Q1 2024 Rayonier Advanced Materials Inc Earnings Call

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Operator: Good morning, and welcome to the RYAM first quarter 2024 earnings conference call. During today's presentation, all parties will be in a listen-only mode.

Good morning, and welcome to the Ryan's first quarter 'twenty 'twenty four earnings conference call.

During todays presentation, all parties will be in a listen only mode. Following the presentation. The conference will be open to questions with instructions will follow at that time.

As a reminder, this conference is being recorded I would now like to turn the call over to your host Mr. Mickey Walsh Treasurer, and Vice President of Investor Relations. Thank you. Mr. Waltz, you may begin.

Operator: Following the presentation, the conference will be open to 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 begin.

Michael H. Walsh: Thank you and good morning. Welcome again to Ryan's first quarter 2024 earnings conference call and webcast. Joining me on today's call are Delisle Bloomquist, 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 at ryan.com. I'd like to remind you that in today's presentation, we will include forward-looking statements made pursuant to the safe harbor provisions of federal securities laws. Our earnings release, as well as our filings with the SEC, list some of the factors which may cause actual results to differ materially from the forward-looking statements we may, or may not, make.

Michael H. Walsh: Thank you and good morning, welcome again to Ryan's first quarter 'twenty 'twenty four earnings conference call and webcast. Joining me on today's call are July all Bloom Quest, our president and Chief Executive Officer, and Marcus Moulton are our Chief Financial Officer, and senior Vice President of Finance, our earnings release and presentation materials were issued.

Michael H. Walsh: Evening and are available on our website at <unk> Dot com.

Michael H. Walsh: They're also referenced on slide two of our presentation material. 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. A reconciliation of these measures to their most directly comparable GAAP measures is included on slides 20 through 25 of our presentation. I would now like to turn the call over to Delisle.

Michael H. 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 wait me.

Michael H. Walsh: They're also referenced on slide two of our presentation materials.

Michael H. Walsh: 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 are included.

Michael H. Walsh: On slides 20 through 25 of our presentation I would now like to turn the call over to dual aisle.

De Lyle W. Bloomquist: Thank you, Mickey, and good morning. I'll begin with a financial overview for the first quarter of 2024. Following that, I'll discuss recent company actions before handing over to Marcus for additional details on the business segments and our capital structure and liquidity.

Dual Aisle: Thank you Mickey and good morning.

Dual Aisle: I'll begin with the financial overview for the first quarter of 'twenty 'twenty four.

Dual Aisle: Following that I'll.

Dual Aisle: I'll discuss recent company actions before handing over to Marcus for additional details on the business segments, and our capital structure and liquidity.

Dual Aisle: Following mark with his comments I'll come back to share additional details on our initiatives and guidance for 'twenty 'twenty four.

De Lyle W. Bloomquist: I'll come back to share additional details on our initiatives and guidance for 2024. This will include updates on the suspension of the operations at our Triscomene HPC plant and the sales process for the paperboard and how you'll pull this. We will then open the floor for questions.

Dual Aisle: This will include updates on the suspension of the operations at our <unk> H B C plant.

Marcus J. Moeltner: And the sales process for the paperboard in high yield pulp businesses.

Michael H. Walsh: He will then open the floor for questions.

De Lyle W. Bloomquist: Let's turn our attention to slide four, where we'll discuss our first quarter performance for 2024. Results exceeded expectations with an adjusted EBITDA of $52 million, a $1 million increase from the same period last year, in the high purity cellulose segment. EBITDA rose by $6 million, driven by higher prices for cellular specialties, along with a decreased cost for key inputs in logistics, as well as improved productivity. However, this increase was somewhat moderated by reduced sales volume. Lower Prices for Commodity Products and the absence of energy benefits that we anticipate we will realize later this year.

Michael H. Walsh: Let's turn our attention to slide four.

Speaker Change: I will discuss our first quarter performance for 2024.

Speaker Change: The results exceeded expectations with an adjusted EBITDA of $52 million.

Michael H. Walsh: A $1 million increase from the same period last year.

Michael H. Walsh: And the high pulp and I'm, sorry in the high purity cellulose segment.

Michael H. Walsh: EBITDA rose by $6 million, driven by higher prices for cellulose specialties, along with a decrease cost for key inputs and logistics as.

Michael H. Walsh: As well as improved productivity.

Michael H. Walsh: This increase was somewhat moderated by reduced sales volumes lower prices for commodity products.

Michael H. Walsh: In the absence of energy benefits that we anticipate we will realize later this year.

De Lyle W. Bloomquist: Conversely, the paperboard segment experienced a $1 million decrease in EBITDA, primarily due to lower sales prices, although this was somewhat mitigated by decreased costs for purchase craft pulp, a high-yield pulp business, saw a $8 million decrease in EBITDA, largely due to lower sales prices, although this was partially offset by increases in sales volumes and reduced logistics expenses. Additionally

Michael H. Walsh: Conversely, the paperboard segment experienced a $1 million decrease in EBITDA.

Michael H. Walsh: Primarily due to lower sales prices. Although this was somewhat mitigated by decreased costs for purchased Kraft pulp.

Michael H. Walsh: High yield pulp business.

Michael H. Walsh: Saw a $8 million decrease in EBITDA.

Michael H. Walsh: Largely due to lower sales prices, though this was partially offset by increases in sales volumes and where do use logistics expenses.

Michael H. Walsh: Additionally.

De Lyle W. Bloomquist: Corporate expenses improved by $4 million, largely driven by a favorable foreign exchange impact. In summary, the overall solid performance was underpinned by strong results in our core cellular specialty segment. Cost Reductions Across the Enterprise, which more than offset the softness in the paperboard and high-yield pulp sectors, in terms of cash flow. There was a strategic use of cash to build finished goods inventories in anticipation of the planned annual maintenance outage at our Jessup plant. In subsequent developments, we have announced the indefinite suspension of operations at our Tomiskamine HPC plant.

Michael H. Walsh: Corporate expenses improved by $4 million, largely driven by a favorable foreign exchange impact.

Michael H. Walsh: In summary.

Michael H. Walsh: The overall solid performance was underpinned by strong results at our core cellulose specialties segment.

Michael H. Walsh: Cost reductions across the enterprise was more than offset the softness in paperboard in high yield pulp segments.

Michael H. Walsh: In terms of cash flow.

Michael H. Walsh: It was a strategic use of cash to build finished goods inventories in anticipation of the planned annual maintenance outage at our Jesup plant.

Michael H. Walsh: And subsequent developments, we have announced the indefinite suspension of operations at our two Miscommunicate S. P C play out.

De Lyle W. Bloomquist: The suspension is expected to provide marginal positive EBITDA benefits and enhance our consolidated free cash flow in 2024. I will share more about the financial implications of this decision after Marcus' comment this month.

Michael H. Walsh: The suspension is expected to provide margin still positive EBITDA benefits and enhance our consolidated free cash flow in 2024.

Michael H. Walsh: I will share more about the financial implications of this decision after markets his comments.

Michael H. Walsh: This month, we also announced a significant transaction.

De Lyle W. Bloomquist: We also announced a significant transaction, selling the rights to our softwood lumber duty refund for $39 million. The sale not only bolsters our financial flexibility but also aligns with our strategic goal to reduce our debt by $70 million in 2024. Considering these updates and our strong performance in the first quarter, I am pleased to reaffirm our full year EBITDA guidance of $180 to $200 million and to raise our full year adjusted free cash flow guidance to $80 to $100 million. With that, I'd like to pass the meeting over to Marcus to walk us through the financials for the quarter. Marcus

Michael H. Walsh: Selling the rights to our softwood lumber duty refund.

Michael H. Walsh: 430 minute $39 million this sale not only bolsters our financial flexibility.

Michael H. Walsh: But also aligns with our strategic goal to reduce our debt by $70 million in 'twenty 'twenty four.

Michael H. Walsh: Considering these updates and our strong performance in the first quarter I am pleased to reaffirm our full year EBITDA guidance of $180 million to $200 million.

Michael H. Walsh: And to raise our full year adjusted free cash flow guidance to $80 million to $100 million.

Michael H. Walsh: With that I'd like to pass the meeting over to Marcus to walk us through the financials for the quarter Marcus Thank you Joe.

Marcus J. Moeltner: Beginning with our HBC segment on slide five, quarterly sales declined by 67 million, or 18%, to 307 million. Overall HPC pricing declined 2%, driven by a 2% increase in CS sales price, which was more than offset by an 11% decrease in commodity prices. Total sales volumes decreased 17% as a result of a 16% decline in sales volume and an 18% decrease in commodity sales. Increased sales volumes in CS were supported by the closure of a competitor's plant in late 2023 and Arise in Ether Sales.

