Q1 2024 Sylvamo Corporation Earnings Call
Operator: Good morning. Thank you for standing by.
Good morning, Thank you for standing by welcome to silver almost first quarter 2024 earnings call.
Operator: Welcome to Sylvamo's first quarter 2024 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, you will have an opportunity to ask questions. To ask a question, please press 1, then 0 on your telephone keypad. To withdraw a question, please press 1, then 0 again. As a reminder, your conference is being recorded. I'd now like to turn the call over to Hans Bjorkman, Vice President, Investor Relations. Sir, the floor is yours.
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. One then zero on your telephone keypad to withdraw a question. Please press one to zero again as a reminder, your conference is being re.
Accorded I'd now like to turn the call over to Hans Bjorkman, Vice President Investor Relations, Sir the floor is yours.
Hans Bjorkman: Thanks, Leah. Good morning, and thank you for joining our first quarter 2024 earnings call. Our speakers this morning are Jean-Michel Rivieres, Chairman and Chief Executive Officer, and John Sims, Senior Vice President and Chief Financial Officer. Slides 2 and 3 contain important information, including certain legal disclaimers. 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... Reconciliations of those figures to U.S. GAAP financial measures are available in the appendix. Our website also contains copies of the earnings release as well as today's. With that, I'll turn the call over to Jean-Michel. Thanks, Hans. Good morning, and thank you.
Yeah.
Hans Bjorkman: Thanks, Leah good morning, and thank you for joining our first quarter 2024 earnings call. Our speakers. This morning are John Michelle with the Arris.
Hans Bjorkman: Chairman and Chief Executive Officer.
Hans Bjorkman: John <unk>, Senior Vice President and Chief Financial Officer.
Hans Bjorkman: Slides, two and three contain important information, including certain legal disclaimers.
Hans Bjorkman: For example, during this call we will make forward looking statements that are subject to risks and uncertainties we.
Hans Bjorkman: We will also present certain non U S GAAP financial information.
Hans Bjorkman: Reconciliations of those figures to U S. GAAP financial measures are available in the appendix.
Hans Bjorkman: Our website also contains copies of the earnings release as well as todays presentation.
Hans Bjorkman: With that I'll turn the call over to John Michelle Thanks, and.
Jean-Michel Rivieres: Good morning, and thank you for joining our call. Let's turn to slide four.
John Van Sims: Good morning, and thank you for joining our call.
John Van Sims: Let's turn to slide four please.
Jean-Michel Rivieres: As anticipated, we experienced improving uncoated free sheet and bulk condition in the first quarter, which resulted in an improved audit. Our milk system runs near full capacity, and our earnings reflect much less economic downtime. We're making good progress with Project Horizon, our program to streamline overhead, manufacturing, and supply chain costs.
John Van Sims: As anticipated, we experienced improving uncoated freesheet that bulk condition in the first quarter.
John Van Sims: Which resulted in improved order book.
John Van Sims: Amidst this devin ran near full capacity.
John Van Sims: Earnings reflect much less economic downtime.
John Van Sims: We're making good progress with project of Ryzen, our program to streamline overhead manufacturing and supply chain cost.
Jean-Michel Rivieres: We are on track to meet our year-end run rate target of $110 million in savings. We also continue to return substantial cash to shareholders. We distributed $12 million via the first quarter dividend. And as of today, we have repurchased $20 million in shares this year.
We are on track to meet our year end run rate target of 120 10 million in savings.
John Van Sims: We also continued to return substantial cash to shareholders.
We distributed $12 million you had this first quarter dividend and as of today, we have repurchased 20 million shares this year.
John Van Sims: Move to the next slide.
Jean-Michel Rivieres: Slide 5 shows our key financial metrics. We generated a just-to-debit dollar of $118 million with a margin of 13%. As expected, free cash flow was lower than the fourth quarter due to the timing of year-end payments, the non-repeat of the fourth quarter inventory reduction benefit, and the payment of annual incentive compensation in the first quarter. Keep in mind that our free cash flow is heavily weighted in the second half. In 2023, we generated almost 90% of free cash in the second half, and in 2022, about 75% in the second half. We generally digested operating earnings of $1.07 per share. Now, John will review our first quarter performance in more detail. John.
John Van Sims: Slide five shows our key financial metrics, we generated adjusted EBITDA of 118 million with a margin of 13%.
John Van Sims: Expected free cash flow was lower than the fourth quarter due to the timing of the non repeat of the fourth quarter inventory reduction benefit and the payment of annual incentive compensation in the first quarter.
John Van Sims: Keep in mind that our free cash flow was heavily weighted into the second half.
John Van Sims: In 2023, we generated almost 90% of free cash in the second half.
John Van Sims: In 2022.
John Van Sims: <unk>, 5% in the second half.
John Van Sims: We generated adjusted operating earnings of $1 <unk> per share.
John Van Sims: Now John will review, our first quarter performance in more detail.
John Van Sims: Sure.
