Q1 2025 Sylvamo Corp Earnings Call
Operator: Good morning. Thank you for standing by.
Good morning, Thank you for standing by welcome to sell Vamose first quarter 'twenty 25 earnings call. All lines have been placed on mute to prevent any background noise.
Operator: Welcome to Sylvamo's first quarter 2025 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 star 1 on your telephone keypad. To withdraw a question, simply press star 1 again. As a reminder, your conference is being recorded.
After the Speakers' remarks, you will have an opportunity to ask questions to ask a question. Please press star one on your telephone keypad.
To withdraw your question simply press Star one again.
As a reminder, your conference is being recorded.
Hans Bjorkman: I'd now like to turn the call over to Hans Bjorkman, Thanks, Sarah. Good morning, and thank you for joining our first quarter 2025 earnings.
Huntsville Ackman: I'd now like to turn the call over to Huntsville, Ackman, Vice President Investor Relations, Sir the floor is yours.
Speaker Change: Thanks, Sara good morning, and thank you for joining our first quarter 2025 earnings call.
Operator: Our speakers this morning are Jean-Michel Rivieres, Chairman and Chief Executive Officer, and John Sims, Senior Vice President and Chief Operating Officer.
Speaker Change: Our speakers. This morning are John Michel reverse Chairman and Chief Executive Officer and.
Speaker Change: John <unk>, Senior Vice President and Chief operating Officer.
Operator: Slides 2 and 3 contain important information, including certain legal disclaimers. For example, during this call, we will make forward-looking statements that are subject to risks and uncertainties. We will also present certain non-U.S. GAAP financial... Reconciliations of those figures to U.S.
Speaker Change: Slides, two and three 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 U S. GAAP financial measures are available in the appendix.
Operator: GAAP financial measures are available in the Our website also contains copies of the earnings release, as well as today's presentation.
Speaker Change: Our website also contains copies of the earnings release as well as todays presentation.
Jean-Michel Rivieres: With that, I'd like to turn the call over to Jean-Michel. Thanks and good morning and thank you for joining our call. Let's start on slide 4, highlighting some news we announced a few weeks ago.
John Michelle: With that I'd like to turn the call over to John Michelle.
John Michelle: Thanks Ann.
John Michelle: Morning, and thank you for joining our call.
John Michelle: I'll start on slide four I liking some news, we announced a few weeks ago.
Jean-Michel Rivieres: After over three decades of working in the paper and packaging industry, I decided to retire at the end of the year. Serving as the Chairman and CEO of Sylvamo for the past four years has been one of the greatest highlights of my career. I'm pleased that John Sims will become the next CEO of Sylvamo. John was elected Chief Operating Officer, effective May 1, and will lead our commercial and operational functions.
John Michelle: After almost two decades working in the paper and packaging industry.
John Michelle: Ladies who retired at the end of the year.
John Michelle: So I think as the chairman and C. O C demo for the past four years has been one of the greatest highlights of my career.
Speaker Change: I'm pleased that John seems to become the next CEO of C level.
Speaker Change: Jonathan was elected Chief operating officer effective May one and will lead our commercial and operational progress.
Jean-Michel Rivieres: Following my retirement, John will assume the role of the CEO on January 1st, 2026. As you know, John has served as the CFO of Sylvamo since the spin-off and has been instrumental in our work to build the world's paper company and drive our company strong performance.
Speaker Change: Following my retirement, Jonathan will assume the role of CEO on January 1st 2026.
Speaker Change: As you know John that seven E C level seem to.
Speaker Change: And that's been instrumental in our work to build the world's best the company and drive our company strong performance.
Jean-Michel Rivieres: Don Devlin was named Senior Vice President and Chief Financial Officer, Effective May 1, and is with us here for today's call. You'll hear more from Don in future earnings.
Speaker Change: Dabbling with M Senior Vice President and Chief Financial Officer effective May one.
Speaker Change: And he is with us for today's call.
Speaker Change: Yeah more from Don in future earnings calls.
Jean-Michel Rivieres: Johnson from International Paper, after 27 years with the company. known as extensive international leadership experience with a track record of building teams, developing strategic plans, and delivering results in diverse and challenging environments. served in a variety of leadership roles including finance director for European Papers, chairman and CEO of IP's and Kotit Vishit business in India and most recently past president finance and strategy for IP industrial package.
Speaker Change: He joins us from international paper after 27 years of the company.
