Q2 2024 Sylvamo Corp Earnings Call

Hello, I'm John Sims, I'm John Sims

Operator: Good morning. Thank you for standing by.

Operator: Good morning. Thank you for standing by.

[inaudible]

Operator: Welcome to Sylvamo's second quarter, two thousand and twenty-four 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 one bin zero on your telephone keypad. To withdraw a question, press one bin zero again. As a reminder, your conference is being recorded.

Speaker Change: Good morning. Thank you for standing by. Welcome to Sylvamo's second quarter 2024 earnings call. All lines have been placed on mute to prevent any background noise.

Operator: Welcome to Sylvamo's second 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, 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.

Speaker Change: After the speaker's remarks, you will have an opportunity to ask questions.

Speaker Change: To ask a question, please press 1 then 0 on your telephone keypad. To withdraw a question, 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.

Hans Bjorkman: I'd now like to turn the call over to Hans Bjorkman, Vice President and Vester Relations. Sir, the floor's yours.

Hans Bjorkman: Thanks, Colin.

Hans Bjorkman: Thanks, Colin. Good morning, and thank you for joining our Sylvamo Corporation second 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, and reconciliations of those figures. The U.S. GAAP financial measures are also available in the appendix. Our website contains copies of the earnings release as well as today's presentation. With that, I'll turn the call over to you, John-Michel. Thanks, Hans.

Hans Bjorkman: Good morning and thank you for joining our Sylvamo Corporation, second quarter, twenty-four earnings call. Our speakers this morning are Jean-Michel Ribertis, Chairman and Chief Executive Officer, and John Sims, Senior Vice President and Chief Financial Officer.

Hans Bjorkman: Thanks Colin. Good morning and thank you for joining our Sylvamo Corporation second 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.

Hans Bjorkman: Slides two and three 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-US GAAP financial information. Reconciliation of those figures to US GAAP financial measures is also available in the appendix.

Speaker Change: Slides 2 and 3 contain important information including certain legal disclaimers.

Speaker Change: For example, during this call, we will make forward-looking statements that are subject to risks and uncertainties.

Speaker Change: We will also present certain non-U.S. GAAP financial information.

Speaker Change: Reconciliations of those figures to US GAAP financial measures are also available in the appendix.

Hans Bjorkman: Our website contains copies of the earnings release as well as today's presentation.

Speaker Change: Our website contains copies of the earnings release as well as today's presentation. With that, I'll turn the call over to you, Jean-Michel. Thanks, Hans.

Jean-Michel Ribertis: With that, I'll turn the call over to you, Jean-Michel. Thanks, Hans. Good morning, and thank you for joining our call.

Jean-Michel Rivieres: Good morning, and thank you for joining our call. I'll begin with our sustainability highlights on slide four, our first and greatest responsibility, to ensure the safety and well-being of our team members. We do this by putting people before paper. We are also committed to operating as a sustainable corporation that creates profits for ocean owners while protecting the environment and improving the lives of those with whom we interact. Continuing Sylvamo's commitment to transparent reporting, in the second quarter, we published our sustainability report in a new streamlined format. We have also expanded the Sustainability Hub on sylvamo.com to communicate sustainable news, regional content, certification, and more. I encourage you to visit our website and learn about our sustainability efforts.

Jean-Michel Ribertis: I'll begin with our sustainability highlights on slide four. Our first and greatest responsibility is to ensure the safety and well-being of our team members. We do this by putting people before paper all the way. We're also committed to operating as a sustainable corporation that creates profits for our shareholders while protecting the environment and improving the lives of those with whom we interact. Continuing Sylvamo's commitment for transparent reporting, in the second quarter, we published our sustainability report in a new streamlined format. We also expanded the sustainability hub on Sylvamo.com to communicate sustainable news, regional content, certification, and more.

Jean-Michel: Good morning, and thank you for joining our call.

Jean-Michel: I'll begin with our sustainability highlights on slide 4.

Jean-Michel: our first and greatest responsibility.

Jean-Michel: is to ensure the safety and well-being of our team members.

Jean-Michel: We do this by putting people before paper, always.

Jean-Michel: We are also committed to operating as a sustainable corporation that creates profits for our shareholders while protecting the environment and improving the lives of those with whom we interact.

Speaker Change: Continuing Sylvamo's commitment for transparent reporting, in the second quarter we published our sustainability report in a new streamlined format.

Speaker Change: We also expanded the Sustainability Hub on sylvamo.com to communicate sustainable news, regional content, certification and more. I encourage you to visit our website and learn about our sustainability efforts.

Jean-Michel Ribertis: I encourage you to visit our website and learn about our sustainability efforts.

Jean-Michel Ribertis: Let's go to slide five. Now, let me go into some highlights of the quarter. We experienced improved and coated free sheet and bulk conditions. Our milk system ran well as we successfully completed our average plan maintenance arch quarter. We know have almost 75% of our plan maintenance outage for the year behind us. We generated strong cash flow, and in May, we announced a 50% increase to our quarterly dividend from 30 to 45 cents per share that paid out at the end of July.

Jean-Michel Rivieres: Let's go to slide 5. Now, let me go into some highlights of the quarter. Sean Cooper, Nigel Padgett, Chris Walkowicz, Madeleine Chamberlain, Our milk system ran well, as we successfully... our AVIUS Plant Maintenance Outage Squadron. We now have almost 75% of our planned maintenance outage for the year behind us, generated strong cash flow, and in May we announced a 50% increase to our quarterly dividend, from 30 to 45 cents per share that paid out at the end of July.

Speaker Change: Let's go to slide 5.

Speaker Change: Now let me go into some highlights of the quarter.

Speaker Change: who experienced improved uncoated free sheet and pulp conditions.

Speaker Change: Our milk system ran well, as we successfully completed...

mendonca: Our previous land maintenance outreach quota.

mendonca: We now have almost 75% of our planned maintenance outage for the year behind us.

Speaker Change: We generated strong cash flow and in May, we announced a 50% increase to our quarterly dividend from $0.30 to $0.45 per share that paid out at the end of July .

John Sims: Let's move to the next slide. Slide six shows our key financial metrics. We earn adjusted a bit of 164 million with a margin of 18%. Free cash flow generation was $62 million. and we generated adjusted operating earnings of $1.98 per share. I'm proud of our team's delivered, impressive results while taking care of our customers and successfully executing several planned maintenance allergies across our system.

Jean-Michel Rivieres: Let's move to the next slide. Slide 6 shows our key financial metrics. We earnt just a bit of $164 million, with a margin of 18%. Free cash per generation was $62 million, and we generated adjusted operating earnings of $1.98 per share. I'm proud of how our team delivered impressive results while taking care of our customers and successfully executing several plant maintenance holidays across our state. Now John will review our performance in more detail.

Speaker Change: Let's move to the next slide.

Speaker Change: Slide six shows our key financial metrics.

Speaker Change: We earn a just a bit of $164 million with a margin of 18%.

Speaker Change: Free cash for a generation was $62 million.

Speaker Change: and we generated adjusted operating earnings of $1.98 per share.

Speaker Change: I'm proud of our team's delivered impressive results while taking care of our customers and successfully executing several plant maintenance outages across our system.

John Sims: Now, John will review our performance in multi-dead.

Speaker Change: Now John will review our performance in more detail.

John Sims: Thank you, John Michelle. Good morning, everyone. I'm on slide seven. Over the first half of the year, uncoded free sheet conditions improved from last year. Looking at industry demand across our region, Europe was up 14%; North America was up 3%. However, Latin America decreased 1%, but this was influenced by a significant drop in Argentina. Industry operating rates improved in North America when a supplier permanently converted approximately 4% of uncoded free sheet capacity to pulp at the end of June. A European competitor announced in May they would close the machine in Germany by the end of the year.

John Sims: Thank you, Jean-Michel, and good morning, everyone. I'm on slide seven. Over the first half of the year, uncoated free-seat conditions improved from last year, looking at industry demand across our region. Europe was up 14. North America was up 3%. However, Latin America decreased by one percent. But this was influenced by a significant drop in Argentina. Industry operating rates improved in North America when a supplier permanently converted approximately 4% of uncoated free sheet capacity to pulp at the end of June. A European competitor announced in May that they would close the machine in Germany by the end of the year. This closure will reduce European supply by about 5%.

John Sims: Thank you, Jean-Michel, and good morning, everyone. I'm on slide seven.

John Sims: Over the first half of the year, uncoated free seed conditions improved from last year. Looking at industry demand across our regions,

John Sims: Europe was up 14%.

John Sims: North America was up 3%.

John Sims: However, Latin America decreased 1%.

John Sims: But this was influenced by a significant drop in Argentina.

John Sims: Industry operating rates improved in converted approximately 4% of uncoated free sheet capacity to pulp at the end of June .

John Sims: A European competitor announced in May they would close a machine in Germany by the end of the year. This closure will reduce European supply by about 5%.

John Sims: This closure will reduce European supply by about 5%. Pulp and vapor prices have moved up across our regions over the first half of the year as well. Excluding pulp, we also saw the stabilization of most input costs, although at a high level.

John Sims: Pulp and vapor prices have moved up across our regions over the first half of the year as well. Excluding pulp, we also saw the stabilization of most input costs, although at a high level. Let's move to the next slide.

John Sims: Pulp and paper prices have moved up across our regions over the first half of the year as well.

John Sims: Excluding pulp, we also saw the stabilization of most input costs.

John Sims: Let's move to the next slide. Slide eight continues our second quarter earnings bridge. The 164 million of adjusted EBITDA was better than our outlook of 145 to 160 million. Price and mix improved by 26 million. Reflecting the implementation of pulp and vapor price increases previously communicated in all regions, as well as better mix in Latin America. Volume increased by 8 million, primarily driven by secretly stronger demand in Latin America. Operations and other costs improved by 10 million. Primarily reflecting a solid operation and seasonally lower costs in Europe and North America. Planned maintenance hours cost increased by 4 million, and input and transportation costs increased by 6 million.

John Sims: Although we're at a high level.

John Sims: Let's move to the next slide.

John Sims: Slide 8 contains our second quarter earnings break. The $164 million of adjusted EBITDA was better than our outlook of $145 to $160 million. Price and mix improved by 26 million, reflecting the implementation of pulp and paper price increases previously communicated in all regions, as well as better mix in Latin America. Volume increased by 8 million, primarily driven by seemingly stronger demand in Latin America. Operations and other costs improved by $10 million, primarily reflecting a solid operation and seasonally lower costs in Europe and North America. However, plan maintenance outage costs increased by $4 million, and input and transportation costs decreased by $6 million. So let's move to slide 9.

John Sims: Slide eight contains our second quarter earnings bridge.

John Sims: The $164 million of adjusted EBITDA was better than our outlook of $145 to $160 million.

John Sims: Price and mix improved by $26 million, reflecting the implementation of pulp and paper price increases previously communicated in all regions, as well as better mix in Latin America.

John Sims: Volume increased by 8 million, primarily driven by seemingly stronger demand in Latin America.

John Sims: Operations and other costs improved by 10 million.

John Sims: Primarily reflecting a solid operation.

John Sims: and seasonally lower costs in Europe and North America.

John Sims: Planned maintenance outage costs increased by $4 million and input and transportation costs decreased by $6 million.

John Sims: Let's move to slide nine. We expected to deliver third quarter adjusted EBITDA of 170 and 185 million. We project price and mix to be slightly unfavorable, primarily due to mix. We expect volume to improve by 10 to 15 million, driven by Latin America and North America. Operations and other costs are projected to increase by 10 to 15 million. Primarily driven by higher unabsorbed fixed costs, but economic downtime in North America and Europe as we continue to manage our production to our customers' demand. We expect input and transportation costs to increase by 5 to 10 million, due to unfavorable fiber in Latin America and energy in North America.

John Sims: So let's move to slide nine.