John Van Sims: Thank you, John, Michelle, and good morning, everyone. On slide six, which contains our first quarter earnings grid, the $118 million of adjusted EBITDA we earned was within our outlook of $105 to $125 million. Price, and Mix were better than.
John Van Sims: Thank you, Joe Michele and good morning, everyone.
John Van Sims: On slide six which contains our first quarter earnings bridge.
$118 million of adjusted EBITDA EBITDA, we earned was within our outlook of $100 million to $125 million.
John Van Sims: Price and mix were better than projected.
John Van Sims: Flex the implementation of pulp and paper price increases that we had communicated late in the fourth quarter and early in the first quarter in all regions.
John Van Sims: The next slide reflects the implementation of pulp and paper price increases that we had communicated late in the fourth quarter and early in the first quarter in all regions of the United States. Volume decreased by 12 million, driven by the normal seasonally weaker demand in Latin America. Volume trends in Europe and North America were favorable, as we projected.
John Van Sims: Volume decreased by $12 million driven by the normal seasonally weak weaker demand in Latin America.
John Van Sims: William trends in Europe, and North America were favorable as we projected.
John Van Sims: Operations and other costs improved by $19 million, primarily reflecting lower economic downtime across our region. Plan maintenance outage costs decreased by $3 million, and input and transportation costs increased by $9 million. Let's move to slide 7.
Operations and other costs improved by $19 million, primarily reflecting lower economic downtime across our regions.
John Van Sims: Planned maintenance outage cost decreased by 3 million and input and transportation costs increased by $9 million.
John Van Sims: Let's move to slide seven.
John Van Sims: This graph shows our economic downtime over the last five quarters. In the first quarter of this year, we took 11,000 tons of economic downtime, which was an 80% decrease from the first quarter of 2023 and nearly a 95% reduction from the peak in the third quarter of last year. Let's move to slide 8. Uncoded free sheet conditions continue to improve.
John Van Sims: This graph shows our economic downtime over the last five quarters and the first quarter. This year, we took 11000 tons of economic downtime.
John Van Sims: It was an 80% decrease from the first quarter of 2023, nearly a 95% reduction from the peak in the third quarter of last year.
Speaker Change: Let's move to slide eight.
Speaker Change: Okay.
Speaker Change: Uncoated free sheet conditions continued to improve.
Jean-Michel Rivieres: Our order books have strengthened across all regions to 2023 levels. We implemented previously communicated price increases in both paper and pulp in all regions as well. We're also experiencing stabilization of input costs. Moved to slide 9.
Speaker Change: Our order books have strengthened across all regions versus 2023 levels.
Speaker Change: We implemented previously communicated price increases in both paper and pulp at all regions as well.
Speaker Change: We are also experiencing the stabilization of input costs.
Let's move to slide nine.
Speaker Change: Yeah.
Jean-Michel Rivieres: We expect to deliver second-quarter adjusted EBITDA of $145 to $160 million. We project price and mix to improve by $15 to $20 million, primarily reflecting price increase realizations across all regions. We're also expecting a favorable mixed impact in Latin America. We expect volume to improve by 5 to 10 million, driven by seemingly stronger demand in Latin America, plus continued momentum in Europe and North America. Operations and other costs are projected to improve by five to ten million, primarily due to lower operating costs in Europe and North America, as well as lower economic downtime. We expect input in transportation costs to improve by up to $5 million due to better transportation energy costs in North America, partially offset by unfavorable fiber costs in Latin America. Plan maintenance outages are projected to increase by 3 million. Let's go to slide 10.
Speaker Change: We expect to deliver second quarter, adjusted EBITDA of $145 million to $160 million.
Speaker Change: We project price and mix to improve by $15 million to $20 million, primarily reflecting price increase realizations across all regions.
Speaker Change: We're also expecting a favorable mix impact in Latin America.
Speaker Change: We expect volume to improve by $5 million to $10 million driven by seasonally stronger demand in Latin America.
Speaker Change: Plus continued momentum in Europe, and North America.
Speaker Change: Operations and other costs are projected to improve both loved the $10 million, primarily due to lower operating costs in Europe, and North America, as well as lower economic downtime in North America.
Speaker Change: We expect input and transportation costs improved by up to $5 million due to better transportation energy costs in North America, partially offset by unfavorable fiber costs.
Speaker Change: Latin America.
Speaker Change: Planned maintenance outages are projected to increase by $3 million.
Speaker Change: Let's go to slide 10.
Jean-Michel Rivieres: In order to remain a low-cost Amadi Products sold in mature demand cyclical markets, we must become leaner and stronger. That's why we initiated Project Horizon to streamline our organization. [inaudible] We are on track to deliver $30 million in overhead cost reductions and to reduce our manufacturing supply chain costs by $80 million before inflation. We have communicated about 150 position eliminations globally. Approximately one third of these have already occurred, and nearly all the rest will be completed by the end of the third quarter. We are on track to meet our run rate savings targets by the end of this year. That's me on slide 11.
Speaker Change: In order to remain a low cost producer of commodity products. So all of the mature demand cyclical market, we must become a leaner stronger company.
Speaker Change: That's why we initiated project horizon, the streamline organization.