Speaker Change: His extensive international leadership experience.
Speaker Change: The track record of building James.
Speaker Change: Is that being strategy plan.
Speaker Change: They're delivering results in diverse and challenging environment.
Speaker Change: He served in the value tier.
Speaker Change: She goes through the finance director for Europe, and Defense Chairman.
Speaker Change: Chairman and CEO of Ip's Uncoated freesheet business in India, and most recently, Vice President Finance and strategy for IP industrial packaging.
Jean-Michel Rivieres: I'm excited to have both John and Don in their new leadership roles to drive the company forward for future success.
Speaker Change: I'm excited to have both John and Doug.
Speaker Change: Pools to drive the company forward for future success.
Jean-Michel Rivieres: Light 5 through the first quarter highlight. First, we successfully completed a heavy plant maintenance outage quarter in Europe and North America. Also, these outages were executed well. We ran into some separate non-outage-related operational challenges, primarily in North America.
Speaker Change: Slide five shows our first quarter highlights.
Speaker Change: First we successfully completed a planned maintenance outage.
Speaker Change: In Europe, and North America.
Speaker Change: Also these allergies were executed well we ran into some separate no outage related professional challenge.
Speaker Change: Marilee in North America.
Jean-Michel Rivieres: John will talk more about the financial impact in a few slides.
John will talk more about the financial impact in a few slides.
Jean-Michel Rivieres: We also began implementing the previously communicated uncredited free sheet price increases. customers in Brazil and North America.
Speaker Change: We also began implementing the previously communicated uncoated freesheet price increases.
Speaker Change: I mentioned, Brazil, and North America.
Jean-Michel Rivieres: Lastly, we return nearly $40 million in cash to shareholders. We distributed $18 million via the first quarter dividend. And as of today, we have repurchased $20 million in shares this year.
Speaker Change: Lastly, we returned nearly $40 million in cash to shareholders.
We distributed 18 million, we had a first quarter dividend.
Speaker Change: To date, we have repurchased $20 million and chat ECS.
Operator: Let's move to the next slide. Slide six shows our first quarter key financial metrics. and Erna just did a bid of $90 million with a margin of 11%.
Speaker Change: Let's move to the next slide.
Speaker Change: Slide six shows our first quarter key financial metrics.
Speaker Change: We earned adjusted EBITDA of $19 million with a margin of 11%.
John Sims: In addition to having almost 30 million planned maintenance outages cost, the first quarter is our weakest demand quarter every year in Latin America. Generated Adjusting Operating Earnings of $0.68 per share. As expected, free cash flow was lower than the fourth quarter. Timing of year-end payments, one-time cash benefit in the fourth quarter from the monetization of working capital related to the closure of IP Georgetown Mills, and the payment of annual incentive compensation in the first quarter. Keep in mind that our free cash flow is heavily weighted to the second half of the year. The last two years, we generated almost 90% of our free cash flow in the second half.
Speaker Change: In addition to having almost 30 million so net net.
Speaker Change: Net R&D costs.
Speaker Change: First quarter is a weaker demand every year in America.
Speaker Change: We generated adjusted operating earnings of 68 cents per share.
Speaker Change: As expected free cash flow was lower than the fourth quarter due to the timing of payments.
Speaker Change: One time cash benefit in the fourth quarter from the monetization of working capital related to the closure of IP Georgetown mill.
Speaker Change: And the payment of annual incentive compensation in the first quarter.
Speaker Change: Keep in mind that our.
Speaker Change: Free cash flow.
Speaker Change: Really weighted to the second half of the year.
Speaker Change: Last two years, we generated almost 90% of free cash flow in the second half.
John Sims: Now John will review our performance in more detail.
Speaker Change: Now John will review our performance in more detail.
John Sims: Thank you, Michelle, and good morning, everyone. I also want to thank Don who's sitting right next to me. We're in a transition, moving the CFO role quickly over to him. I look forward to working in the future with Don.
John: Thank you Michelle and good morning, everyone. I'm also one to think.
Speaker Change: Don't you sitting right next to me.
Speaker Change: We're in a transition moving CFO quickly over to him and look forward to.
Speaker Change: Working in the future we're done.
