Q4 2023 Rayonier Advanced Materials Inc Earnings Call
Operator: Good morning, welcome to Ryan's fourth quarter and full year 2023 earnings conference call. During today's presentation, all parties will be in a listen only mode.
Good morning, welcome to Ryan fourth quarter, and full year 2023 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 to follow at that time.
Operator: Following the presentation, the conference will be open for questions with instructions to 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. Thank you, Mr. Walsh. You may be disconnected.
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. Thank you. Mr. Waltz, you may begin.
Mickey Walsh: Thank you. Good morning. Welcome again to Ryan's fourth quarter and full year 2023 earnings conference call and webcast. Joining me on today's call are Delisle Blomquist, our President and Chief Executive Officer, and Marcus Moeltner, 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, ryam.com.
Thank you and good morning, well well get under Ryan <unk> fourth quarter, and full year 2023 earnings conference call and webcast.
Joining me on today's call are July all Bloomquist, 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 are available at our website <unk> Dot com.
Mickey Walsh: 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, list 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 slide two of our presentation. Additionally, today's presentation will also reference certain non-GAAP financial measures, as noted on slide 3 of our presentation. We believe non-GAAP financial measures provide useful information for management and investors, but non-GAAP measures should not be considered an alternative to GAAP measures.
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 list. 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 slide two of our presentation materials today.
Today's presentation will also reference certain non-GAAP financial measures as noted on slide three of our presentation. We believe non-GAAP financial measures provide useful information for management and investors, but non-GAAP measures should not be considered an alternative to GAAP measures. A reconciliation of these measures to their most directly comparable GAAP financial measures.
Mickey Walsh: A reconciliation of these measures to their most directly comparable gap financial measures is included on slides 19 through 24 of our presentation. With that, I'd like to turn the call over to Delisle. Thank you, Mickey, and good morning.
Are included on slides 19 through 24 of our presentation with that I'd like to turn the call over to Doyle.
Well, thank you Mickey and good morning.
Delisle Blomquist: I'll begin with a financial overview for the fourth quarter of the full year 2023. Following that, I'll discuss recent company actions before handing over to Marcus for additional details on the business segment and our capital structure and liquidity. After Marcus's update, I'll return to offer further insights into our 2024 initiatives and guidance, including an update on the sales process for the paperboard and high-yield pulp business, before opening the call for questions. Let's now turn to slide four to review our performance in the fourth quarter and the full year of 2023. The results for both periods fell below expectations, with EBITDA of $37 million for the fourth quarter and $130 million for the full year, reflecting declines of $18 million and $38 million versus 2022, respectively. The fourth-quarter shortfall can be attributed to weaker-than-expected demand for paperboard.
I'll begin with a financial overview for the fourth quarter. The full year 2023, following that I will discuss recent company actions before handing over to Marcus for additional details on the business segments, and our capital structure and liquidity.
After Mark says update I'll return to offer further insights into our 'twenty 'twenty four initiatives and guidance.
Looking at update on the sales process for the paperboard in high yield pulp business.
Before opening the call for questions.
Let's now turn to slide four to review our performance in the fourth quarter and the full year of 2023.
The results for both periods fell below expectations with EBITDA of $37 million for the fourth quarter and $130 million for the full year.
Reflecting declines of $18 million and $38 million versus 2022 respectively.
The fourth quarter shortfall can be attributed to weaker than expected demand for paperboard, while the full year results were impacted by persistent weak demand across various product categories.
Delisle Blomquist: While the full-year results were impacted by persistent weak demand across various product categories, notwithstanding the strong pricing observed in our CS segment, despite the challenges stemming from the weak paperboard results in Q4, I was encouraged by the rebound observed in our core cellulose specialty business. This was principally the result of increased market share accruing to us as a result of the closure of a competitor. As we noted on our previous calls, we focus our efforts on free cash flow generation in the second half of 2023, given these macro headwinds. These efforts resulted in $53 million of free cash flow, which was largely driven by a $93 million benefit in working capital.
Standing strong pricing observed in our CS segment.
Despite the challenges stemming from the weak paperboard results in Q4 I was encouraged by the rebound observed in our core cellulose specialty business.
This was principally the result of increased market share recruiting to us as a result of the closure of a competitor.
As we noted on our previous calls we focus our efforts on free cash flow generation in the second half of 'twenty twenty-three given these macro headwinds.
These efforts resulted in $53 million of free cash flow, which was largely driven by a $93 million benefit in working capital.
Delisle Blomquist: We expect to maintain this benefit in 2024, and we think we can realize an additional $15 million in working capital monetization this year, stemming mainly from declining commodity pricing and decreased, particularly in markets that are interest rate sensitive like the construction ethers market. Conversely, our cellular specialty products maintain strong pricing, realizing an 11% increase compared to 2022. This result reflects our focus on prioritizing value over volume for a specialized product. In the paperboard segment, EBITDA decreased by $1 million compared to 2022, primarily due to lower sales volumes from customer to stock, partially offset by decreased purchase pull, maintenance, and logistics costs, along with market-driven downtime taken in response to the weak market condition. High-yield pulp Evodog decreased by $20 million versus 2022, driven by lower sales volumes and prices amid weak market demand.
We expect to maintain this benefit in 2024, and we think we can realize the additional $15 million of working capital monetization this year.
The challenges encountered in our high purity cellulose segment stemmed mainly from declining commodity pricing and decreased volumes in cellulose specialties, particularly.
Particularly in markets that are interest rate sensitive like the construction ethers markets.
Conversely.
Our cellulose specialty products maintained strong pricing.
Realizing an 11% increase compared to 2022.
This result reflects our focus on prioritizing value over volume for our specialized products.
Yeah.
In the paperboard segment EBITDA decreased by $1 million compared to 2022, primarily due to lower sales volumes from customer Destocking.
Partially offset by decreased purchase pulp maintenance and logistics costs, along with market driven downtime taken in response to the weak market conditions.
High yield pulp EBITDA decreased by $20 million versus 2022, driven by lower sales volumes.
And prices amid weak market demand increase wood cost and market driven downtime taken in response to the weak market conditions.
Delisle Blomquist: Increased wood cost and market-driven downtime taken in response to the weak market condition. Corporate segment EBITDA declined by $11 million primarily due to less favorable foreign exchange rates and discounting and financing fees incurred to support working capital enhancement. Next, I would like to offer some high-level commentary on a few significant events that occurred in the fourth quarter, each of which will be elaborated on by Marcus.
Corporate segment EBITDA declined by $11 million, primarily due to less favorable foreign exchange rates and discounting and financing fees incurred to support working capital enhancements.
Next I would like to offer some high level commentary on a few significant events that occurred in the fourth quarter, each of which will be elaborated elaborated on by Marcus.
First.
Delisle Blomquist: The finance team secured a covenant amendment for our 2027 Turnbull facility. In January, we announced an amendment to expand the Net Secured Debt Covenant to 5.25X. While we are confident in our ability to manage within the original covenant, as evidenced by the results of a 4.2x for Q4, we wanted the operational flexibility that the expanded covenant and result in liquidity would grant us so we could continue to execute on our strategic initiative. We also believe that the enhanced flexibility will also reassure key stakeholders. Second, we conducted a review of our existing assets and determined that impairments were necessary for our Tamiscomine HPC plant and the seam line at our Jessup plant.
