarily due to lower accruals for the annual incentive compensation and favorable foreign exchange in Brazil.
Absent cost improvements occurred despite taking about 60000 tons of lack of water downtime in response to our customers' inventory adjustment.
About half of the lack of order downtime was taken in Europe and the other half in North America.
We did not conduct any planned maintenance outages in the first quarter, which resulted in 31 million favorable variance.
Important transportation costs improved by $14 million, reflecting favorable energy and distribution costs trends.
And lastly, our new mill to mill added $17 million of adjusted EBITDA and is performing very well since we closed on the acquisition at the beginning of the year.
Let's move to slide eight and talk about the uncoated free sheet industry conditions.
Okay.
In the first quarter significant inventory Destocking continued in all regions, resulting in lower shipments in Europe and North America.
We expect inventory corrections to continue in the second quarter and be completed in the third quarter.
With respect to demand the first quarter is always the seasonally weakest quarter in Latin America.
The man also it was also adversely impacted by delay the annual Brazilian government textbook program.
This was a material shift since the education segment accounts for about one third of Brazil, uncoated freesheet demand.
These orders have started in the second quarter.
Okay.
It cuts the segment with accounts were about 40% of the uncoated free sheet market in North America has been the most resilient segment of uncoated free sheet over the last few quarters as demand has increased with more workers returning to the office.
Segment didn't see an increase in inventories in North America. So there was no need to destock.
As we expected uncoated freesheet imports receded to more normal levels. After peaking last October we anticipate second quarter imports do return to normal levels, driven by the adequate domestic supply and the reopening of the tiny as economy.
In the first quarter, two competitors announced permanent uncoated freesheet capacity shut down no.
North America 240000 ton in North America was shut down in North Carolina were shut down and in Europe , a machine in Australia will be shut down as well.
We expect these capacity reductions to favorably impact operating rates.
And in North America, we have already secured more than 50000.
Incremental tons on an annual basis.
Okay.
Okay.
Let's go to slide nine to look at imports into Europe , and North America.
Driven by domestic supply shortages in the first half of 2022.
Lower Chinese demand due to Covid Lockdown Indonesian exports were diverted from China into our regions and increased steadily until peaking in October of 2022.
As we mentioned last quarter, we expected that input.
It already peaked and would return to more normal levels.
And as you can see from the chart imports have dropped by about half in Europe , and two thirds in North America and are back to normal levels.
Moving to slide 10, let's discuss our second quarter outlook.
We expect to deliver an adjusted EBITDA of $115 million to $125 million, which reflects a $59 million increase in planned maintenance outage expense this quarter.
We project price and mix of decreased by $45 million to $50 million, reflecting the realization of prior price decreases for pulp in all regions and paper in Europe .
As well as less favorable product mix.
Keep in mind that pulp accounts for 10% of our sales on average 100000 tonnes per quarter.
We expect volume to improve.
$10 million to $15 million, reflecting seasonally stronger volume in Latin America.
We protect operations that caused the increase by $10 million to $15 million.
Due to Unabsorbed fixed costs as we continued to match supply to our customers needs.
We.
<unk> input and transportation cost to improve by $15 million to $20 million.
Largely on favorable trends in cost for natural gas chemicals and transportation.
Our adjusted operating earnings shouldn't be about 90 to $1 10 per share, including about one dollar per share of higher planned outage expense.
Okay.
Okay.
Okay.
Slide 11 shows our planned maintenance outages scheduled for the quarter with two thirds of total annual call scheduled for the second quarter.
During this quarter, we will conduct outages in all three regions.
After this quarter the remaining planned outage expenses will largely occur in the fourth quarter.
Okay.
Okay.
Okay.
I'm on slide 12.
Which shows again, our capital allocation framework.
And how we think about allocating cash to drive shareowner value.
As we maintain a much stronger financial position with about 1 billion of growth that we are putting a greater emphasis on returning cash to shareowners and reinvesting in our business.
Our earnings and generate cash.
We remain a cash flow story, we leverage our strengths to drive high returns on invested capital and generate free cash flow.
And we use that cash to increase shareholder value by maintaining a strong financial position returning more cash to shareowners.
And reinvesting in our business.
Let's flip to slide 13 to review, what we have done to enable us to increase the limit on cash returns to shareholders.
Yeah.
In March we repurchased $360 million of our outstanding notes in order to eliminate the covenant limited cash returned to $90 million per year.
We were pleased these notes with a new 300 million term loan a and short term debt.
This also allowed us to reduce our interest expense of $300 million of debt from 7% to 6% and the largest rate in by executing five year interest rate swaps.