John Sims: Slide seven contains our first quarter earnings bridge versus the fourth quarter. The $90 million of adjusted EBITDA was in line with our outlook of $85 to $105 million. As Jean-Michel mentioned, we had some operational issues in North America which impacted us by roughly 10 million. half from lower sales volume and half from operations and other costs. This also includes less volume from IP's Riverdale mill than was planned. Price and Mix was unfavorable by $10 million. driven by the expected seasonally unfavorable mix in Latin America, lower pulp price. The paper price decreases in Europe and in our export regions.
Speaker Change: Slide seven contains our first quarter earnings bridge versus the fourth quarter.
Speaker Change: $90 million of adjusted EBITDA was in line with the outlook of $85 million to $105 million.
Speaker Change: As Michelle mentioned, we had some operational issues in North America, which impacted us by roughly one by $10 million.
Speaker Change: Half from lower sales volume and half from operations and other costs.
Speaker Change: This also includes the less volume from Ip's Riverdale Mill plant.
Speaker Change: Price and mix was unfavorable by $10 million.
Speaker Change: Driven by the expected seasonally unfavorable mix of Latin America.
Speaker Change: Lower pulp prices.
Speaker Change: And paper price decreases in Europe, and then in our export regions.
John Sims: These were partially offset by paper price increase realizations in North America and Brazil. volume decreased by 30 million. driven by the seasonally weakest demand quarter in Latin America. Lower North America volume from IPs Georgetown, no exit, and the operational challenges in North America. Operations and other costs were unfavorable by $12 million, primarily driven by unfavorable FX, plus the North America operational challenges we mentioned earlier. Planned maintenance outage costs increased by $9 million as we executed major outages at our SIOT and Eastover Mills. input and transportation costs increased by $6 million, primarily driven by seasonally higher energy prices.
Speaker Change: These were partially offset by paper price increase realizations in North America and Brazil.
Speaker Change: Volume decreased by $30 million.
Speaker Change: Driven by the seasonally weakest demand quarter in Latin America.
Speaker Change: Lower North American volume from Ip's, Georgetown mill exit and the operational challenges in North America.
Speaker Change: Operations and other costs were unfavorable by $12 million, primarily driven by favorable FX plus the North America operational challenges you mentioned earlier.
Speaker Change: Planned maintenance outage costs increased by 9 million as we executed major outages at our site in Easter.
Speaker Change: Eastover Mills.
Speaker Change: Input and transportation costs increased by $6 million, primarily driven by seasonally higher energy prices.
John Sims: and the longer than expected extreme cold weather across the United States in the first quarter.
Speaker Change: And the longer than expected extreme cold weather across the United States in the first quarter.
John Sims: Let's move to slide 8. We expect to deliver second quarter adjusted EBITDA of $75 to $95 million. project price and mix to be favorable by 5 to 10 million. This is primarily due to favorable mix in Latin America and North America. We expect volume to be stable. Volume 1 have been sequentially higher as we have the orders, but anticipate being unable to fill them all during the quarter. This is due to low inventory levels in North America as a result of our operational issues. In addition, we expect to get less volume from IP's Riverdale mill in the quarter.
Speaker Change: Let's move to slide eight.
Speaker Change: We expect to deliver second quarter, adjusted EBITDA of $75 million to $95 million.
Speaker Change: We project price and mix to be favorable by $5 million to $10 million. This is primarily due to favorable mix in Latin America and North America.
Speaker Change: We expect volume to be stable.
Speaker Change: Volume would have been sequentially higher.
Speaker Change: We have the orders, but anticipate being unable to fill them all during the quarter. This was due to low inventory levels in North America as a result of our operational issue.
Speaker Change: In addition, we expect to get less volume from Ip's Riverdale mill in the quarter.
John Sims: Therefore, some of our orders may get pushed into the third quarter. Operations and other costs are projected to be favorable by $10-15 million due to better operations and seasonally lower operating costs in North America and Europe. We expect input and transportation costs to improve by $5 to $10 million, primarily due to internet.
Speaker Change: Therefore, some of the orders may get pushed into the third quarter.
Speaker Change: Operations and other costs are projected to be favorable by $10 million to $15 million due to better operations and seasonally lower operating costs in North America and Europe.
Speaker Change: We expect input and transportation cost to improve by $5 million to $10 million, primarily due to energy.
John Sims: Planned maintenance outages are projected to increase by 36 million as we execute the heaviest outage quarter of the year across all three regions.
Speaker Change: Planned maintenance outages are projected to increase by $36 million as we execute the heaviest outage quarter of the year across all three regions.