The finance team secured a covenant amendment for our 'twenty 'twenty seven term loan facility.
In January we announced an amendment to expand the net secured debt covenant to 5.25 X.
While we are confident in our ability to manage within the original covenant as evidenced by the results of a two 4.2 X for Q4, we wanted the operational flexibility that the extent of coveted and resultant liquidity would grant us. So we could continue to execute on our strategic initiatives.
We also believe that the enhanced flexibility will also reassure key stakeholders.
Second we conducted a review of our existing assets and determined the impairments were necessary for Artemis can mean H P C plant.
And the C line at our Jesup plant.
Delisle Blomquist: Regarding the Jessup Sea Line, we have made the strategic commitment to focus its capacity on fluff production going forward and, conversely, focus the Jessup specialty cellulose production on the A and B lines. The write-off related to the tamiscomene HBC plant reflects the transition of the tamiscomene HBC facility to viscose production, which we are doing to leverage its low unit variable The total impact of these two non-cash write-offs is $62 million. With that, I'd like to pass the meeting over to Marcus to walk us through the financials for the year. Thank you. Thank you. Thank you, Delisle.
Regarding the Jesup C line, we have made the strategic commitment to focus its capacity of fluff production going forward.
Conversely focus the jesup specialty cellulose production on the a and B lines.
The write off related to the Mis you mean H B C plant reflects the transition of the tourists can mean H B C facility two bits goes production.
Which we are doing to leverages slow unit variable cost.
The total impact of these two noncash write offs of $62 million.
With that I'd like to pass the meeting over to Marcus to walk us through the financials for the year.
Marcus Thank you Doyle.
Beginning with our high purity cellulose segment on slide five sales for the year decreased by $23 million or 2% to $1 3 billion due to a higher mix of commodity sales and lower market demand in certain specialty markets.
Marcus J. Moeltner: Beginning with our high purity cellulose segment on slide 5, sales for the year decreased by 23 million or 2% to 1.3 billion due to a higher mix of commodity sales and lower market demand in certain specialty markets. The decline was primarily driven by a 13% decrease in commodity sales prices, partially offset by an 11% increase in CES prize.
The decline was primarily driven by a 13% decrease in commodity sales prices, partially offset by an 11% increase in C S pricing highlighting.
Our commitment to securing fair value for our specialty offerings.
Sales volumes increased by 4% to 955000 metric tons.
Marcus J. Moeltner: Highlighting our commitment to securing fair value for our specialty offers, sales volumes increased by 4% to 955,000 metric tons, resulting from increased sales in the commodity market. Commodity sales volumes rose by 39% compared to the prior year, whereas CS volumes decreased by 18%. The decline was associated with lower market demand and substantial customer destocking, primarily in construction markets.
Resulting from the increased sales in the commodity markets.
<unk> sales volumes rose by 39% compared to the prior year, whereas C. S volumes decreased by 18%.
The decline was associated with lower market demand.
And substantial customer destocking, primarily in construction markets.
Other sales for the year were 98 million, which included $49 million of Green energy sales.
EBITDA for the segment decreased by 6 million to $144 million, primarily due to a less favorable sales mix declining commodity prices and increased labor costs due to inflation.
Marcus J. Moeltner: Other sales for the year were $98 million, which included $49 million of green energy spending. EBITDA for the segment decreased by $6 million to $144 million, primarily due to a less favorable sales mix, declining commodity prices, and increased labor costs due to inflation. These impacts were partially offset by higher CS sales prices. As Delisle mentioned earlier, we undertook a review of our existing assets and concluded that impairments were necessary for our Temiscaming HPC plant and the Jessup Sea Lion.
These impacts were partially offset by higher C S sales pricing.
As Neil mentioned earlier, we undertook a review of our existing assets and concluded that impairments were necessary for our two Michigan mean, H B C plant and the Jesup C line.
The total noncash impact on operating income amounts to $62 million.
This will result in a lower annual depreciation expense of approximately five mill.
Turning to slide six sales in the paperboard segment experienced a decline of 31 million, mainly due to a 13% reduction in sales volumes due to customer destocking.
Year over year sales prices improved slightly and EBITDA for the segment decreased by 1 million to $52 million.
Marcus J. Moeltner: The total non-cash impact on operating income amounts to $62 million. This will result in a lower annual depreciation expense of approximately $5 million. Turning to slide 6.
Primarily due to lower sales volumes.
Which more than offset the benefits of reduced purchase pulp maintenance and logistics costs.
Turning to the high yield pulp segment on slide seven.
Marcus J. Moeltner: Sales in the paperboard segment experienced a decline of 31 million, mainly due to a 13% reduction in sales volumes due to customer destocking. However, year over year, sales prices improved slightly. And EBITDA for this segment decreased by $1 million to $52 million, primarily due to lower sales volumes, which more than offset the benefits of reduced purchase pulp, maintenance, and logistics costs. Turning to the high-yield pulp segment on slide 7. Sales declined by $24 million in comparison to the prior year, mainly due to a 12% drop in external sales prices and a 5% reduction in sales volume. The reductions were a consequence of weaker market demand. Segment EBITDA stood at negative $1 million in contrast to $19 million generated in the prior year.
Sales declined by $24 million in comparison to prior year, mainly due to a 12% drop in external sales prices and a 5% reduction in sales volumes.
The reductions were a consequence of weaker market demand.
Segment EBITDA stood at negative $1 million in contrast to $19 million generated in the prior year.
Transitioning to slide eight our consolidated operating loss for the year amounted to $65 million inclusive of the $62 million noncash asset impairment charge recorded in the fourth quarter.
Sales price improvements and see us in paperboard.
Were more than offset by the impact of unfavorable H P. C sales mix lower sales prices in each P C commodities and high yield pulp.
Costs remained relatively stable compared to the previous year with deflation in certain input costs being offset by increased labor expenses due to inflation.
Marcus J. Moeltner: Transitioning to slide 8, our consolidated operating loss for the year amounted to $65,000,000, inclusive of the $62,000,000 non-cash asset impairment charge recorded in the fourth quarter. Sales price improvements in CS and paperboard were more than offset by the impact of an unfavourable HPC sales mix, lower sales prices in HPC commodities, and high-yield pulp. Costs remained relatively stable compared to the previous year, with deflation in certain input costs being offset by increased labor expenses due to inflation.
SG&A and other costs increased by $57 million.
Mainly due to the $62 million noncash asset impairment charge unfavorable foreign exchange rates disk.
Discounting and financing fees incurred to support working capital enhancements as well as higher ERP project costs and professional fees.
These costs were partially offset by lower variable compensation and one time severance expenses from the previous year.
Now, let's turn to slide nine.