Speaker Change: Our cost structures.
Speaker Change: We are on track to deliver 30 million overhead cost reductions and to reduce our manufacturing supply chain caused by $80 million.
Speaker Change: Please.
Speaker Change: We have communicated about 150 position eliminations globally.
Speaker Change: Approximately one third of these have already occurred in nearly all the rest will be completed by the end of the third quarter.
Speaker Change: We are on track to meet our run rate savings target by the end of this year.
Speaker Change: Let's move to slide 11.
Yeah.
Jean-Michel Rivieres: We spent $25 million on planned maintenance outages in the first quarter and expect to spend $28 million in the second quarter. By mid-year, we'll have spent about three-quarters of the total annual planned maintenance outage cost. In the second quarter, we'll conduct outages in Latin America and North America.
Speaker Change: We spent $25 million of planned maintenance outages in the first quarter and expect to spend $28 million in the second quarter.
Speaker Change: By mid year, we will have spent about three quarters of the total annual planned maintenance outage cost for this year.
Speaker Change: In the second quarter, we will conduct outages in Latin America, and North America.
Jean-Michel Rivieres: We have no planned maintenance outages scheduled for our European mills in 2024. Let's move to slide 12. We are focused on uncoded.
Speaker Change: We have no planned maintenance outages scheduled for our European Mills in 2024.
Speaker Change: Let's move to slide 12.
Speaker Change: We are focused on uncoated freesheet and will continuing to create long term value to our talented team iconic brands and low cost mill and favorable locations.
Jean-Michel Rivieres: Long-term value to our talented, iconic brands and low-cost mills in favorable locations. Our capital allocation strategy is to maintain a strong financial position. We invest in our business to improve our competitive advantages, and continue to return substantial cash to share owners. Let's look at the next few slides for some additional color on each of these tabs.
Our capital allocation strategy and maintain a strong financial position.
Speaker Change: We invest in our business to improve our competitive advantages and continue to return substantial cash to shareowners.
Let's look at the next few slides with some additional color on each of these.
Speaker Change: Yes.
Jean-Michel Rivieres: Slide 13 shows our commitment to maintaining a strong financial position to allow us to operate and invest throughout the cycle. We have reduced our gross debt by $580 million. Almost 40% since the spinoff, and remain below our $1 billion target. This healthy position allows us to retain flexibility, to address macro conditions, and downside risk, and to invest in high-return opportunities across the cycle. Let's look at the cash returns to shareholders on slide 14.
Speaker Change: Slide 13 shows our commitment to maintaining a strong financial position will allow us to operate and invest throughout the cycle.
Speaker Change: We have reduced our gross debt by $580 million.
Speaker Change: Almost 40% since the spinoff.
Speaker Change: And we remain below a $1 billion.
Speaker Change: Target.
Speaker Change: This healthy position allows us to retain flexibility to address macro conditions downside risks and to.
Speaker Change: We invest in high return opportunities across the cycle.
Speaker Change: Let's look at the cash returned to shareowners on slide 14.
Jean-Michel Rivieres: We will continue to return substantial cash to shareholders via dividends and share repurchases, as this graph shows. In 2022, we have returned $170 million in cash via opportunistic share repurchase. We have repurchased almost 3.5 million shares, or 8% of our initial shares out there, at an average price of just over $49 per share. These repurchases show a return of 35% based on a share price of $65,000.
Speaker Change: We will continue to return substantial cash to shareholders via dividends and share repurchases.
Speaker Change: On this graph. This graph shows 2022, we have retired $170 million in cash via opportunistic share repurchases.
Speaker Change: We have repurchased almost $3 5 million shares or 8% of our initial shares outstanding.
Speaker Change: And the average price of just over $49 per share.
Speaker Change: These repurchases still a return of 35% based on a share price of $65.
Jean-Michel Rivieres: We will continue to look for opportunities to repurchase shares at attractive prices and to also return cash via regular and special dividends.
Speaker Change: We will continue to look for opportunities to repurchase shares at attractive prices.
Speaker Change: And to also return cash via regular and special dividends.
John Van Sims: All right, so let's shift gears and discuss reinvesting in our business on slide 15. We will continue to invest in high-return projects to strengthen our business and increase our cash flow. At the time of our spinoff, we projected at least $100 million of high-return projects, about 70 million of which we have funded, and we'll have funded by the end of this year. We have now identified another $200 million of high-return capital projects, which will allow us to grow our earnings and cash flow in the future.
Speaker Change: Alright, so let's shift gears and discuss reinvesting in our business on slide 15.
Speaker Change: We will continue to invest in high return projects.
Speaker Change: Strength in our business and increase our cash flow.
Speaker Change: At the time of our spin off we projected at least $100 million of high return projects.
Speaker Change: About $70 million of which we have funded.
Speaker Change: We'll have funded by the end of this year.
Speaker Change: We have now identified another $200 million of high return capital projects, which will allow us to grow our earnings and cash flow in the future.