John Sims: Let's go to slide nine. This slide illustrates the planned maintenance hours scheduled for the full year. We spent $27 million in the first quarter and expect to spend $63 million in the second quarter.
Speaker Change: Let's go to slide nine.
This slide.
Speaker Change: Illustrates the planned maintenance outage scheduled for the year full year.
Speaker Change: We spent 27 million in the first quarter and expect to spend $63 million in the second quarter.
John Sims: By mid-year, WELF spent over 80% of the total annual planned maintenance outage cost. Unlike last year, where we had no major planned maintenance outages in Europe, this year we have outages in both mills in the first half of the year.
Speaker Change: But mid year, well spend over 80% of the total annual planned maintenance outage cost.
Speaker Change: Last year, we had no major planned maintenance outages in Europe. This year, we have outages in both mills.
Speaker Change: In the first half of the year.
Operator: Let's move to slide 10.
Speaker Change: Let's move to slide 10.
John Sims: I'll now shift to talk about overall uncoded free sheet conditions across our region. In Europe, demand is down 7% year-over-year through the first quarter, while imports appear stable. As a reminder, industry supply was reduced by 7% after two uncoated free sheet machines closed late last year. In Latin America, demand is up 3% year over year through the first quarter, with most of the increase in Brazil, largely due to strong demand in the publishing segment. In North America, apparent demand is down about 1% year over year through the first quarter driven by higher imports. This brings imports to almost 15% of overall North America supply, which is on the higher end of historical ranges.
Speaker Change: I'll now shift to talk about overall uncoated freesheet conditions across our regions.
Speaker Change: In Europe demand is down 7% year over year during the first quarter, while imports appear stable.
Speaker Change: As a reminder, industry supply was reduced by 7% after two uncoated free sheet machines closed late last year.
Speaker Change: In Latin America demand is up 3% year over year during the first quarter with most of the increase in Brazil.
Speaker Change: Due to strong demand in the publishing segment.
Speaker Change: North America apparent demand is down about 1% year over year through the first quarter driven by higher imports.
Speaker Change: This brings imports almost 15% of overall north American supply, which is on the higher end of historical ranges.
John Sims: We still believe that real demand will be down about 3 to 4%. As another reminder, domestic industry supply was reduced by 10 percent after a few machines, including IP's Georgetown mill, closed in the second half of last year. We have stronghold of books across our region. and all of our mills are running. We have more demand than we can supply right now due to our commercial team success combined with the supply issues we've been dealing with in North America. Consequently, going forward, we're going to take advantage of our global footprint to improve our mix and serve our customers in North America.
Speaker Change: We still believe that real demand will be down about 3% to 4% this year.
Speaker Change: As another reminder, domestic energy supply was reduced by 10% after a few machines, including Ip's Georgetown mill closed in the second half of last year.
Speaker Change: We have strong order books across all regions and all of our mills are running full we have more demand than we can supply right now due to our commercial team's success combined with the supply issues, we've been dealing with in North America.
Speaker Change: Consequently, going forward, we're going to take advantage of our global footprint to improve our mix and serve our customers in North America.
John Sims: As a result, we expect to have less exports to non-core markets.
Speaker Change: As a result, we expect to have less exports to non core markets.
John Sims: We are not going to give a full year of guidance with all the uncertainty, however, we do expect a significantly better adjusted EPITDA performance in the second half. This is due to lower planned maintenance outage expenses, improved commercial results, and better operation. Tariff uncertainty aside. We expect.
Speaker Change: We are not going to give a full year guidance with all the uncertainty. However, we do expect the slipped me better adjusted EBITDA performance in the second half of.
Speaker Change: This is due to lower planned maintenance outage expenses improved commercial results and better operations.
Speaker Change: Tariff uncertainty aside.
Speaker Change: We expect.
Speaker Change: 2025, Latin America, and North America, combined full year, adjusted EBITDA to be slightly better than 2024.
John Sims: 2025 Latin America and North America combined full year of Justice Dean Bidah to be slightly better than 2025. Europe's 2025 performance will be sniffly worse. Moore, due to the $39 million of planned maintenance outages this year and worse market conditions as we're seeing signs of the pulp market.
Speaker Change: Europe 2025 performance will be significantly worse in 2024.
Speaker Change: Due to the $39 million of planned maintenance outages year and worse market conditions as we are seeing signs that the pulp market weakening.
