Q4 2024 Sylvamo Corporation Earnings Call
Good morning, Thank you for standing by welcome to Saddam was.
Fourth quarter 2024 earnings call.
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Hans Bjorkman: I would now like to turn the call over to Hans Bjorkman, Vice President Investor Relations, Sir the floor is yours.
Speaker Change: Thanks, Andre good morning, and thank you for joining our fourth quarter and full year 2024 earnings call our.
Speaker Change: Our speakers this morning are John Michel Ramirez.
Speaker Change: Chairman and Chief Executive Officer, and John <unk>, Senior Vice President and Chief Financial Officer.
Speaker Change: 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.
Speaker Change: We will also present certain non U S GAAP financial information.
Speaker Change: Reconciliations of those figures to U S. GAAP financial measures are available in the appendix.
Speaker Change: Our website also contains copies of the earnings release as well as today's presentation.
John Michelle: With that I'd like to turn the call over to John Michelle.
John Michelle: Thanks, and good morning, and thank you for joining our call.
John Michelle: I'll start on slide four.
John Michelle: 'twenty 'twenty four we generated 23% return on invested capital as we execute our strategy and strengthen our competitive advantage.
John Michelle: Of course, our coated freesheet market.
John Michelle: We improved our financial position by repay and then 40 54 million in debt at <unk>.
John Michelle: Our net debt to adjusted EBITDA of <unk> nine times.
John Michelle: We had 632 million.
John Michelle: Adjusted EBITDA.
John Michelle: 248.
John Michelle: Cash flow and we've done 100 at $30 million in cash to shareowners.
John Michelle: We reinvested 221 million across our manufacturing network.
John Michelle: Brazil first and then strengthen our low cost position.
John Michelle: We're committed to being the investment of choice.
John Michelle: We believe we can generate significant shareholders returns in the future by executing our strategy.
John Michelle: Slide five highlights our 2020 for food you a key financial metrics.
John Michelle: Adjusted EBITDA was 632 million with a 17% margin.
John Michelle: $248 million of free cash flow was more than seek startup of sure.
John Michelle: Adjusted operating earnings were $7 42 per share which is 14%.
John Michelle: <unk> suite.
John Michelle: We know our sweet food years under our belt since becoming an independent company.
John Michelle: And our financial results I've established a solid track record.
John Michelle: Indicative of our ability to navigate tough industry conditions.
John Michelle: <unk> agenda.
John Michelle: Events and other uncertainty that we may face.
John Michelle: As we enter 2025.
John Michelle: Our country that no ability to continue to create value for customers and shareholders.
John Michelle: Let's move to slide six.
John Michelle: We had very strong cash generation to finish it yeah.
Speaker Change: Mr Lewis to pay down additional debt reinvest in our business and return cash to shareholders.
Speaker Change: Our teams collaborated well discuss the mezz to manage it to a successful transition as a result of the Georgetown Gotcha.
Speaker Change: Thank God employees.
Speaker Change: All the work and execution as we navigated through the transition.
Speaker Change: I also wanted to thank our customers for the.
Speaker Change: Dress, you're placing us each and every day.
Speaker Change: We are committed to remain the supplier of choice and we will work hard to retain the business.
Speaker Change: Lastly regarding project horizon.
Speaker Change: Cost reduction program to streamline manufacturing.
Speaker Change: Biogen and overhead costs.
Speaker Change: <unk> 110 million year end run rate saving goals.
Speaker Change: 34 mill yet.
Speaker Change: John will cover this in more detail in a few slides.
Speaker Change: Let's move to the next slide.
Speaker Change: Slide seven shows our fourth quarter key financial metrics.
Speaker Change: We just need to be done and then at 57 million with a margin of 16%.
Speaker Change: Free cash flow generation was I didn't mean that David.
Speaker Change: As we generated adjusted operating earnings of $1 96 per share.
I'm proud of our teams delivered impressive results, while taking do you have a guesstimate.
Speaker Change: More importantly, I'm proud of our team's.
Speaker Change: Team's commitment to putting people before paper to ensure everyone returns on safe at the end of each day.
Speaker Change: We are focused on building a resilient safety culture.
Speaker Change: Golfing every team member our assets to proactively eliminate waste and create a safe environment for everyone every day.
Speaker Change: Now John will review our performance in more detail.