Marcus J. Moeltner: Beginning with our H B C segment on slide five.

Marcus J. Moeltner: Quarterly sales declined by $67 million or 18% to $307 million.

Marcus J. Moeltner: Overall H P C pricing declined 2%.

Marcus J. Moeltner: Driven by a 2% increase in CS sales price, which was more than offset by an 11% decrease in commodity pricing.

Marcus J. Moeltner: Total sales volumes decreased 17% as a result of a 16% decline in CS sales volumes and an 18% decrease in commodity sales in.

Marcus J. Moeltner: Increased sales volumes and see US were supported by the closure of a competitor's plant in late 2023.

Marcus J. Moeltner: And a rise in ethers sales.

Marcus J. Moeltner: This was more than offset by destocking in certain acetate products and the impact of a one-time favorable change in customer contract terms from the previous. The decrease in commodity sales volume was primarily a result of higher production in favor of CS as the company built inventory ahead of Jessup's second quarter planned maintenance outage. Other sales for the quarter were $23 million, which included $12 million of green energy sales.

Marcus J. Moeltner: This was more than offset by destocking in certain acetate products.

Marcus J. Moeltner: And the impact of a one time favorable change in customer contract terms from the previous year.

Marcus J. Moeltner: The decrease in commodity sales volumes was primarily a result of higher production in favor of C. S.

Marcus J. Moeltner: As the company built inventory ahead of Jessops second quarter planned maintenance outage.

Marcus J. Moeltner: Other sales for the quarter were $23 million.

Marcus J. Moeltner: Which included $12 million of Green energy sales.

Marcus J. Moeltner: EBITDA for the segment rose by $6 million to $50 million, primarily due to higher CS sales prices and decreased key input and logistic costs, along with the benefits of improved productivity. However, these improvements were partially offset by declines in CS sales volume, lower commodity prices and volumes, and the absence of $7 million in energy-related cost benefits from the previous year that are expected to recur later in the year. Turning to slide six.

Marcus J. Moeltner: EBITDA for the segment rose by 6 million to $50 million.

Marcus J. Moeltner: Primarily due to higher C. S sales prices and decreased key input and logistic costs, along with the benefits of improved productivity.

Marcus J. Moeltner: These improvements were partially offset by declines in CS sales volumes.

Marcus J. Moeltner: Lower commodity prices and volumes.

Marcus J. Moeltner: And the absence of $7 million in energy related cost benefits from the previous year that are expected to recur later in the year.

Marcus J. Moeltner: Turning to slide six.

Marcus J. Moeltner: Sales in the paperboard segment declined $6 million, largely due to a 12% drop in sales price. Resulting from changes in product mix and market-driven demand decline, EBITDA for the segment declined $1 million to $12 million, mainly due to lower sales prices, though this impact was somewhat mitigated by decreased costs for purchase bulk. Turning to the high yield pulp segment on slide 7,

Marcus J. Moeltner: Sales into paperboard segment declined $6 million.

Marcus J. Moeltner: Largely attributed to a 12% drop in sales prices Reis.

Marcus J. Moeltner: Resulting from changes in product mix and market driven demand declines.

Marcus J. Moeltner: EBITDA for the segment declined 1 million to $12 million, mainly due to lower sales prices, though this impact was somewhat mitigated by decreased decreased cost for purchase pulp.

Marcus J. Moeltner: Turning to the high yield pulp segment on slide seven.

Marcus J. Moeltner: Sales declined by $8 million in comparison to the prior year, mainly due to a 27% drop in external sales prices, partially offset by a 16% increase in sales volume. The price reductions were a consequence of market supply dynamics, mainly in China. Segment EBITDA reached a break-even point in contrast to $8 million generated in the prior year. Transitioning to slide eight.

Marcus J. Moeltner: Sales declined by $8 million in comparison to the prior year.

Marcus J. Moeltner: Mainly due to a 27% drop in external sales prices, partially offset by a 16% increase in sales volumes.

Marcus J. Moeltner: The price reductions were a consequence of market supply dynamics, mainly in China.

Marcus J. Moeltner: Segment EBITDA reached a breakeven point in contrast to $8 million generated in the prior year.

Marcus J. Moeltner: Transitioning to slide eight.

Marcus J. Moeltner: Consolidated operating income for the quarter amounted to $17 million. Sales Price Improvements in CS were more than offset by pricing declines across all other products. In addition, sales volume and mix impacts were offset by cost. SG&A and other cost benefits related to favorable foreign exchange rates were partially offset by discounting and financing fees incurred. Support Enhancements in Working Capital. Now let's turn to slide nine.

Marcus J. Moeltner: Consolidated operating income for the quarter amounted to 17 million Saar.

Marcus J. Moeltner: Price improvements in C. S were more than offset by pricing declines across all other products.

Marcus J. Moeltner: In addition sales volume and mix impacts were offset by cost improvements.

Marcus J. Moeltner: SG&A and other cost benefits related to favorable foreign exchange rates were partially offset by discounting and financing fees incurred to support enhancements in working capital.

Marcus J. Moeltner: Now, let's turn to slide nine.

Marcus J. Moeltner: Total debt ended the quarter at $798 million, a reduction of $54 million from the same period in 2023. Net secured debt, reflected in our financial covenant ratio associated with the term loan, ended the quarter at $721 million. Net secured leverage closed the corridor at 4.4 times within the original covenant test. Liquidity closed the quarter at $199 million, reflecting $55 million of cash, $131 million available under our ABL facility, and $13 million for our French factoring facility. As anticipated, working capital levels increased driven by the inventory build ahead of Jessup's annual planned maintenance outing. Topics for the quarter totaled $33 million.

Marcus J. Moeltner: Total debt ended the quarter at 798 million a reduction of 54 million from the same period in 2023.

Marcus J. Moeltner: Net secured debt reflected in our financial covenant ratio associated with the term loan ended the quarter at $721 million.

Marcus J. Moeltner: Net secured leverage closed the quarter at four four times within the original Covenant test.

Marcus J. Moeltner: Liquidity to close the quarter at $199 million.

Marcus J. Moeltner: Reflecting $55 million of cash 131 million available under our ABL facility and $13 million for French factoring facility.

Speaker Change: As anticipated.

Speaker Change: Working capital levels increased driven by the inventory build ahead of just its annual planned maintenance outage.

Speaker Change: Capex for the quarter totaled $33 million with 5 million directed towards strategic capital to support the startup of the Tar test by a bio ethanol project.

Marcus J. Moeltner: $5 million directed towards strategic capital to support the start-up of the TARTIS bioethanol project. Additionally, as Delisle previously noted, we announced the sale of our softwood lumber duty refund rights for $39 million. Overall liquidity remains strong, and we are well positioned to achieve our targeted $70 million debt reduction this year. In preparation for the upcoming refi of our 2026 senior notes, we have retained Houlihan Loki to provide advisory services throughout the process. With that, I'd like to turn the call back over to Delisle. All right. Thank you, Marcus.

Speaker Change: Additionally, as previously noted we announced the sale of our softwood lumber duty refund rates for $39 million.

Speaker Change: Overall liquidity remains strong and we are well positioned to achieve our targeted 70 million debt reduction this year.

Speaker Change: In preparation for the upcoming refi of our 2026 senior notes, we have retained houlihan lokey to provide advisory services throughout the process.

Speaker Change: With that I'd like to turn the call back over to Doyle Alright. Thank you Marcus.

De Lyle W. Bloomquist: All right, thank you, Marcus. Let's now turn our attention to slide 10, where I'll provide an update on our key initiatives for 2024. Our primary goal this year is to refinance the 2026 senior notes before they go current in January 2025, with a particular focus on reducing debt. We are on track to meet our target of reducing gross debt by $70 million in 2024.

Doyle: Let's now turn our attention to slide 10, where I'll provide an update on our key initiatives for 2024.

Doyle: Our primary goal this year is to refinance the 2026 senior notes before they go current in January 2025.

Doyle: With a particular focus on reducing debt.

Doyle: We are on track to meet our target of reducing gross debt by $70 million in 'twenty 'twenty four.

De Lyle W. Bloomquist: Supported by business-generated free cash flow, a tax refund, and proceeds from the recent sale of the Softwood Lumber Duty's refund rights. In addition, we are progressing with the sales process of our paperboard and high-yield pulp assets. Interest remains high among prospective buyers following the announcement of the suspension of operations at the Tamiscamine High Purity Cellulose Plant, which has introduced some delays due to the change in the underlying assumptions of how the site will be managed. However, the suspension and asset sales decisions affecting the Tommiscomene site have been approached and carried out independently.