John Sims: Let's go to slide 11.
Speaker Change: Let's go to slide 11.
John Sims: I want to take some time to discuss our European business. As we look back on the Numala Mill acquisition, the mill generated about $70 million of free cash flow before overhead allocations in its first two years as part of Savannah. who exceeded over $20 million run rate synergy target by $5 million.
Speaker Change: I wanted to take some time to discuss our European business.
Speaker Change: As we look back on our new Millen Mill acquisition, the mill generated about $70 million of free cash flow before overhead allocations in its first two years as part of <unk>.
Speaker Change: We exceeded over $20 million run rate synergy target by $5 million.
John Sims: The Popemill Modernization Project.
Speaker Change: The pulp mill modernization project exceeded as projected benefits as well.
John Sims: Nussbaum. Unfortunately, compared to 2022, last year the mill experienced a $41 million increase in wood costs and a cumulative $63 million over the last two years. This increase in wood cost is due to the war, with Russia and Belarus stopping the export of wood fiber. Reducing overall wood supply to the... Additionally, high demand from the energy sector in the Nordic increased overall wood demand.
Speaker Change: Unfortunately, compared to 2022 last year, the mill experienced a $41 million increase in wood cost cumulative $63 million over the last two years.
Speaker Change: This increase in wood cost is due to the war.
Speaker Change: With Russia, with Russia, and Belarus, stopping the export of wood fiber.
Speaker Change: Reducing overall wood supply to the region.
Speaker Change: Additionally, high demand from the energy sector and the Nordic increased overall wood demand.
John Sims: Stepping back and looking at our entire European business, our earnings performance is below our expectations. In addition to numerous escalated wood costs, high input costs, and challenging industry conditions have impacted demand and price. We're not satisfied with our performance.
Speaker Change: Stepping back and looking at our entire European business, our earnings performance is below our expectations.
Speaker Change: In addition to numerous escalating wood cost.
Speaker Change: Cause in challenging industry conditions have impacted demand and pricing.
Speaker Change: We're not satisfied with our performance.
John Sims: saw the new Senior Vice President and General Manager effective May 1 to lead our talented team, further develop our strong customer relationship. and improve our performance. We are focusing on reducing costs across the region.
Speaker Change: The new senior Vice President and General manager effective may one to lead our talented team.
Further develop our strong customer relationship.
Speaker Change: And improve our performance.
Speaker Change: We are focusing on reducing our cost cost across the region.
John Sims: We'll be improving our product mix by upgrading some capabilities at SciYot. We are working to reduce wood costs and are targeting best-in-class efficiency at the Numala Mill.
Speaker Change: I'll be improving our product mix by upgrading some capabilities.
Speaker Change: We are working to reduce wood costs and are targeting best in class efficiency at the new molar mill.
Jean-Michel Rivieres: I'll now turn the call back over to Jean-Michel. Thanks, John.
Speaker Change: I'll now turn the call back over to <unk>.
Speaker Change: Thanks, John.
Jean-Michel Rivieres: I'm new on slide 12. We understand that one of the main risks in today's environment... is a global economic slowdown due to the current tariff situation.
Speaker Change: Now on slide 12.
Speaker Change: We understand that and one of the main risk in today's environment is a global economic slowdown due to the current tariff situation.
Speaker Change: It could impact and coated freesheet demand.
Jean-Michel Rivieres: Goodimpact, and Coté-Fouché-Demain. Some shifts in encoded flowsheets and portrait flows are already starting to materialize. also anticipate higher risk of inflation on our raw material, transportation, and capital spending. Why this represents possible challenges. These three correctly appear managed. Our global sourcing teams are already working on mitigation strategies. as well as alternative sourcing options. for some raw materials, plus optimizing modes of transportation. Regarding our major capital spending plans for the year, the business cases for this project include the possibility of higher costs. which are not expected to be material at this point.
Speaker Change: Some shifting in coated freesheet and bulk trade flows are already starting to materialize.
Speaker Change: Also anticipate higher risk of inflation on our raw material transportation and capital spending.
Speaker Change: While this represents brassy about challenges.
Speaker Change: These risks correctly FPL manageable.
Speaker Change: Mobile sourcing teams are already working on mitigation strategies as.
Speaker Change: As well.
Speaker Change: Well as alternative sourcing options.
Speaker Change: Some raw materials.
Speaker Change: Optimizing modes of transportation.