John Sims: We expect to deliver a third quarter adjusted EBITDA of $170 and $185 million, project price and mix to be slightly unfavorable, primarily due to mix. We expect volume to improve by 10 to 15 million, driven by Latin America and North America. Operations and other costs are projected to increase by $10 to $15 million, primarily driven by higher unabsorbed fixed costs and economic downtime in North America and Europe as we continue to manage our production to our customers. We expect input and transportation costs to increase by 5 to 10 million due to unfavorable fiber in Latin America and energy in North America.

John Sims: We expect to deliver a third quarter adjusted EBITDA of $170 and $185 million.

Speaker Change: We project price and mix to be slightly unfavorable primarily due to mix.

John Sims: We expect volume to improve by 10 to 15 million, driven by Latin America and North America.

John Sims: Operations and other costs are projected to increase by $10-15 million.

John Sims: primarily driven by higher unabsorbed and Europe , as we continue to manage our production to our customers' demand.

John Sims: We expect input and transportation costs to increase by $5-10 million due to unfavorable fiber in Latin America and energy in North America.

John Sims: Plan maintenance hours is a projected and improved by 28 million as we have no major planned outages this quarter.

John Sims: Planned maintenance outages are projected to improve by $28 million as we have no major planned outages this quarter. We're making good progress on Project Horizon, our program to streamline overhead, manufacturing, and supply chain costs. We're on track to achieve our year-end run rate target of $110 million in savings. Now, let's go to slide 10.

John Sims: Planned maintenance outages are projected to improve by 28 million as we have no major planned outages this quarter.

John Sims: We're making good progress on Project Horizon, our program to streamline overhead, manufacturing, and supply chain costs. We're on track to achieve our year-end run rate target of 110 million in savings.

John Sims: We're making good progress on Project Horizon, our program to streamline overhead, manufacturing, and supply chain costs.

John Sims: We're on track to achieve our year-end run rate target of $110 million in savings.

John Sims: Let's go to slide 10. We are focused on ongoing free sheet and will continue to create long-term value through our talented teams, iconic brands, and low-cost mills and favorable locations. Our capital allocation strategy to maintain a strong financial position, reinvest in our business and improve our competitive advantages, and continue to return to the SAMHSA cash shareholders. Let's look at the next few slides and talk through each of these uses of cash. Last week, we announced the refinancing of our long-term debt to extend our maturity profile. Details are in the 8-K we filed on August 1st, and also included in the appendix.

Jean-Michel Rivieres: We are focused on uncutted free-range sheep, and we will continue to create long-term value through our talented teams, iconic brands, and low-cost mills in favorable locations. A Capital Allocation Strategy to Maintain a Strong Financial Provision, Reinvest in our business to improve our competitive advantages, and continue to return substantial cash to shareholders. Let's look at the next few slides and talk through each of these uses of CAT.

John Sims: Let's go to slide 10.

Speaker Change: We are focused on uncoded free sheet and will continue to create long-term value through our talented team, iconic brands, and low-cost mills in favorable locations.

John Sims: A Capital Allocation Strategy to Maintain a Strong Financial Position.

Speaker Change: We invest in our business to improve our competitive advantages and continue to return substantial cash to shareholders.

Speaker Change: Let's look at the next few slides and talk through each of these uses of cash.

John Sims: Last week we announced the refinancing of our long-term debt to extend our maturity profile. Details are in the 8K we filed on August 1st, and also included in the appendix. Here, on slide 11, you can see a before and after picture of our maturity profile after we redeemed all outstanding 7% notes on September 1st.

Speaker Change: Last week we announced the refinancing of our long-term debt to extend our maturity profile.

Speaker Change: Details are in the 8k we filed on August 1st.

John Sims: Here on slide 11, you can see the before and after picture of our maturity profile after we redeem all outstanding 7% notes on September 1st. A strong balance sheet provides us the flexibility to address macro-conditioned downside risk and to invest in high return opportunities throughout the cycle.

Speaker Change: and also included in the appendix.

Speaker Change: Here on slide 11, you can see the before and after picture of our maturity profile after we redeem all outstanding 7% notes on September 1st.

John Sims: A strong balance sheet provides us with the flexibility to address macro conditions, downside risk, and to invest in high-return opportunities throughout the cycle. See slide 12. We will continue to return substantial cash to shareholders via dividends and share repurchase. As this graph shows, we initiated a dividend within the first year of our spinoff after paying down significant debt and strengthening our financial position. In 2023, we more than doubled our regular dividend and then raised it again to 30 cents per share in the fourth quarter.

Speaker Change: A strong balance sheet provides us the flexibility to address macro conditions, downside risk, and to invest in high return opportunities throughout the cycle.

John Sims: Let's make this slide 12. We will continue to return to SAMHSA cash shareholders via dividends and share repurchases. As this graph shows, we initiated a dividend within the first year of our spin-off after paying down significant debt and strengthening our financial position. In 2023, we've more than doubled our regular dividend and then raised it again to 30 cents per share in the fourth quarter. We also issued a special dividend of 30 cents per share. This year, we raised our regular dividend by 50 percent to 45 cents per share. Thus far in 2024, we have distributed 43 million via the three quarterly dividends and have repurchased $30 million in shares.

Speaker Change: Let's move to slide 12.

Speaker Change: We will continue to return substantial cash to shareholders via dividends and share repurchases.

Speaker Change: As this graph shows, we initiated a dividend within the first year of our spinoff, after paying down significant debt and strengthening our financial position.

Speaker Change: In 2023, we more than doubled our regular dividend and then raised it again to 30 cents per share in the fourth quarter.

John Sims: We also issued a special dividend of $36,000. This year, we raised our regular dividend by $50,000, $0.45 per share. Thus far in 2024, we have distributed $43 million via the three quarterly dividends, and I've repurchased $30 million. Let's move to slide 13.

Speaker Change: We also issued a special dividend of $0.30 per share.

Speaker Change: This year we raised the regular dividend by 50%.

Speaker Change: to $0.45 per share.

Speaker Change: Thus far, in 2024, we have distributed $43 million via the three quarterly dividends

Speaker Change: and I've repurchased $30 million in shares.

John Sims: Let's make this slide 13. We continue to invest in high return projects to strengthen our business while increasing earnings and cash flow. On this slide, you can see how we have ramped up our spending in maintenance, reform stations, and high return capital projects since our spin-off. At the time of our spin-off, we had line of sight on at least 100 million of high return projects, about 70 million of which we have funded by, we'll have funded by the end of this year. We have now identified in starting to develop another 200 million of high return capital projects to invest in the coming years.

Speaker Change: Let's move to slide 13.

John Sims: We continue to invest in high-return projects. Staphos, Arsen Kitch, John Sims, Cole Hathorn, Matthew McKellar, Hans Bjorkman, and Sylvamo. On this slide, you can see how we have ramped up our spending on maintenance, reforestation, and high-return capital projects since our spinoff. At the time of our spinoff, we had a line of sight on at least 100 million high return projects, about 70 billion of which we will have funded by the end of this year.

Speaker Change: We continue to invest in high-return projects.

Speaker Change: to strengthen our business while increasing earnings and cash flow.

Speaker Change: On this slide, you can see how we have ramped up our spending in maintenance, reforestation, and high return capital projects since our spinoff.

Speaker Change: At the time of our spinoff, we had line of sight on at least 100 million of high-return projects.

Speaker Change: about 70 billion of which we have funded but will have funded by the end of this year.

John Sims: We have now identified and started to develop another $200 million of high-return capital projects to invest in the coming years. These projects of varying sizes are largely focused on our flagship mills, providing us with opportunities to grow our earnings and cash. We expect such investments to generate well-above-cost capital.

Speaker Change: We have now identified and starting to develop another $200 million of high return capital projects to invest in the coming years.

John Sims: These projects are varying sizes, are largely focused on our flagship mills, providing us with opportunities to grow our earnings and cash flow. We expect such investments to generate well above cost-to-capable returns.

Speaker Change: These projects of varying sizes are largely focused on our flagship mills, providing us with opportunities to grow our earnings and cash flow.

Speaker Change: We expect such investments to generate well-above-cost-of-capital-return.

Jean-Michel Ribertis: With that, I'll turn it back over to you.

Jean-Michel Rivieres: With that, I'll turn it back over to you.

Jean-Michel Ribertis: Thanks, John.

Speaker Change: With that, Jean-Michel, I'll turn it back over to you.

Jean-Michel Rivieres: I'll conclude my comments on slide 14. This is a cash flow story, and we continue to deliver against our investment thesis, which will leverage our strengths to drive high returns on invested capital, generate free cash flow, and use that cash to increase shareholder value. Financial discipline is a key component of our strategy. As John discussed, we have refinanced our long-term debt to extend our maturity profile, and we are committed to returning at least 40% of our free cash. Sherwin-Williams.

Jean-Michel Ribertis: I'll conclude my comments on Slide 14. Sylvamo is a cash flow story, and we continue to deliver against our investment thesis. We will leverage our strengths to drive high returns on invested capital, generate free cash flow, and use that cash during pre-share on our volume. Financial discipline is a key component of our strategy. As John discussed, we have refinanced our long-term debt to extend our maturity profile. We are committed to return at this 40% of our free cash flow.

Jean-Michel: Thanks John , I'll conclude my comments on slide 14.

Jean-Michel: Sylvamo is a cash flow story and we continue to deliver against our investment thesis.

Speaker Change: We will leverage our strengths to drive high returns on invested capital, generate free cash flow, and use that cash to increase shareholder value.

Speaker Change: Financial discipline is a key component of our strategy.

Speaker Change: As John discussed, we have refinanced our long-term debt to extend our maturity profile. We are committed to return at least 40% of our free cash to shareholders this year.

Jean-Michel Ribertis: We share on us this year. We are reducing our cost structure and have a great pipeline of high return capital projects, which will enable us to grow earnings and cash flow in the coming years. We are confident in our future and motivated by the opportunities that lie ahead.

Jean-Michel Rivieres: We are reducing our cost structure and have a great pipeline of high-return capital projects. It will enable us to earn some cash flow in the coming years. We are confident in our future and motivated by the opportunities that lie ahead. And with that, I'll turn the call back to Hans.

John Sims: We are reducing our cost structure and have a great pipeline of high return capital projects which will enable us to grow earnings and cash flow in the coming years.

John Sims: We are confident in our future and motivated by the opportunities that lie ahead.

Hans Bjorkman: With that, I'll turn the road back to Hans. Thanks, John; Michelle, and thank you, John.

Hans Bjorkman: Thanks, Jean-Michel, and thank you, John. Okay, Colin, we're ready to take questions. If you would like to ask a question, please press...

Speaker Change: With that, I'll turn the call back to Hans.

Operator: Okay, Colin, we're ready to take questions. If you would like to ask a question, please press 1, then 0 on your telephone keypad. To withdraw a question, press 1, then 0 again.

Speaker Change: Thanks, Jean-Michel, and thank you, John . Okay, Colin, we're ready to take questions.

Operator: If you would like to ask a question, please press 1 then 0 on your telephone keypad. To withdraw a question, press 1 then 0 again. We do ask that you limit yourself to one question and one follow-up question. Thank you. Our first question is from Cole. Hathorn, with Jeffreys, your line is open.

Speaker Change: If you would like to ask a question, please press 1 then 0 on your telephone keypad. To withdraw a question, press 1 then 0 again. We do ask that you limit yourself to one question and one follow-up question. Thank you.

Operator: We do ask that you limit yourself to one question and one follow-up question. Thank you.

Speaker Change: [inaudible]

Cole Hathorn: Our first question is from Cole Pathorn with Jeffries. Your line is open. Good morning. Thanks for taking my question. Two from my side. The first one is on wood cost. You called out a bit of cost information in Latin America, but in the Nordics, we've seen a high wood cost structure. I'm just wondering what you're seeing in your other market within Europe and in your French mill. Are you seeing a more stable wood basket?

Cole Hathorn: Good morning, thanks for taking my question. Two from my side.