Speaker Change: Thank you John Michel and good morning, everyone.
Slide eight contains our fourth quarter earnings bridge versus the third quarter.
Speaker Change: 157 million of adjusted EBITDA was in line with the outlook of $150 million to $165 million.
Speaker Change: Price and mix was unfavorable by 18 billion, 40% of this was driven by lower pulp and paper pricing in Europe, and about 30% was due to worse mix in North America.
Speaker Change: Volume increased by $6 million driven by the seasonality of Latin America.
Speaker Change: Operations and other costs were stable due to favorable FX and less economic downtime in North America.
Speaker Change: Which more than offset the planned 10 year turbine generator maintenance event at our eastern <unk> mill that we highlighted on our last earnings call.
Speaker Change: We also had some one time events some planned like an insurance settlement the others like a LIFO adjustment.
Speaker Change: Planned maintenance outage costs increased by $17 million as we executed a major planned outage at the <unk> mill in the quarter.
Speaker Change: Input and transportation costs increased by 9 million driven by transportation and seasonally higher energy prices.
Speaker Change: Maybe to slide nine.
Speaker Change: A core pillar of our strategy is to be a low cost producer project horizon.
Speaker Change: Cost reduction program to streamline manufacturing supply chain and overhead costs.
Speaker Change: Giving us the stay low cost.
Speaker Change: As Michel mentioned earlier before inflation, we exceeded our $110 million year in run rate savings goal by $34 million.
Speaker Change: We beat our manufacturing savings targets by delivering results on over 180 initiatives across all three regions.
Speaker Change: These projects targeted chemical energy and fixed cost reductions as well as improving fiber efficiency.
Speaker Change: Productivity.
Speaker Change: We surpassed our supply chain savings targets by reducing approximately 20%.
Speaker Change: Our distribution centers in North America.
Speaker Change: Optimizing seating and re wining outsourcing processes as well as other initiatives across our network.
Speaker Change: We executed all of these initiatives, while maintaining our focus on the customer experience.
Speaker Change: As we mentioned several quarters ago, we eliminated about 150 salaried positions.
Speaker Change: Or 7% globally.
Speaker Change: These collective efforts are making us a leaner stronger company.
Speaker Change: Let's move to slide 10.
Speaker Change: Another important part of our strategy is to invest in high return projects to strengthen our competitive advantages and.
Speaker Change: And increased future earnings and cash flow.
Speaker Change: Here are two examples one of our flagship build the Latin America Louisa Antonio Mill, where we are already seeing positive results.
Speaker Change: The first project increases our self generation of power at the mill by upgrading the turbine gearbox one of our turbine generators.
Speaker Change: This was a $7 million investment that started up in the third quarter of 2024 and is showing approximately a 25% internal rate of return.
Speaker Change: The second project reduces our production ways.
Speaker Change: Installing a new real transition system on one of our paper machines.
Speaker Change: This was a $1 million investment also started up in the third quarter of 2024.
Speaker Change: As a yielding approximately a 40% internal rate of return.
Speaker Change: These are just a few of the many high return projects that we were assessing it implementing to make us more competitive in the future.
Speaker Change: Let's go to slide 11, and look at our first quarter outlook.
Speaker Change: We expect to deliver first quarter adjusted EBITDA.
Speaker Change: Of $85 million to $105 million.
Speaker Change: We protect price and mix to be unfavorable by $10 million to $15 million.
Speaker Change: This is due to paper price decreases in Europe.
Speaker Change: And then our Brazilian export regions, plus seasonally unfavorable mix in Latin America.
Speaker Change: These decreases are projected to be partially offset by realizations on paper price increases communicated to customers in North America, and Brazil in the fourth quarter.
Speaker Change: We should see higher realization from these increases in the second quarter.
Speaker Change: We expect volume to be unfavorable a 20% to $25 million due to the seasonally weakest demand quarter in Latin America, and lower North American volume from the Georgetown Mill exit.
Speaker Change: Operations and other costs are projected to be stable to slightly up as a project horizon initiatives offset the non repeat.
Speaker Change: Favorable fourth quarter events.
Speaker Change: We expect input and transportation costs increased by $5 million to $10 million, primarily due to seasonally higher energy prices and the longer than expected extreme cold weather across the United States. So far this quarter.