Speaker Change: Regarding our major capital spending plans for the year.
Speaker Change: Business cases for these projects include the possibility of higher costs.
Speaker Change: Which are not expected to be material at this point.
Jean-Michel Rivieres: Let's move to slide 13. Although there is a lot of uncertainty around the tariffs and their impact on the economy, we are well positioned to manage through this environment. Over 90% of our raw materials are sourced locally. very little coming from China. Regarding our shipments, the majority stay within their respective regions. in Europe and North America, more than 90% of our shipments stays within their respective regions. Latin America, 80% of our shipments remain in the region.
Speaker Change: Let's move to slide 13.
Speaker Change: Although there is a lot of uncertainty around the tariffs and the impact on the economy.
Speaker Change: Well positioned to manage through this environment.
Speaker Change: Over 90% of our raw materials are sourced locally.
Speaker Change: Very little coming from China.
Speaker Change: Regarding our shipments.
Speaker Change: The majority stay within their respective region.
Speaker Change: In Europe, and North America.
Speaker Change: More than 90% of our shipment stays within that respective region.
Speaker Change: Latin America, 80% effort shipments remained in the region.
Jean-Michel Rivieres: Although we export about 20% of our products from Latin America, we are well positioned as our Brazilian mills are some of the world's most competitive and low-cost uncoated free sheet facilities.
Speaker Change: Although we export about 20% of our products from Latin America we.
Speaker Change: We are well positioned as our Brazilian mills are some of the worlds most competitive and low cost uncoated freesheet facility.
Jean-Michel Rivieres: Lastly, I want to remind everyone that even though imports tend to rise and fall for a variety of reasons, import historically represent less than 15% of uncoated fish industry supply in each of our three regions.
Speaker Change: Lastly, I want to remind everyone that even though import tend to rise and fall for a variety of reasons.
Speaker Change: Impulse historically.
Speaker Change: Less than 15% of uncoated freesheet industry supply in each of our three region.
Jean-Michel Rivieres: Let's move to slide 14. I will take this opportunity to remind everyone of all the work we did to de-leverage our balance sheet over the past year. after launching with close to 1.4 million net debt and a leverage ratio of 2.6 times. We have reduced our debt by about half. and our leverage ratio is now 1.1 times. We have no major maturities until 2027. Plus, we have availability on a revolver of 400 minutes. strong balance sheet, available cash on hand, plus the ability on our revolver, provides us with the ability to take care of a customer, run our business, and invest in our future.
Speaker Change: Let's move to slide 14.
Speaker Change: I will take this opportunity to remind everyone of all the work reduced de leverage our balance sheet over the past three years.
Speaker Change: After launching with close to $1 4 billion debt.
Speaker Change: Net debt and a leverage ratio of two six times.
Speaker Change: We have reduced our debt by about half.
Speaker Change: And our leverage ratio is now one one times.
Speaker Change: We have new majority major maturity is until 2027 press, we have available revolver of $400 million.
Speaker Change: Our strong balance sheet available cash on hand.
Speaker Change: Deputy General revolver.
Speaker Change: This with the ability to take care of a customer.
Speaker Change: In our business and invest in our future.
Jean-Michel Rivieres: Our capital allocation strategy is to maintain a strong financial position. We invest in our business to improve our competitive advantages and return cash to shareholders. Our position of financial strength allows us to navigate this uncertain environment without changing our thoughtful, long-term approach to capital allocation. which allow us to serve customers while navigating economic headwinds. A law also enables us to invest in our business, even during times of uncertainty. and it preserves the flexibility to return cash to shareholders. We will continue to evaluate opportunities to repurchase shares at an attractive price with the $62 million available on our current share repurchase authorization.
Speaker Change: Our capital allocation strategy and maintain a strong financial position.
Speaker Change: We invest in our business to improve our competitive advantages and return cash to shareholders.
Speaker Change: Our position of financial strength.
Speaker Change: To navigate this uncertain environment.
Speaker Change: Changing a thoughtful long term approach to capital allocation.
Speaker Change: It allow us to serve customers, while navigating economic headwinds.
Speaker Change: It also enables us to invest in our business.
Speaker Change: Then during times of uncertainty.
Speaker Change: And at preserve the flexibility to return cash to shareholders.
Speaker Change: We will continue to evaluate opportunities to repurchase shares at attractive prices.