The last step to increasing the limits on cash returns is to address the credit agreement covenant that restricts annual cash returns of $90 million.
When we approach that limit later this year, we expected deposit 60 million into an escrow account and maintained $225 million and liquidity. These actions will enable us to return more than $90 million.
Yeah.
Returning more cash to our shareowners.
It remains a priority.
I'll wrap up my comments on slide 14.
We're also reinvesting in our assets assuming it in our business. This year, we plan to invest $175 million to $190 million of non discretionary capital.
We are committed to ensuring safe operations in compliance with all laws and regulations and we need to ensure reliable operations to remain the supplier of choice to our customers.
In order to remain in the investment of choice, we need to maintain our low cost position and ensure availability of low cost fiber in Brazil.
We also expect to invest $35 million to $45 million cost reduction and strategic capital.
At our flagship mills to improve our low cost position.
And ensure the long term competitiveness these mills.
This slide shows two examples of attractive cost reduction project.
One in east over to reduce chemical consumption.
And one as Luisa Antonio to increase energy efficiency.
Both projects are forecasted to.
Generate internal rate of return over 20%.
So with that Zelle, Michelle I'll turn it back to you.
Thanks, John I'm now on slide 15.
We have revised our full year outlook, we now project adjusted EBITDA of $7 $20 million to $770 million and free cash flow of $2 $50 million to $280 million.
This new projections to reflect the impact of previously announced both price decreases.
Our updated views on second half pulp and paper pricing and volume.
And favorable input and transportation costs.
<unk> remains a cash flow story.
Our revised outlook indicates continued strong free cash flow of about six to $7 per share, which will allow us to return more cash to shareholders.
Yes.
Slide 16 please.
We remain confident no ability to create shareowner value and we remain committed to our investment thesis.
We will continue to leverage our strengths to drive returns on invested capital and generate cash and we will use that cash to maximize shareholder value.
Our three pronged strategy of commercial excellence.
The restaurant excellence and financial discipline.
That enabled us to continue creating long term value for shareowners.
We are grateful for tenancy that engaged colleagues and their dedication to working safely delivering on customer commitment and creating value for our shareholders.
Also grateful for our customers.
Without their continued support and partnership who cannot succeed.
With that I'll turn the call back to Hans.
Thanks, John Michelle and thank you John .
Greg we're now ready to take questions.
Okay, ladies and gentlemen, if you'd like to ask a question. Please press. One then zero on your telephone keypad to withdraw your question. Please press one zero again, we do ask that you limit yourself to one question and one follow up question.
And one moment. Please for your first question.
Your first question comes from the line of George Staphos from Bank of America. Please go ahead.
Congratulation on the progress thanks for all the details Mike.
My two questions one is going to be on the value return and then also just on the.
The outlook so in terms of the value return and.
The $60 million in escrow and the $225 million liquidity. John did you say you will do that or you can do that I just wanted to make sure that we're clear on.
Expectations over the course of the year, whether you are what your intention is there and then on the <unk>.
Are you seeing impact in your outlook.
You were very explicit in saying that you had reflected in your <unk> guidance.
Pulp pricing across all regions.
Paper in Europe .
There was no explicit mention of pricing elsewhere in other regions.
And then said that you have incorporated your views on paper pricing in the second half recognizing that pricing discussion is obviously very challenging at times on an open mic conversation what do you want to take away about your paper pricing expectations.
Timing of which across the other regions well across all the regions. Thanks guys.
Hey, George Good morning, and thanks for your question in terms of the value question you had.
Our top priority, we had going into this year with the increased cash returns to our shareowners, we returned $90 million last year, and we intend to substantially increase that this year to be able to do that.
We do have to address the bank covenants now that we've got them.
We've got admitted for let's say we've eliminated the.
The bond so as we approached 90 million the intent would be to put 60 million into an escrow. So that we can return more going forward okay.
I think the second question was around pricing, let me give you some color around the outlook. So as we've talked about and look at our first quarter pricing.
We did roll back energy surcharge in Europe , and that was really just associated with this mill volume because we of course, we didn't have the numerous mill last October .
And the <unk>.
We did increase prices in Brazil and.
In the first quarter.
And then prices in the Americas the price mix was.
Wisconsin It was flat.
In our outlook to $720 to $770 million that we revised our outlook does incorporate.
What we've seen already.
And we would expect in terms of both pulp prices in paper prices across the region and.
Yes, that's all I can really say about that yeah, just hi, Joe Thanks for joining the call what I would just add without getting on projections.
Your question was so America is in the.
North America like Latam Latam, we have not seen any price.
Decrease up to know our prices are flat.
Okay.
I will turn it over and come back thank you.