Speaker Change: Planned maintenance outages are projected to increase by $15 million.
Speaker Change: We expect quarterly earnings to improve throughout the year as we benefit from seasonally stronger volume less maintenance outage expenses in the second half of the year and realize the price increases we are currently implementing.
Speaker Change: You should note on appendix slides 44 and 45.
Speaker Change: That about 80% of our planned maintenance outages will be in the first half of this year.
Speaker Change: Let's go to slide 12.
Yeah.
Speaker Change: I'll shift now to talk about overall industry conditions across our regions in Europe, we are seeing improved order books and industry supply was reduced by 7%. After 230 freesheet machines closed last year.
Speaker Change: Cope in uncoated freesheet prices have also stabilized as we are entering the new year.
Speaker Change: In Latin America, we expect seasonally weaker industry demand in the first quarter.
Speaker Change: <unk> demand to be sequentially stronger in each calendar quarter like every year.
Speaker Change: In Brazil, we are currently seeing strong demand for back to school orders in notebooks.
Speaker Change: We previously communicated.
Speaker Change: Coated freesheet price increases to our customers in Brazil effective in January.
Speaker Change: We are seeing uncoated free sheet pricing pressure for our Brazilian papers exports to other Latin America and offshore markets.
Speaker Change: In North America, we are seeing slightly lower industry demand in line with our expectations.
Speaker Change: Domestic industry supply was reduced by 10%.
Speaker Change: After a few machines closed in the second half of last year.
Speaker Change: We previously communicated uncoated freesheet price increases to our North American customers effective in January.
Speaker Change: Globally pulp industry conditions appear to be stabilizing alright anticipated to improve over the course of the year.
Zoe Michelle: I'll turn back over to Zoe Michelle pick up on slide 13.
Zoe Michelle: Thanks, John.
Speaker Change: We have generated substantial cash since our inception.
Speaker Change: And have allocated about one point Ed billion as you can see on this slide.
Speaker Change: Over 70% of this cash was used to repay debt and reinvest in our business.
Speaker Change: After starting out with a $1 5 billion in growth that we have reduced it by almost 50%.
Speaker Change: <unk> net debt to adjusted EBITDA ratio of zero nine by the end of 2024.
Speaker Change: Keeping a healthy financial position is a cornerstone of our capital allocation framework.
Speaker Change: This allows us to reinvest in our business to strengthen our competitive advantage through the cycle and to increase future earnings and cash flow.
Speaker Change: As most of you already know many people are investing to get out of uncoated freesheet why.
Speaker Change: Our reinvested over $600 million in our business in the last three years in order to improve our competitive position.
Speaker Change: One of the main advantages we have as an independent company.
Speaker Change: It allows us to invest in our future.
Speaker Change: That we could not do before.
Speaker Change: Improving our financial police position.
Speaker Change: Load us to return home with 350, EMEA to share owners through dividends and share repurchases.
Speaker Change: We will continue to look for opportunities to repurchase shares at attractive prices.
Speaker Change: We have generated substantial cash over the past few years and plan to continue to do so moving forward.
Speaker Change: But 2025, we are planning 2000 $20 million to $240 million and capital spending.
Speaker Change: Our outlook includes approximately 125 million in maintenance and regulatory spending.
Speaker Change: Our Brazil for Iceland, a significant competitive advantage.
Speaker Change: Gallop, just foundations provides a material cost advantage.
Speaker Change: Most other global competitors.
Speaker Change: We plan to invest roughly $35 million in off price plan to increase our self sufficiency and reduce wood cost.
Speaker Change: Additionally, we will complete the $30 million three as wood supply agreement.
Speaker Change: Sure <expletive>.
Speaker Change: Wood supply from 24%.
Speaker Change: As we have been saying for several quarters, we will continue to ramp up our high return projects to strengthen our low cost assets to increase our earnings and cash flow.
Speaker Change: This year, we expect to invest $50 million to $70 million for high return projects.
Speaker Change: Slide 15.
Speaker Change: Speaking of reinvesting in our low cost asset we're excited to announce that we are investing in the future of what our flagship Mills Eastover South Carolina.
Speaker Change: We have three high return projects that will reduce cost, while improving efficiency and mix as the most competitive uncoated freesheet mill in North America.
Speaker Change: First we.