Speaker Change: Our first question is from Cole Hathorn with Jeffries. Your line is open.

Jean-Michel Rivieres: The first one's on wood costs. You called out a bit of cost inflation in Latin America, but in the Nordics, we've seen, you know, higher wood costs structurally. I'm just wondering what you're seeing in your other markets within Europe at your French mill. Are you seeing kind of a more stable wood basket? And just any colors, any color you can talk about on wood cost, because I think that gives you a relative advantage versus some of the others.

Cole Hathorn: Good morning, thanks for taking my question. Two from my side. The first one's on wood costs. You called out a bit of cost of inflation in...

Speaker Change: In Latin America, but in the Nordics we've seen, you know, higher wood cost structurally. I'm just wondering what you're seeing in your other markets within Europe in your French mill. Are you seeing kind of a more stable wood basket? And just any colors, the color you can talk about on wood cost, because I think that gives you a relative advantage versus some of the others.

Cole Hathorn: Just any color you can talk about on wood cost because I think that gives you a relative advantage versus some of the others.

Cole Hathorn: Then sticking with Europe, we've seen some changes in market structure, with various paper distributors having financial issues and going bankrupt. Is that a positive or a negative for still farmer going forward from here? Effectively, are you able to kind of cut out the middleman in that? I love your thoughts there. Thank you.

Speaker Change: And then sticking with Europe , we've seen some changes in market structure with various paper distributors.

Speaker Change: having financial issues and going bankrupt. Is that a positive or a negative for Sylvamo going forward from here? Effectively, are you able to kind of cut out the middleman in that? I'd love your thoughts there. Thank you.

Jean-Michel Ribertis: So let me iron. Thanks for joining the call. Let me start by the wood cost. The wood cost increase in Brazil, you started by Brazil, is due to all the known, the wood we buy. First, for two to three years, we need to buy more wood because when we got in Vamo, there had been years where the investment in the forestry was not sufficient. So we made up of this investment, and we cut out. So now only we need to buy a little bit more price spending, wood, sorry, and in top of that, it's a little bit more expensive.

Jean-Michel Rivieres: And then, you know, sticking with Europe, we've seen some changes in market structure with various paper distributors having financial issues and going bankrupt. Is that a positive or a negative for Sylvamo going forward from here? And effectively, are you able to kind of cut out the middleman in that? I'd love your thoughts there. Thank you.

Jean-Michel Rivieres: So let me, hi, and thanks for joining the call. Let me start with the wood cost. The wood cost increase in Brazil, started by Brazil, is due to all the norms, but the wood we buy. First, we..., for two to three years.

Speaker Change: So let me, hi and thanks for joining the call. Let me start by the Woodcost.

Speaker Change: The wood cost increase in Brazil, started by Brazil, is due to all the non-

Speaker Change: The wood we buy, first we, for two to three years.

Jean-Michel Rivieres: We need to buy more wood because when we got Sylvamo, there had been years where the investment in forestry was not sufficient, so we made up for this investment, and we cut back. So not only do we need to buy a little bit more wood, but, sorry, and on top of that, it's a little bit more expensive. In Europe, we've seen, as you mentioned, the root cause of Scandinavia. Uh, Dayza, some of the Hollywood demand increased, which has an impact, and Russia and Belarus stopped exporting wood chips, which has The other Holwood spines can be... So, an increase in Sweden, some increase in Brazil, which we'll make up for it. Saya is roughly stable, and the U.S.'s Refugee Staphos is at a high level. So that's for the wood side.

Speaker Change: We need to buy more wood because when we got Sylvamo, there had been years where the investment in the forestry was not sufficient, so we made up for this investment and we cut out.

Speaker Change: So not only we need to buy a little bit more price, but in wood, sorry, and on top of that it's a little bit more expensive.

Jean-Michel Ribertis: In Europe, we've seen, as you mentioned, the wood cost of Scandinavia increase. There is some other whole wood demand increase which has impact and Russian delivery stuff, exporting woodchips, such as to reduce the other whole wood splines, Scandinavia. So, increasing Sweden, some increasing Brazil, which will make up for it. Sya is roughly stable, and the US is roughly stable on a high level. So that's for the wood side. But I agree with you; we have an advantage with our forest in Brazil, and we have very good woodcut in the US. In the merchant side in Europe, I would say it's neutral to us.

Speaker Change: In Europe , we've seen, as you mentioned, the wood cost of Scandinavia increase.

Speaker Change: There is some other Hollywood demand.

Speaker Change: increase which has impact and Russia and Belarus stopped exporting wood chips which has reduced

Speaker Change: We are the Hollywood Spine, Scandinavia.

Speaker Change: So...

Speaker Change: increase in Sweden, some increase in Brazil which will make up for it.

Speaker Change: Saya is roughly stable and the U.S. is roughly stable.

Jean-Michel Rivieres: But I agree with you, we have an advantage with our forestry in Brazil, and we have very good wood costs in the U.S. On the merchant side in Europe, I would say it's neutral to us. We have great partners in Europe, and I'm glad to have these customers.

Speaker Change: on a high level. So that's for the wood side. But I agree with you, we have an advantage with our forestry in Brazil and we have very good wood costs in the U.S.

Speaker Change: In the merchant side in Europe , I would say it's neutral to us. We have great partners in Europe and we're glad to have these customers. We're ready if there are some more changes in the merchant area.

Jean-Michel Ribertis: We have great partners in Europe, and we would like to have those customers. We're ready if there are some more changes in the merchant area, or in the channels. If it has to be more direct, we would be, but I would call it neutral for us, one way or another.

Jean-Michel Rivieres: We're ready if there are some more changes in the merchant area, in the channels. If it has to be more direct, we would be... But I would call it neutral for us, one way or another.

Speaker Change: in the channels.

Speaker Change: If it has to be more direct, we will be, but I would call it neutral for us, one way or another.

Cole Hathorn: And then, if I could have a follow-up, which is just around the demand trends, we saw a lot of restocking across various end markets, and graphic paper in general, including office paper, source and restocking.

John Sims: And then I could have a follow-up question, which is just around the demand trends. We saw a lot of restocking across various end markets, and, you know, graphic paper in general, including office paper, saw some restocking. Where do you see us from an underlying demand perspective? You know, do you have any good visibility or items to call out on, you know, the demand trends by region in North America, Europe, and Latin America?

Speaker Change: And then, if I could have a follow-up, which is just around the demand trends. We saw a lot of restocking across various end markets and, you know, graphic paper in general, including office paper, saw some restocking.

John Sims: Where do you see we are from an underlying demand perspective? Do you have any good visibility or items to call out on the demand trends by region in North America, Europe, and that term?

Speaker Change: Where do you see we are from an underlying demand perspective? Do you have any good visibility or items to call out on the demand trends by region in North America, Europe and Latin?

John Sims: Thank you.

John Sims: Of course, this is John. I'll talk a little bit about demand. So, we have seen restocking in the first half, and we talked about that with some of the improvements. You look at by region, looking at the industry, where we are a year-to-date, we're up about 3% in North America, 14% in Europe, and Latin was relatively flat. Again, there was an issue around Argentina. Going forward, we expect that the demand will be positive for the full year, and this is actually consistent with forecasts we're seeing from other industry experts. Some of that is driven not because of the restocking, but because of the weak comp to the second half.

John Sims: Cole, this is John. I'll talk a little bit about demand. So we have seen restocking in the first half, and we talked about that being what drove some of the improvements you look at by region when looking at the industry. Where we are a year to date, we're up about 3% in North America, 14% in Europe, and LATAM was relatively flat. Again, there was an issue around Argentina.

Speaker Change: This is John . I'll talk a little bit about demand. So we have seen restocking in the first half and we talked about that's what drove some of the improvements. You look at by region for you know looking at the industry

Speaker Change: Where we are a year to date, we're up about 3% in North America, 14% in Europe . And LATAM was relatively flat. Again, there was an issue around Argentina.

John Sims: Going forward, we expect that demand will be positive for the full year, and this is absolutely, and John L. We're going to be talking about the demand forecast we're seeing from other industry experts. Some of that is driven not because of the restocking, but because of the weak comp in the second half. So I would characterize our demand now, and particularly in North America and Western Europe, as relatively stable. But from a comp perspective, easy comp perspective, it's going to be positive relative to last year. So we're looking at Europe around 7% a full year, LATAM around up 3% a full year, and North America around 5%. And on the long train, I think you talked about that.

Speaker Change: Going forward, we expect that the demand will be positive for the full year, and this is absolutely consistent.

Speaker Change: with forecasts we're seeing from other industry experts.

Speaker Change: Some of that is driven not because of the restocking, but because of the weak comp to second half. So I would characterize our demand now, and particularly in North America and Western Europe , as relatively stable.

John Sims: So, I would characterize our demand now, and particularly in North America and Western Europe, is relatively stable. But from a comp perspective, easy comp perspective, it's going to be a positive relative to last year. So, we're looking at probably Europe around 7%, four year, Latin, around up 3%, four year, and North America around 5%. And on the long trend, I think you talked about that also, we see returning in Europe and North America at long-term trends, which is a slight decrease.

Speaker Change: But from a comp perspective, easy comp perspective, it's going to be a positive relative to last year. So we're looking at probably Europe around seven percent

Operator: Good morning. Thank you for standing by. Welcome to Sylvamo's second quarter, two thousand and twenty-four 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 one bin zero on your telephone keypad. To withdraw a question, press one bin zero again. As a reminder, your conference is being recorded.

Speaker Change: full-year, LATAM around up 3%, full-year, and North America around 5%.

John Sims: And on the long train, I think you talked about that also. We see Europe and North America returning to long-term trends, which is like...

Speaker Change: And on the long trend, I think you talked about that also, we see returning in Europe and North America to long-term trends, which is slight decrease.

John Sims: Thank you.

Matthew Mckellar: Our next question is from the line of Matthew McKellar with RBC Capital Markets. Hi, good morning. Thanks for taking my questions. I'd like to first just follow on Cole's question around fiber costs in Latin America. Could you maybe just give a little bit more color around what's happening with fiber costs and what your expectations are in terms of what happens with cost of purchase when Latin America over the next few quarters?

Speaker Change: Thank you.

Matthew Mckellar: Our next question is from the line of Matthew McKellar with RBC Capital Markets.

Speaker Change: Thank you.

Hans Bjorkman: I'd now like to turn the call over to Hans Bjorkman, Vice President and Vester Relations. Sir, the floor's yours. Thanks, Colin.

Speaker Change: Our next question is from the line of Matthew McKellar with RBC Capital Markets.

Matthew Mckellar: Hi, good morning. Thanks for taking my questions. I'd like to first just follow on Cole's question around fiber costs in Latin America. Could you maybe just give a little bit more color around what's happening with fiber costs and what your expectations are in terms of what happens with the cost of purchase in Latin America over the next few quarters?

Matthew Mckellar: Hi, good morning. Thanks for taking my questions. I'd like to first just follow on Cole's question around fiber costs in Latin America. Could you maybe just give a little bit more color around what's happening with fiber costs and what your expectations are in terms of...

Hans Bjorkman: Good morning and thank you for joining our Sylvamo Corporation, second quarter, twenty-four earnings call.

Hans Bjorkman: Our speakers this morning are Jean-Michel Ribertis, Chairman and Chief Executive Officer, and John Sims, Senior Vice President and Chief Financial Officer. Slides two and three 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-US gap financial information. Reconciliation of those figures to US gap financial measures are also available on the appendix. Our website contains copies of the earnings release as well as today's presentation.

Speaker Change: What happens with cost of purchase when Latin America over the next few quarters?

John Sims: Yeah, Matthew, thanks, John Sims. So, what we're seeing, you know, this kind of drove what we talked about in terms of the valuation of our land in Brazil. We see increased cost of fiber in Brazil, and that's, and that we expect that to continue. Maybe at the inflation rate, but when you compare, man, when I talk about increased market price, that's wood that we're not actually harvesting and growing. But when we have to go to the market, you know, it's about three times the cost of our own wood. And so, that's what's driving some of the cost increases we've seen down in Brazil is what Jean-Michel talked about.