Doyle: Supported by business generated free cash flow a tax refund.

Doyle: Proceeds from the recent sale of the softwood lumber duties refund rates.

Doyle: In addition, we are progressing with the sales process of our paperboard into high yield pulp assets.

Doyle: Interest remains high among the prospective buyers following the announcement of the suspension of operations at the <unk> high purity cellulose plant.

Doyle: She has introduced some delays due to the change in the underlying assumptions of how the site will be managed.

Doyle: Well the suspension and asset sales decisions affecting that typically means site had been approached and carried out independently.

De Lyle W. Bloomquist: We believe that suspension will bring clarity to the asset sales diligence process by validating that these assets can be effectively run separately. It's important to reemphasize that this is not a fire sale. We have a value threshold based on the high EBITDA margins and the low custodial capital intensity of the paper board business. While the proceeds from the sale would obviously reduce our debt load, we are carefully balancing the estimated annual $50 million plus in pre-cash flow that we receive from these businesses against any potential debt repayment.

Doyle: We believe that this suspension will bring clarity to the asset sales diligent process by validating that these assets can be effectively run separately.

Doyle: It's important to reemphasize that this is not a fire sale.

Doyle: We have a value threshold based on the high EBITDA margins and the low custodial capital intensity of the paperboard business, while the proceeds from the sale would obviously reduce our debt load.

Doyle: We are carefully balancing the estimated annual $50 million plus in free cash flow.

Doyle: That we receive from these businesses against any potential debt repayment.

De Lyle W. Bloomquist: We plan to complete the transition, provided the terms are acceptable, before our notes go current in January 2025. We are taking significant steps to optimize our assets and address the ongoing challenges associated with our high purity of cellulose commodity exposure, which has been impacting our profit margins and earnings stability, as part of this strategic pivot. We announce the indefinite suspension of operations at our Tommiscomene HPC.

Doyle: We plan to complete the transition provided the terms are acceptable before notes go current in January 2025.

Doyle: We are taking significant steps to optimize our assets and address the ongoing challenges associated with our high purity cellulose commodity exposure.

Doyle: Which has been impacting our profit margins and earnings stability is.

Doyle: Part of this strategic pivot.

Doyle: We announced the indefinite suspension of operations at our <unk> H P C plant.

De Lyle W. Bloomquist: This decision reflects our commitment to mitigating the financial drag from non-slip commodities, which projected a 2024 EBITDA loss of $48 million, following a $60 million loss in 2023. I will provide more details on this announcement in the slide that follows. One of the most promising initiatives is the continued expansion of our biomaterials business. The Tardis Bioethanol Plant, a first step of this strategy, celebrated its first shipment in April. We anticipate this facility will generate $3 to $4 million in EBITDA this year, with projections of $8 to $10 million annually from 2025 as we achieve our targeted production levels.

Doyle: This decision reflects our commitment to mitigating the financial drag from not slept commodities.

Doyle: Which projected a 'twenty 'twenty four EBITDA loss of $48 million. Following me a 60 million dollar loss in 2023.

Speaker Change: I will provide more details on this announcement.

Speaker Change: Slide that follows.

Speaker Change: One of the most promising initiatives in just the continued expansion of our biomaterials business.

Doyle: Our tightest bioethanol plant a first step of this strategy celebrated his first shipment in April.

Doyle: We anticipate this facility will generate $3 million to $4 million in EBITDA this year.

Doyle: With projections of $8 million to $10 million annually from 'twenty to 'twenty five as we achieved targeted production levels.

De Lyle W. Bloomquist: Looking forward, our biomaterials project pipeline includes the proposed AGE project at our Jessup facility, which will produce green energy for sale, and a new prebiotics additives plant at the same site. We continue to advance the proposed bioethanol plant in Fernandina Beach.

Speaker Change: Looking forward.

Doyle: Our Biomaterials project pipeline includes the proposed E. G E project at our Jesup facility, which will produce green energy for sale.

Doyle: And a new prebiotics additives plant at the same site.

Doyle: We continue to advance the proposed bioethanol plant in Fernandina Beach.

De Lyle W. Bloomquist: As we've commenced detail engineering and submitted the project's air permit with the regulatory authority. Our proposed projects in the works include crude tall oil operations in both France and the U.S. We aim to finance all these projects with green capital. Now, I'll discuss the recent decision to indefinitely suspend operations at our Tomiscomene HPC plant. In April, we made the difficult decision to halt operations at this facility.

Doyle: As we've commenced detail engineering and submitted the projects air permit with the regulatory authorities.

Doyle: Our proposed projects in the works at Fluke crude tall oil operations in both France and the U S.

Doyle: We aimed to finance all of these projects with Green capital.

Doyle: Let's turn to slide 11, where I'll discuss the recent decision to indefinitely suspend operations at our <unk> H B C plant.

Doyle: In April we made the difficult decision to halt operations at this facility.

De Lyle W. Bloomquist: A Move Driven by Ongoing Market Weakness in the Non-Fluff Commodity Market and uncertainty availability of affordable wood fiber and high capital and fixed costs, which when combined all together, created significant significant operating losses. The financial implications for 2024 include a one-time cost of around $30 million for severance, Benefits Extension, Health Placement Services, and Mothballing the Plant. While we are still evaluating non-cash impairment charges, we anticipate the overall impact on this year's operating results and adjusted EBITDA to be marginally positive.

Doyle: Move driven by ongoing market weakness in the non fluff commodity markets yes.

Doyle: Certain availability of affordable wood fiber and high capital and fixed costs, which when combined all together created significant significant operating losses.

Doyle: The financial implications for 'twenty 'twenty four include one time cost around $30 million for severance.

Doyle: Benefits extension, how placement services and mothballing the plan.

Doyle: While we are still evaluating noncash impairment charges, we anticipate the overall impact on this year's operating results and adjusted EBITDA to be marginally positive.

De Lyle W. Bloomquist: Furthermore, we expect an improvement in 2024 free cash flow by approximately $15 to $20 million. Driven by the monetization of working capital and reduced CapEx, this should more than offset the associated one-time suspension costs. Once mothballed, we believe that this facility will represent the industry's best available idle capacity to satisfy future specialty cellulose demand grills since it will require minimal capital investment to restart, can re-enter supply into the market within a year, exists within an operating industrial site with utilities and other site services, and is qualified by many customers to supply CS products. Consequently, we plan to at least annually assess the possibility of restarting the Tamiskamine HP During the suspension period and after the CS, the product qualification process concludes.

Doyle: Furthermore, we expect an improvement in 'twenty 'twenty four free cash flow by approximately $15 million to $20 million drew.

Doyle: Driven by the monetization of working capital and reduced capex that should more than offset the associated onetime suspension costs.

Doyle: Once mothballed, we believe that this facility will represent the industry's best available idled capacity to.

Doyle: To satisfy future specialty cellulose demand growth.

Doyle: Since it will require minimal capital investment investment to restart.

Doyle: Can re enter supply into the market within a year.

Doyle: Exist within an operating in this industrial site with utilities and other site services.

Doyle: And is qualified by many customers as supply see us products.

Doyle: So quickly we plan to at least annually assess the possibility of restarting the <unk> H P C plant.

Doyle: During the suspension period and after the call.

Doyle: The qualification process concludes.

De Lyle W. Bloomquist: We estimate that we will realize an annualized improvement in adjusted EBITDA of $15 to $20 million a year, primarily to reduce losses resulting from the HPC commodities sales. We also anticipate an increase of approximately $30 million in free cash flow. Summary from this EBITDA Improvement in the Avoidance of Custodial Capital Expenditures. The customer qualification process is actively ongoing. All targeted customers are currently testing the CS products from our other plant. This qualification work is expected to take 18 to 24 months.

Doyle: We estimate that we will realize an annualized improvement in adjusted EBITDA of $15 million to $20 million eight year.

Doyle: Primarily to reduce losses, resulting from the H P C commodity sales.

Doyle: We also anticipate an increase of approximately $30 million in free cash flow.

Doyle: 70 from this EBITDA improvement and the avoidance of custodial capital expenditures.

Doyle: The customer qualification process is actively ongoing.

Doyle: With all targeted customers currently testing the <unk> products from our other plants.

Doyle: This qualification work is expected to take 18 to 24 months.