Speaker Change: We're investing to optimize waterflood two paper machines.
Speaker Change: Second we are reducing our next distinct <unk> with a brand new cheetah.
Speaker Change: These first two projects will require a total investment of approximately <unk> hundred 45 million over the next three years.
Speaker Change: The spending was stopped this year with the majority occurring in 2026.
Speaker Change: Once completed these combined investments should have an internal rate of return of greater than 30%.
Speaker Change: This should create incremental adjusted EBITDA of more than $50 million per year, resulting in additional cash flow as well.
Third we are partnering with an industry leader in woodyard operations.
Speaker Change: To modernize our wood job and improve our efficiency.
Speaker Change: While avoiding but 75 million capital over the next five years.
Speaker Change: This is a very exciting moment for all of it.
Speaker Change: I'll turn it to John to discuss these higher return projects in more detail.
Speaker Change: Yes. Thank you Jo Michelle this is exciting I'm on slide 16.
John Michelle: The first of these high return projects that our flagship Eastover mill will be to optimize one of our two paper machines modernizing it to the same world class level as our other paper machine at east over.
John Michelle: We plan to make investments starting at the head box continuing all the way down the paper machine through the forming press and dryer sections, including modifications to the winder at the end of the base at the end of the machine.
John Michelle: These enhancements will allow us to reduce cost while improving our product mix across both paper machine.
John Michelle: This debottleneck Ling <unk>.
John Michelle: <unk> result in up to an incremental 60000 tons of uncoated freesheet.
John Michelle: Logic is an investment of approximately $100 million over the next three years with an expected startup in the fourth quarter of 2026.
John Michelle: Let's turn to slide 17.
John Michelle: The second high return projects will be to replace an existing seeded with our stadia cut size Cedar this new and more efficient cedar will lower our CD cost up to 15% reduce waste by maximizing paper machine tram well, providing incremental cut slides volume capability.
John Michelle: This data will allow us to reduce outsource seating, while providing better reliability and additional flexibility to better service our <unk>.
John Michelle: Customers.
John Michelle: This $45 million.
John Michelle: The project expected to start up in the fourth quarter of 2026.
John Michelle: Let's turn to slide 18.
John Michelle: And the third.
John Michelle: Ill return project at East River will be to improve our wood yard efficiency.
John Michelle: <unk> innovative modernization.
John Michelle: We are entering into a 20 year partnership with an external provider the price companies.
John Michelle: With an industry leader in Woodyard operations.
John Michelle: They design finance and operate the most efficient wood yards in the world. They will invest the capital to upgrade our wood yard and they will also operate and maintain new woodyard at the east over mill.
John Michelle: This will result in more efficient reliable and cost effective wood processing operations.
This project will greatly improve the overall reliability of our operations.
John Michelle: Placing our aging woodyard equipment.
John Michelle: As Michel mentioned earlier this project will enable us to avoid spending about $75 million in capital over the next five years.
John Michelle: The anticipated startup is in the first quarter of 2026.
John Michelle: These high return projects reinforce our commitment to reinvest to strengthen our low cost assets to increase earnings and cash flow.
Brazil: I'll now turn it back over to his own Brazil. Thanks, John.
Zoe Michelle: I'm on slide 19.
Zoe Michelle: We strive to create long term shareholder value by executing our strategy and delivering on our investment.
Zoe Michelle: Since becoming an independent company just over three years ago, yes.
Zoe Michelle: The total shareholders' return of almost 150%.
Zoe Michelle: And of a $2 billion in adjusted EBITDA.
Zoe Michelle: Generated over $900 million in free cash flow.
Zoe Michelle: <unk> debt balance was $725 million.
Zoe Michelle: We invested over 600 million to strengthen our business and returned almost $350 million in cash to share owners.
Zoe Michelle: I'll conclude my comments on slide 20.
Zoe Michelle: I continue to be impressed with our team as we work to take care of our customer needs and remain the supplier of choice.
Zoe Michelle: We are reducing our cost structure and are reinvesting in our business through a great pipeline of high return capital projects, which will enable us to grow our earnings and cash flow in the coming years.
Zoe Michelle: <unk>, creating shareholder value through strong cash generation and disciplined capital allocation.
Zoe Michelle: We believe in the promise of paper.
Zoe Michelle: Kitchen communication and entertainment.