John Sims: Yeah, Matthew, thanks. This is John Sims.

Speaker Change: Yeah Matthew, thanks, this is John Sims. So what we've seen, and you know this kind of drove what we talked about in terms of valuation of our land in Brazil, we see

John Sims: So, what we've seen and, you know, this kind of drives what we talked about in terms of the valuation of our land in Brazil. Increased cost of fiber in Brazil, um, and that's, and then we expect that to continue maybe at the inflation rate, but when you compare it and when I talk about an increased market price for wood that we're not actually harvesting and growing. But when we have to go to the market, it's about three times the cost of our own wood. And so that's what's driving some of the cost down in Brazil, as Jean-Michel talked about.

Speaker Change: increased cost of fiber in Brazil.

Speaker Change: and that's and then we expect that to continue maybe at the inflation rate but when you compare and when I talk about increased market price so that's

Hans Bjorkman: With that, I'll turn the call over to you Jean-Michel. Thanks, Hans.

Speaker Change: not actually harvesting and growing, but when we have to go to the market, it's about three times the cost of our own wood. And so that's what's driving some of the cost increases.

Jean-Michel Ribert: Good morning and thank you for joining our call. I'll begin with our sustainability highlights on slide four. Our first and greatest responsibility is to ensure the safety and well-being of our team members. We do this by putting people before paper all the way. We're also committed to operating as a sustainable corporation that creates profits for our shareholders while protecting the environment and improving the lives of those with whom we interact. Continuing Sylvamo commitment for transparent reporting, in the second quarter, we published our sustainability report in a new streamlined format. We also expanded the sustainability hub on Sylvamo.com to communicate sustainable news, regional content, certification and more. I encourage you to visit our website and learn about our sustainability efforts.

Speaker Change: We say...

John Sims: Right now, our self-sufficiency is lower than what we had been historically. Yeah, we're probably supplying about 70% of our needs. We'd like to be around 85%.

John Sims: Right now, our self-sufficiency is lower than what we have been historically. You know, we're probably supplying about 70% of our needs. We'd like to be around 85%.

Speaker Change: down in Brazil is what Jean-Michel talked about.

John Sims: Right now, our self-sufficiency

John Sims: is lower than what we had been historically. You know, we're probably supplying about 70% of our needs. We'd like to be around 85%. This is why we're reinvesting and increased our investments in our own plantations. But when you reach out for higher, or for...

John Sims: This is why we're re-investing and increased our investments in our own plantations. But when you reach out for higher or for market wood, those prices are higher. We're also reaching out to further distances, so you have to pay the additional freight. So, that's some of the things that are impacting us in Latin America. But, as we said, this is why we're re-investing or increasing our investments and reforestation.

John Sims: This is why we're reinvesting and increasing our investments in our own plantations. But when you reach out for higher, or for Markit Wood. Those prices are higher. We're also reaching out to further distances, so you have to pay for the additional freight. So those are some of the things that are impacting us in Latin America. But as we said, this is why we're reinvesting or increasing our investments in reforestation. And finally, I think your question is the trend. We expect that to increase, continue to increase, the cost of fiber down and down.

John Sims: Market Wood, those prices are higher. We're also reaching out to further distances, so you have to pay the additional freight.

John Sims: So that's some of the things that are impacting us in Latin America, but as we said, this is why we're reinvesting or increasing our investments in Reforestation.

Matthew Mckellar: And finally, I think your question is the trend. We expect that to increase. Continue to increase the cost of fiber down in Latin America. Okay, great. Thanks. It's helpful.

John Sims: And finally, I think your question is the trend. We expect that to increase, continue to increase the cost of fiber down in Latin America.

Jean-Michel Ribert: Let's go to slide five. Now, let me go into some highlights of the quarter. We experienced improved and coated free sheet and bulk conditions. Our milk system ran well as we successfully completed our average plan maintenance arch quarter. We know have almost 75% of our plan maintenance outage for the year behind us. We generated strong cash flow and in May, we announced a 50% increase to our quarterly dividend from 30 to 45 cents per share that paid out at the end of July.

Matthew Mckellar: Okay, great. Thanks. That's helpful. Maybe next time.

Matthew Mckellar: Maybe next, you called up price mix is somewhat unfavorable for the sequential progression into key three mostly on mix. Can you provide just a bit more color there? Is that more export mix and paper sales? Is there maybe also an assumption around what happens with pulp prices in there? Any color would be helpful. Thank you.

Speaker Change: Okay, great. Thanks. That's helpful.

Matthew Mckellar: You called up price next is somewhat unfavorable for the sequential progression into Q3, mostly on next. Can you provide just a bit more color there? Is that more export mix and paper sales? Is there maybe also an assumption around what happens if the pulp price is in there?

Speaker Change: Maybe next, you called out price mix is somewhat unfavorable for the sequential progression into Q3 mostly on mix. Can you provide just a bit more color there? Is that more export mix and paper sales? Is there maybe also an assumption around what happens if pulp price is in there? Any color would be helpful. Thank you.

John Sims: Any color would be helpful. Thank you.

John Sims: Man, we can't really talk about future pricing, but that variance that we said is predominantly all mix, and it is more export mix, particularly in North America.

John Sims: Man, we can't really talk about future pricing, but that variance that we said is predominantly all mixed, and it is more export mixed, particularly in North America.

Speaker Change: Bye.

Speaker Change: Man, we can't really talk about future pricing, but...

Speaker Change: That variance that we said is predominantly all mixed, and it is more export mixed, particularly in North America.

John Sims: Let's move to the next slide. Slide six shows our key financial metrics. We earn adjusted a bit of 164 million with a margin of 18%. Free cash flow generation was 62 million, and we generated adjusted operating earnings of $1.98 per share. I'm proud of our team's delivered, impressive results while taking care of our customers and successfully executing several planned maintenance allergies across our system.

John Sims: And where is that going? That's going to Mexico? You may be aware that Mexico is implementing tariffs for the next two years on countries that don't have a trade agreement. So that gives an advantage to companies like us that are based in the US, and we're taking advantage of that. So we're exporting more to Mexico, and that's what the count for the mix change.

John Sims: And where is that going? Is it going to Mexico? You may be aware that Mexico has implemented tariffs for the next two years on... countries that don't have a trade agreement to their advantage, too, companies like us that are based in the U.S., taking advantage of that. So we're exporting more to Mexico and that's what's accounting for the mix. Thanks for the help. I'll turn it back and put it in the queue.

Speaker Change: And where is that going? That's going to Mexico?

Speaker Change: You may be aware that Mexico has implemented tariffs for the next two years on countries that don't have a trade agreement.

Speaker Change: It gives an advantage to companies like us that are based in the U.S. and we're taking advantage of that. So we're exporting more to Mexico and that's what's accounting for the mixed change.

Matthew Mckellar: Great. Thanks for the help.

Matthew Mckellar: I'll turn it back and get in the queue.

John Sims: Now, John will review our performance in multi-dead. Thank you, John Michelle.

Speaker Change: Both.

Speaker Change: Great, thanks for the help. I'll turn it back and get into the queue.

Operator: Thank you.

George Staphos: Next we'll go to the line of George Staffos with Bank of America. Hi, everyone. Good morning. Thanks for the details. Can you hear me okay? Yes, George. Hi. Thanks for joining. Hey, John. Hi, John.

George Staphos: Next, we'll go to the line of George Staphos with Bank of America.

John Sims: Good morning, everyone. I'm on slide seven. Over the first half of the year, uncoded free sheet conditions improved from last year. Looking at industry demand across our region, Europe was up 14%, North America was up 3%. However, Latin America decreased 1%, but this was influenced by a significant drop in Argentina. Industry operating rates improved in North America, when a supplier permanently converted approximately 4% of uncoded free sheet capacity to pulp at the end of June.

Speaker Change: Thank you.

Speaker Change: Next we'll go to the line of George Staphos with Bank of America.

George Staphos: Hi everyone, good morning. Thanks for the details.

George Staphos: Hi everyone, good morning. Thanks for the details. Can you hear me okay?

George Staphos: Can you hear me okay?

Jean-Michel Rivieres: Yes, George. Hi. Thanks for joining us.

George Staphos: Yes George, hi, thanks for joining. Hey Jean-Michel, hi Jean. So two questions to start and I'll go back in queue. Can you give us a little bit more detail on the projects that are in the pipeline now?

George Staphos: So two questions to start, and I'll go back and queue. Can you give us a little bit more detail on the projects that are in the pipeline now? Relative to what you have been working on and what the return differential might be, where they basically all still above cost of capital, presumably they're all above cost capital and the same spread. So any color on how this latest pipeline varies with what's been in the pipeline in terms of processes, approaches, and return thresholds.

George Staphos: relative to what you have been working on.

Speaker Change: and what the return differential might be.

John Sims: A European competitor announced in May, they would close the machine in Germany by the end of the year. This closure will reduce European supply by about 5%. Pulp and vapor prices have moved up across our regions over the first half of the year as well. Excluding pulp, we also saw the stabilization of most input costs, although at a high level.

Speaker Change: or are they basically all still above cost of capital? Presumably they're all above cost of capital and the same spread. So any color on how this latest pipeline varies with what's been in the pipeline in terms of processes, approaches.

George Staphos: Hey, Jean-Michel. Hi, Jean.

George Staphos: So two questions to start, and I'll go back in queue. Can you give us a little bit more detail? on the projects that are in the pipeline now, relative to what you have been working on, and what the return differential might be, or are they basically all still above cost of capital? Presumably they're all above cost of capital and have the same spread. So any color on how this latest pipeline varies with what's been in the pipeline in terms of processes, approaches, and return thresholds? That's question one.

George Staphos: Question two on the dividend, you know, congratulations on raising the dividend with another size will increase. How did you think about raising it to the degree you did on the regular side as opposed to maybe raising it a lesser amount and then doing a special dividend? What gave you the comfort to raise it, you know, the full, you know, 50%? Thank you.

Jean-Michel Rivieres: Question two on the dividend. Congratulations on raising the dividend with another sizable increase. How did you think about raising it to the degree you did on the regular side as opposed to maybe raising it a lesser amount and then doing a special dividend? What gave you the confidence to raise it the full 50 percent? Thank you.

Speaker Change: and return thresholds. That's question one. Question two, on the dividend.

John Sims: Let's move to the next slide. Slide eight continues our second quarter earnings bridge. The 164 million of adjusted EBITDA was better than our outlook of 145 to 160 million. Price and mix improved by 26 million. Reflecting the implementation of pulp and vapor price increases previously communicated in all regions, as well as better mix in Latin America. Volume increased by 8 million, primarily driven by secretly stronger demand in Latin America. Operations and other costs improved by 10 million. Primarily reflecting a solid operation and seasonally lower costs in Europe and North America. Planned maintenance hours cost increased by 4 million and input and transportation costs increased by 6 million.

Speaker Change: you know.

Speaker Change: Congratulations on raising the dividend with another sizable increase.

Speaker Change: How did you think about raising it to the degree you did on the regular side as opposed to maybe raising it a lesser amount and then doing a special dividend? What gave you the comfort to raise it, you know, the full, you know, 50%? Thank you.

Jean-Michel Ribertis: So I'll take maybe the first one, and John take the second question, but we could use answer it, I guess. So yes, we still have a very high threshold of capital investment return. So all the projects we're looking at is a strict minimum of 20% return. So this is why it's very attracting: this projects about different side. Some are very small, and some are larger.

John Sims: So I'll take maybe the first one, and John will take the second question and will answer it, I guess. So yes, we still have a very high threshold of capital investment return. So all the projects we're looking at have a strict minimum of 20% return, and Bruce is why it's very attractive. These projects are of different sizes. Some are very small. Some of ours are larger. We are studying them, they are in the pipeline, and we are working with our board to plan for the coming years on this investment. But they're very attractive and incremental on both cash and earnings for Sylvamo.