Marcus J. Moeltner: SG&A and other costs increased by $57 million. mainly due to the $62 million non-cash asset impairment charge, unfavorable foreign exchange rates, Discounting and financing fees incurred to support working capital enhancement, as well as higher ERP project costs and professional fees. These costs were partially offset by lower variable compensation and one-time severance expenses from the previous year. Now let's turn to slide 9.
Total debt ended the year at 777 million a reduction of $76 million from the same period in 2022.
Net secured debt reflected in our financial covenant ratio associated with the term loan ended the year at $698 million.
Our primary focus for 2023.
What is on free cash flow and debt management.
Consequently, we executed opportunistic downtime at both paperboard in high yield pulp facilities as well as at our Tar tests HBC facility.
Marcus J. Moeltner: Total debt ended the year at $777 million, a reduction of $76 million from the same period in 2022. Net secured debt, reflected in our financial covenant ratio associated with the term loan, ended the year at $698 million. Our primary focus for 2023 was on free cash flow and debt management. Consequently, we executed opportunistic downtime at both paperboard and high yield pulp facilities, as well as at our TARTAS HPC facility. All key factors in supporting the impressive $93 million working capital benefit generated during the year. In January, management took a prudent and proactive approach and successfully amended the covenant associated with the term loan.
All key factors.
In supporting the impressive $93 million working capital benefit generated during the year.
In January management took a prudent and proactive approach and successfully amended the covenants associated with the term loan.
While we remain confident in our ability to navigate through the covenant.
We believed it was important to ensure the company maintained operating flexibility to fully implement our strategic initiatives, while alleviating any liquidity concerns star.
Structurally the amendment expands the adjusted let net leverage test from four and a half times to five to five times gradually stepping down until four and a half times has reached after Q4 of 2024.
Net secured leverage closed the year at four two times within the original Covenant test.
Liquidity ended the year at 199 million, reflecting $76 million of cash.
Marcus J. Moeltner: While we remain confident in our ability to navigate through the Covenant, we believe it was important to ensure the company maintained operating flexibility to fully implement our strategic initiatives while alleviating any liquidity concerns. Structurally, the amendment expands the Adjusted Net Leverage Test from 4.5x to 5.25x. Gradually stepping down until four and a half times is reached after Q4 of 2024, net secured leverage closed the year at 4.2 times, within the original covenant test.
Entered 18 million available under our ABL facility and 5 million for a French factoring facility.
We remain committed to adhering to the original four and a half times Covenant test and will focus on all levers at our disposal to maintain appropriate liquidity levels and execute the company's exciting growth opportunities with that I'd like to turn the call back over to the law.
Thank you Marcus.
Let's now turn our attention to slide 10, where I'll outline our key initiatives for 2024.
Our top priority for the new year is to refinance the 2026 senior notes before they go courage in January 2025.
Marcus J. Moeltner: Liquidity ended the year at $199 million, reflecting $76 million of cash, $118 million available under our ABL facility, and $5 million for our French factoring. We remain committed to adhering to the original four and a half times covenant test, and we'll focus on all levers at our disposal to maintain appropriate liquidity levels and execute the company's exciting growth operations. With that, I'd like to turn the call back over to Delisle. Thank you, Marcus.
To best position us to execute on this refinancing we will continue to prioritize debt reduction.
We are targeting a gross debt reduction of $70 million in 'twenty 'twenty four financed through business generated free cash flows and a potential monetization of $35 million to $40 million in passive assets.
Additionally, as announced last year.
We are exploring the potential sale of our profitable paperboard into high yield pulp businesses.
To further reduce the debt before the refinancing.
The sales process being is being managed by Houlihan lokey.
And it remains on schedule.
We received expressions of interest from both strategic parties and financial sponsors.
Delisle Blomquist: Let's now turn our attention to slide 10, where I'll outline our key initiatives for 2024. Our top priority for the new year is to refinance the 2026 senior notes before they go current in January 2025. To best position us to execute honest refinancing, we will continue to prioritize debt reduction.
We will provide further updates on this project as it develops.
We are working hard to implement our asset optimization strategies to address our H P. C commodity exposure given the drag this exposure has on our profit margins and earnings stability.
To highlight the importance of this effort.
Delisle Blomquist: We are targeting a growth debt reduction of $70 million in 2024, financed through business-generated free cash flows, and a potential monetization of $35 to $40 million in passive assets, additionally, as announced last year. We are exploring the potential sale of our profitable paperboard and high-yield pulp business to further reduce the debt before the refinance. The sales process is being managed by Houlihan Loke, and it remains on schedule.
Our non fluff commodity sales had an EBITDA loss of minus $60 million in 2023, and currently we project a minus $48 million EBITDA loss in 2024.
Obviously, if there's a strategic imperative to mitigate exposure to non fluff commodities.
As you know a key element of our strategy entails transferring a significant portion of our viscose production towards misgiving HBC facility.
Which benefits from the lowest variable cost among our HBC lines.
Delisle Blomquist: We received expressions of interest from both strategic parties and financial sponsors, and we'll provide further updates on this project as it develops. Meanwhile, we are working hard to implement our asset optimization strategies to address our HPC commodity exposure given the drag this exposure has on our profit margins and earnings stability. To highlight the importance of this effort, our non-fluff commodity sales had an EBITDA loss of minus $60 million in 2023, and currently, we project a minus $48 million EBITDA loss in 2024. Obviously, it's just a strategic imperative to mitigate this exposure to non-fluff commodities.
I'm pleased to announce the project is progressing according to our initial timeline.
And I will provide updates as we move forward.
Our final, perhaps the most compelling initiatives.
To continue realizing the exceptional opportunities within our biomaterials business.
Our TARDIS Bioethanol plant is currently going through testing and if all goes well we expect to begin bioethanol production in March.
This policy is expected to generate $4 million in EBITDA. This year as we ramp up production.
And then $8 million to $10 million in 2025, and thereafter, when we achieve steady state production.
Yeah.
This project is the first of several bio material projects that we plan to launch over the next couple of years.
As highlighted during our Investor day upcoming projects in the pipeline include a bio ethanol plant at our Fernandina facility.
Delisle Blomquist: As you know, a key element of our strategy entails transferring a significant portion of our viscose production to our tamiscomine HPC facility, which benefits from the lowest variable cost among our HPC lines. I'm pleased to announce the project is progressing according to our initial timeline, and I will provide updates as we move forward. Our final and perhaps most compelling initiative is to continue realizing the exceptional opportunities within our biomaterials business. Our TARDIS bioethanol plant is currently going through testing.
The H E project at our Jesup facility.
With just the production of Green energy for sale to Georgia power.
Ah Prebiotics added a plant to also be located at our Jesup facility.
In crude tall oil projects in France and in the U S.
As previously disclosed these projects will primarily be funded by low cost Green project capital there.
We're expected to generate significant margin expansion due to co product economics economies of scale.
Delisle Blomquist: If all goes well, we expect to begin bioethanol production in March. This project is expected to generate $4 million in EBITDA this year as we ramp up production, and then $8 to $10 million in 2025 and thereafter when we achieve steady-state production. This project is the first of several biomaterial projects that we plan to launch over the next couple of years.