Zoe Michelle: And we intend to increase our competitive advantages in the regions we serve.
Zoe Michelle: We caution thats in our future and motivated by the opportunities that lie ahead.
Hans Bjorkman: With that I'll turn the call back to Hans.
Speaker Change: Thanks, John Michelle and thank you John.
Joe: Joe were ready to take questions.
Speaker Change: Thank you if you have dialed in and then we'd like to ask a question. Please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question simply press Star one again we.
Joe: We do ask that you limit yourself to one question and one follow up question. Thank you.
Speaker Change: And we will take our first question from George Staphos at Bank of America.
George Staphos: Thanks, So much hi, everyone. Good morning, thanks for the details.
George Staphos: My two questions and congratulations on the progress over the last few years.
George Staphos: Two questions first of all can you talk a little bit about what impact of pricing that might be in the process of being implemented.
George Staphos: Is in your guidance for the first quarter, if anything at all or is all of that pricing more or less locked and loaded from prior.
George Staphos: Efforts and then.
George Staphos: If I go to slide <unk>.
George Staphos: Eight I believe and.
Speaker Change: And we look at volume you touched a little bit on it but volume was a little bit weaker than what you had been looking for in the fourth quarter can you give us a bit more detail on what was going on there. Thank you guys.
George Staphos: Yes, George and thank you.
Speaker Change: To your first question.
Speaker Change: So we have two price increases that we announced to our customers as we mentioned one in Brazil remember, Brazil. So that's about 50% volume down in Latam and one in North America, and we are in the process of implementing that in the first quarter. Because we are implementing I can't give you a lot of details, but I can say that the realization.
Speaker Change: While the timing of those is going to be more in the second quarter and very little in the first quarter than our outlook.
Speaker Change: The second question in terms of volume.
Speaker Change: Volume was lower than what we expected.
Speaker Change: Across all the regions.
Speaker Change: Mostly in North America.
Speaker Change: And so that that's really the difference between our outlook and the actual results.
Speaker Change: I guess, John why was it a little bit weaker in North America and then the other regions. If you. If you had a view I'm sorry keep going.
Speaker Change: Georgia was a little bit lower in the commercial printing and envelope market.
Speaker Change: I think the cut size copy paper business will definitely stronger than what we expected, but it was more so than in.
Speaker Change: No.
Speaker Change: Printing area.
Speaker Change: Okay that makes sense.
Speaker Change: Anyway, we had in North America to be hydro Michele Thanks, John Michelle.
Speaker Change: In North America, we had.
Speaker Change: November I think we didn't anticipate.
Speaker Change: All the holidays and the impact that you had so we had a as planned.
Speaker Change: Seven months, but November was below.
Speaker Change: Okay.
Speaker Change: Thank you I'll go back to queue.
Speaker Change: We will take our next question from Matthew Mckellar at RBC capital markets.
Matthew Mckellar: Hi, good morning, Thanks for taking my questions.
Speaker Change: Like to start by asking about tariffs.
Speaker Change: It's sort of imply a sustained 25% tariffs on goods from Canada, and Mexico and they in turn applied retaliatory tariffs on the U S. How.
Speaker Change: How do you think your business would be affected in what would be your response in that scenario.
Speaker Change: So.
Speaker Change: Thanks for joining the call first of all this is still very difficult to assess.
Speaker Change: Donna.
Speaker Change: I think the 25% on Illumina and still.
Speaker Change: We will have some impact that we've anticipated potentially.
Speaker Change: On some of the equipment, we buy because of the still know alumina might get more expensive in the U S. In general.
Speaker Change: That material yet for us I would not be too worried about that.
Speaker Change: The rest with Canada, and Mexico, if it were to happen.
Speaker Change: It's more a question of where is the retaliation and we're going to get.
Speaker Change: I don't think it's going to impact us.
Speaker Change: Really at all or is there is no retaliation, but as up no.
Speaker Change: I'll start with where to put in place, we don't know, what Canada, or Mexico will do and Thats. A question much I don't have the answer.
Speaker Change: Okay. Thanks for that color.
Speaker Change: Maybe shifting to Latin America, I think you mentioned seeing some positive trends.
Speaker Change: And demand in Brazil.
Speaker Change: I'd also like to ask about your expectations for demand to the textbook order this year and maybe putting it all together.