Speaker Change: So I'll take maybe the first one and John takes the second question, but we could both answer it I guess. So yes, we still have a very high threshold of capital investment return. So all the projects we're looking at...

Speaker Change: is a strict minimum of 20% returns.

Speaker Change: So this is why it's very attractive.

Speaker Change: These projects are of different sizes, some are very small.

Jean-Michel Ribertis: We are studying them, then the pipeline, and we're working with our board to plan for the coming years on this investment, but they're very attractive and incremental on both cash and earnings to Sylvamo.

John Sims: and some of our larger...

Speaker Change: We are studying them, they are in the pipeline, and we're working with our board to plan for the coming years on this investment.

John Sims: Let's move to slide nine. We expected to deliver third quarter adjusted EBITDA of 170 and 185 million. We project price and mix to be slightly unfavorable, primarily due to mix. We expect volume to improve by 10 to 15 million driven by Latin America and North America. Operations and other costs are projected to increase by 10 to 15 million. Primarily driven by higher unabsorbed fixed costs, but economic downtime in North America and Europe as we continue to manage our production to our customers demand.

Speaker Change: But they're very attractive and incremental on both cash and earnings to Sylvamo.

John Sims: And George see a second question because back to our capital allocation strategy, first and foremost, and our priorities have a strong balance. The second is to reinvest back into business where we can grow our earnings and cash flow. And then the third is returning cash to shareholders, and core to that is a dividend. A dividend that we have believe and have confidence that we can sustain forever, if you will, and a dividend that doesn't restrict us from a strategic flexibility perspective. So we had a lot of confidence in terms of increase in the dividend and mostly driven by what your first question pertained to. We believe there's opportunities for us to increase earnings and cash flow in this business through smart reinvestments and high return projects going forward, which we're executing right now.

John Sims: Yeah, and George, to your second question, it goes back to our capital allocation strategy. First and foremost, our priority is to have a strong balance sheet. Second, to reinvest back into the business where we can grow our earnings and cash flow. And then the third is returning cash to shareholders, and core to that is a dividend, a dividend that we believe and have confidence that we can sustain, forever, if you will, a dividend that doesn't restrict us from a strategic flexibility perspective. We had a lot of conflict.

Speaker Change: Yeah, and George, to your second question, it goes back to our...

George Staphos: Capital allocation strategy, first and foremost, and our priority is to have a strong balance sheet. Second is to reinvest back into business where we can grow our earnings and cash flow.

George Staphos: And then the third is returning cash to shareholders.

George Staphos: And core to that is a dividend, a dividend that we have believed and have confidence that we can sustain forever, if you will, and a dividend that doesn't restrict us from a strategic flexibility perspective. So we had a lot of confidence in terms.

John Sims: We expect input and transportation costs to increase by 5 to 10 million, due to unfavorable fiber in Latin America and energy in North America. Plan maintenance hours is a projected and improved by 28 million as we have no major planned outages this quarter.

John Sims: M. B., driven by what your first question pertained to, we believe there are opportunities for us to increase earnings and cash flow in this business through smart reinvestments and high-return projects going forward, which we're executing right now. And because we have a good line of sight on that, and because of the competitive advantages we believe we have in the markets that we operate in, and that give us a lot of confidence to be able to sustain the dividend that we put forward.

George Staphos: of increasing the dividend and mostly...

George Staphos: It's driven by what your first question pertained to. We believe there's opportunities for us.

George Staphos: to increase earnings and cash flow in this business through smart reinvestments and high return projects going forward, which we're executing right now. And because we have a good line of sight on that, and because of our

John Sims: We're making good progress on Project Horizon, our program to streamline overhead, manufacturing and supply chain costs. We're on track to achieve our year-end run rate target of 110 million in savings.

John Sims: And because we have a good line of sight on that, and because of our we believe competitive advantages we have and in the markets that we operate, give us a lot of confidence, be able to sustain the dividend that we put forward.

John Sims: Let's go to slide 10. We are focused on ongoing free sheet and will continue to create long-term value through our talented teams, iconic brands and low-cost mills and favorable locations. Our capital allocation strategy to maintain a strong financial position, reinvest in our business and improve our competitive advantages, and continue to return to the SAMHSA cash shareholders.

Speaker Change: We believe competitive advantages we have and in the markets that we operate and Give us a lot of confidence to be able to sustain dividend that we put forth

George Staphos: John, maybe if I could do a quick tag on them turn over, maybe I'm reading between the lines incorrectly, but does that suggest any next dividend increases maybe are more of the special side as you return once again to, I mean, your balance is in great shape as we sit here right at the moment. As you develop the next pipeline and increase presumably the cash generation of the business through reinvestment, would that be the right way to think about the cadence and staging.

George Staphos: John, maybe if I could sort of do a quick tag on, I'll turn it over. Maybe I'm reading between the lines incorrectly, but does that suggest any next dividend increases maybe are more of the special side as you return once again to, I mean, your balance sheet's in great shape as we sit here at the moment. As you, you know, develop the next pipeline and increase, presumably, the cash generation of the business through reinvestment, would that be the right way to think about the cadence and staging? Thank you. Yeah, I wouldn't want to, uh...

Speaker Change: John , maybe if I could sort of do a quick tag on, I'll turn it over.

Speaker Change: Maybe I'm reading between the lines incorrectly, but does that suggest any next dividend increases maybe are more of the special side as you...

John Sims: return once again to, I mean, the balance sheet's in great shape as we sit here at the moment. As you, you know, develop the next pipeline and increase, presumably, the cash generation of the business through reinvestment, would that be the right way to think about the cadence and staging? Thank you.

Jean-Michel Ribert: Let's look at the next few slides and talk through each of these uses of cash. Last week, we announced the refinancing of our long-term debt to extend our maturity profile. Details are in the 8K we filed on August 1st, and also included in the appendix. Here on slide 11, you can see the before and after picture of our maturity profile after we redeem all outstanding 7% notes on September 1st. A strong balance sheet provides us the flexibility to address macro-conditioned downside risk and to invest in high return opportunities throughout the cycle.

John Sims: Thank you. Yeah, I wouldn't want to foreshadow that. I think we will, we will view that, and we think about that as we view our strategy plans with the board. And, you know, I think to the sense that we believe that we can sustainably increase the dividend; that we'll do that, or if we think that there may be better uses for cash, such as buying back shares or reinvesting back in the business. We may do that prior to a special dividend, or in the case like we did last year, we may issue a special dividend.

John Sims: Yeah, I wouldn't want to foreshadow that. I think we will review that, and we will think about that as we review our strategic plans with the board. And I think to the extent that we can sustainably increase the dividend that will do that, I think there may be better uses for cash, such as buying back shares or reinvesting back in the business. We may do that prior to a special dividend, or, as we did last year, we may issue a special dividend.

Speaker Change: Yeah, I wouldn't want to foreshadow that. I think we will review that and we think about that as we review our strategic plans with the board. And, you know, I think to the extent that we believe

Speaker Change: We can sustainably increase the dividend that will do that, or if we think that there may be better uses for cash, such as buying back shares or reinvesting back in the business, we may do that prior to a special dividend, or in the case like we did last year, we may issue a special dividend.

John Sims: Let's make this slide 12. We will continue to return to SAMHSA cash shareholders via dividends and share repurchases. As this graph shows, we initiated a dividend within the first year of our spin-off after paying down significant debt and strengthening our financial position. In 2023, we've more than doubled our regular dividend and then raised it again to 30 cents per share in the fourth quarter. We also issued a special dividend of 30 cents per share. This year, we raised our regular dividend by 50 percent to 45 cents per share. Thus far in 2024, we have distributed 43 million via the three quarterly dividends and have repurchased $30 million in shares.

George Staphos: Thank you so much.

Speaker Change: Thank you so much.

Matthew Mckellar: And we'll go back to the line of Matthew McKellar with RBC Capital Markets. Thank you. As you get closer to the fall election, what do you see in terms of impacts to uncoded free sheet demand as far as you can discern? So the ballot is always an opportunity for us, but it's not a big volume. So it's something we have largely the capacity between us and our competition in North America to supply. So it's an opportunity, but it's nothing very significant. It's a few Southern tones. Okay, thank you.

Matthew Mckellar: And we'll go back to the line of Matthew McKellar with RBC Capital Markets.

Speaker Change: And we'll go back to the line of Matthew McKellar with RBC Capital Markets.

Matthew Mckellar: Thank you. As we get closer to the fall election, what have you seen in terms of impacts on uncoded free sheet demand, as far as you can discern?

Matthew Mckellar: Thank you. As we get closer to the fall election, what do you see in terms of impacts to uncoded free sheet demand as far as you can discern?

Jean-Michel Rivieres: So the balance is always an opportunity for us, but it's not a big volume. So it's something we have largely the capacity for. It's an opportunity, but it's nothing very significant.

Speaker Change: So the balance is always an opportunity for us, but it's not a big volume, so it's something we have largely the capacity to do.

Speaker Change: between us and our competition in North America to supply. So it's an opportunity, but it's nothing very significant. It's a few thousand tons.

John Sims: Let's make this slide 13. We continue to invest in high return projects to strengthen our business while increasing earnings and cash flow. On this slide, you can see how we have ramped up our spending in maintenance, reform stations, and high return capital projects since our spin-off. At the time of our spin-off, we had line of sight on at least 100 million of high return projects, about 70 million of which we have funded by, we'll have funded by the end of this year.

John Sims: Okay, thank you. Yeah, Matthew, in general, yeah, we've seen less of an election impact on uncredited free seat demand. I mean, it used to be a pretty significant driver, but that's become less and less. Okay, fair enough. Thank you.

Matthew Mckellar: Matthew, in general, yeah, we've seen less of an election impact on uncoded free sheet demand. I mean, it used to be a pretty significant driver, but that's become less and less. Okay, fair enough.

Speaker Change: That's a big deal.

Speaker Change: Okay, thank you. Yeah, Matthew, in general, yeah, we've seen less of an election impact on uncredited free seat demand. I mean, it used to be a pretty significant driver, but that's become less and less.

Operator: Thank you. Next move is shifting to imports. It looks like they continue to take higher North America.

Matthew Mckellar: Next, we'll be shifting to imports. It looks like they continue to tick higher in North America. Can you just maybe provide some updated perspective here? Are imports more of a concern as it relates to how you're thinking about the market landscape today versus how you might have thought about the market at the start of the year?

Speaker Change: Okay, fair enough. Thank you. Next we'll be shifting to imports. It looks like they continue to tick higher in North America. Can you just maybe provide some updated perspective here? Are imports more of a concern as it relates to how you're thinking about the market landscape today versus how you're maybe thinking about the market at the start of the year?

Operator: Could you just maybe provide some updated perspective here? Our imports more of a concern as it relates to how you're thinking about the market landscape today versus how you're maybe thinking about the market at the start of the year.

John Sims: We have now identified in starting to develop another 200 million of high return capital projects to invest in the coming years. These projects are varying sizes, are largely focused on our flagship mills, providing us with opportunities to grow our earnings and cash flow. We expect such investments to generate well above cost-to-capable returns.

Jean-Michel Ribertis: So let me maybe give back the story. Imports in North America since 2018 are varied between 8% to 13%. And they're really very depending upon, say, on freight rates, on market, foreign exchange. So we have been in the same range since early 23 and even this year. So I think we should always be on the 10, 13, something like that range. And I don't read more than that. And I think some of the importers to the US have been down due to freight. Some have been down to local markets opportunity to send spots. If you look at it, it's interesting because where the imports come in North America, it changes also through the years.

Jean-Michel Rivieres: So let me maybe give you some history. Imports in North America have varied between 8 to 13 percent since 2018, and they really vary depending on freight rates, home market, and foreign exchange. So we have been in the same range since early 23 and even this year. So I think we should always be in the 10, 13, something like that range. And I don't read more than that.