Last night, we announced the Mou with first so energy to explore E fuels, specifically E staff.
From renewable resources, including Biogenic C O two at our TARDIS plant.
Staff or sustainable aviation fuel.
Would be used by the global airline industry is a drop in a sustainable replacement for current jet fuel.
Well he's working with first so energy to explore the feasibility of capturing the biogenic C. O two produced at the <unk> plant.
Delisle Blomquist: As highlighted during our Investor Day, upcoming projects in the pipeline include a bioethanol plant at our Fernandina facility, the AGE project at our Jessup facility, which is the production of green energy for sale to Georgia Power, a prebiotics additive plant to also be located at our Jessup facility, and crude tall oil projects in France and the U.S. As previously disclosed, these projects will primarily be funded by low-cost green Last night, we announced an MOU with Verso Energy to explore e-fuels, specifically e-saf, from renewable resources, including biogenic CO2 at our TARDIS plant. SAF, or Sustainable Aviation Fuel, would be used by the global airline industry as a drop-in sustainable replacement for current jet fuel.
To produce the east staffing combination with green hydrogen.
While we are still in the early stages of evaluating this opportunity.
The potential impact to Ryan is substantial.
We look forward to keeping you updated as this project progresses.
Let's move to slide 11, where I'll present, our EBITDA and free cash flow projections for 2024.
We anticipate 'twenty 'twenty four enterprise EBITDA to range between 180 and $200 million for the year.
Cash interest expense is expected to be in the 85 billion dollar range.
Which is inclusive of about $14 million attributed to the timing of interest payments.
On a normalized basis.
The estimated annual interest expense would be around $70 million.
Yeah.
Maintenance expenses are set at $85 million a figure we consider sufficient this year to maintain the reliability of our assets.
Be projected $15 million benefit from working capital.
Delisle Blomquist: We'll be working with Verso Energy to explore the feasibility of capturing the biogenic CO2 produced at the TARDIS plant to produce the ESF in combination with green hydrogen. However, we are still in the early stages of evaluating this opportunity. The potential impact on RIME is substantial. We look forward to keeping you updated as this project progresses. Let's move to slide 11, where I'll present our EBITDA and free cash flow projections for 2024. We anticipate 2024 Enterprise EBITDA to range between $180 and $200 million for the year. Cash interest expense is expected to be in the $85 million range, which is inclusive of $14 million attributed to the timing of interest payments on a normalized basis.
An additional $10 million benefit from tax receivables to be realized during the year.
With some offsets related to deferred energy payments and other accrued liabilities.
We expect adjusted free cash flow to range between $20 million to $40 million for the year, which.
Which will be used to reduce debt and invest in strategic capital projects.
Currently we forecast such strategic Capex spending of around $10 million in 2024.
Mainly to finance the ERP project.
Pursue high return cost reduction projects at the plants.
Yeah.
This guidance differs from the $225 million EBITDA estimate that it presented during the Investor day.
I believe it's important to emphasize the factors driving this.
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Since the Investor day guidance, we realized a $14 million decrease in paperboard EBITDA versus expectations.
Due to unforeseen levels of Destocking towards the end of the year.
High yield pulp experienced rapid price declines post investor day, as pulp markets encountered weak demand.
Delisle Blomquist: The estimated annual interest expense would be around $70 million. Maintenance expenses are set at $85 million, a figure we consider sufficient this year to maintain the reliability of our assets. We project a $15 million benefit from working capital and an additional $10 million benefit from tax receivables to be realized during the year, with some offsets related to deferred energy payments and other accrued liabilities. We expect adjusted free cash flow to range between $20 to $40 million for the year, which will be used to reduce debt and invest in strategic capital projects. Currently, we forecast such strategic capex spending of around $10 million in 2024, mainly to finance the ERP project and pursue high-return cost-reduction projects at the plant. This guidance differs from the $225 million EBITDA estimate that was presented during Investor Day.
<unk> and a $3 million impact versus expectations.
We also now expect Destocking at a couple of large acetate customers, which will impact EBITDA by $23 million in 'twenty to 'twenty four.
Additionally, corporate charges were primarily affected by higher discounting and financing fees incurred to support.
Support working capital enhancements due in part to higher interest rates totaling approximately $5 million.
On slide 12, I delve deeper into the expected performance of each of our businesses.
Our 'twenty 'twenty four we expect to achieve EBITDA in the range of $180 million to $190 million for H P. C segment.
On average cellulose specialty prices are expected to increase a low single digit percentage as compared to 2023.
Cellulose specialty sales prices are expected to remain flat in 2024 with increased volumes from market share gain that accrued to us from our competitors plant closure.
Delisle Blomquist: I believe it's important to emphasize the factors driving this variant. Since the Investor Day guidance, we realized a $14 million decrease in paperboard EBITDA versus expectations due to unforeseen levels of dystocia toward the end of the year. High-yield pulp experienced rapid price declines post-Investor Day as pulp markets encountered weak demand, resulting in a $3 million impact versus expectations.
<unk>, principally by lower shipments due to the stocking to select acetate customers.
Demand for Ryan cellulose specialties is anticipated to be mixed.
With improved volumes in construction ethers, albeit at lower than historical.
Oracle levels and relatively stable acetate markets.
However, as noted we expect acetate will undergo some level of destocking.
We also anticipate strong demand in the other C S grades.
Additionally, we expect resilient market demand for commodity products.
Delisle Blomquist: We also now expect the stocking at a couple of large acetate customers, which will impact EBITDA by $23 million in 2024. Additionally, corporate charges were primarily affected by higher discounting and financing fees to encourage and support working capital enhancements due in part to higher interest rates totaling approximately $5 million. On slide 12, I delve deeper into the expected performance of each of our businesses. For example, for 2024, we expect to achieve EBITDA in the range of $180 to $190 million for our HPC segment. On average, cellular specialty prices are expected to increase by a low single-digit percentage as compared to 2023.
Fluff and physical prices expected to improve from Q4 'twenty late 'twenty three.
Moreover, we foresee modest tailwind from ease raw material and logistics input cost in 2024.
As part of our growth strategy.
We are actively pursuing strategic investments in our biomaterials business to capitalize on the increasing demand for sustainable products.
The tourists bio ethanol plant is set to begin commercial production in the first quarter of this year with an expected EBITDA contribution of $4 million in 'twenty 'twenty, four which is expected to reach $8 million to $10 million. Upon full production that is expected in 2025.
Regarding paperboard, we expect to achieve EBITDA in the range of $50 million to $60 million in 2024 prices are expected to decrease slightly as compared to 2023 Q4 levels.
Sales volumes are expected to improve as destocking eases and production skills up to meet the improved demand.
Delisle Blomquist: Cellulose specialty sales prices are expected to remain flat in 2024 with increased volumes for market share gain that accrued to us from a competitor's plant closure, offset principally by lower shipments due to the stocking for select acetate customers. Demand for Ryan's cellulose specialties is anticipated to be mixed, with improved volumes in construction ethers, albeit at lower than historic levels, and relatively stable acetate. However, as noted, we expect ASCAPE will undergo some level of disruption.