De Lyle W. Bloomquist: We are building bridge inventory until July to sustain customer demand through this qualification period. The CS business that we expect to retain will be produced from our A and B lines at Jessup and our sulfide plants at Fernandina Beach and Tardis. We remain committed to our fluff business, and the majority of our C line at Jessup will continue to focus on fluff production.

Doyle: We are building bridge inventory until July so sustained customer demand through this qualification period.

Doyle: The <unk> business that we expect to retain will be produced from our a and b lines at Jessup.

Doyle: And our sulfide plants at Fernandina Beach and TARDIS.

Doyle: We remain committed to our fluff business and the majority of our C line of Joseph will continue to focus on fluff production.

Doyle: Let's turn to slide 12.

De Lyle W. Bloomquist: We expect Enterprise EBITDA to be between $180 to $200 million for the year. Cash interest expenses are projected at approximately $85 million this year, which includes the $15 million payment that was made in early January for last year's Q4 due to the timing of the interest payment around the holidays. As a reminder, the current normalized annual interest expense is estimated at $70 million.

Doyle: We expect enterprise EBITDA to be between $180 million to $200 million for the year.

Doyle: Cash interest expense is projected at approximately $85 million this year.

Doyle: Which includes the $15 million payment that was made in early January for last year's Q4 due to the timing of the interest payment around the holidays.

Doyle: As a reminder, the current normalized annual interest expense is estimated at $70 million.

De Lyle W. Bloomquist: Maintenance CapEx is estimated now at $80 million, reflecting a $5 million reduction due to the suspension of the Tamiscomene HPC plant. Additionally, we project a $45 million benefit from working capital, which includes a $30 million increase resulting from the Tamiscomene HPC plant suspension. Furthermore, we anticipate $14 million in tax refunds and $39 million from the monetization of the lumber duties, which will be partially offset by impacts related to the tamiscomene HPC plant suspension.

Doyle: Maintenance Capex is estimated now at $80 million, reflecting a $5 million reduction due to the suspension of the Smiths can mean H B C plant.

Doyle: Additionally, we projected $45 million benefit from working capital, which includes a $30 million increase resulting from the Tamil <unk> H P. C plant suspension.

Doyle: Furthermore, we anticipate $14 million in tax refunds and $39 million from the monetization of the lumber duties.

Doyle: Which will be partially offset by impacts related to the <unk> H B C plant suspension.

De Lyle W. Bloomquist: Deferred Energy Payments and other accrued liabilities. In sum, we are raising our adjusted free cash flow guidance to a range between $80 to $100 million for the year. These funds will be allocated toward debt reduction and strategic capital investment.

Doyle: <unk> energy payments and other accrued liabilities.

Doyle: In sum, we are raising our adjusted free cash flow guidance to a range between $80 million to $100 million for the year.

Doyle: Funds will be allocated towards debt reduction and strategic capital investments.

De Lyle W. Bloomquist: On slide 13, I dive deeper into the expected 2024 performance of each of our businesses. For example, we project EBITDA for our HPC segment to be in the range of $180 to $190 million. We anticipate cellulose specialty prices to increase by a low single-digit percentage as compared to 2023 as we continue to prioritize value over volume for specialty products. Cellulose volumes for cellular specialties are expected to be comparable to last year, with increases in market share gains resulting from a competitor's plant closure and a modest rise in ether sales volumes, though ether sales will remain below historical levels.

Doyle: On slide 13, I dive deeper into the expected 'twenty 'twenty four performance of each of our businesses.

Doyle: We project EBITDA for our H P. C segment to be in the range of $180 million to $190 million.

Doyle: We anticipate cellulose specialty prices to increase a low single digit percentage.

Doyle: Compared to 2023.

Doyle: As we continue to prioritize value over volume for our specialty products.

Doyle: Sales volumes for cellulose specialties are expected to be comparable to last year.

Doyle: With increases in market share gains, resulting from our competitors' plant closure and a modest rise in ethers sales volumes, though ether sales will remain below historical levels.

De Lyle W. Bloomquist: These increases will be partially offset by lower acetate volumes due to modest stocking and a one-time favorable impact from a change in customer contract terms in the prior year. We expect a decline in commodity sales volumes in 2024 due to the planned suspension of operations at our HBC plant in Miscamene during the second half of the year. Overall costs are anticipated to be lower, driven by improved cost management and production efficiencies, alongside the impact of the suspension of operations at the Temescomene HPC plant.

Doyle: These increases will be partially offset by a lower acetate volumes due to modest stocking.

Doyle: And a one time favorable impact from a change in customer contract terms in the prior year.

Doyle: We expect a decline in commodity sales volumes in 2024 due to the planned suspension of operations at our HBC play.

Doyle: Plant into Misdemean during the second half of the year.

Doyle: Overall costs are anticipated to be lower driven by improved cost management and production efficiencies alongside the impact from the suspension of operations at the <unk> plant.

De Lyle W. Bloomquist: Our growth strategy remains focused on strategic investments in our biomaterials business, capitalizing on the increased demand for sustainable products. The Tardis bioethanol plant, which successfully completed its first shipment in April, is operational and projected to contribute $3 to $4 million in EBITDA in 2024, with expectations to reach $8 to $10 million at full production by 2025.

Doyle: Our growth strategy remains focused on strategic investments in our biomaterials business capitalizing on the increased demand for sustainable products.

Doyle: It's hardest bio ethanol plant, which was successfully completed its first shipment in April is operational and projected to contribute $3 million to $4 million in EBITDA in 2024.

Doyle: The expectations to reach $8 million to $10 million at full production by 2025.

De Lyle W. Bloomquist: Regarding paperboard, we expect to achieve EBITDA in the range of $50 to $60 million in 2024. Prices are projected to stay consistent with those seen in the first quarter, and we expect sales volumes to increase due to rising customer demand. Raw material prices are expected to increase due to increased purchased pulp prices. We expect our high-yield pulp business to achieve EBITDA in the range of $5 to $10 million in 2024. We expect a slight increase in high-yield pulp prices in Q2, with further rises anticipated in the second half of the year.

Doyle: Regarding paperboard, we expect to achieve EBITDA in the range of $50 million to $60 million in 2024.

Doyle: Prices are projected to stay consistent with those seen in the first quarter.

Doyle: And we expect sales volumes to increase due to rising customer demand.

Doyle: Raw material prices are expected to increase due to increased purchased pulp prices.

Doyle: We expect our high yield pulp business to achieve EBITDA in the range of $5 million to $10 million in 2024.

Doyle: We expect a slight increase in high yield pulp prices in Q2.

Doyle: Further rices anticipated in the second half of the year.

De Lyle W. Bloomquist: Additional sales volumes are projected to increase as we move into the second half of 2024. The total custodial capex for the paperboard and high yield pulp businesses is expected to be $5 million. For 2024, we expect corporate costs of $55 to $60 million, up slightly versus 2023, as we are in the final year of our multi-year ERP implementation. As the ERP project concludes, we anticipate cost reductions 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.

Doyle: Additional sales volumes are projected to increase as we move into the second half of 2024.

Doyle: Okay.

Doyle: The poll custodial capex for the paperboard in high yield pulp businesses is expected to be $5 million.

Doyle: Yeah.

Doyle: Our 'twenty 'twenty four we expect corporate costs of $55 million to $60 million up slightly versus 2023.

Doyle: We are the final year of our multi year ERP implementation.

Doyle: As the ERP project concludes we anticipate cost reductions starting in 2025.

Doyle: It is important to note that these cost me very due to factors like currency fluctuations.

Doyle: Environmental charges and other noncash expenses.

De Lyle W. Bloomquist: On slide 14, we illustrate the trajectory of our EBITDA margin growth and net leverage decline. In 2024, we anticipate our margins to be in the 11 to 12% range. Forecast for net secured leverage at the end of the year stands at three times Covenant EBITDA. Our commitment remains resolute to achieving our target net debt leverage ratio of 2.5 times by 2027. With that, operator, please open the call to questions. Thank you. We will now be conducting a survey.

Doyle: On slide 14, we illustrate there should trajectory of our EBITA margin growth and net leverage declined.

Doyle: In 'twenty 'twenty, four we anticipate our margins to be in the 11% to 12% range.

Doyle: Forecast for net secured leverage at the end of the year stands at three tie.

Doyle: Times Covenant EBITDA.

Doyle: Our commitment remains resolute and achieving our target net debt leverage ratio of two and a half times by 2027.

Speaker Change: With that operator, please open the call to questions.