John Van Sims: We expect such investments to generate well above cost of capital return. This slide highlights three specific projects, two at Eastover that are already ramping up, and one in Luis Antonio that will start up later this year. We had the opportunity to take advantage of a new supply of low-cost wood. The project started up in the first quarter, and we project annual savings of half a million dollars with an IOR of 35%.
Speaker Change: We expect such investments to generate well above cost of capital returns.
Speaker Change: This slide highlights three specific projects <unk> already ramping up and one in Luisa Antonio that will start up later this year.
Speaker Change: And Easter, but we had the opportunity to take advantage of a new supply of low cost Wood chips. This project started up in the first quarter and we project annual savings of a half a million dollars with the IRR of 35%.
John Van Sims: We also started up the Evaporator Heat Recovery project. This project will allow us to capture and reuse evaporator heat. We expect annual savings of $1 million with a return of $33.5 million. The third example is a new term for General Louis Antonio.
Speaker Change: We also started up the evaporator heat recovery system entities.
Speaker Change: This project will allow us to capture and we use a bet evaporator heat.
Speaker Change: We expect annual savings of $1 million with a return of 33%.
The third example is the new turbine generator looser Antonio.
John Van Sims: This will increase our self-generated power and reduce annual maintenance. We expect annual savings of $2 million with a return of 24%. I'll turn it back over to you. Thanks, John.
Speaker Change: This will increase our self generated power and reduce annual maintenance expenses.
Speaker Change: Expect annual savings of $2 million with a retired 24%.
Speaker Change: So Michelle I'll turn it back over to you. Thanks John.
Jean-Michel Rivieres: We are strengthening our ability to create shareholder value throughout the cycle. It is a cash flow story and continues to deliver against our investment key. Uncoated free sheet conditions are strengthening across all regions.
We are strengthening our ability to create shareholder value throughout the cycle.
Michelle: Since that was a cash flow story and continues to deliver against our investment.
Michelle: Uncoated freesheet conditions are strengthening across our region.
Jean-Michel Rivieres: Our system is still running near full capacity, and our price and mix continue to improve. As a result, our earnings are improving from the bottom of the cycle. Financial discipline is a key component of our strategy. We continue to leverage our strengths to drive high returns on invested capital, generate free cash flow, and use that cash to increase shareholder value. As John discussed, we are reducing our cost structure. We are confident in our future and motivated by the opportunities that lie ahead. With that, I'll turn the call back to Hans.
Michelle: Our system is still running near full capacity and our <unk>.
Michelle: And mix continues to improve.
As a result, our earnings are improving from the bottom of the cycle.
Michelle: Financial discipline is a key component of our strategy will continue to leverage our strengths to drive high returns on invested capital generate free cash flow and use that cash to increase shareowner value.
Michelle: As John discussed, we are reducing our cost structure, and we see opportunities to grow earnings and free cash flows.
Michelle: With confidence in our future and motivated by the opportunities that lie ahead.
Speaker Change: With that I'll turn the call back to <unk>.
Hans Bjorkman: Thanks, Jean-Michel, and thank you, John. Okay, Leah, we're now ready to take questions.
Thanks, John Michelle and thank you John Okay lay up we're now ready to take questions. Thank.
Operator: Thank you, ladies and gentlemen. As a reminder, if you would like to ask a question, please press 1, then 0 on your telephone keypad. If your question has already been answered, you may withdraw by pressing 1, then 0. We do ask that you limit yourself to one question and one follow-up question. One moment, please. And our first question is from George Staphos with Bank of America. Please go ahead.
Speaker Change: Thank you, ladies and gentlemen, as a reminder, if you would like to ask a question. Please press. One then zero on your telephone keypad. If your question has already been answered you may withdraw by pressing the one zero again, we do ask that you limit yourself to one question and one follow up question.
Speaker Change: One moment please.
Speaker Change: And our first question is from George Staphos with Bank of America. Please go ahead.
George Leon Staphos: Hi everyone, good morning. Thanks for the details. I want to go to slide 6, where you have the waterfall and look at it this way, at the end of the day, your performance was in line with your expectations. The guidance looks at least in line for 2Q with where the street is. So congratulations on all that.
George Leon Staphos: Hi, everyone. Good morning.
George Leon Staphos: Thanks for the details.
George Leon Staphos: I wanted to go to slide six where.
George Leon Staphos: We have a waterfall and.
George Leon Staphos: Look I've been a day your performance was in line with your expectations.
George Leon Staphos: The guidance it looks at least in line for <unk> with where the street is so.
Speaker Change: So congratulation on all that.
John Van Sims: But on operations and other costs, there was a slight sort of miss, if you will, versus the midpoint of the range. And just because the performance was in line or better elsewhere, just curious what was driving that. And then, maybe, to start off and warm up, across the regions, how was performance relative to your expectations across North America, Europe, Latin America, any things to call out?
Speaker Change: On ops and other costs, there was a slight sort of Miss if you will versus the midpoint of the range and just because of the performance being in line or better elsewhere. Just curious what was driving that and then if you could maybe to start off and warm up.
Speaker Change: Across the regions, how is performance relative to your expectations across North America Europe.