Speaker Change: With a 62 million available on our current share repurchase authorization.
Jean-Michel Rivieres: I'll conclude my remarks on slide 16. All of the work we have done to strengthen our financial position the past few years is providing us with flexibility. financial strengths and regional businesses have us well positioned to navigate the current tariff uncertainty.
Speaker Change: I'll conclude my remarks on slide 16.
Speaker Change: All of the work we have done to strengthen our financial position. The past few years is providing us with flexibility.
Speaker Change: Our financial strength centers channel businesses well positioned.
Speaker Change: Navigate the current tariff uncertainty.
Jean-Michel Rivieres: We are reinvesting in our business through a great pipeline of high-return capital projects. It will enable us to grow our earnings and cash flow in the coming years. Sylvamo is creating shareholder values through strong cash generation and disciplined capital allocation.
We are reinvesting in our business through a great pipeline of high return capital projects.
Speaker Change: Which will enable us to grow our earnings and cash during the coming years.
Speaker Change: As bandwidth, creating shareholder value through strong cash generation and disciplined capital allocation.
Jean-Michel Rivieres: And we are in the process of executing a seamless CEO and CFO succession plan as we prepare for my retirement at the end of the year. We are confident in our future and motivated by the opportunities that lie ahead.
Speaker Change: And we are in the process of executing a seamless CEO and CFO succession plan as we prepare for my retirement at the end of the year.
Speaker Change: We have confidence in our future and motivated by the opportunities that lie ahead.
Hans Bjorkman: With that, I turn the call back to Hans. Thanks, Jean-Michel, and thank you, John.
Speaker Change: Does that is done the call back to <unk>.
Speaker Change: Thanks, John Michelle and thank you John Okay, Sarah we're ready to take questions.
Operator: OK, Sarah, we're ready to take questions. Thank you. If you would like to ask a question, please press star 1 on your telephone keypad. If you would like to withdraw your question, simply press star 1 again. We do ask that you limit yourself to one question and one follow-up question. Thank you.
Speaker Change: Thank you if you would like to ask a question. Please press star one on your telephone keypad. If you would like to withdraw your question simply press Star one again we.
Speaker Change: We do ask that you limit yourself to one question and one follow up question. Thank you.
George Staphos: Your first question comes from George Staphos with Bank of America. Your line is open. Hi everyone, good morning. Thanks for the details.
Speaker Change: Your first question comes from George Staphos with Bank of America. Your line is open.
George Staphos: Hi, everyone. Good morning, Thanks for the details.
George Staphos: Jean-Michel, John, and Don, congratulations, and all the best on the next chapters. I guess the question...
Speaker Change: Michelle John and Don Congratulations.
George Staphos: All the best next chapters.
George Staphos: <unk>.
Speaker Change: And John Michel Thanks for all the help obviously and you're not retiring yet, but thanks for all the help with our research for everybody on the call.
George Staphos: Since you've been public.
George Staphos: The question I had I didnt really follow what the operational issues were if you could give us a bit more detail in terms of what happened and then I know you're not guiding on third quarter, but you mentioned you won't be in a position to recover some of the orders in <unk>.
John Sims: I didn't really follow what the operational issues were, if you could give us a bit more detail in terms of what... And then, I know you're not counting on third quarter, but... You won't be in a position to recover some of the orders. It sounds like some of that might be pushed into 3Q. Weiss, what that benefit might be as you recapture. Yeah, George, and thank you. The issues we had with the, actually there's multiple reliability issues, both at our Ticonderoga mill and our Eastover mill. A majority of that is behind us. We do have one issue that's intermittent, so it makes it hard to troubleshoot on one paper machine at Eastover.
George Staphos: It sounds like some of that might be pushed into <unk> as a way for you to size what that benefit might be as you recapture some of those orders, particularly as regards seasonality, Brazil typically picks up in the third quarter as well. Thank you.
George Staphos: Yes, George and thank you.
George Staphos: The issues, we had with the.
George Staphos: Separately as a multiple of reliability issues, both at Ticonderoga mill and our Eastover mill.
George Staphos: The majority of that is behind US we do have one issue that's intermittent so it makes it hard to troubleshoot, a one paper machine at <unk>.