Thank you. Thank you.
If there are any additional questions. Please press 190.
Okay.
Once again, if you have a question please press one than zero.
And we'll go back to the line of George Staphos. Please go ahead.
Oh, Hey, guys.
So related to that question can you remind.
Find us.
How much of your of your volume is impacted.
By the pricing that we might see in the published indices against specifically within North America.
And then related.
Ross the other regions, if there's volume and if so roughly how much is tied to indices.
The second question for this turn.
You did from our vantage point a bit better than expected.
In overall blended realizations in Europe , yet for what it's worth that's our model Tonight Your model.
Our results were a little bit off on our forecast in Europe . So were theres some operating costs.
Clipped you there and similarly in North America.
<unk> operated very well from what we can see any any call outs there beyond what you've already shared in the waterfall.
So just one thing on indexes.
We have new prices linked to index, we not like market, both big guys. Our pulp customers are mostly.
Small and medium regional customers No index, and our paper price of New index relation so we that doesn't impact us.
The second question was on European cost I think there was two things one is we had some unabsorbed fixed costs.
We took as we mentioned some economic downtime in Europe , so that impacting our costs at west probably some of the cost.
But it and John anything else I think that was the main reason no. The only other thing. We had is we had a couple of reliability issues at.
It's a new mill in Mil, nothing really major but that did impact us.
Thank you I'll turn it over.
Your next question comes from the line of Paul Quinn from RBC Capital markets. Please go ahead.
Yes, thanks very much good morning, guys just said on the 60000 tenants like order downtime.
Your level of confidence that this destocking is going to end at the end of Q2 here in that.
Back half of the year should be should be full on.
Hey, good morning, Paul.
Actually we believe that Destocking will not end in the second quarter. It will continue into the third quarter.
Both in North America, and and in Europe , and this is what we're seeing from our customers.
We're really confident that it will be completed by the end of <unk>.
Ended the third quarter. So we are seeing and expect the second half of our outlook is stronger than the first half because we do expect increased volumes across all our regions. One is driven by the Destocking is going to work its way through by the third quarter.
In North America, we picked up additional tonnes from the mill that shut down in North Carolina, which is 60000 tons.
In Brazil, it's seasonally always stronger in the second half, but on top of that this book the government book issue wasn't significant.
The issue and this is not unusual for when there's a change in government, but I'm not the release.
School book publishing contract.
They were low late on that but that's absolutely we started seeing orders in the second quarter, but we'll have to see the bulk of that in the third quarter, which will make our.
Brazilian shipments stronger even seasonally stronger than what we've seen in the past.
Okay, and then just maybe as a follow up to that how do you. How do you determined between destocking and sort of secular decline.
Appreciate it.
Yeah, Hi, Paul Thanks for joining the call it's always a.
Key question.
The.
Well I wouldn't mention it is it's difficult to separate it.
We do attribute from our customers and what we see on the end use.
Informations that helps us well.
All we can say is coming from our customers. Most of them are still talking about some destocking going on but clearly less than it was in first quarter.
From the end use probably the only thing we have is the commercial printing.
And commercial printing I would say, especially also the marketing budget.
Big companies with the uncertainty of the economy have a tendency to be reduced on advertising and that reduction of an advertising budget is impacting direct mail.
So from the end use segment the only trend we can see.
Is the.
Direct as a matter of the rest of it we're not seeing something significative, we're mostly seeing.
Destocking.
Yeah.
Yes, Paul let me add to that I think there is because sometimes in the reported.
Industry statistics can be confusing when you look at how significant demand decline that we reported in the fourth quarter.
One thing to understand like win win.
When the pulp and paper products Counsels for example, the calculation of demand. It is apparent demand what they used to calculate that domestic shipments minus exports plus imports and so.
And the both North America and also in Europe imports can have a significant impact on this apparent demand so <unk>.
Imports increased significantly in the fourth quarter demand was.
Somewhat inflated in terms of reported numbers and because the exports receded in the first half.
Demand declined numbers looked pretty severe.
If you look at the six months the last six months essentially averages to you get in North America for example demand was down 3%.
I'm curious rishi.
And that's how we're kind of looking at it one of it is you got to look at kind of through the noise and.
We have seen.
We believe some demand decline is driven.
The economy is slowing in the economy, particularly we see it and.
<unk>.
And envelopes and we've seen that and lower spending on direct mail.
But for example, as I talked about cuts us being resilient and if you look at the past six months.
<unk> up 2% and that's because more people returning back to the offices. So I hope that adds a little bit more color to the.
Demand.
Situations.
Yes.
Eight point, thanks, very much John maybe I'll just sneak in a bonus question here.