Speaker Change: Latin America anything to call out either positive or negative. Thank you guys.
John Van Sims: George, John, thanks for your question. We were slightly below our range in the ops. We had a couple of things that were not planned or not forecasted. One was the attacks down in Brazil. And then we had [inaudible] were roughly about $4 million that would have put us closer to our race. In terms of expectations by regions, we were close to where we thought we were across all the regions, a little bit better maybe in and also in North America, a little bit less. And Brazil, mostly because of a mixed issue, we ended up selling more into export markets and less into Brazil than we expected. But in general, pretty much in line with what we've got. Yes. Hi George. Thanks.
Speaker Change: Yes, John Thanks for your question.
Speaker Change: We were slightly below our range in ops, and we had a couple of things that were not planned or not forecasting one was attacks.
Speaker Change: Lying down in Brazil, and then we had.
Speaker Change: And inventory revaluation that occurred in Europe, So those two things.
Speaker Change: We're roughly about $4 million that would've put it closer into our range.
Speaker Change: In terms of expectations by regions.
Speaker Change: We were close to where we thought we were.
Speaker Change: Across all the regions a little bit better maybe.
Speaker Change: Europe and also in North America, a little bit less and.
Speaker Change: In Brazil, mostly because of a mix issue, we ended up selling more into export markets and less into our into Brazil, and we expect it but in general.
Yes.
Speaker Change: Pretty much in line with what we expected.
Jean-Michel Rivieres: Yes, George, thanks for joining us. In terms of outreach, we're asking... I think we have continued momentum of what we've seen in the first quarter, which is improvement in every one of the regions. Latin America, you know, the first quarter seasonally is always the weakest one, so it should come up. The rest is just continuing to progress, and you can see it in our update. Thank you.
Speaker Change: Yeah. Thank you hi, Josh Thanks, a lot Jonathan Hi, Shang.
Speaker Change: Akshay.
Speaker Change: Asking.
Speaker Change: I think we have a continued momentum of what we've seen in first quarter, which is improvement in every one of the regions.
Speaker Change: Latin America, you know the first quarter seasonally always the weakest one so issue.
Matt: Hi, Matt.
Matt: The rest is just continuing to progress and you can see our outlook.
Matt: Thank you.
Operator: And next, we go to the line of Matthew McKellar with RBC Capital Markets. Please go ahead. Mr. McKellar, do you have your phone muted?
Matt: And next we go to the line of Matthew Mckellar with RBC capital markets. Please go ahead.
Matthew McKellar: Mr. Mckellar do you have your phone muted.
Matthew McKellar: Hi, thanks. Good morning. Thank you for taking the time to answer my questions.
Matthew McKellar: Hi, Thanks. Good morning, Thank you for taking my questions.
Matthew McKellar: Could you provide a little bit more color on the 200 million in high-return capital projects you've identified? Is there anything you can share about the time frame you'd expect to invest in these projects? What share of the project set would maybe be associated with each geographic segment?
Matthew McKellar: First could you provide a little bit more color on the $200 million of high return capital projects you've identified.
Matthew McKellar: Is there anything you can share over.
Matthew McKellar: Over what timeframe you would expect to invest in these projects.
Matthew McKellar: What share of the projects that would maybe be associated with each geographic segment.
Matthew McKellar: If there's anything you can share around weighted average IRR is across the pipeline of projects that would be helpful. Thank you.
John Van Sims: So Matthew, I think we said on the call that by the end of this year, we'll invest it in about 70 million dollars. If you look at next year, we probably will spend about $115 million on high-return projects. If you look at the weighted average returns across those projects, it's almost greater than 35%, so even higher than what we're showing in return on our share repurchase. But I think the project, you know, if you think about in terms of what we were spending on on an annual basis, it's about that trajectory.
Speaker Change: So Matthew I think.
Speaker Change: We said on the call that.
Speaker Change: The end of this year.
Matthew: Invested $70 million.
Speaker Change: Look at next year.
Speaker Change: Probably it will.
Speaker Change: And then about $115 million on high return projects.
Speaker Change: If you look at the weighted average returns across those.
Speaker Change: Those projects it's almost.
Speaker Change: Tom with greater than 35%, so even higher than what we're showing a return on our share repurchases, but I think the implied if you think about in terms of what we're spending on an annual basis, it's about that trajectory. So it took us about three years to go through 100 million.
John Van Sims: So it took us about three years to get through $100 million in return projects. Now we've identified another $200 million. We'll probably be generally continuing at that rate. Most of these projects, when you look at them on average, return well above 20%.
Speaker Change: Return projects now we've done it but another $200 million.
Speaker Change: Probably be generally considered continue at that rate. There are most of these projects and when you look at them on average is about $2 million.
Speaker Change: Capital project on average we're turning.
Speaker Change: Well above 20%.
Speaker Change: Internal rates of return.
Speaker Change: There are several projects that we need to continue to evaluate and of course.
Speaker Change: Get board approval that may be above.
Speaker Change: $15 million to $20 million, but those are things that.