Operator: One moment, please, while we poll for questions. Thank you. Our first question is from Daniel Harriman with Sidoti and Company. Please proceed with your question.

Speaker Change: Thank you we will now be conducting a question and answer session.

Operator: Thank you. We will now be conducting a question and answer session. If you'd 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. You may press star 2 if you'd 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.

Speaker Change: I'd 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 you'd like to remove your question from the queue for participants using speaker equipment may be necessary to pick up your handset before pressing the star one.

Speaker Change: While we poll for questions.

Speaker Change: Oh.

Speaker Change: Thank you our first question from Daniel Harman with Sidoti <unk> Company. Please proceed with your question.

Daniel Scott Harriman: Thank you. Good morning, guys.

Daniel Scott Harriman: Thank you good morning, guys.

Daniel Scott Harriman: Happy to see a little uptick in the ethers volume could you just provide a little bit more color on.

Daniel Scott Harriman: What youre seeing in that market in particular, the European construction market and then the Destocking that I think you alluded to last quarter and you talked about today in acetate.

Daniel Scott Harriman: Do you do.

Daniel Scott Harriman: Do you expect that to be mostly finished or should that be ongoing throughout 2024.

Daniel Scott Harriman: Yes.

Daniel Scott Harriman: I'm happy to see a little uptick in the ethers volume. Could you just provide a little bit more color on what you're seeing in that market, in particular, the European construction market and then the destocking that I think you alluded to last quarter and you talked about today with acetate. Do you expect that to be mostly finished, or should that be ongoing throughout 2024?

Speaker Change: Hey, good morning, Daniel this.

Speaker Change: This is a while.

De Lyle W. Bloomquist: Good morning, Daniel. This is Delisle.

Speaker Change: Pass to answer your question on Ethers, we're still trying to figure it out to be honest. The we don't know whether this is a.

Speaker Change: Restocking by our customers or by our customers customers in the expectation that our other construction markets will start improving in Europe.

Speaker Change: As the ECB is expected to lower interest rates there in the second half of this year.

De Lyle W. Bloomquist: You asked me to answer your question on ethers. We're still trying to figure it out. To be honest, we don't know whether this is a restocking by our customers or by our customers' customers in the expectation that the construction markets will start improving in Europe, as the ECB is expected to lower interest rates there in the second half of this year, or whether it's really, truly an underlying increase in demand. I think we'll have a better look at that and a better understanding of that when we get to the end of Q2.

Speaker Change: Or whether it's really truly an underlying increase in demand I think we'll have a better look on that in a better staying at that when we get to the end of Q2.

De Lyle W. Bloomquist: So we'll just have to wait there. And then, with respect to the acetate market, again, what we said is that the stocks are really concentrated with a couple of our large customers, principally in China and Asia. And we expect that the stocks will continue through the first half, and then we'll start normalizing in the second half.

Speaker Change: So we'll just have to wait there.

Speaker Change: And then with respect to the acetate market.

Speaker Change: Again, what we said is that are you know the destocking is really concentrated with a couple of our large customers principally in China and Asia.

Speaker Change: And we expected that our that Destocking will continue through the first half and then we will start start normalizing in the in the second half of this year.

De Lyle W. Bloomquist: Okay, great. Thank you all so much. Best of luck in the coming quarter.

Speaker Change: Okay, great. Thank you all so much best of luck in the coming quarter.

Speaker Change: Alright, thank you.

Matthew McKellar: Thank you. Our next question is from Matthew McKellar with RBC Capital Markets. Please proceed with your question.

Speaker Change: Thank you. Our next question is from Matthew Kelly with RBC capital markets. Please proceed with your question.

Matthew McKellar: Hi, good morning. Thanks for taking my questions. First, can you maybe provide a little bit of color on how the requalification processes for those CS volumes historically produced at Tomiskamine have been going with that 18 to 24-month time frame you talked about, be it from the time you first started talking about concentrating commodity volumes at Tomiskamine as of last year or from today? And then do you expect you can requalify all of those volumes at other facilities, or do you expect to lose a little bit of business along the way?

Matthew McKellar: Hi, good morning, Thanks for taking my questions.

Matthew McKellar: First can you maybe provide a little bit of color on how the re qualification processes for SCS volumes.

Matthew McKellar: Strictly produced at Smiths can mean.

Matthew McKellar: I've been going would that mean that 18 to 24 month timeframe you talked about be it from the time for you first started talking about concentrating commodity volumes at <unk> and as of last year.

Matthew McKellar: From today and then.

Matthew McKellar: Do you expect you can re qualify all of this yes volumes at other facilities or do you expect to lose a little bit of business along the way.

De Lyle W. Bloomquist: Hey, good morning, Matt. With respect to your question on the requalification process itself, it's going well. All of our targeted customers, CS customers that we were supplying it to miscommitted, are taking product from our various plants. And I could just say that the process is proceeding as planned. With respect to the period of time, I would say that the 18 to 24 months is from the beginning of the process, so we probably have got a little less than that in terms of remaining time going forward to conclude those processes.

Speaker Change: Hey, Yeah, good morning, Matt.

Speaker Change: With respect to your question on the REIT qualification process itself is going well.

Speaker Change: Yeah, all of our targeted customers C S customer or is that we were supplying it to Mr. Median are taking product from our various plants.

Speaker Change: And I can just say that the process is proceeding as planned.

Speaker Change: With respect to the period of time I would say that you know the 18 to 24 months is as from the beginning of the process.

Matthew McKellar: So we probably got a little less than that in terms of remaining time going forward to conclude and conclude those processes and then the question about or be including all of our customers in the process all of our customers. We're certainly invited to be part of the qualification process.

De Lyle W. Bloomquist: And then the question of whether we are including all of our customers in the process. All of our customers were certainly invited to be part of the qualification process. Some of them, given that they were qualified, which some of our competitors chose not to do. And so, consequently, we think that some of our customers that we're currently supplying out of Tamiskamine will likely go to our competitors. But we do believe that we retain what we think are our most important and higher-margin business.

Matthew McKellar: Some of them given that they had a they were qualified with some of our competitors chose not to.

Matthew McKellar: And so consequently, we think that some of our customers that were currently supplying out of to Misdemean will likely go to our.

Matthew McKellar: Our competitors.

Matthew McKellar: But we do believe that we will retain what we think are our most our most important and higher margin business.

De Lyle W. Bloomquist: Great. Thanks for that, Keller. And then just sticking with the Tamizkameen HPC indefinite curtailment, can you talk about how that will affect your wood chip and residual fiber supply agreement with Green First, your investment in Anamera, and then the operation of the cogeneration facility at the site?

Speaker Change: Great Thanks for that color.

Matthew McKellar: And then just sticking with the Smiths can be in HBC and definitely curtailment.

Matthew McKellar: Can you talk about how that will affect your wood chipping residual.

Matthew McKellar: Is it your fiber supply agreement with the clean first.

Matthew McKellar: Youre investing and Adam Mirror and then the operation of the cogeneration facility at the site.

Matthew McKellar: Okay.

De Lyle W. Bloomquist: All right, with respect to our chip supply agreement with Green First. We fully intend to continue to honor that agreement. Again, this is a suspension of operations and not a closure. So there may be a time in the future when we'll need to have a ship supply. But obviously, with the suspension, we're not going to consume chips anymore. So the focus would be working with Green First to resell the chips in the market.

Matthew McKellar: Alright, with respect to our chip supply agreement with Green first.

Matthew McKellar: We fully intend to continue to honor that agreement again. This is a suspension of operations and not a closure.

Matthew McKellar: So there may be times sometime in the future that will need to have a ship supply.

Matthew McKellar: But obviously with the suspension, we're not going to consume chips anymore.

Matthew McKellar: So the focus would be working with green first to resell the chips into the market.

De Lyle W. Bloomquist: Just as a reminder, with respect to that agreement, it is based on the transfer price between the parties based on market prices. So we expect that any impact on us with respect to profits or losses will largely be mitigated. With respect to the Anomera business, again, they take a small volume; we'll be able to supply that from our other plants to keep that operation moving and growing. And then, the last issue with respect to our boiler 10, I think it's what you're talking about, our liquor boiler. That is part of the suspension. So we're planning to shut those operations down or close those operations down for the time being.

Matthew McKellar: The just as a reminder, respected actor agreement. It is based on the transfer price between the parties is based on market pricing.

Matthew McKellar: So we expect it any impact to us with respect to.

Matthew McKellar: Profits or losses will be.

Matthew McKellar: Largely be mitigated.

Matthew McKellar: With respect to the Ana marrow business again, they take a small volume, we'll be able to supply that from our other plants to keep to keep that operation moves.