The maintenance Varian.
Really caught us by surprise.
What sort of big Q2 and Q4.
And do you anticipate that sort of same sort of pattern in 'twenty four as well.
So there are two things into that and we tried to.
Locate when we give our numbers but.
And then as the outages.
Due to regulatory obligations.
And sometimes two timing with the weather. So in some mills you don't want to do it when you close to a risk of where we can see that our strong cold season, when youre in Ticonderoga.
So.
You have also saw yet which is maybe a little bit traveling because we are not on a 12 months <unk> rotation at saia, we on a 12 or 18 months 18 months rotation, which mean you have two years with about $20 million.
<unk> impact and you've got a year with zero in maintenance last year, we had zero. This year, we have not yet at the edge, which is 'twenty and we'd do it according to regulatory but we usually always have strong seasons, which are second and fourth quarter. When you look at the Easter holiday.
As I mentioned due to regulatory and weather.
Alright, Thank you very much.
Thank you Paul.
Your next question comes from the line of Jonathan Luft from Eagle Capital Partners. Please go ahead.
Hey, guys. Thanks for taking my question.
I was hoping you could flesh out a little bit.
The capacity closures and what Youre seeing and how you were able to.
Take some of that share.
Was it competitively bills was it something that the.
The customers came to you. So that's my first question.
Yes, Jonathan Thanks for your question and thanks for joining the call.
Yes, we were.
Well, we are working with actually existing customers.
A lot of these orders in terms of moving some of that business that they had.
Source with the Bill that was closing.
To us we wanted to be.
We want to be selective we wanted to make sure that we've got attractive business and so our sales teams targeting those particular businesses that were attractive to us.
Yeah.
Great.
And the closure in Europe that you mentioned did that happened yet or is that to come in as they're similar.
A similar opportunity to take some volume there.
Just wondering if there is no it has not happened yet.
They have yet to.
Now on exactly when that would the timing of that shutdown.
Okay.
But we do expect that like anything there is opportunity there.
Pick up business, yes, Jonathan.
With target.
Thanks, and just my last question just on the guidance.
And looking at slide 15, and talking about the second half you talked about favorable input and transportation costs.
And I was hoping you could flesh that out are those are related to two items that might have annual contracts is it.
It was something that maybe will benefit us going into 'twenty four or is it really you know spot contracts that youre seeing lower just what's going on there.
Well it doesn't it's really kind of a mix.
Most of it is driven by spot prices in terms of fuel like fuel surcharges for freight.
And we're seeing it also in terms of energy as you see gas coming down and so that'll move maybe with somewhat of a lag sometimes.
In fact, and we really haven't seen yet is chemical costs.
Down, but we expect that in the future.
Go down because that also is driven by the energy markets and.
So thats a little bit delayed, but we're seeing we expect to see that in the second half and yes all of those costs for the most part will carry on into.
You may hopefully into the next year.
Having said all that cost is still extremely high compared to where they were a couple of years ago.
It's also less supportive.
Pricing.
Yeah.
Okay. Thank you very much I'll turn it over.
Next we'll go back to the line of George Staphos. Please go ahead.
Hi, guys.
Couple of questions here first of all having owned <unk> for a couple of months now what are your learnings with it you said you had some reliability issues you said it wasn't significant but.
What was behind that as well so kind of whats what did you learn with normal what was and reliability.
Kind of what's the horizon opportunity there that would be sort of a multipart.
Question number one.
And then <unk>.
Just as we think about.
Again, destocking consumption and the like.
Are you seeing better trends or worse trends, depending on whether we're talking about retail versus commercial print versus distribution. My sense is probably your big box retail customers are doing okay. In terms of the man because you said cut size, there's not really any destocking to go through so if you could give us some.
Additional one affirm that or correct that but to give us some color there and.
And then last I took three here.
Coated paper markets have been.
Perhaps even more challenged based on the operating metrics.
Are you seeing any effect, obviously, it really wouldn't have that much in cut size, but are you seeing any effect of that coated paper.
Your commercial print markets in uncoated freesheet or is there something that you've embedded in your second half guidance for that potential risk score.
And if not why not thank you guys.
Well I'll take the first one and maybe we'll tag team on this it will take the second question, maybe just a third question too but let.
Let me just say from a <unk> perspective, we've been very pleased with the performance that bill very happy.
With the asset with the people that we have so this issue that I talked about in terms of reliability is not atypical I mean, we have that.
And our other mills that will go up over time. This is just happened to be impact our energy consumption and increased our cost but that that issue.
Was behind us.
And the mill is performing very well.
We said in our and our.