Speaker Change: We're still looking at.
Speaker Change: Okay.
John Van Sims: Okay, thanks. That's helpful. As a follow-up, would that $70 million for this year be encompassed within Project Horizon? And then, just on Project Horizon more generally, could you maybe talk about how much you may achieve on an annualized run rate basis in Q1 and how much incremental benefit you might expect in Q2.
Speaker Change: Okay. Thanks, that's helpful.
Speaker Change: As a follow up.
Speaker Change: Would that $70 million for this year be encompassed within project Horizon and then just on project horizon more generally could you maybe talk about how much you may be achieved at an annualized run rate basis in Q1, and how much incremental benefit you might expect in Q2.
John Van Sims: Yeah, some of these high-return projects are driving cost reductions that we're seeing, particularly in our manufacturing. So they are incorporated into our targets for Verizon and also will be, you know, part of our strategy going forward as we say we're doing this to strengthen our competitive position in our core assets across the region, in terms of the benefit of what we saw in the first quarter.
Speaker Change: Yes. Some of these high return projects are driving cost reductions that we're seeing particularly in our manufacturing. So they are incorporated into.
Speaker Change: Our targets for Horizon, and also that will be part of our strategy going forward as we say we are doing this to strengthen our competitive positions.
Speaker Change: And our core assets across the regions.
Speaker Change: In terms of the.
Speaker Change: The benefit of what we saw in the first quarter November we shared this last time, it's clearly expect about.
John Van Sims: And remember, we shared this last time, we really expect about the bottom line, 10 to 15 million this year. So because of $50 million, roughly inflation, so we, we said horizon, we're going to deliver. By the end of this year, we'll be at that run rate, so 50 million of inflation will have to be netted against that. So we expect 10 to 15 this year, and most of that's back in the second half of the year, as we implement these projects and also reduce positions. So the bottom answer is that we probably didn't see much in the second quarter. I'll be back.
Speaker Change: Bottom line $10 million to $15 million this year because of $50 million roughly inflation. So we'd said horizon, we're going to deliver $110 million run rate.
Speaker Change: At the end of this year will be at that run rate.
Speaker Change: $50 million of inflation will have to be netted against that so we expect 10% to 15 this year and most of that back end loaded towards the second half of the year.
Speaker Change: As we implement these projects and also.
Speaker Change: Reduced.
Speaker Change: Position.
Speaker Change: So the bottom answer isn't that we didn't see much in the first in order to second quarter will be backend loaded.
Matthew McKellar: Okay, that's helpful, Caller. Thanks. I'll turn it back and get back in the queue.
Speaker Change: Okay. That's helpful color, Thanks ill turn it back and get back in the queue.
Speaker Change: Okay.
Operator: and we have a follow-up from George Staphos with Bank of America. Please go ahead.
Speaker Change: And we have a follow up from George Staphos with Bank of America. Please go ahead.
George Leon Staphos: Hi, thanks for taking my question. I know it's a little difficult to talk about this sort of thing live, Mike, but
Speaker Change: Hi.
George Leon Staphos: Thanks for taking my question.
George Leon Staphos: I know, it's a little difficult to talk about this sort of thing like Mike but.
George Leon Staphos: Some of the other producers in North America have either scaled back, or we've heard from our trade contacts that they had some operating issues in the first quarter where they had outages, perhaps not planned. Has that been a material driver of your business? And if so, should we be?
George Leon Staphos: Some of the other producers in North America have either scaled back <unk>, we've heard from our trade contacts had some operating issues.
George Leon Staphos: In the first quarter, where they had outages.
George Leon Staphos: Perhaps not planned.
George Leon Staphos: Has that been a material driver of your business.
George Leon Staphos: And if so should we be.
Jean-Michel Rivieres: To the extent possible, maybe trying to build in some cushion should that business leave that entered earlier in the year leave you later in the year and into 2025. How would you have us think about that conceptually? And then the second question I had, and then I'll turn it over to you, you know, I know you're not guiding for the third quarter yet. But we do know what the maintenance guide is. Are there any other significant bridge items that you would have us at least conceptually think about as we think about this?
George Leon Staphos: The extent possible, maybe trying to build in some cushion should that business leave that entered earlier in the year leave you later in the year and into 'twenty.
George Leon Staphos: 25, how would you have us think about that.
George Leon Staphos: Conceptually.
Speaker Change: And then second question I had and then I'll turn it over.
Speaker Change: I know you're not guiding.
Speaker Change: On third quarter, yet, we do know with the maintenance guide is are there any other significant bridge items that you would have us at least conceptually think about as we think about <unk>. Thank you.
Jean-Michel Rivieres: George, if you don't mind, I'll ask you to repeat your first question, because I think I didn't understand the first question. I can answer the second question at a high level. So the main thing is maintenance, as you said. The other thing, as we always say, is the second half, much better seasonality in Latin America than the first half, so if I had to guide you on two things, which might they be?
Speaker Change: George if you don't mind.
George Leon Staphos: I ask you to repeat your first question because I think I didn't get the first question I can answer the second question on that.