Speaker Change: What that implies for how your volumes and mix kind of evolve through 2025.
Speaker Change: Put differently do you expect the seasonality, we typically see in Latam to be exaggerated. This year, it's a bigger ramp through the year the unusual driven by a more significant shift in mix.
Speaker Change: Specially given the prices in Brazil are going up that you called out <unk> prices in the export channel as being under some pressure.
Matthew Mckellar: Yes Matthew.
Matthew Mckellar: Thank you one of the questions. Yes is just around the textbooks in the school business.
Speaker Change: If I heard that correctly, yes, we're seeing improved.
Speaker Change: Order book demand for that down in Brazil, and you got to remember in Brazil last year demand was down.
Speaker Change: So that does impact us from a negative mix perspective, as we ship less into enter Brazil. This year, we're seeing it up flat to slightly up and we expect as we said that that debt.
Speaker Change: Brazil, and also Latam markets will sequentially increase throughout the year.
Speaker Change: So that's going to be positive from a volume perspective, but also very positive from a mix perspective and that will start to really materialize itself.
Speaker Change: More as the year goes on second and third.
Speaker Change: Third quarter.
Speaker Change: Thanks, that's helpful I'll turn it back.
Speaker Change: And as a reminder to ask a question. Please press star one we will go next to Daniel Herman at Sidoti.
Daniel Herman: Hey, guys. Good morning, Thanks for taking my question.
Daniel Herman: Just a quick one here today for me can you help us a little bit with the cadence of your capital spending in 2025 within that range of $2 22 to $2 40 should we expect more or less the capex.
Capex to kind of follow the cadence that it did in 2024.
Speaker Change: Yes are you talking about.
Speaker Change: Thanks for joining Daniel are you talking about in terms of the timing of the spend is that what you mean by yes, just how should we think about it being spread out throughout the year on a quarterly basis.
Speaker Change: Yeah, and I think the way to think about that as well.
Speaker Change: We're heavily weighted to the first half because you can see 80% of outages.
Speaker Change: Sure.
Speaker Change: Now with the spending.
Speaker Change: <unk> spending that we'll do on the east over projects that we talked about.
Speaker Change: That will occur throughout the year.
Speaker Change: Not really tied to the outages as we prepare for that implementation in 2026.
Speaker Change: Okay.
John Michelle: Alright, Thank you John.
John Michelle: Yes. The outage this year particular reads, it's probably one of the most extreme we've had in terms of timing about Ags first half versus second half of the.
John Michelle: Which is part of our earnings growth, where we have a hockey stick you have 80% of where are they spending in the first half of the year versus 20% in the second half.
John Michelle: So thats.
John Michelle: A big component to take into consideration.
John Michelle: Thanks, so much Greg.
Speaker Change: Do you look at like.
Speaker Change: The monthly spend the projections that we have and as we forecast is really not much different than what we had last year in terms of the.
Speaker Change: The monthly spend on capital.
Okay. That's helpful. Thank you.
George Staphos: We'll go next to George Staphos with Bank of America.
George Staphos: Hi, guys. Thanks for taking the follow ons My next two.
Speaker Change: Can you talk a little bit about how the cost curve.
George Staphos: Shifting in Europe.
George Staphos: You know certainly pulp prices stabilize or it looks like that.
George Staphos: In a few markets, but it was a declining situation second half.
George Staphos: What does that mean for the cost curve and.
George Staphos: Ultimately <unk>.
Speaker Change: Rising in your market shares in the region. The related question. What do you think the industry operating rate is in Europe right now thank you.
George Staphos: Yes, George I think when we look at the cost curve as it has certainly moved up.
Speaker Change: As Willie.
Speaker Change: The western invasion into Ukraine, and Thats really driven.
Speaker Change: That has driven increased energy costs.
Speaker Change: Gas costs.
Speaker Change: As well as would the wood costs, we've seen go up across the region.
You look at your pricing.
Speaker Change: Pricing net where we looked at Europe uncoated freesheet pricing is stabilizing because about 20 or so maybe even more.
Speaker Change: Quarter of.
Speaker Change: The cost curve is.
Speaker Change: Is right now the pricing is.
Speaker Change: Below the cash cost.
Speaker Change: <unk>.
Speaker Change: So right now we got about 2025%.