Raw material prices are expected to see a slight uptick as pulp markets rebound.
We expect to achieve EBITDA in the range of $5 million to $10 million in 2024 for our high yield pulp business.
Pulp prices are expected to increase in the first quarter as we realize higher index pricing observed. The later part of 2023 Q4.
However, we are beginning to see pricing pressure related to the Chinese pulp markets. Thus expect pricing pressure in late Q2, and possibly Q3.
We are diversifying our portfolio globally to mitigate this exposure.
Additionally, sales volumes are projected to improve in Q1.
Delisle Blomquist: We also anticipate strong demand for the other CS grades. Additionally, we expect resilient market demand for commodity products. The fluff and fiscal price is expected to improve from Q4 2023. Moreover, we foresee modest tailwinds from eased raw material and logistics input costs in 2024, as part of our growth strategy. We are actively pursuing strategic investments in our biomaterials business to capitalize on the increasing demand for sustainable products. The Tardis bioethanol plant is set to begin commercial production in the first quarter of this year with an expected EBITDA contribution of $4 million in 2024, which is expected to reach $8 to $10 million upon full production, which is expected in 2025.
Production ramps up to meet improved customer demand.
For 'twenty 'twenty four we expect corporate cost in the range of $55 million to $60 million flat to up slightly versus 2023.
As we are in the final year of our multi year ERP implementation.
As the ERP project concludes we anticipate annual cost reductions of $3 million to $5 million starting in 2025.
It is important to note that these cost me very due to factors like currency fluctuations environmental charges and other noncash expenses.
Yeah.
We illustrate the trajectory of our EBITA margin growth and net leverage decline on page 13 in 'twenty 'twenty four we anticipate our margins to be in the 10% to 11% range.
Reflecting a weighted average of the strong margins in our cellulose specialty in paperboard segments.
Counterbalanced by a low positive high yield margins and the anticipated negative margins in our non fluff commodity sales.
Delisle Blomquist: Regarding paperboards, we expect to achieve EBITDA in the range of $50 to $60 million in 2024. Prices are expected to decrease slightly as compared to 2023 Q4 levels, while sales volumes are expected to improve as the stocking eases and production scales up to meet the improved demand. Raw material prices are expected to see a slight uptick as pulp markets rebound.
The forecast for net secured leverage at the end of the year stands at three three times Covenant EBITDA.
Our commitment remains resolute and achieving our target net debt leverage ratio of two and a half times by 2027.
With that operator, please open the call to questions.
Thank you if he would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if he would like to remove your question from the queue for participants using speaker equipment.
Delisle Blomquist: We expect to achieve EBITDA in the range of $5 to $10 million in 2024 for our high yield pulp business. High yield poll prices are expected to increase in the first quarter as we realize higher index pricing observed in the later part of 2023 Q4. However, we are beginning to see pricing pressure related to the Chinese pulp markets. Thus, expect pricing pressure in late Q2 and possibly Q3. We are diversifying our portfolio globally to mitigate this exposure. Additionally, sales volumes are projected to improve in Q1, as production ramps up to meet improved customer demand. For 2024, we expect corporate costs in the range of $55 to $60 million, flat to slightly higher versus 2023, as we are in the final year of our multi-year ERP implementation. As the ERP project concludes, we anticipate annual cost reductions of $3 to $5 million starting in 2025. It's important to note that these costs may vary due to factors like currency fluctuations, environmental charges, and other non-cash expenses.
Sorry to pick up your handset before pressing the star keys.
Our first question is from Daniele Harryman with Sidoti and company. Please proceed.
Thank you Ed Good morning, everyone. I just wanted to talk about kind of the transition from 2023 to 2024, and obviously 23 was a tough year in the fourth quarter.
It was certainly weaker than than than what you expected.
Would you mind, providing more color to us on why you're confident that the 'twenty 'twenty four will be better, particularly you know in.
In the first half of the year, such that you can kind of prove and show them you know earnings power within the within the core business to potentially refinance them by the end of the year and then what do you see right now is the biggest risk to to not meeting your guidance for the year.
Okay.
Hey, good morning, Daniel this is double aisle.
Hum.
To answer your question with respect to the transition of from 'twenty three to 'twenty four.
The the big the biggest driver is is around our core business our Rcs business.
And.
The expectation is is that see us business is going to improve roughly 30% to $35 million relative to last year.
Delisle Blomquist: We illustrate the trajectory of our EBITDA margin growth and net leverage decline on page 13. In 2024, we anticipate our margins to be in the 10 to 11% range, reflecting a weighted average of the strong margins in our cellular specialty and paperboard segments. Counterbalanced by low positive high yield margins and the anticipated negative margins in our non-fluff commodity sales, the forecast for net secured leverage at the end of the year stands at 3.3 times Covenant EBITDA.
And what's really driving that is a couple of things that gives us confidence that we will see this improvement one is the gains that we saw in market share relative to the fully closure.
We expect in total a total gain of market share around 50000 tons.
And the value of north of the $35 million that we had guided to is let's say something north of 40, 40 plus million dollars of value over the over the period.
Delisle Blomquist: Our commitment remains resolute in achieving our target net debt leverage ratio of two and a half times by 2027. With that, operator, please open the call to questions. Thank you. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue.
The we'd also expect to see some improvement.
As noted in the AR in the call that are in ethers, and we expect that Destocking has largely run its course, but that demand continues to be.
[noise] muted because of the construction market and the high interest rate market.
Operator: You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. Our first question is from Daniel Harriman with Sidoti and Company. Please proceed. Thank you. Hey, good morning, everyone. I just wanted to talk about kind of the transition from 2023 to 2024. And obviously, 2023 was a tough year, and the fourth quarter was certainly weaker than what you expected.
There may be some risk to that number but we do think that we will see improvement because we do think destocking has has a largely concluded there.
Hum.
Noted that there are some destocking going on at acetate Ah I would say that this is as a one time hit don't think that is going to be beyond the impact is noted.
This is driven by you know the congestion that we saw in the supply chains in 'twenty, two and 'twenty three.
Delisle Blomquist: Would you mind providing just more color to us on why you're confident that 2024 will be better, particularly in the first half of the year, such that you can kind of prove and show, you know, earnings power within the core business to potentially refinance by the end of the year? And then what do you see right now as the biggest risk to not meeting your guidance for the year? Hey. Good morning, Daniel.
And the uncertainties expressed or or held by our Asian customers given the long supply chain that was in place.
And.
I would think that given that the the more of these customers.
<unk> got comfortable as as the supply chain demonstrated that things things that normalized weather that the acetate destocking roughly cost us 23 million bucks relative to expectations and to Hum and do what we were expecting.