George Leon Staphos: Hi, David So the maturing is the manifest as you said the other thing as we always say the second half.
George Leon Staphos: <unk> in Latin America than the first half so if I had to guide on two things.
Which may be.
George Leon Staphos: Easy border Auguste too and then of course, the continuation of improvement that we've seen in the first half first quarter.
George Leon Staphos: So the momentum that time and the outer edge is probably a good way to look at it and I am sure.
So im sure momentum Latam and what was the other thing you said.
George Leon Staphos: Momentum in general industry region.
George Leon Staphos: And the R&D and the R&D engine.
George Leon Staphos: Yep Yep Yep.
George Leon Staphos: My first point, we had heard some some of the other free sheet producers had some operating issues in the first.
George Leon Staphos: First portion of the year I think there was one that was in the press with within I think an unplanned outage did any of that business accrue to you and if it did does it go away. Once those produced are back running more normally I guess is a substance of the question.
Speaker Change: Yes, we had about a two and we just saw.
Speaker Change: First our estimate of operating rate for the months of April and the statistic you, saying it was 96% which is very high.
Speaker Change: But I don't think we can we can put a direct relation between our order book and what happens to our competitors I think goes to independent okay.
Speaker Change: Thank you.
Speaker Change: And we go back to a follow up with Matthew Mckellar with RBC capital markets. Please go ahead.
Matthew McKellar: Alright. Thanks.
Matthew McKellar: You talked about upward pressure on the cost of your wood fiber in Sweden in 2023, and I think you also mentioned expecting continued headwinds in the cost of fiber in Latin America at least in the near term here.
Matthew McKellar: Can you talk about what the latest trends are in each country and maybe talk about whether you expect any moderation wood fiber cost was 24 at progressive.
Speaker Change: Yes Matthew.
Progressive: Situation in Sweden, the wood cost continues to be elevated remember, we've said that the reason for that is.
Progressive: Higher demand for <unk>.
Progressive: Good for bio energy and also the western situations and the lack of it.
Progressive: Exports would it has stabilized, but it's stabilized at a higher level the higher level. So we're not seeing increases in Sweden, but were not seen nor are we seeing decreases so its pretty much stabilize there.
Progressive: And same thing in Brazil.
Progressive: Brazil wood prices.
Progressive: Certainly increased on the open market.
Progressive: And that also is stabilize but stay blood that highway.
Speaker Change: Thanks, Thanks, that's helpful and if I could sneak one more in.
Speaker Change: Are you seeing new opportunities in Mexico that you could serve from either the U S to Brazil, with Mexico, and closing important duties in uncoated freesheet from China and Indonesia.
Speaker Change: So the Mexico side, there is a balance for us because we had some export from.
Speaker Change: Brazil, which is going to be tax.
Speaker Change: It's created opportunity from North America. So net net I think when we looked at it as more opportunities.
Speaker Change: Then anything.
Speaker Change: It's been a balance between the two but yes, youre correct, that's probably an opportunity, which we are seeing.
Speaker Change: To export more from North America to Mexico.
Speaker Change: Okay. Thanks for the color I'll turn it back.
Speaker Change: We do have another follow up from George Staphos. Please go ahead.
George Leon Staphos: Hi, everyone just a last one from me just.
George Leon Staphos: Number one if possible could you give us a quick snapshot on capacities by region.
George Leon Staphos: Paper versus pulp and it fits in the deck or in the coming Q, we'll wait and we'll look but if you had that quickly that'd be great and then what did you say the head count reduction is with horizon for this year in total I recognize a third is already done from what you said, but what what was the number you cited for the for the year. Thank you guys.
Speaker Change: The Georgia for the for the I'll answer the Horizon question for 150.
Speaker Change: And that is across globally.
Speaker Change: Okay.
Speaker Change: On the capacity perspective.
Speaker Change: Yes.
Speaker Change: Well, we have it by region is.
Speaker Change: Uncoated. So I'll give you these numbers so for uncoated papers in Europe at 760000.
Speaker Change: For market pulp in Europe, it's dirty.
Speaker Change: In Latin America is $1 1 million for uncoated freesheet.
Speaker Change: Hundred 60 buffer market bolt.
Speaker Change: And in North America.
Speaker Change: Our facilities, it's 975000.
Speaker Change: Uncoated free sheet and 115000 market Paul.
Speaker Change: Well remember we have a supply agreement with international paper.
Speaker Change: The supply agreements for both Georgetown and Riverdale, It's 655000.
Speaker Change: Uncoated freesheet.
Speaker Change: Thank you so much and that is in the appendix.
Speaker Change: Thanks very much.
Speaker Change: Ladies and gentlemen for any additional questions. Please press one zero at this time.
Jean-Michel Rivieres: [inaudible]
Speaker Change: We have no other questions I will now turn the call back over to Hans Brookman for closing comments.
Jean-Michel Rivieres: momentum in general, and The Origin, as you mentioned.
Hans Bjorkman: Thanks, Leah before we wrap up the call John Michel any closing thoughts and just a few so first of all thank you for joining the call.