Speaker Change: Path.
Even with the pulp prices, where they are today, which is bottoming.
Speaker Change: We have a call.
That's above the current pricing.
Speaker Change: And in Europe in terms of the operating rate has improved.
Speaker Change: Cause of the.
Speaker Change: The outages because of the closure that occurred yes, and so it's in the mid 80% right now.
Speaker Change: Including the 10% I think you said reduction from closures.
Speaker Change: That's right including them.
Speaker Change: And John just a point of clarity clarification on I'll turn it over so your view is the cost curve actually is up over last quarter two quarters in Europe or.
Speaker Change: It's more or less stable and certainly up over the last several years because of Ukraine and alike.
Speaker Change: It's the latter.
Speaker Change: With a decrease in pulp prices, you can say that maybe quarter sequentially quarter slightly down but overall.
Speaker Change: <unk>.
Speaker Change: The cost curve is.
Speaker Change: Increased if you will get higher cost.
Speaker Change: Okay perfect.
Speaker Change: Thank you John I'll turn it over.
Speaker Change: And we'll take a follow up from Matthew Mckellar at RBC.
Matthew Mckellar: Thanks, very much just following up on an earlier response I think you mentioned you saw lower commercial printing and envelope volumes in North America in the quarter than maybe you were anticipating.
Matthew Mckellar: Just wanted to I guess get a little bit more color on that or are you seeing any kind of rebound in volumes you start Q1, or whether maybe you're expecting to see some more permanent kind of demand destruction.
Matthew Mckellar: Maybe on the back of higher postal rates are there any other factors.
Matthew Mckellar: No I think good.
Matthew Mckellar: We don't see that as a systemic issue, we see that coming back and our projections are for North America, the demand will be.
Matthew Mckellar: Down about 3% the historical trend.
Matthew Mckellar: That we had been saying well, we haven't been seeing really because of the inventory corrections no, but net net we generally been seen over the for the industry So not indifferent.
The normal.
Speaker Change: Okay. Okay. Thanks for that if I could sneak one more in on.
Matthew Mckellar: Can you still hear woodyard operations.
Speaker Change: Of course, the partner will be laying out some capital.
Matthew Mckellar: Could it be avoiding spending your own capital you also mentioned.
Matthew Mckellar: Reliable and cost effective operations I guess with this agreement how should we think about the impact to operating costs at east over Bolton 26 versus 25, and then how things progress over the longer term just specific to what you've announced the woodyard here. Thanks.
Matthew Mckellar: I think just the woodyard is that a huge impacting costs. It's avoidance of capital spending the first thing and then the yield that none of that will continue to put our wood, which is very competitive.
Matthew Mckellar: Even more competitive.
Matthew Mckellar: Once transform at the mill.
Matthew Mckellar: So, it's a small impact but that.
Matthew Mckellar: We will take every penny counts everything in this industry.
Matthew Mckellar: It's a small impact in the cost side.
Matthew Mckellar: Better reliability flexibility and avoidance of capital that's the way I would look at it.
Matthew Mckellar: Okay. Thanks for the help I'll turn it back.
Matthew Mckellar: Okay.
Speaker Change: And a final reminder, if you would like to ask a question. Please press star one.
Speaker Change: And we will go back to George Staphos with Bank of America.
George Staphos: Thanks, guys I wanted to piggyback off of Matt's question. So what does your partner get from you in exchange for operating the Woodyard. If you can talk about the terms there.
Speaker Change: Second question penciling it out free cash flow for the first quarter looks to be.
Speaker Change: On our math kind of neutral to maybe up $20 million I don't know if you called it out actually in the deck or the release, if you did I apologize for missing it but if you could sort of give us some thoughts there.
Speaker Change: And then I'll turn it over come back into queue.
Speaker Change: Yeah.
Speaker Change: Yes, I think the.
George Staphos: To your first question George we're not going to relate disclose the terms of the agreement other than what we said at the 20 year agreement, we are paying them the service the wood yard and the ways Michel talked about it we're going to get.
Speaker Change: And the efficiencies on yield, but thats going to pay for the.
Speaker Change: The service fee that we're charging them. So the big benefit there is it's really the capital avoidance because they will be investing.
Speaker Change: Installing the equipment and maintaining the equipment and the woodyard ice was significant.