Delisle Blomquist: This is Delisle. To answer your question with respect to the transition from 23 to 24, the biggest driver is our core business, our CS business, and, uh... The expectation is that the CS business is going to improve by roughly 30 to 35 million dollars relative to last year. And what's really driving that is a couple of things that give us confidence that we'll see this improvement. One is the gains that we saw in market share relative to the full closure. We expect a total gain in market share of around 50,000 tons and a value of north of the $35 million that we had guided to, let's say something north of $40 plus million in value over the period. We also expect to see some improvement, as noted in the call, in ethers. We expect that the stocking has largely run its course, but that demand continues to be muted because of the construction market and the high interest rate market. There may be some risk to that number, but we do think that we will see improvement because we do think that de-stocking has largely concluded there. Um...
Should should be I'm pretty pretty close to the number for the year.
High yield.
If you were to ask you about you know were some risk.
Actually be in the high yield space. There is some activity going on in China, right now that some of some concern.
There's quite a bit of unused underutilized capacity of new paperboard.
Plants in that that have a fully integrated back to their pulping operations.
These are facilities to generate any kind of cash or are running their pulping operations in Saudi that pulp a substantial discount to the imported material that we.
We're bringing in.
And so there's some risk to them to the pulp pulp forecast, but we're doing all we can to mitigate that by moving the product into other regions that are less impacted by by that dynamic.
Paperboard, we believe the Destocking has ended and we got them hired our confidence that the numbers that we're projecting will be realized.
Delisle Blomquist: I note that there is some destocking going on at acetate. I would say that this is a one-time hit. Don't think that it's going to be beyond the impact, as noted. This is driven by the congestion that we saw in the supply chains in 22 and 23, and the uncertainties expressed or held by our Asian customers given the long supply chain that was in place. And I would think that given that these customers got comfortable, as the supply chain demonstrated that things had normalized, that acetate to stocking roughly cost us $23 million, relative to expectations and to what we were expecting. High yield, if you were to ask about where there is some risk, it would likely be in the high yield space.
With our with our customers and then finally, the corporate charges I would suggest again are going to be relatively flat and that's certainly that's an area that we have a tight control on so pulp.
Oh I hope that answered your question.
Yeah, Dan Thanks, so much Joe I'll I'll get back in the queue.
Our next question is from Matthew Mckellar with RBC capital markets. Please proceed.
Hi, good morning, Thanks for taking my questions Firstly could.
Could you maybe give a little bit of color on when you might expect destocking by your acetate customers to fade and confirm if the strong finish to 'twenty four for the <unk> business. You had described is based on acetate markets improving.
Hum.
First off good morning, Matt.
Matthew I'm I know, it's early for you.
B are with respect to you know sequentially I'm looking into 'twenty four for the next couple of quarters with respect to the just stocking for acetate is largely going to play out in Q1 Q2.
Delisle Blomquist: There is some activity going on in China right now that's of some concern. There is quite a bit of unused, underutilized capacity in new paperboard plants that are fully integrated back into their pulping operations. These facilities, to generate any kind of cash, are running their pulping operations and selling that pulp at a substantial discount to the imported material that we're bringing in. And so there's some risk to the pulp forecast. But we're doing all we can to mitigate that by moving the product into other regions that are less impacted by that dynamic. For Paperboard, we believe the de-stocking has ended.
So, let's say the first half and the market should get stronger as we as the year progresses.
But the largest impact should be should be felt in the first half with.
Back to you.
So sequentially, how the or see us businesses to participate we expect it to them as essentially.
Be in line with what we saw in the in fourth quarter for the first quarter.
Okay. Thanks, Thanks, very much for that color.
I think also for the HBC business you mentioned.
Do you expect raw material inputs and logistics costs to be lower than 24 could you maybe just provide a little bit more color on what you were expecting across different input costs and the magnitude of the cost relief you're expecting.
Delisle Blomquist: We have higher confidence that the numbers that we're projecting will be realized with our customers. And then finally, the corporate charges, I would suggest, again, are gonna be relatively flat, and certainly that's an area that we have tight control over. Well, I hope that answers your question. Yeah, I did.
You know, there's a lot of puts and takes with respect to that as you would expect I mean.
Labor costs of course are up went up significantly, particularly here in North America.
Hum, but that's being offset by you know lower chemical costs wood costs logistics costs.
Delisle Blomquist: Thanks so much, Delisle. I'll get back in the queue. Our next question is from Matthew McKellar with RBC Capital Markets. Please proceed. Hi, good morning.
And I would say net on net Oh, we're expecting lower manufacturing slash.
Logistics costs to the tune of roughly $7 million right now are forecasting.
Operator: Thanks for taking my questions. Firstly, could you maybe give a little bit of color on when you might expect the destocking by your acetate customers to fade and confirm if the strong finish to 24 for the CS business you had described is based on acetate markets improving? Um, first off, Matthew.
So overall I'm expecting cost.
Cost to come down.
By that by about that amount for Mt.
Thanks, That's very helpful. And then maybe last one for me are you able to give a sense of where discussions are at with respect to developing a second bioethanol plant in Florida.
We're going through the.
The permitting process and the both with the community as well as with the state.
Delisle Blomquist: I know it's early for you, um, The, with respect to, you know, sequentially looking into 24 for the next couple of quarters with respect to the stock and for out of state, it's largely going to play out in Q1, Q2. So let's say the first half, and the market should get stronger as the year progresses. But the largest impact should be felt in the first half. With respect to, you know, sequentially how our CS business is to participate, we expect it to essentially be in line with what we saw in the fourth quarter. Thanks very much for that color.
Oh obvious now on top of that we're going through call. It the the final detail engineering on that project.
Our.
Expect that everything moves along as expected that hopefully that will start construction later in 'twenty four and maybe early 'twenty five.
Great. Thanks, very much I'll hop back in the queue.
Our next question is from Dmitry Silverstein with what our Cowboy research. Please proceed.
Good morning, gentlemen, thank you for taking my call just wanted to follow up on your memorandum of understanding with burst of energy. So.
Delisle Blomquist: I think also for the HBC business, you mentioned you expect raw material inputs and logistics costs to be lower in 24. Can you just provide a little bit more color on what you're expecting across different input costs and the magnitude of the cost relief you're expecting? You know, there's a lot of put and takes with respect to that, as you would expect. I mean, labor costs, of course, are up significantly, particularly here in North America.
The the idea is that you will work jointly to.
See if you can produce the oh.
SAP is the aviation fuel.
Substitute.
How does that fit in with your bio ethanol plant in touch with them.
I'm, sorry, it's harder unless youre looking at.
If the production are you going to be putting this if it does go forward are you going to putting this in the TARDIS plants or the Florida plant, where you're going to have to build a new facility.
Good morning Dmitry.
With respect to S. A F, which the acronym stands for sustainable Asia Aviation fuel and it is a direct substitute a drop in replacement for.
Delisle Blomquist: But that's being offset by, you know, lower chemical costs, wood costs, logistics costs. And I would say net on net, we're expecting lower manufacturing slash logistics costs to the tune of roughly $7 million right now. So, overall, I'm expecting costs to come down. Why about that mouth?
I'm kind of curious seeing that goes into that makes up aviation fuel today.
The.
The deal with first though is.