Speaker Change: So let me maybe give back the history. Imports in North America since 2018

Speaker Change: have varied between 8 to 13 percent.

Speaker Change: And they really vary depending on freight rates, home market, foreign exchange.

John Sims: With that, I'll turn it back over to you. Thanks, John.

Speaker Change: So we have been in the same range since early 23 and even this year so I Think we should always be on the 10 13 something like that range And I don't read more than that and I think

Jean-Michel Ribert: I'll conclude my comments on slide 14. Sylvamo is a cash flow story, and we continue to deliver against our investment thesis. We will leverage our strengths to drive high returns on invested capital, generate free cash flow, and use that cash during pre-share on our volume. Financial discipline is a key component of our strategy. As John discussed, we have refinanced our long-term debt to extend our maturity profile. We are committed to return at this 40% of our free cash flow.

Jean-Michel Rivieres: Some of the importers to the U.S. have been dumped due to threats, and some have been down to local markets for the opportunity to send spots. If you look at it, it's interesting because where the imports come from in North America, it changes also through the years. It's not always the same region because it's very opportunistic, kind of. So I still see the opportunistic and of that range that we have. Nothing significant has changed.

Speaker Change: Some of the importers to the U.S. have been dumped due to threat.

Speaker Change: Some have been down to local markets opportunity to send spots.

Speaker Change: If you look at it, it's interesting because...

Speaker Change: Where the imports come in North America, it changes also through the years.

Jean-Michel Ribertis: It's not always the same regions because it's very opportunistic kind of. So I still see the opportunity and all that range that we have today, nothing significant if changed. Okay, thanks. That's helpful.

Speaker Change: It's not always the same regions because it's very opportunistic, kind of.

Jean-Michel Ribert: We share on us this year. We are reducing our cost structure and have a great pipeline of high return capital project, which will enable us to grow earnings and cash flow in the coming years. We are confident in our future and motivated by the opportunities that lie ahead.

Speaker Change: So, I still see it opportunistic and on that range that we have today.

Speaker Change: Nothing significant has changed.

Matthew Mckellar: Okay, thanks, that's helpful. And if I could just sneak one more in, I was a little bit surprised to see some economic downtime in the European pulp system in Q2. Can you just give me a little color on what happened there?

Operator: And if I could just speak one more in, it was a little bit surprised to see some economic downtime in the European pulp system in Q2. Could you just provide me a little color on what happened there? Is that again, I'm sorry. He's asked. Oh, answer that question.

Speaker Change: Okay thanks that's helpful and if I could just sneak one more in, I was a little bit surprised to see some economic downtime in the European pulp system in Q2. Can you just provide me a little color on what happened there?

Hans Bjorkman: With that, I'll turn the road back to Hans. Thanks, John Michelle, and thank you, John.

Operator: Okay, Colin, we're ready to take questions. If you would like to ask a question, please press 1, then 0 on your telephone keypad. To withdraw a question, press 1, then 0 again. We do ask that you limit yourself to one question and one follow-up question. Thank you.

Operator: Is that again? I'm sorry. He's at...

John Sims: Please ask. I'll answer that question.

John Sims: So yes, we had economic downturn both in Europe and North America. You know, that's just a matter of us matching our capacity to customer demand. So, and he looked in the outlook, we're expecting a little bit more in the third quarter than we had in the second quarter, but in the second quarter we had significant outages. So, although volumes are up, we're still matching our supply to our customer's demand, and we're being careful not to build unnecessary inventories.

Speaker Change: I'll answer that question. So, yes, we had economic down time.

John Sims: So, yes, we had economic downtime both in Europe and North America. Yeah, and that's just, um... Manor of Us Match, our capacity to customer demand. So, in the outlook, we're expecting a little bit more in the third quarter than we had in the second quarter. But in the second quarter, we had significant outages. So all the volumes are up. We're still matching our supply to our customers' demand, and we're being careful not to build too much. Unnecessary inventories

Speaker Change: both in Europe and North America, you know, and that's just...

Speaker Change: It's a matter of us matching.

Speaker Change: our capacity to customer demand. So in the outlook, we're expecting a little bit more in the third quarter than we had in the second quarter. But in the second quarter, we had significant outages.

Cole Hathorn: Our first question is from Cole Pathorn with Jeffries. Your line is open. Good morning. Thanks for taking my question. Two from my side. The first one is on wood cost. You called out a bit of cost information in Latin America, but in the Nordics, we've seen a high wood cost structure. I'm just wondering what you're seeing in your other market within Europe and in your French mill. Are you seeing a more stable wood basket?

Speaker Change: So all the volumes are up.

Speaker Change: We're still matching our our supply to our customers demand and we're being careful not to build

Cole Hathorn: Just any color you can talk about on wood cost because I think that gives you a relative advantage versus some of the others. Then sticking with Europe, we've seen some changes in market structure with various paper distributors having financial issues and going bankrupt. Is that a positive or a negative for still farmer going forward from here? Effectively, are you able to kind of cut out the middleman in that? I love your thoughts there. Thank you.

Speaker Change: Unnecessary Inventories.

John Sims: Okay, and just to confirm, that's true of the pulp side as well, where it looks like you had a couple thousand tons of economic downtime in Europe, and, you know, recognizing it's fairly small volumes, but just wanted to confirm.

John Sims: Okay, just to confirm that's true of the pulp side as well, where it looks like you had a couple thousand tens of economic downtown in Europe and, you know, recognizing it's fairly small volumes, but just wanted to confirm. Oh, I'm sorry. I misunderstood your question. You were asking about the pulp. And that was really driven just by some constraints that we had in balancing our, the pulp production with our paper production and nothing more than that. It was plenty of demand for pulp in the second quarter. It's just a matter of a misbalance, if you say, in our ability to, you know, move pulp that we produced to the pulp dryer; we didn't do it.

Speaker Change: Okay, and just to confirm, that's true of the pulp side as well, where it looks like you had a couple thousand tons of economic downtime in Europe , and, you know, recognizing it's fairly small volumes, but just wanted to confirm.

John Sims: Oh, I'm sorry, I misunderstood your question. You were asking about the pulp, and that it was really driven just by some constraints that we had in balancing our pulp production with our paper production, nothing more than that. There was plenty of demand for pulp in the second quarter. It's just a matter of a misbalance, you could say, in our ability to..., you know, move the pulp that we produce to the pulp dryer. We didn't do it.

Speaker Change: I'm sorry, I misunderstood your question. You were asking about the poll. And that was really driven just by some constraints.

Speaker Change: that we had.

Speaker Change: the pulp production with our paper production.

Speaker Change: And nothing more than that. There was plenty of demand for pulp in the second quarter, it's just a matter of...

Speaker Change: A misbalance, you could say, in our ability to ship.

Speaker Change: you know move pulp that we produce to the pulp dryer we

Jean-Michel Ribert: So let me iron, thanks for joining the call. Let me start by the wood cost. The wood cost increase in Brazil, you started by Brazil, is due to all the known, the wood we buy. First, for two to three years, we need to buy more wood because when we got in Vamo, there had been years where the investment in the forestry was not sufficient. So we made up of this investment and we cut out.

John Sims: So, that's what that was.

Jean-Michel Ribert: So now only we need to buy a little bit more price spending, wood, sorry, and in top of that, it's a little bit more expensive. In Europe, we've seen, as you mentioned, the wood cost of Scandinavia increase. There is some other whole wood demand increase which has impact and Russian delivery stuff, exporting woodchips, such as to reduce the other whole wood splines, Scandinavia. So, increasing Sweden, some increasing Brazil, which will make up for it.

Speaker Change: We didn't do it, so that's what that was.

John Sims: Okay, thanks very much. I'll turn it back. We can say what we want in Bulb in Europe.

Speaker Change: Okay, thanks everyone, I'll turn it back.

Speaker Change: We can sell all we want in Poland and Europe , we have no issue at all.

Operator: Okay, thanks thanks very much.

George Staphos: And we'll go back to the line of George Staples with Bank of America. Thanks so much. So, General, I want to return back to the project line of questioning. Can you talk to the regions that are more likely to see some of this capital? Number one, I know it's going to be an all three region. I know it's going to be a mixture, but if there's any way that you could maybe give a some view on where it might be a bit more weighted relative to the size of the business. Secondly, can you talk to the degree to which some of the investments will be moving Sovamo further down on the cost curve, and that's a presumption.

George Staphos: and we'll go back to the line of George Staphos with Bank of America.

Speaker Change: Thanks very much.

Speaker Change: And we'll go back to the line of George Staphos with Bank of America.

George Staphos: So gentlemen, I want to return to the project line of questioning. Can you talk to the regions that are more likely to see some of this capital? Number one, I know it's going to be in all three regions, I know it's going to be a mixture, but if there's any way that you could maybe give us some view on where it might be a bit more weighted relative to the size of the business.

Speaker Change: Thanks so much.

Speaker Change: So gentlemen, I want to return back to the project line of questioning. Can you talk to...

Speaker Change: The regions that are more likely to see some of this capital

Speaker Change: Number one, I know it's going to be in all three regions, I know it's going to be a mixture, but if there's any way that you could maybe give us some view on where it might be a bit more weighted relative to the size of the business.

George Staphos: Secondly... Can you talk to the degree to which some of the investments will be moving Sylvamo further down on the cost curve, and that's a presumption. If that's true, what do you do with that benefit? Again, you have a really strong position in the market from a balance sheet standpoint. How are you levering that for the longer term competitively? Thank you.

Speaker Change: Secondly,

Speaker Change: Can you talk to the degree to which some of the investments will be moving Sylvamo?

Speaker Change: further down on the cost curve.

Jean-Michel Ribert: Sya is roughly stable, and the US is roughly stable on a high level. So that's for the wood side. But I agree with you, we have an advantage with our forest in Brazil, and we have very good woodcut in the US. In the merchant side in Europe, I would say it's neutral to us. We have great partners in Europe, and we would like to have those customers. We're ready if there is some more changes in the merchant area, or in the channels, if it has to be more direct, we would be, but I would call it neutral for us, one way or another.

Jean-Michel Ribertis: If that's true, what do you do with that benefit? Again, you have a really strong position in the market when balance is standpoint. How are you leveraging that for the longer term competitively? Thank you.

Speaker Change: And that's a presumption.

Speaker Change: If that's true,

Speaker Change: What do you do with that benefit?

Speaker Change: Again, you have a really...

Speaker Change: strong position in the market from a balance sheet standpoint.

Speaker Change: How are you levering that for the longer term competitively? Thank you.

Jean-Michel Ribertis: So, let me answer the first question. As we mentioned, we intend to invest essentially in our flagship mills. So, we intend to invest in our lowest cost mills, which is mostly in North America, East over, as you know, and in Brazil, Luis Antonio, and in Europe, Numeras. So, those are the Locust Mills. This is where we intend to continue to invest with high returns. In terms of the cash, as we said, we want to continue to give back cash to our shareholders. We have a policy right now of 40% of our free cash flow. If we had more cash, we could give back.

Jean-Michel Rivieres: So let me answer the first question. We, as I mentioned, intend to invest essentially in our flagship milk. So we tend to invest in our lowest-cost mills, which are mostly in North America, east of us, you know, and in Brazil, Luis Antonio, and in Europe, Nomola. So those are the low-cost mills, which is where we intend to continue to invest with high returns.

Speaker Change: So let me answer the first question.

Speaker Change: We, as we mentioned, we intend to invest essentially in our flagship mills.

Speaker Change: So we tend to invest in our lowest cost mills.

Luis Antonio: which is mostly in North America, east of us, you know, and in Brazil, Luis Antonio, and in Europe , NMOLA. So those are the...

Cole Hathorn: And then, if I could have a follow-up, which is just around the demand trends, we saw a lot of restocking across various end markets, and graphic paper in general, including office paper, source and restocking.