Matthew McKellar: Moving and growing.

Matthew McKellar: And then the last issue with respect to the our boiler 10, I think is what you're talking about our liquor our liquor boiler.

Matthew McKellar: That is part of the suspension. So we're planning to shut those operations are closed those operations down for for the period.

De Lyle W. Bloomquist: Okay, great. Thanks for that detail. The last one for me, as part of that Southwood Lumber duty refund sale, you called on an opportunity for the company to receive additional future sale proceeds contingent upon the timing of the terms of the ultimate trade dispute outcome. Can you provide any color here and under what circumstances would you receive additional proceeds in the future?

Speaker Change: Okay, great thanks for that detail.

Matthew McKellar: And last one for me as part of that softwood lumber.

Matthew McKellar: Duty refund sale, you called out an opportunity for the company to receive additional future sale proceeds contingent upon the timing in terms of the ultimate trade dispute outcome can you provide any color here and under what circumstances, you would receive additional proceeds in the future.

De Lyle W. Bloomquist: really can't, uh, uh, Matthew, the, uh, Those are we're under an NDA on those type of details, so we can't really share that. Okay.

Matthew McKellar: Really can't Matthew the.

Speaker Change: Those are where we're under under NDA on those type of type of details. So we can't really share that with you.

Matthew McKellar: Okay, understood. Thanks. I'll toss it back.

Speaker Change: Okay understood. Thanks, I'll pass it back.

Dmitry Silverstein: Thank you. Our next question is from Dmitry Silverstein with Water Tower Research. Please proceed with your question.

Speaker Change: Thank you. Our next question is from the <unk>.

Dmitry Silversteyn: Matrix Silverstein with water tower.

Dmitry Silversteyn: Please proceed with your question.

Dmitry Silverstein: Good morning, gentlemen. Thank you for taking my question. I just want to circle back to a couple of things. First of all, the $7 million energy benefit that you will realize later in the year, can you provide a little bit more detail about what that is and is it likely to fall in the first half of the year or the second half?

Dmitry Silversteyn: Good morning, gentlemen, thank you for taking my question.

Dmitry Silversteyn: I just want to circle back to a couple of things first of all the $7 million in NRG benefit that you will realize later in the year can you provide a little bit more detail on what that is and is it.

Dmitry Silversteyn: Likely to fall in the first half of the year in the second half of the year.

Michael H. Walsh: Okay, Dmitry, what we're talking about is the CO2 credits that we receive in France with our TARS facility. Historically, we've usually been able to realize those and recognize those as part of eVidalia either in the first or second quarters of the year. Right now, we're thinking that it's likely to occur in the third quarter of this year, largely due to, you know, government authorities pushing out the payment, the payment potential on that. Then, again, it'll be there roughly about the same amount as we've seen in the past; it's just a little delay.

Speaker Change: Okay Dmitry.

Dmitry: Well, we're talking about is the C. O two credits that we that we receive it in France with our Taurus facility.

Speaker Change: Historically, we've usually been able to realize those and recognize those as part of EBITDA either in the first or second quarters of the year.

Speaker Change: Now, we're thinking that it's likely to occur in the third quarter of this year.

Speaker Change: Largely due to.

Speaker Change: Government authorities pushing out.

Speaker Change: Two the payment the payment potential on that.

Speaker Change: The.

Speaker Change: So again it'll be there roughly.

Speaker Change: Roughly about the same amount as we've seen in the past it just a little delay.

Michael H. Walsh: Thank you, Mickey. And then just to follow up on your comment about the market conditions in China that are impacting your high-yield pulp business, can you provide a little bit more detail on what's going on there in China and how long these market conditions are expected to last?

Speaker Change: Got it. Thank you make it and then just a follow up on your comment about the market conditions in China that are impacting your high yield pulp business.

Speaker Change: Can you provide a little bit more detail on what's going on there in China.

Speaker Change: How long does.

Speaker Change: These market conditions are expected to last.

Michael H. Walsh: Well, the conditions continue, as we discussed last quarter, there's still an excess supply of high yield pulp or mechanical pulp in China due to, you know, new capacity that came on. And I would expect that that's probably going to continue through most of the year.

Speaker Change: Well the the conditions continue as we discussed last quarter are the there's still.

Speaker Change: A an excess supply of <unk>.

Speaker Change: High yield pulp or mechanical pulp in China due to you know new capacity that came on.

Speaker Change: And I would expect that that's probably going to continue through most of the year.

Speaker Change: There's a lot of lot of excess supply in that market.

Michael H. Walsh: There's a lot of, a lot of excess supply in that market. The impact it's having with respect to global pricing for high yield pulp is, though limited to, China; we're not really seeing a lot of that bleed out to other regions in the world. So pricing in, you know, the Indian subcontinent area as well as Europe continues to be, Unknown Executive, Michael Walsh, Daniel Harriman, Ben Chambers, Kenneth Duffy, Rayonier Advanced Materials Inc. And we believe that as a result of those stronger dynamics, we'll be able to improve our average pricing as the year progresses.

Speaker Change: The impact, it's having a with respect to global pricing on high yield pulp as though limited to China, we're not really seeing a lot of that bleed out.

Speaker Change: Two other regions in the world So pricing in our you know the Indian subcontinent area as well as Europe continues to be.

Speaker Change: Strong and we expect we will continue to improve as we go through the year.

Speaker Change: And in response to what we're seeing in China. We are obviously then repositioning.

Speaker Change: Our sales and our supply into those markets that are more attractive and then we believe that as a result of the stronger dynamics will be able to improve our average pricing as the year progresses.

Michael H. Walsh: Okay, so I mean, if I look at your slide, for the volume and price and how much you'll pop, it does look like it's come off the bottom a little bit, but obviously not to the level that we saw in 2022. Is the expectation that the sort of normal pricing is somewhere more in line, let's say with the first half of 23? I mean, how should we think about sustainable pricing for this business?

Speaker Change: Okay.

Speaker Change: If I look at your slide.

Speaker Change: For the volume and price in high yield pulp. It does look like it's come off the bottom a little bit.

Speaker Change: But obviously not to the level that we saw in 2022 is the expectation that the sort of.

Speaker Change: The normal pricing.

Speaker Change: Were more in line, let's say, what the first half of 'twenty three I mean, how should we think about kind of a sustainable pricing for this for this business.

Michael H. Walsh: Yeah, that's any good question of what what would be a normalized price? Normally, you know, over a cycle, our high yield pulp business generates positive EBITDA and positive cash flow. Obviously, we're coming off the trough and starting to see improvements, and as we get into the latter part of this year, we'll start to enjoy positive EBITDA and positive cash flow. I really can't right now tell you where the, um.., where the normalized pricing would be.

Speaker Change: Yeah, that's and again that's a good question of what would be a normalized price normally you know over the over a cycle are high yield pulp business.

Speaker Change: It generates positive EBITDA and positive cash flow, obviously, we're coming off the trough.

Speaker Change: And it's starting to see improvements as we get into later part of this year, we will start to enjoy positive EBITDA.

Speaker Change: Positive cash flow.

Speaker Change: I I really can't right now I'll tell you, where the where the normalized pricing would be.

Michael H. Walsh: It's likely gonna be higher than we are today. We'll get all the way back to, you know, the first quarter of 2023. I think right now it's probably, it would be a guess on my part. I really, really don't want to speculate on that.

Speaker Change: Likely going to be higher than where we are today, we will get all the way back to you know the first quarter of 2023.

Speaker Change: That's.

Speaker Change: I think right now it's probably.

Speaker Change: It'd be a guess on my part I really really don't want to speculate on that and Dmitry remember theres a lag effect.

Michael H. Walsh: And Dmitry, remember there's a lag effect on our high-yield business, given our order file and our logistics supply.

Speaker Change: Our high yield business, giving our order file and our logistics supply chain.

Michael H. Walsh: Gotcha, so yeah, I understand that. Okay, thank you. All right, thank you.

Dmitry Silversteyn: Got you so yes, I understand that okay. Thank you.

Michael H. Walsh: All right, thank you, Dmitry.

Speaker Change: Alright, Thank you dmitry.

Sanford Murray Burns: Thank you. Our next question is from Sandy Burns with People. Please proceed with your question.

Speaker Change: Thank you. Our next question is from Sandy Burns with Stifel. Please proceed with your question.

Sanford Murray Burns: Hi, good morning, and good start to the year. Maybe just to clarify one item about the EBITDA guidance. The $30 million one-time cash charges for the domestic enclosure suspension, is that added back to get to the $180,000 to $200,000, or are you including those as valid expenses for 2024?