George Leon Staphos: My first point is that we had heard some of the other free sheet producers had some operating issues in the first year, first portion of the year. I think there was one that was in the press with an, I think, unplanned outage. Did any of that business accrue to you? And if it did, does it go away once those producers are back running more normally? I guess that is the substance of the question.
Jean-Michel Rivieres: Yeah, we heard about it too.
Jean-Michel Rivieres: Yeah, we heard about it too, and we just saw the first estimate of the operating rate for the month of April, and the statistics are saying it was 96%, which is very high. But I don't think we can put a direct relation between our other book and what happens to our competitors. I think those two are independent.
Operator: And we go back to a follow-up with Matthew McKellar of RBC Capital Markets. Please go ahead.
Matthew McKellar: Hi, thanks. I think you talked about upward pressure on the cost of your wood fiber in Sweden in 2023. And I think you also mentioned expecting continued headwinds on the cost of fiber in Latin America, at least in the near term. Can you talk about what the latest trends are in each country and maybe talk about whether you expect any moderation in wood fiber costs as 2024 progresses?
John Van Sims: As we've demonstrated since its peanuts, we maintain a balance between our healthy financial position and returning cash to shareholders and reinvesting in our business and will continue to go through the same direction.
John Van Sims: Yes, Matthew. The situation in Sweden continues to be elevated because of the wood cost. Remember, we said that the reason for that is higher demand for wood for bioenergy and also the Russian situation, a lack of. It is stabilized, but it's stabilized at a higher level. So we're not seeing increases in Sweden, but we're not seeing, nowhere are we seeing decreases, so it's pretty much stabilized there. And same thing in Brazil. Brazilian wood prices have certainly increased on the open market side. And that also is stabilized, but stabilized at a higher level.
John Van Sims: So our strategy is reinvesting in our business to increase our competitive advantages.
John Van Sims: We're confident in our ability to generate strong earnings and cash flow throughout the cycle and looking forward for the second quarter and this year. Thank you very much.
John Van Sims: Thanks. Thanks. That's helpful. And if I could sneak one more in, are you seeing new opportunities in Mexico that you could serve from either the US or Brazil with Mexico imposing import duties and uncoded free sheets from China and Indonesia?
John Van Sims: So the Mexico side is a balance for us because we had some exports from Brazil, which is going to be taxed. And it's created an opportunity from North America. When we looked at it, it's more opportunity, which we are seeing, to export more from North America.
Speaker Change: Thanks for joining us today, we appreciate your interest in silver them, all and we look forward to continued conversations in the coming weeks and months.
Matthew McKellar: Okay, thanks for the color. I'll turn it back.
Operator: We do have another follow-up from George Staphos. Please go ahead.
George Leon Staphos: Hi everyone, just last one from me. Just number one, if possible, could you give us a quick snapshot on capacities by region, you know, paper versus pulp? And if it's on the deck or in the coming queue, we'll wait and or look. But if you had it that quickly, that'd be great. And then what did you say the headcount reduction is with Horizon for this year in total? I recognize a third is already done from what you said, but what was the number that you cited for the whole year? Thank you, guys.
John Van Sims: at Georgia for the answer to the Horizon question first, 150 positions, and that is the cost.
Hans Bjorkman: Thanks for joining us today. We appreciate your interest in Sylvamo, and we look forward to continued conversations in the coming weeks and months. Once again, we'd like to thank you for your participation in Sylvamo's first quarter 2024 earnings call. You may now disconnect.
John Van Sims: [inaudible] from the capacity perspective.
Speaker Change: Once again, we'd like to thank you for your participating in Silvar malls first quarter 2024 earnings call you may now disconnect.
John Van Sims: We have it by region for uncoated, so I'll give you these numbers to you. So for uncoated papers in Europe, it's 765,000, and for market bulk in Europe, it's 130. In Latin America, it's $1.1 million for uncredited free sheets and $165 for market pull, and in North America, for our facilities, it's 975,000 for uncoded free sheets and $115,000 for market call. But remember, we have a supply agreement with International Paper. So the supply agreement for both Georgetown and Riverdale is $655,000 in Uncoded Friends.
George Leon Staphos: Thank you so much. And that is in the appendix? Yeah.
Operator: Ladies and gentlemen, for any additional questions, please press 1-0 at this time. We have no other questions, and I'll turn the call back over to Hans Bjorkman for closing comments.
Hans Bjorkman: Thanks, Leah. Before we wrap up the call, Jean-Michel, any closing thoughts?
Jean-Michel Rivieres: Just a few. First of all, thank you for joining the call. As we've demonstrated in the spinoff, we maintain a balance between a healthy financial position, returning cash to shareholders, and reinvesting in our business, and we'll continue to do so. Our strategy is to reinvest in our business to increase our competitive advantage. We're confident in our ability to generate strong earnings and cash flows throughout the cycle and looking forward to the second quarter and this year. Thank you very much.
Operator: We're sorry, your conference is ending now. Please hang up.
Speaker Change: We're sorry your conferences ending now please hang up.