Luis Antonio: Low-cost mills, this is where we intend to continue to invest with high returns.

Jean-Michel Rivieres: In terms of cash, you know, as we said, we... We want to continue to give back cash to our shareholders. We have a policy right now of 40% of our free cash. If we had more cash, we could... give it back. We could also, which is a good thing, even if we have a low debt right now, we could also reduce a little bit more our debt. So we have plenty of opportunities for cash reuse.

Luis Antonio: In terms of the cash, you know, as we said, we...

John Sims: Where do you see we are from an underlying demand perspective? Do you have any good visibility or items to call out on the demand trends by region in North America, Europe, and that term?

Luis Antonio: We want to continue to give back cash to our shareholders. We have a policy right now of 40% of our free cash flow.

Jean-Michel Ribertis: We could also, which is a good thing, even if we have a low debt right now, we could also reduce a little bit more on that. So we have plenty of opportunity of cash reuse them.

Speaker Change: If we had more cash we could give back, we could also, which is a good thing, even if we have a low debt right now, we could also reduce a little bit more our debt.

John Sims: Thank you. Of course, this is John. I'll talk a little bit about demand. So, we have seen restocking in the first half, and we talked about that with some of the improvements. You look at by region, looking at the industry, where we are a year-to-date, we're up about 3% in North America, 14% in Europe, and Latin was relatively flat. Again, there was an issue around Argentina. Going forward, we expect that the demand will be positive for the full year, and this is actually consistent with forecasts we're seeing from other industry experts.

Speaker Change: So, we have plenty of opportunity of cash re-users.

Jean-Michel Ribertis: But, John Michelle, I guess what I was asking, if you can hear me, are some of these projects designed to put you at an even better position versus your peers in the market from a cost standpoint, or not really. And, completely, there are; there are most of them are cost-oriented or cost impact. So they are really on that direction. We're the low cost, and we want to be even lower cost. Thank you so much.

Jean-Michel Rivieres: Jean-Michel, I guess what I was asking, if you can hear me, are some of these projects designed to put you in an even better position versus your peers in the market? From a cost-cutting standpoint, or not really?

Speaker Change: Episode 2

Speaker Change: Thank you.

Speaker Change: Jean-Michel, I guess what I was asking, if you can hear me, are some of these projects designed to put you at an even better position versus your peers in the market from a cost-cut standpoint or not really? Completely, most of them are cost-oriented or cost-impact.

Jean-Michel Rivieres: Okay. Completely.

Jean-Michel Rivieres: They are, they are, most of them are cost-oriented, or across IMPACT. So they are really going in that direction. We're the low cost, and we want to be even lower cost.

Speaker Change: So they are really on that direction. We're the low cost and we want to be even lower cost.

John Sims: Some of that is driven not because of the restocking, but because of the weak comp to the second half. So, I would characterize our demand now, and particularly in North America and Western Europe, is relatively stable. But from a comp perspective, easy comp perspective, it's going to be a positive relative to last year. So, we're looking at probably Europe around 7%, four year, Latin, around up 3%, four year, and North America around 5%. And on the long trend, I think you talked about that also, we see returning in Europe and North America at long-term trends, which is slight decrease.

Speaker Change: Thank you so much.

Operator: And, if you would like to ask a question, please press 1-0 on your telephone keypad. To withdraw a question, press the 1-0 again. We do ask that you limit yourself to one question and one follow-up question.

Cole Hathorn: Thank you.

Operator: And if you would like to ask a question, please press 1 then 0 on your telephone keypad. To withdraw a question, press 1 then 0. We do ask that you limit yourself to one question and one follow-up question. Thank you.

Speaker Change: And if you would like to ask a question, please press 1 then 0 on your telephone keypad. To withdraw a question, press the 1-0 again. We do ask that you limit yourself to one question and one follow-up question. Thank you.

Operator: Thank you.

Jean-Michel Ribertis: Just maybe to finish the discussion with George, let me give you one example of a project we just did. So that gives you; that was our other mill. We increase our wood chip capacity to boost the supply of low-cost wood. This was a $1.3 million investment. We forecasted to save half a million. And, actually, we're saving about a million on a yearly basis. It's 35%. It's building cost. So that's one example of a cost project we have.

Jean-Michel Rivieres: Just maybe to finish the discussion with George, let me give you one example of a project we just did. So that gives you, that was our Eastover mill. We increased our wood chip capacity to boost the supply of low-cost wood.

Speaker Change: Just maybe to finish the discussion with George, let me give you one example of a project we just did. So that gives you, that was our Easter meal.

Speaker Change: We increased our wood chip capacity to boost the supply of low-cost wood. This was a $1.2 million investment.

Jean-Michel Rivieres: This was a $1.2 million investment. We forecasted to save half a million, and actually, we're saving about a million on a yearly basis, 35%, and it's purely cost. So that's one example of a cost-saving project.

Speaker Change: We forecasted to save half a million, and actually we're saving about a million on a yearly basis. It's 35%. It's purely cost. So that's one example of cost project we have.

Matthew Mckellar: Our next question is from the line of Matthew McKellar with RBC Capital Markets. Hi, good morning. Thanks for taking my questions. I'd like to first just follow on Cole's question around fiber costs in Latin America. Could you maybe just give a little bit more color around what's happening with fiber costs and what your expectations are in terms of what happens with cost of purchase when Latin America over the next few quarters?

Matthew Mckellar: Yeah, Matthew, thanks, John Sims. So, what we're seeing, you know, this kind of drove what we talked about in terms of the valuation of our land in Brazil. We see increased cost of fiber in Brazil, and that's, and that we expect that to continue. Maybe at the inflation rate, but when you compare, man, when I talk about increased market price, that's wood that we're not actually harvesting and growing, but when we have to go to the market, you know, it's about three times the cost of our own wood.

Operator: Sorry. And, we'll go back to the line of George Stephels. Your line is open. Thank you.

George Staphos: And we'll go back to the line with George Staphos. Your line is open. Thank you. Last question from me.

Speaker Change: And we'll go back to the line of George Staphos. Your line is open.

George Staphos: Thank you. Last question from me, gentlemen. So, you know, we spent a lot of time on costs and capital and the like, and rightly so. What are your customers asking you for now? relative to, say, six months and a year ago, how has it changed? How are you leveraging whatever commercial requests are coming in to appropriately, profitably, at a high return, all that, you know, maintain and grow your presence in the market with your best customers? How are you turning that into commercial margin? Thank you.

George Staphos: Last question from me, gentlemen. So, you know, we spent a lot of time on costs and capital and the like. And rightly so. What are your customers asking you for now, relative to, say, six months and a year ago? How has it changed? How are you leveraging whatever commercial requests you're coming in? To appropriately, properly, at a high return, all that. You know, maintain and grow your presence in the market with your best customers. How are you turning that into commercial margin? Thank you.

George Stafos: Thank you. Last question from me, gentlemen. So, you know, we spend a lot of time on costs and capital and the like, and rightly so.

George Stafos: What are your customers asking you for now?

Speaker Change: relative to say six months and a year ago, how has it changed?

Speaker Change: How are you leveraging whatever commercial requests are coming in to appropriately, profitably, at a high return, all that, you know, maintain and grow your presence in the market with your best customers?

Speaker Change: How are you turning that into commercial margin? Thank you.

Matthew Mckellar: And so, that's what's driving some of the cost increases we've seen down in Brazil is what Jean-Michel talked about. Right now, our self-sufficiency is lower than what we had been historically. Yeah, we're probably supplying about 70% of our needs. We'd like to be around 85%. This is why we're re-investing and increased our investments in our own plantations. But when you reach out for higher or for market wood, those prices are higher.

George Staphos: I'm trying to make sure I understand what your question, George. I think we've been. What are your customers asking you for differently now? Jean-Michel, they might have been the case six months ago or a year ago. And, how are you turning that, whether it's service, whether it's SKUs, whether it's whatever online ordering? I mean, that's an old one. How are you turning it into higher revenue per ton? Thank you.

Jean-Michel Rivieres: I am trying to make sure I understand your question well George. I think we have...

Speaker Change: I'm trying to make sure I understand well your question, George. I think we've been...

Operator: We're here now. We have been.

George Staphos: What are your customers asking you for differently now, Jean-Michel, than might have been the case six months ago or a year ago? And how are you turning that, whether it's service, whether it's SKUs, whether it's whatever, online ordering, I mean, that's an old one. How are you turning it into higher, you know, revenue per ton? Thank you. So the minimum number of customers is actually a little bit

Speaker Change: What are your customers asking you for differently now, Jean-Michel, than might have been the case six months ago or a year ago? And how are you turning that, whether it's service, whether it's SKUs, whether it's whatever, online ordering. I mean, that's an old one. How are you turning it into higher, you know, revenue per ton? Thank you.

Jean-Michel Rivieres: So the demand from customers is actually a little bit different in the region and John Fitzpatrick's statement. There is more and more demand for sustainability, and key customers want to be aligned with sustainable companies, which we are very well positioned for, especially in Europe. In Brazil, it is more continuing to develop our brands and supporting them. All in Brazil. In the U.S., I would say it's more and more around service.

Jean-Michel Ribertis: So the manner of customers is actually a little bit different in the regions. If you're in Europe, there is more and more demand around sustainability. And the key customers, they want to be aligned with the sustainable companies, which we are very well positioned, especially in Europe. In Brazil, it is more continuing to develop our brands and supporting the importance of the brands because they are a partner. You know, a lot of merchants in Brazil on cut-size are exclusive because they are very common to the brand.

Speaker Change: So, the demand of customers is actually a little bit different in the regions.

Matthew Mckellar: We're also reaching out to further distances, so you have to pay the additional freight. So, that's some of the things that are impacting us in Latin America, but as we said, this is why we're re-investing or increasing our investments and reforestation. And finally, I think your question is the trend. We expect that to increase. Continue to increase the cost of fiber down in Latin America. Okay, great. Thanks. It's helpful.

Speaker Change: If you're in Europe ,

Speaker Change: There is more and more demand around sustainability.

Jean-Michel: And the key customers, they want to be aligned with the sustainable companies, which we are very well positioned, especially in Europe .

Speaker Change: In Brazil, it is more continuing to develop our brands and supporting the...

Speaker Change: importance of the brands because they are our partners, you know, a lot of the merchants in Brazil on the cut side are exclusive because they are very common to the brand.

Matthew Mckellar: Maybe next, you called up price mix is somewhat unfavorable for the sequential progression into key three mostly on mix. Can you provide just a bit more color there? Is that more export mix and paper sales? Is there maybe also an assumption around what happens with pulp prices in there? Any color would be helpful. Thank you. Man, we can't really talk about future pricing, but that variance that we said is predominantly all mix and it is more export mix, particularly in North America.

Jean-Michel Ribertis: In the US, I would say it's more and more on service. How can we optimize the service and having capacity worldwide and including strong capacity in the US allow us to bring this unique service and integrations of supply chain? How does this of the trend if it's what you are asking for? That's exactly it. Thank you.

Speaker Change: In the U.S. I would say it's more and more around service.

Speaker Change: How can we optimize the service and having capacity worldwide and including strong capacity in the U.S. allow us to bring this unique service and integrations of supply chain? I would say those are the trends.

Jean-Michel Rivieres: How can we optimize the service, and having capacity worldwide and including strong capacity in the U.S. allow us to bring this unique service and integration of the supply chain? I would say those are the trends you were asking for.

Speaker Change: if it's what you are asking for.

Speaker Change: Yep.

Speaker Change: That's exactly it.

Matthew Mckellar: And where is that going that's going to Mexico? You may be aware that Mexico is implemented terrorists for the next two years on countries that don't have a trade agreement. So that gives an advantage to companies like us that are based in the US and we're taking advantage of that. So we're exporting more to Mexico and that's what the count for the mix change. Great. Thanks for the help. I'll turn it back and get in the queue. Thank you.