Delisle Blomquist: Thanks, that's very helpful. And then, maybe the last one for me, are you able to give a sense of where discussions are at with respect to developing a second bioethanol plant in Florida? We're going through the permitting process with both the community as well as with the state. Obviously, on top of that, we're going through the final detail engineering on that project. I expect that as everything moves along, as expected, that hopefully, we'll start construction later in 2024 and maybe early 2025. Great. Thanks very much. I'll hop back into queue. Our next question is from Dmitry Silverstein with Watertower Research. Please proceed. Good morning, gentlemen.
It is too jointly developed a feasibility study on this opportunity the size of this opportunity for for us as it is.
Can be very significant.
And but it largely depends on how we decide to participate in this this opportunity and really the opportunity what it what it is for us it's hardest.
Is to capture.
The biogenic C O two that we produce right now it is just emitted into the atmosphere would be to capture that and then with green hydrogen convert the.
That into a peak hydrocarbon sustainably aviation fuel hydrocarbon.
That will then be sold to commercial Airlines for example.
Operator: Thank you for taking my call. I just wanted to follow up on your memorandum of understanding with Bursa Energy. The idea is that you will work jointly to see if you can produce SAP, the aviation fuel substitute. How does that fit in with your bioethanol plan in Tartar and, as you're looking at..., production? Are you gonna be putting this, if it does go forward, are you gonna be putting this in the Tardis plant or the Florida plant, or are you gonna have to build a new facility? Good morning, Dmitry.
So it's a we don't have to.
Bring in any additional raw materials or anything were actually would just use a are byproducts of our current process to get them to participate in this it would likely include.
The construction of carbon capture and other other facilities to make this happen.
But hardest has the land a water is available locally.
Hum again, the demand a bit.
Delisle Blomquist: With respect to SAF, the acronym stands for Sustainable Aviation Fuel, and it is a direct substitute, a drop-in replacement for, The Current Care Scene that goes into, that makes up Aviation Fuel Today. The deal with Verso is to jointly develop a feasibility study on this opportunity. The size of this opportunity for us can be very significant, but it largely depends on how we decide to participate in this opportunity. And really, the opportunity for us in TARDIS is to capture the biogenic CO2 that we produce right now and is just emitted into the atmosphere. And then, with green hydrogen, convert that into the hydrocarbon, the sustainable aviation fuel hydrocarbon, that then can be sold to commercial airlines, for example.
For this product is not only something that the airline industries I think we'd be interested in but it's being required by the regulatory agencies in France in the EU for the commercial airline industry to increase over the course of the next 15 to 20 years. So.
Hum and on top of that the the last thing just like it with the bio energy or the bioethanol plant that we have been taught us the regulatory agencies in the state or are willing to participate and help fund both the study as well as potentially the product itself going forward.
Really that's why our initial focus is in is in the EU.
Okay. Okay got it so bhilai all to follow up on your comments around the ether ethers market recovery.
Delisle Blomquist: So it's, we don't have to bring in any additional raw materials or anything. We actually would just use a byproduct of our current process to participate in this. It would likely include the construction of carbon capture and other facilities to make this happen, but TARDIS has the land, and water is available locally.
<unk>.
Can you kind of delve a little bit deeper into why you think the market will recover now that we've gotten through a hopefully a majority of the Ah.
The destocking, but the market for instance, particularly for construction is still not particularly strong so what would be driving that recovery and he starts other than the easier comps as you get into the back end of the year and Youre not comping against inventory reductions by your customers.
Delisle Blomquist: And again, the demand for this product is not only something that the airline industries, I think, would be interested in, but it's being required by the regulatory agencies in France and the EU for the commercial airline industry to increase over the course of the next 15 to 20 years. And on top of that, the last thing, just like with the bioenergy or the bioethanol plant that we have in TARDIS. The regulatory agencies in the state are willing to participate and help fund both the study as well as potentially the project itself going forward.
Yeah, and that's a great question, it's actually a question we continue to wrestle with a little bit here at the company.
About how strong ethers is going to rebound, but we do.
Because at the end of the day Youre absolutely right. The demand continues to be muted and week in the construction markets there in Europe.
The why we got some confidence in the increase in demand is because the Destocking has ended right.
Delisle Blomquist: So really, that's why our initial focus is on the EU. Okay, okay. I got it. So, Delisle, to follow up on your comments around Ether's market recovery. Can you kind of delve a little bit deeper into why you think the market will recover now that we've gotten through, hopefully, the majority of the de-stocking, but the market, first, particularly for construction, is still not particularly strong? So what will be driving the recovery ethos other than easier comps as you get into the back end of the year, and you're not comping against inventory reductions by your customers? Yeah, and that's a great question. It's actually a question we continue to wrestle with a little bit here at the company about how strong ethers are going to rebound. But we do, because at the end of the day, you're absolutely right.
And it has bottomed out and as a consequence, you're the overlap the underlying demand now becomes revealed and as a consequence, we expect that well the orders, we'll see in 24 will be greater than what we saw in 'twenty three but the demand continues to be so.
<unk> continues to be muted.
Got it Okay, and then I mean, just to make sure I understand what's going on in China. So that there is there is a underutilized capacity and hanmi, how high yield pulp and paperboard that produces more high yield pulp and then therefore makes.
Your product less appealing from a price perspective, as you were importing product into China do I understand that correctly and if that's the case how long do you think that the underutilized capacity.
Delisle Blomquist: The demand continues to be muted and weak in the construction markets there in Europe. Why have we got some confidence in the increase in demand is because the stocking has ended, right? And as a consequence, the underlying demand has now become revealed. And, as a consequence, we expect that the orders we'll see in 24 will be greater than what we saw in 23. But the demand continues to be somewhat muted, continues to be muted, got it okay, and then on the uh, just to make sure I understand what's going on in China so that there is underutilized capacity in high yield pulp and or paper boards that that produces more high yield pulp and then therefore makes your product less appealing from the price perspective as you're importing this product into China. Do I understand that correctly, and if that's the you know, in terms of competition with local producers.
We'll be underutilized in other words, what needs to happen in the Chinese market for this capacity to become absorbed so your import products get them up to have a better footing.
And in terms of competition with the local producers.
Yeah Dmitry. Your your description of what's going on is is largely correct I mean, what what's half what's happened is the paperboard industry in China, just overbuilt and they've got a lot of unused capacity now and this new capacity is fully integrated backs it back through pulp matter.
Factory and.
In other words. These paperboard plants can also make their own on pulp similar to what we do on <unk>.
<unk> to get to to realized any kind of cash.
These these plants are running their pulp lines relatively I'm hard and generating excess pulp, which they then ship regionally to pull other paper pulp producers to use to make paperboard.
And this the offset there is there is less less imports from other parts of the world, including potentially us.
Delisle Blomquist: Dmitry, your description of what's going on is largely correct. What's happened is... The paperboard industry in China just overbuilt, and they've got a lot of unused capacity now. And this new capacity is fully integrated back into pulp manufacturing. In other words, these paperboard plants could also make their own pulp, similar to what we do on Timiscus, to get to realize any kind of cash. These plants are running their pulp lines relatively hard and generating excess pulp, which they then ship regionally to other paper pulp producers to use to make paper.