Sanford Murray Burns: Hi, good morning, and good start to the year maybe.

Sanford Murray Burns: Maybe just to clarify one item about the EBITDA guidance the.

Sanford Murray Burns: The 30 million one time cash charges for the <unk> closure suspension.

Sanford Murray Burns: Is that added back to get to the 180 to 200 or are you, including knows is valid expenses for 2024.

De Lyle W. Bloomquist: Now, we're adding that back to get to the adjusted EBITDA guide.

Sanford Murray Burns: Now, we're adding that back to get to that your adjusted EBITDA guidance.

De Lyle W. Bloomquist: Okay, so that is an ad back. And those are all cash costs, just to confirm.

Speaker Change: Okay. So that is that as an add back and those are all cash costs just to confirm.

De Lyle W. Bloomquist: There are no... Now, they're not all cash costs, but... Very good, good. A good majority of it is. And just the other point to make is that the $30 million will be spread out over the course of multiple years. It's not all going to happen in 2024.

Speaker Change: There are no.

Speaker Change: No, they're not all cash costs, but.

Speaker Change: But a good good.

Speaker Change: Majority of it is.

Speaker Change: And just the other point to make is that the the $30 million it will be spread out over the over the course of multiple years, it's not all going to happen in 2024.

Speaker Change: Yeah.

Speaker Change: Okay. Good.

Sanford Murray Burns: And maybe just to follow up on the prior question about the duty sale, and I appreciate you don't want to get into too much detail, but maybe just to clarify, was that a sale of all of the duty refunds you were expecting, or was it just a portion of those?

Speaker Change: Okay, and maybe just to follow up on the prior question about the duty sale and I. Appreciate you don't want to get into too much detail, but maybe just to clarify was that a sale of all of the <unk>.

Speaker Change: Duty refunds, you were expecting or was it just a portion of those.

De Lyle W. Bloomquist: It was the sale of all of our duty refund rights, so not just the amount that was in receivables, but the full $111 million.

Speaker Change: See the sale of all of our duty refund rates.

Speaker Change: So not just the amount that was in our receivables so.

Speaker Change: The full $111 million.

Sanford Murray Burns: All right, great, thank you.

Speaker Change: Alright, great. Thank you.

Roger Neil Spitz: As a reminder, if you'd like to ask a question, please press star 1 on your telephone keypad. Our next question is from Roger Spitz with Bank of America. Please proceed with your question. Thanks very much. Good morning.

Speaker Change: As a reminder, if you'd like to ask a question. Please press star one on your telephone keypad.

Speaker Change: Our next question is from Roger Spitz with Bank of America. Please proceed with your question.

Roger Neil Spitz: Thanks very much. Good morning. What is the EBITDA impact of the Q2-24 JSEP turnaround?

Roger Neil Spitz: Thanks, very much good morning.

Roger Neil Spitz: What does the EBITDA impact of that.

Roger Neil Spitz: Q2, 'twenty for Joseph.

Roger Neil Spitz: Turnaround.

Roger Neil Spitz: Thanks, Tony.

Michael H. Walsh: Oh, that's a good question, Roger, and you got me stumped on that one. I would say in the neighborhood of 10, to 10 million, something like that. But again, that's gonna be a guess. Just thinking about historical impacts, but that's... Given the size of the plant, given the... Obviously, the impact it has. It's going to be, it's going to be material.

Tony: Oh, that's a good question Roger and you got me stumped.

Roger Neil Spitz: Yeah.

Roger Neil Spitz:

Roger Neil Spitz: I would say in the neighborhood of 10.

Roger Neil Spitz: Ken.

Roger Neil Spitz: 10 million something like that.

Roger Neil Spitz: But again, that's that's gonna be a guess just thinking about historical impacts but that's.

Roger Neil Spitz: Given the size of the plant given the.

Roger Neil Spitz: Obviously the impact it has.

Roger Neil Spitz: It's gonna be it can be material.

Michael H. Walsh: Are you doing all the lines or just one particular one? You know, we brought the whole plant down.

Speaker Change: Are you doing Paul.

Speaker Change: All lines are just one particular line, we brought the whole plant down.

Michael H. Walsh: You know, he brought the whole plan.

Speaker Change: For about three weeks.

Speaker Change: Yeah.

Speaker Change: Okay. Roger it's important to note, where we're through that shutdown right now the important point is that the plants back up and running now.

Michael H. Walsh: Okay. Roger, it's important to note that we're through that shutdown, right? Yeah. The important point is that the plant's back up and running now, and we brought it back up a little earlier than planned. So it was a very successful outage.

Roger: Got it and we brought it back up a little earlier than planned.

Roger: So it was a very successful outage.

Roger: Perfect.

Roger Neil Spitz: Um, so Regarding Ms. You're going to idle on your HPC plan, continue to run the paperboard, and how you'll pull plants. And the slide talks about what you save in EBITDA, but my question is this: If we look at the paperboard, and how you'll pull.

Roger: So.

Roger:

Roger: Regarding to mccamey.

Roger: You're going to idle all your HBC plan, obviously, continuing to run the paperboard and pulp plant.

Roger: And the slide talks about what you save in EBITDA right.

Speaker Change: Hi, My question is this.

Speaker Change: If we look at the paperboard in high yield pulp.

Roger Neil Spitz: You both have EBITDA associated with it. Presumably, there will be some additional EVADAP pressure or cost from running those plants but not having the benefit of the HPC plant to absorb the, You know, the other fixed costs of running the whole company. So, how should we think about... Like LTME, but out of those two segments, if HPC wasn't running, is there like, do they have to absorb another X million dollars

Speaker Change: Both both.

Speaker Change: EBITDA associated with it.

Speaker Change: But presumably there will be some additional EBITDA pressure or cost.

Speaker Change: From.

Speaker Change: Running those plants.

Speaker Change: Having the benefit of the HBC plant.

Speaker Change: Absorb the.

Speaker Change: Other fixed costs of running the whole complex.

Speaker Change: So how should we think about.

Speaker Change: Alright, LTM EBITDA of those two segments.

Speaker Change: If.

Speaker Change: HBC Watson is there like do they have to absorb another X million dollars of.

Speaker Change: Fixed costs from not running HBC.

De Lyle W. Bloomquist: You're getting into some details with respect to some of the negotiations and discussions we're having with potential suitors for the paperboard business. So I don't really want to get into the details on that. But I will say that any of the stranded costs that we've forecasting for the business right now are in that $15 to $20 million of benefit that we've got in the EBITDA for the business for the business going forward. We've got it included in the estimates we've given.

Speaker Change: And youre getting it into the some details relevant relative and with respect to.

Speaker Change: Some of the negotiations and discussions we're having with potential suitors.

Speaker Change: The paperboard business, so I don't really want to get into the details on that.

Speaker Change: But I.

Speaker Change: I will say that.

Speaker Change: Are any of the stranded costs that I'm right now that we are forecasting for the businesses in that $15 million to $20 million of benefit that we've got in the EBITDA for the business for.

Speaker Change: For the business going forward so.

Speaker Change: We've got included in the in the estimates we've given you.

Speaker Change: Got it.

De Lyle W. Bloomquist: And the last point, let me make one more point, Roger. Again, this is not a closure. This is a suspension.

Speaker Change: And the last but let's get the last part of it.

Speaker Change: Make one more point Roger again.

Speaker Change: Again this is not a closure.

Speaker Change: This is a suspension.

De Lyle W. Bloomquist: So any of these retained costs or these stranded costs, or however you want to describe them, the plan is that HPC will retain those costs ongoing and won't affect the paperboard business or the high-yield pulp business. Again, because there's a likelihood that we would actually restart these operations sometime in the future, so these ongoing fixed costs that we would have at the site, we would need to retain to support that potential.

Speaker Change: So any of these retained cost of these stranded costs or however, you want to describe them.

Speaker Change: Is that H P. C will retain those costs ongoing and won't affect the paperboard business or the <unk> or the high yield pulp business.

Speaker Change: Because you know the day.

Speaker Change: You're right, there's a likelihood that we would actually restart these operations sometime in the future. So these these are ongoing fixed cost that we would have at the site. We would we would need to retain to to support that that potential.

De Lyle W. Bloomquist: Well, I guess it leads to the following two questions. One is, where are you in the process? Have you, it's not, you said last time you received indications of an, which suggests, did you get the first round, you know, agent that is. Um, where are you? Have you asked for a second round bid? [inaudible] Ahead of the second round, should I be sent out?