Jason that the pulp mill upgrades.
That were completed prior to the acquisition of <unk>.
Those benefits now that the ramp up curve is actually going better than expected. So all in all we're very pleased.
With the performance of the <unk> mill, and really believe Thats, just going to be a great.
As a great business for us.
Europe .
Yes concerning destocking.
As you mentioned it you are correct. We are we seeing it much more in the commercial printing, which impact merchants than we're seeing it on the retail and cut size cut size has been more resilient as John mentioned it. So we're seeing a differences and by the way we're seeing some of our customers which are turning.
It is getting much better they've done.
Biggest destocking they needed to so that's why we plan to continue to have some in Q2 may be less in Q1.
And I think by third quarter would be gone.
We sometimes see it.
On some of our eye and products from Ticonderoga, but it is nuts initiative to us.
Thanks, John Michelle Thanks, Shawn good luck in the quarter. Thank you. Thank.
Thank you.
Once again, if you have a question. Please press one then zero.
And you have you have a question from the line of David Steinhardt from.
Training capital. Please go ahead.
Hey, guys can you talk about the.
New additional directors that came on through the cooperative agreement with Atlas.
How they have impacted the board.
How they might've been helpful. So far and any thoughts that you might have about the company as you approach your important two year anniversary.
Yes, thanks for the question and thanks for joining the call first of all let me tell you. It's a good experience.
As we expected.
We have to experience person. So I believe board meeting, we will come to two new directors.
The timing was perfect in SaaS prudent when we conduct our strategic reviews with the board.
All those sessions with protective I'll bring out new direct to see is that as I mentioned, they bring unique experience and talented and they are all aligned resolved rejecting about creating value for shareholders. So I would say all in all the good experience nothing special.
Yeah.
Got it and then any thoughts around that.
So you might have about the business as you approach your two year anniversary.
I'm not sure I understand the question I'm, sorry, if anything I would just say.
<unk> is doing well I mean, we expect again a year off.
760 <unk>.
$720 million, sorry, two $770 million, our strong free cash flow. So two great years 2022 was a good year and expect another good year in 'twenty three.
And I'll just add to that David I mean, we really believe that the uncoated freesheet markets that we operate in provide attractive conditions that allow us to leverage our competitive advantages to generate high returns on invested capital.
And.
And we believe we can generate first quartile total shareholder returns.
We feel very positive about that even in light of maybe some challenging economic clouds that are rolling in but we believe that we will continue to generate.
High returns on invested capital and we're generating over 25% returns on Linzess capital today, and we believe that there is.
There is more to be done and we can increase our earnings and our cash flow going forward.
Thank you.
And next we'll go back to the line of George Staphos. Please go ahead.
Hi, guys I lied one last question for you.
Working capital was a touch more negative than we're looking for one of the things that we saw with payables were down and I'm just guessing that you know as you've been trying to work working capital down you also haven't needed as much in the way of chemicals and other inputs I will go into.
Production, but just wanted to ascertain if that was it if there was anything else other than.
I see the Destocking and then that working capital line. So yeah.
What was in the accounts payable and working capital and now I'll turn it over and have a good quarter. Thank you.
Thanks, George and thanks for your question.
Yes.
Our free cash flow in the first quarter was as expected. The key things that were driving that rightly said is that payables went down one of that was the incentive plans that we paid.
Yeah.
That was a.
Big contributor to that the other thing was the increase in inventories.
Our working capital.
And that was in preparation and getting prepared for this significant outage quarter that we had right now so that was the key factors that drove the working capital change in the first quarter.
Okay. So nothing beyond that in terms of payables.
I appreciate it guys. Thank you.
Thank you. Thank you for your question.
And at this time there are no further questions I'd now like to turn the call back to Hans Bjorkman for any closing comments.
Thanks, Greg before I wrap up the call John Michel any closing thoughts thanks, and first of all thanks, everybody for joining our call I think it's important to say this year, we remain confident in our ability to generate very strong EBITDA beats.
Between $720 to $770 million free cash flow of 250 to $2 80.
Just to put it in perspective that can present, an adjusted to be down more than 18%.
The return on invested capital above 25%. So we are expecting good numbers and that will Lewis.
To achieve one of our main goal, which is to return more than $90 million to shareholders, we'd do that jet Davita and then share repurchases in 'twenty, three and that remains a priority.
With that thank you for joining the call.
Thanks for joining the call. We appreciate your interest in <unk> and we look forward to continued conversations in the coming weeks and the months ahead. Thank you very much have a great day.
Once again, we'd like to thank you for participating in silver almost first quarter 2023 earnings call you may now disconnect.
Yeah.
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