Coming out of Canada.
And there are there are offering this this locally produce pulp at substantially price discounts relative to what we're currently seeing in the in the fourth quarter and going into the first quarter for our pulp products. So that's the threat and the concern your question about how long.
This is going to last.
I feel that.
That's a question that.
Delisle Blomquist: And this, the offset there is less imports from other parts of the world, including potentially us, coming out of Canada. And they're offering this locally produced pulp at substantially lower prices relative to what we're currently seeing in the fourth quarter and going into the first quarter for our pulp products. So that's the threat and the concern. Your question about how long this is going to last? I feel that that's a question that we're still trying to get our hands around. Think that this problem is going to last through, likely through Q3, at which point the expectation is that we'll start seeing that reduce, either because this new, call it this new high purity pulp capacity, will get itself sold out, and therefore will no longer be a problem, or paperboard demand picks up and begins to satisfy that supply.
We're still trying to get our hands around think that this problem is going to last through likely through Q3.
At which point our expectation is that we'll start seeing that reduce either because this new call. It this new high purity pulp capacity will get itself sold out and therefore will no longer be a problem.
Or paperboard demand picks up and begins to satisfy that.
That supply so that's.
That's currently what our thinking is.
Got it got it okay. Thank you very much that's all the questions I had about thank you.
As a reminder, this star one on your telephone keypad, if he would like to ask a question. Our next question comes from Andrew Burns with Stifel. Please proceed.
Oh, Hi, good morning, everyone and thanks for all the detail about 'twenty 'twenty four but maybe just to talk a little bit about the H P. C business first I mean, maybe just to clarify the volume picked up from the Foley closure is that all aimed specialties or is some of that in on the commodity side also.
Delisle Blomquist: So that's currently what we're thinking. Got it. Got it. Okay. Thank you very much. That's all the questions I have now.
Operator: Thank you. As a reminder, it is star one on your telephone keypad if you would like to ask a question. Our next question comes from Andy Burns with Stiefel. Please proceed. Hi, good morning, everyone.
And that was all in specialties and it was across the three different grades, but primarily the other see us.
Delisle Blomquist: And thanks for all the detail about 2024. Maybe just to talk a little bit about the HPC business. First, maybe just to clarify the volume pickup from the Foley closure. Is that all in specialties? Or is some of that in on the commodity side also?
Okay, and then I just wanted to see if you could elaborate a little more on the comment you made in terms of bridging the 24 that 23 had a favorable customer contract term that is not repeated.
Anything more you could say was that just on the volume side and or also pricing and if it was more on volume is there the opportunity to regain those volume sometime this year or 2025.
Delisle Blomquist: That was all in specialties, and it was across the three different grades, but primarily the other CS. Okay. And then I just wanted to see if you could elaborate a little more on the comment you made in terms of bridging the 24 that 23 had a favorable customer contract term that's not repeated. Anything more you could say, was that just on the volume side and or also pricing? And if it was more volume, is there the opportunity to regain those volumes sometime this year or 2025? Yeah, and I know that was a little confusing, Sandy. The change in the INCO terms really was going from, let's say, a CIF or delivered terms to more of an FOB ship point term, all right, and that allowed us to realize revenues sooner than what we had historically at some of our accounts.
Yeah.
I know that was a little confusing sandi.
The.
The change in equal terms really was going from let's say a C O I F for deliberate turns to more of an F O b.
Chip point in term, alright, and that allowed us to realize revenues sooner.
Then than what we had historically at some of our accounts.
What happened in 'twenty three is when we negotiated that that change.
We had some deferred.
Sales volumes that were delayed out of 'twenty two.
To Asia.
That because of this change when it did ship in 'twenty three.
Delisle Blomquist: What happened in 23 was when we negotiated that change, we had some deferred sales volumes that were delayed at 22, to Asia, that because of this change, when they did ship in 23, we were able to realize immediately. And so really, the increase in volume and sales really was capturing the deferred sales that we had coming out of 22. But also because of those changes in those income terms, we didn't have a similar impact of deferrals coming out of 23 into 24. And so we won't capture that kind of deferrals that we experienced coming out of 22. The total volumes are roughly 22,000 tons, roughly equivalent to about $7 million in EBITDA. And really, it was a one-time impact.
We were able to realize a immediately.
And so really what the the increase in volume and sales really was capturing the deferred sales that are that we had coming out of 'twenty two.
But also because of those changes and those those include terms, we didn't have a similar impact or deferrals coming out of 23% to 24 and as and so we won't capture that kind of deferrals that that we experienced coming out of 22, the total volumes roughly 22000 tons.
Roughly equivalent to about a $7 million in.
EBITDA.
And really it was a one time impact shouldn't expect any changes going forward right, but I guess importantly, it doesn't sound like it was a customer loss.
Delisle Blomquist: You shouldn't expect any changes going forward. Right. But I guess, importantly, it doesn't sound like it was a customer loss or, Recognize revenue earlier.
No not at all no. It was just it was just a change in you know essentially the Inca in terms of the law that allowed us to too.
Recognize revenue earlier.
Delisle Blomquist: Great. All right. Thank you and good luck. If there are no further questions at this time, I would like to turn the conference back over to Mr. Blomquist for closing remarks. Well, thank you all once again for joining us today. I do sincerely appreciate your interest in and your support for RIAM. I do want to note that I'm incredibly proud of all the collective efforts made by our team, particularly during the difficult 23 year, 2023 year, and also express that I'm fully confident that we will continue to focus on enhancing our profitability and work diligently to reduce our debt and our leverage. I look forward to providing further updates on all of our ongoing projects and initiatives. And we here at Ryan continue to value your support and look forward to delivering to you the long-term success and growth of the business.
Great Alright, Thank you and good luck this year.
Thank you.
There are no further questions at this time I would like to turn the conference back over to MS. Kimberly pressed for closing remarks.
Well. Thank you all once again for joining us today I do sincerely appreciate your interest and your support for Ryan.
I do want to note that I'm incredibly proud of all the collective efforts made by our team, particularly during the difficult 23 year 20, 2023 a year.
And also expressed that I'm fully confident that we will continue to focus on enhancing our profitability and work diligently to reduce our debt and our leverage I look forward to providing further updates on all of our ongoing projects and initiatives and we hear it Ryan.
To value your support.
Look forward to delivering to you long term success and growth of the business.
Delisle Blomquist: We are committed to transparency and open communication, so if you have any questions or if you require further information, please reach out to us at any time. Thank you again for your participation. Thank you. This will conclude today's conference. You may disconnect at this time, www.marcoparet.com and www.free-for-all.com www.marcoparet.com www.free-for-all.com www.marcoparet.com www.free-for-all.com www.marcoparet.com www.free-for-all.com www.marcoparet.com www.free-for-all.com www.marcoparet.
We are committed to transparency and open communication.
So if you have any questions or if you require further information please reach out to us at any time. Thank you again for your participation.
Thank you. This will conclude today's conference you may disconnect at this time.
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