Speaker Change: Well I guess at least the following two questions. One is where are you in the process have you.

Speaker Change: Last time, you were seeing indications of.

Speaker Change: Interest which suggests.

Speaker Change: You did.

Speaker Change: Yeah first round.

Speaker Change: Hey, Jim.

Jim: So where are you have you ask for second round bids have you run management presentations.

Speaker Change: The second round have you sent out.

Roger Neil Spitz: You know, contracts for potential buyers to mark up.

Speaker Change: Contracts for potential buyers to markup markup.

Speaker Change: Okay.

De Lyle W. Bloomquist: We have had management presentations, and we've had site visits with interested parties.

Speaker Change: We have had management presentations, we've had site visits with interested parties.

De Lyle W. Bloomquist: We are, um, uh, have, uh, provided, um, a draft, uh, you know, draft APA agreements, but as a result of the suspension. Obviously, the underlying fundamentals and assumptions relative to how the site will operate have now changed. And so because of that.

Speaker Change: We are.

Speaker Change: Have provided draft.

Speaker Change: The draft or.

Speaker Change: Yeah Draft AR AP a agreements.

Speaker Change: But with the as a result of the suspension.

Speaker Change: Obviously, the underlying fundamentals and assumptions relative to how the site will operate have now changed.

Speaker Change: And so because of that.

De Lyle W. Bloomquist: The diligence process is going to be extended so that our suitors will have a chance to understand what it would mean to the paper board and high-yield pulp business relative to the suspension that we've discussed. THE END So anyway, the delay is actually relatively minor. It doesn't at all talk about or even suggest that there's a lack of enthusiasm for the assets. In fact, I would suggest that as a result of the suspension, that enthusiasm has actually increased from the parties that are interested.

Speaker Change: The the diligence process is going to be extended.

Speaker Change: So that our suitors will have a chance to understand what it would mean to the the paperboard and a high yield pulp business relative.

Speaker Change: Relative to the suspension that we've discussed.

Speaker Change: The.

Speaker Change: The.

Speaker Change: So anyway, the the delay the delay we believe is actually a relatively minor.

Speaker Change: Minor it isn't it doesn't.

Speaker Change: Yeah all.

Speaker Change: Talk about or even suggests that there's a lack of enthusiasm for for the assets. In fact, I would suggest that as a result.

Speaker Change: The suspension that our enthusiasm has actually increased from the parties that are interested and I would actually suggest also that we've actually seen increased interest from.

De Lyle W. Bloomquist: And I would also suggest that we've actually seen increased interest from other parties. So we will continue to run the process as we see necessary to get the best value for those assets. As I said earlier, this is not a fire sale. We want to make sure we get fair value for these assets. And we'll run the process as we deem necessary to extract that value.

De Lyle W. Bloomquist: Got it. If I can take one more step on this subject.

Speaker Change: Other other parties.

Speaker Change: So we will continue to run the process as we as we as we see.

Speaker Change: Necessary to get the best value for those assets as I said earlier.

Speaker Change: This is not a fire sale, we want to make sure we're getting fair value for these assets.

Speaker Change:

Speaker Change: And we'll run the process as we as we deem necessary to extract that value.

Roger Neil Spitz: You're shutting down, you're idling the plan on July 2nd, so Q3 will be relatively, or substantially clean. Do you think that you really need to go back out and show them the Q3 numbers, and with one quarter of clean quarters shown, that's when you can restart, or do you think you'll have to show them two full quarters? of quote-unquote clean numbers without HPC operating to give potential buyers full confidence to make as high a bid, hopefully, as they can.

Speaker Change: Got it if I can take one more further on on this subject.

Speaker Change: You're idling a plant on July 2nd.

Speaker Change: So Q3 will be relatively.

Speaker Change: Our substantially clean.

Speaker Change: Do you think that you really need to go back out and show them, the Q3 numbers and with one quarter of clean quarter.

Speaker Change: We've shown that when you can restart or what do you think youll. After we showed them two full quarters.

Speaker Change: Alright, unquote clean numbers without HBC operating.

Speaker Change: Thank you.

Speaker Change: Buyers confidence to Mega as high a bed hopefully if I can.

De Lyle W. Bloomquist: That depends on the suitor. All right, so it's up to them, but our goal is to conclude the deal if the terms are attractive before we have to by the end of the year as part of the refi process.

Speaker Change: It depends on the suitor.

Speaker Change: Alright.

Speaker Change: So it's up to them, but our goal is to conclude the deal.

Speaker Change: If the if the terms are attractive before we have to Oh by the end of the year as part of the refi process.

Speaker Change: Got it.

Roger Neil Spitz: And then, are there other people in the queue, or can I ask two more?

Speaker Change: And then.

Speaker Change: All other people in queue or can I ask two more.

Operator: You can go ahead and ask a couple more questions.

Speaker Change: Yeah I can go ahead and ask a couple more questions.

Roger Neil Spitz: Sure, maybe you said this and I missed it. The 2024 HPC EBITDA, did that change from 180 to 190 and the paperboard from 50 to 60? I just maybe missed it, and you said it in the prepared remarks. No, they didn't change. Same as we gave last time. Got it. And then lastly, regarding the Green First Woodchip Supply Agreement, is that based on take or pay volumes, requirements, contracts, or is it just general volume, min., max., under the Supply Agreement?

Speaker Change: Or maybe you said this I missed it.

Speaker Change: 24, HBC EBITDA did that changed from the one eight to 190 in the paperboard from 50 to 60 I just maybe missed it you said it on the prepared remarks. So they didn't change the same as we gave last last time.

Speaker Change: Got it and then lastly regarding the green fresh wood chip supply agreement.

Speaker Change: That oh.

Speaker Change: Based on take or pay volumes requirements contracts or is it just general volume Min Max.

Speaker Change: Under the supply agreement.

De Lyle W. Bloomquist: We're required to take a certain amount of volume every year from Green First. And that, so we will need to take the volume even though we're not operating the facility, but the pricing is based on the market. Market pricing at the time. And as a consequence, as I said, we will look to resell, working with Green First. And as a result of that, our expectation is that we will not see either profit or loss from that resale. To hear it. Thanks for the

Speaker Change: We were required to take a certain amount of volume every year.

Speaker Change: From a green first.

Speaker Change: And that so we will need to take the volume, even though were not operating the facility, but the pricing is based on market.

Speaker Change: The market pricing at the time.

Speaker Change: And as a consequence as I said, we will look to resell.

Speaker Change: Working with Green first and as a result of that.

Speaker Change: Our expectation is that we will not see either profit or loss from that resell.

Roger Neil Spitz: I'm glad to hear it. Thanks for the extra time. I appreciate it.

Speaker Change: Glad to hear it thanks for the extra time I appreciate it.

Speaker Change: Yep.

De Lyle W. Bloomquist: Thank you. There are no further questions at this time. I'd like to hand the floor back over to Delisle Bloomquist for any closing comments.

Speaker Change: Thank you there are no further questions at this time I'd like to hand, the floor back over to Lyle bloomquist for any closing comments.

De Lyle W. Bloomquist: All right. Again, as always, thank you for joining us today. I appreciate all your interest and support for the company. I am very proud of the hard work and dedication that has been shown by our team, and I'm very confident in our ability to continue to enhance profitability while we work to reduce our debt and our leverage. I look forward to providing updates on all of our ongoing projects and initiatives and value your continued support as we strive for long-term success and growth. As always, we're committed to maintaining transparency and open communication, so feel free to contact us if you have any further questions or you need any further information. Thank you again for your participation.

Speaker Change: Alright.

De Lyle W. Bloomquist: Again as always thank you for joining us today I appreciate all your interest and support for the company.

Operator: This concludes today's conference. You may disconnect your lines at this time. Thank you again for your participation.

De Lyle W. Bloomquist: I am very proud of the hard work and dedication that we.

De Lyle W. Bloomquist: So that has been shown by our team and very confident in our ability to continue to enhance the profitability, while we worked to reduce our debt and our leverage.

De Lyle W. Bloomquist: I look forward to providing updates on all of our ongoing projects and initiatives and a valued your continued support.

De Lyle W. Bloomquist: As we strive for long term success and growth.

De Lyle W. Bloomquist: As always we're committed to maintaining transparency and open communication, so feel free to contact us. If you have any further questions or you need any further information. Thank you again for your participation.

De Lyle W. Bloomquist: Yeah.

Speaker Change: This concludes today's conference.

Speaker Change: Your lines at this time, thank you again for your participation.