Speaker Change: Is it so.
Speaker Change: That's that's all that's going to work.
Speaker Change: Okay.
Speaker Change: And on free cash flow.
Speaker Change: Alright.
Speaker Change: I'm, sorry, you're going to have to repeat your question again.
John So as penciling it out and I don't know if you've actually mentioned in the deck or the release. If you did I missed it I'm kind of coming out with sort of flat to up $20 million on free cash flow for the first quarter could you give us some thoughts on that.
Speaker Change: Yes.
Speaker Change: Go ahead and.
Speaker Change: Remember that question, but yes, we do.
George Staphos: George we don't give any guidance on.
Speaker Change: Our free cash flow.
Speaker Change: Just one thing I would say is like 24, I would expect at 25 with a seasonally stronger.
Speaker Change: Cash flow in the second higher than first half.
Speaker Change: We have been the first out, especially in the first quarter.
Speaker Change: This outage is in Europe, which impact the cash we've got the annual incentive compensation and comfort and customer rebates. So we've got quite a one times.
Speaker Change: In Q1 versus the rest of the quarters. So.
Speaker Change: It's.
Speaker Change: I won't get exact number might be more pressure than you have in your numbers. The first quarter is always our more.
Speaker Change: Challenging in terms of cash flow, they're worried for the year is just this.
Speaker Change: Yeah.
Speaker Change: Understood Hey, guys, maybe I'll throw my last two in here, if it's okay tax rate ticks up a little bit 20% to 29% what's in that and could you give us my last question what was the effect of the one timers in the quarter.
Speaker Change: Then I know you.
Speaker Change: You'll be offsetting with horizon in the first quarter, but what was kind of that.
Speaker Change: Benefit that you got in the fourth quarter, Thanks, and good luck in the first quarter.
Speaker Change: Yes.
Speaker Change: Stuart and the.
A question on the taxes, we had a benefit last year, we bought some credits that we were able to use.
Speaker Change: And so that lowered our tax we're not going to have that repeat right. Now we are going to be continuing to look at that but that's not in our in our outlook and the other thing is lower earnings in Europe as.
Speaker Change: Sure.
Speaker Change: And so that increases our our tax.
Speaker Change: Overall tax rate because we have less earnings in Europe.
Speaker Change: Okay, and one timers.
Speaker Change: <unk> <unk> one time, yes so.
Speaker Change: Specifically, we had $5 million.
Speaker Change: <unk> payment that we got in the fourth quarter LIFO was about $7 million.
Speaker Change: Okay.
Speaker Change: Thanks very much.
Speaker Change: I'll now turn the call back over to highest blackman for closing comments.
Yeah.
Speaker Change: Alright. Thank you before we close up I'm going to let John Michelle kind of wrap up the call today.
John Michelle: So thank you everybody for joining exciting times and we.
John Michelle: We are writing our strategy, but to investing in our high return projects.
John Michelle: One thing for 25 is I don't intend to give you a <unk>.
John Michelle: <unk> on the annual earnings guidance.
John Michelle: With all the uncertainty of the macro and the geopolitical and be prudent.
John Michelle: On a high level kind of if you look at 25 versus 24.
John Michelle: <unk> in North America, and Latin America, we plan or slightly better at $25 24 on adjusted EBITDA.
John Michelle: With this $75 million incremental maintenance outage, we plan to be worse than 2004.
John Michelle: So I'm, putting that with some sort of cost because as you mentioned all salaries and macro is very difficult to predict.
John Michelle: To forecast.
John Michelle: And it's not an exact number but it gives you a trend which I hope helps you.
John Michelle: As we mentioned.
John Michelle: Expect a quarterly earnings to improve throughout the year due to three main factors season.
John Michelle: Seasonality strong volume right.
John Michelle: Transition of the price increase in North America, and Brazil, and less maintenance outages.
John Michelle: Second half of this year.
John Michelle: So with that I. Thank you for joining the call.
John Michelle: Have a good day.
John Michelle: Once again, we would like to thank you for participating in <unk> fourth quarter 2024 earnings call. Thank you you may now disconnect.
John Michelle: [music].
John Michelle: Yes.
John Michelle: [music].
John Michelle: Thanks.
John Michelle: [music].
John Michelle: Okay.
John Michelle: [music].