Hans Bjorkman: Now I'll turn the call back over to Hans Bjorkman for closing comments. All right. Thank you, Colin.

Hans Bjorkman: I'll now turn the call back over to Hans Bjorkman for closing comments.

Speaker Change: I'll now turn the call back over to Hans Bjorkman for closing comments.

Hans Bjorkman: All right, thank you, Colin. Jean-Michel, any closing comments? So, first of all, thanks for joining our call and for your question.

Hans Bjorkman: John Michelle, only closing comments. So, first of all, thanks for joining our call and your question. We really appreciate it. Let me remind you that core to a strategy is managing a strong financial position. We're investing in our business to increase our competitive advantages and returning cash to shareholders. We're in a confidence, you know, ability to generate strong earnings and cash flows throughout the cycle.

Jean-Michel Rivieres: So first of all, thanks for joining our call and for your question. We really appreciate it. Let me remind you that core to a strategy is managing a strong financial position. We're investing in our business to increase our competitive advantages and returning cash to shareholders. We are confident in our ability to generate strong earnings. The floor. So again, thank you and have a good day.

Hans Bjorkman: All right, thank you, Colin. Jean-Michel, any closing comments? So first of all, thanks for joining our call and your question, we really appreciate it.

Jean-Michel: Let me remind you that Kortweil Trege is managing a strong financial position.

Speaker Change: Reinvesting in our business to increase our competitive advantages and returning cash to shareholders.

Speaker Change: We are confident in our ability to generate strong earnings and cash flow throughout the cycle.

Operator: So again, thank you, and have a good day. Thank you.

George Staphos: Next we'll go to the line of George Staffos with Bank of America. Hi, everyone. Good morning. Thanks for the details. Can you hear me okay? Yes, George. Hi. Thanks for joining. Hey, John. Hi, John.

Speaker Change: So, again, thank you and have a good day.

Speaker Change: Thank you.

Operator: Once again, we would like to thank you for participating in Silver Most Second Quarter 2000 and 24 earnings call. You may now disconnect. We're sorry. Your conference is ending now. Please hang up.

Operator: Once again, we would like to thank you for participating in Sylvamo's second quarter 2024 earnings call. You may now disconnect.

Speaker Change: i

Speaker Change: Once again, we would like to thank you for participating in SILVAMO's second quarter 2024 earnings call. You may now disconnect.

George Staphos: So two questions to start and I'll go back and queue. Can you give us a little bit more detail on the projects that are in the pipeline now? Relative to what you have been working on and what the return differential might be where they basically all still above cost of capital, presumably they're all above cost capital and the same spread. So any color on how this latest pipeline varies with what's been in the pipeline in terms of processes, approaches and return thresholds.

John Sims: Question two on the dividend, you know, congratulations on raising the dividend with another size will increase. How did you think about raising it to the degree you did on the regular side as opposed to maybe raising it a lesser amount and then doing a special dividend? What gave you the comfort to raise it, you know, the full, you know, 50%. Thank you. So I'll take maybe the first one and John take the second question, but we could use answer it, I guess.

John Sims: So yes, we still have a very high threshold of capital investment return. So all the projects we're looking at is a strict minimum of 20% return. So this is why it's very attracting this projects about different side. Some are very small and some are larger. We are studying them then the pipeline and we're working with our board to plan for the coming years on this investment, but they're very attractive and incremental on both cash and earnings to Sylvamo.

John Sims: And George see a second question because back to our capital allocation strategy, first and foremost, and our priorities have a strong balance. The second is to reinvest back into business where we can grow our earnings and cash flow. And then the third is returning cash to shareholders and core to that is a dividend. A dividend that we have believe and have confidence that we can sustain forever, if you will, and a dividend that doesn't restrict us from a strategic flexibility perspective.

John Sims: So we had a lot of confidence in terms of increase in the dividend and mostly driven by what your first question pertained to, we believe there's opportunities for us to increase earnings and cash flow in this business through smart reinvestments and high return projects going forward, which we're executing right now. And because we have a good line of sight on that and because of our we believe competitive advantages we have and in the markets that we operate and give us a lot of confidence, be able to sustain the dividend that we put forward.

John Sims: John, maybe if I could do a quick tag on them turn over, maybe I'm reading between the lines incorrectly, but does that suggest any next dividend increases maybe are more of the special side as you return once again to, I mean, your balance is in great shape as we sit here right at the moment. As you develop the next pipeline and increase presumably the cash generation of the business through reinvestment, would that be the right way to think about the cadence and staging.

John Sims: Thank you. Yeah, I wouldn't want to foreshaddle that. I think we will, we will view that and we think about that as we view our strategy plans with the board. And, you know, I think to the sense that we believe that we can sustainably increase the dividend that we'll do that or if we think that there may be better uses for cash, such as buying back shares or reinvesting back in the business. We may do that prior to a special dividend or in the case like we did last year, we may issue a special dividend. Thank you so much.

Matthew Mckellar: And we'll go back to the line of Matthew McKellar with RBC Capital Markets. Thank you.

Matthew Mckellar: As you get closer to the fall election, what do you see in terms of impacts to uncoded free sheet demand as far as you can discern? So the ballot is always an opportunity for us, but it's not a big volume. So it's something we have largely the capacity between us and our competition in North America to supply. So it's an opportunity, but it's nothing very significant. It's a few southern tones.

John Sims: Okay, thank you. Matthew, in general, yeah, we've seen less of an election impact on uncoded free sheet demand. I mean, it used to be a pretty significant driver, but that's become less and less.

Matthew Mckellar: Okay, fair enough. Thank you.

Matthew Mckellar: Next move is shifting to imports. It looks like they continue to take higher North America.

Jean-Michel Ribert: Could you just maybe provide some updated perspective here? Our imports more of a concern as it relates to how you're thinking about the market landscape today versus how you're maybe thinking about the market at the start of the year. So let me maybe give back the story. Imports in North America since 2018 are varied between 8 to 13%. And they're really very depending upon, say, on freight rates, on market, foreign exchange.

Jean-Michel Ribert: So we have been in the same range since early 23 and even this year. So I think we should always be on the 10, 13, something like that range. And I don't read more than that. And I think some of the importers to the US have been down due to freight. Some have been down to local markets opportunity to send spots. If you look at it, it's interesting because where the imports come in North America, it changes also through the years. It's not always the same regions because it's very opportunistic kind of. So I still see the opportunity and all that range that we have today, nothing significant if changed.

Matthew Mckellar: Okay, thanks. That's helpful.

Matthew Mckellar: And if I could just speak one more in, it was a little bit surprised to see some economic downtime in the European pulp system in Q2. Could you just provide me a little color on what happened there? Is that again, I'm sorry. He's asked. Oh, answer that question. So yes, we had economic downtown both in Europe and North America. You know, that's just a matter of us matching our capacity to customer demand.

Matthew Mckellar: So, and he looked in the outlook, we're expecting a little bit more in the third quarter than we had in the second quarter, but in the second quarter we had significant outages. So, although volumes are up, we're still matching our supply to our customer's demand, and we're being careful not to build unnecessary inventories. Okay, just to confirm that's true of the pulp side as well, where it looks like you had a couple thousand tens of economic downtown in Europe and, you know, recognizing it's fairly small volumes, but just wanted to confirm.

Matthew Mckellar: Oh, I'm sorry. I misunderstood your question. You were asking about the pulp. And that was really driven just by some constraints that we had in balancing our, the pulp production with our paper production and nothing more than that. It was plenty of demand for pulp in the second quarter. It's just a matter of a misbalance, if you say, in our ability to, you know, move pulp that we produced to the pulp dryer, we didn't do it. So, that's what that was.

John Sims: Okay, thanks thanks very much.

George Staphos: And we'll go back to the line of George Staples with Bank of America. Thanks so much. So, General, I want to return back to the project line of questioning. Can you talk to the regions that are more likely to see some of this capital? Number one, I know it's going to be an all three region. I know it's going to be a mixture, but if there's any way that you could maybe give a some view on where it might be a bit more weighted relative to the size of the business.

George Staphos: Secondly, can you talk to the degree to which some of the investments will be moving sovamo further down on the cost curve and that's a presumption. If that's true, what do you do with that benefit? Again, you have a really strong position in the market when balance is standpoint. How are you leveraging that for the longer term competitively?

Jean-Michel Ribert: Thank you. So, let me answer the first question. As we mentioned, we intend to invest essentially in our flagship mills. So, we intend to invest in our lowest cost mills, which is mostly in North America, East over, as you know, and in Brazil, Luis Antonio, and in Europe, Numeras. So, those are the Locust Mills, this is where we intend to continue to invest with high returns. In terms of the cash, as we said, we want to continue to give back cash to our shareholders.

Jean-Michel Ribert: We have a policy right now of 40% of our free cash flow. If we had more cash, we could give back. We could also, which is a good thing, even if we have a low debt right now, we could also reduce a little bit more on that. So we have plenty of opportunity of cash reuse them. But, John Michelle, I guess what I was asking, if you can hear me, are some of these projects designed to put you at an even better position versus your peers in the market from a cost standpoint, or not really. And, completely, there are, there are most of them are cost oriented or cost impact. So they are really on that direction. We're the low cost and we want to be even lower cost.

Operator: Thank you so much. And, if you would like to ask a question, please press 1-0 on your telephone keypad. To withdraw a question, press the 1-0 again. We do ask that you limit yourself to one question and one follow-up question. Thank you.

George Staphos: Just maybe to finish the discussion with George, let me give you one example of a project we just did. So that gives you, that was our other mill. We increase our wood chip capacity to boost the supply of low cost wood. This was a $1.3 million investment. We forecasted to save half a million. And, actually, we're saving about a million on a yearly basis. It's 35%. It's building cost. So that's one example of cost project we have. Sorry. And, we'll go back to the line of George Stephels.

George Staphos: Your line is open. Thank you.

George Staphos: Last question from me, gentlemen. So, you know, we spent a lot of time on costs and capital and the like. And rightly so. What are your customers asking you for now, relative to say six months and a year ago? How has it changed? How are you leveraging whatever commercial requests you're coming in? To appropriately, properly at a high return, all that. You know, maintain and grow your presence in the market with your best customers. How are you turning that into commercial margin? Thank you.

George Staphos: I'm trying to make sure I understand what your question, George. I think we've been. What are your customers asking you for differently now? Jean-Michel, they might have been the case six months ago or a year ago. And, how are you turning that, whether it's service, whether it's SKUs, whether it's whatever online ordering? I mean, that's an old one. How are you turning it into higher revenue per ton? Thank you.

Jean-Michel Ribert: So the manner of customers is actually a little bit different in the regions. If you're in Europe, there is more and more demand around sustainability. And the key customers, they want to be aligned with the sustainable companies, which we are very well positioned, especially in Europe. In Brazil, it is more continuing to develop our brands and supporting the importance of the brands because they are a partner. You know, a lot of merchants in Brazil on cut-size are exclusive because they are very common to the brand.

Jean-Michel Ribert: In the US, I would say it's more and more on service. How can we optimize the service and having capacity worldwide and including strong capacity in the US allow us to bring this unique service and integrations of supply chain? How does is this of the trend if it's what you are asking for?

George Staphos: That's exactly it. Thank you.

Hans Bjorkman: Now I'll turn the call back over to Hans Bjorkman for closing comments. All right. Thank you, Colin.

Jean-Michel Ribert: John Michelle, only closing comments. So first of all, thanks for joining our call and your question. We really appreciate it. Let me remind you that core to a strategy is managing a strong financial position. We're investing in our business to increase our competitive advantages and returning cash to shareholders. We're in a confidence, you know, ability to generate strong earnings and cash flows throughout the cycle.

Hans Bjorkman: So again, thank you and have a good day. Thank you.

Operator: Once again, we would like to thank you for participating in Silver Most Second Quarter 2000 and 24 earnings call. You may now disconnect. We're sorry. Your conference is ending now.

Operator: Please hang up.