John Sims: That actually is in our outlook in the second quarter, and, you know, we think we're going to have that resolved. We should have that resolved by this quarter. The other thing I'll make a point about is the impact of the Riverdale volume, because that doesn't show up in the operations, but it's certainly showing up in the volume. In fact, they've obviously been having some runnability issues themselves, and it really started in the fourth quarter, translated into when it continued into the first, and it's also continuing into the second quarter. That in itself is in about almost 30% of what they should be supplying us, we haven't been getting.
George Staphos: It actually is in our outlook.
George Staphos: The second quarter.
George Staphos: And.
George Staphos: We think we're going to have that resolved.
George Staphos: Should have that resolved, but this quarter the other.
George Staphos: The thing I'll make a point about is.
George Staphos: The impact of the Riverdale volume because that doesn't show up in the operations, but it's certainly showing up in the volume I mean in fact.
George Staphos: They've obviously been having some run ability issues themselves and it really started in the fourth quarter translated into it continued into the first and its also continuing into the second quarter.
George Staphos: That in itself is.
George Staphos: Then about almost 30% of what they should be supplying us we havent been getting so you can see that actually cause a buildup in the first quarter. We said the impact of all of these issues is roughly about $10 million.
John Sims: So you can see it actually kind of build up. In the first quarter, we said the impact of all these issues was roughly about $10 million. I would say that the Riverdale conditions also are continuing into the second quarter. And some of that is in our outlook, but if you're trying to get to a number of what would the improvement be in the third quarter, something a little bit less than $10 million.
George Staphos: <unk>.
George Staphos: I would say that.
George Staphos: The Riverdale conditions also continuing into the second quarter.
George Staphos: And some of that has been.
George Staphos: Our outlook, but if you're trying to get to a number of wood wood.
George Staphos: What would the improvement be in the third quarter is something a little bit less than $10 billion.
George Staphos: Okay.
George Staphos: Thank you. And the related question that I had there was, just in general, can you remind us... Cole, Lapp, Tamblines. Saizat. You're not guiding on 3Q, but as we're trying to... Yeah, George, you know, the best thing I would do is look at what we've done historically. And we break it down by region, and we don't see much difference. Stewart.
Speaker Change: Thank you.
George Staphos: And so that's what.
Georgia.
George Staphos: So that will show up in both Austin and volume Okay.
George Staphos: And the related question that I had there was just in general can you remind us then.
George Staphos: Really what goes.
George Staphos: Well.
George Staphos: Third quarter versus <unk> as a recall latam volumes pick up as a way to size that for us.
George Staphos: On <unk>, but as we're trying to build out our purchase or refine them. Thank you.
Speaker Change: Yes, Joe its knows best thing I would do is look at what we've done historically okay.
Speaker Change: Break it down by region.
John: We don't see much difference in that okay. Thank you John.
Speaker Change: Okay. Good.
Speaker Change: Once again, if you have a question it is star one on your telephone keypad.
Matthew Mckellar: Your next question comes from Matthew McKellar of RBC Capital Markets. Your line is open. Hi, good morning.
Speaker Change: Your next question comes from Matthew Mckellar of RBC capital markets. Your line is open.
Speaker Change: Hi, Good morning, Jim Michele Congratulations on your upcoming retirement and congratulations also to John and Don for their appointments.
Matthew Mckellar: Jean-Michel, congratulations on your upcoming retirement and congratulations also to John and Don for their appointment. I think that's it. Thank you, Matt.
Speaker Change: Hi, Matt.
Speaker Change: Thank you Matt.
Matthew Mckellar: I'd like to start by asking, just around the changes at Syatt and Nemula, can you tell us maybe just a bit more about what the upgrades to your capabilities at Syatt entail, and the market opportunity that's leading you to reposition your product mix, maybe whether that's entirely serving demand in North America, or if there's anything else going on there? And then at Nemula, what levers do you have to reduce your wood costs and improve efficiency? And as we kind of think about putting this all together, how do you have us think about how financially meaningful these changes could be, and over what timeline?
Speaker Change: I'd like to start by asking just around the changes in <unk>.
Speaker Change: You tell us maybe just a bit more about what the upgrades to your capabilities I add some tail and the market opportunity. That's leading you to reposition your product mix, making whether that's entirely serving demand in North America, where if there is anything else going on there and then.
Speaker Change: What levers do you have to reduce your wood costs and improving efficiency and as we kind of think about putting this all together.
Speaker Change: How do you have us think about how financially meaningful these changes can be and over what timeline. Thanks.
John Sims: Thanks. and Matt. So, uh...
Matt: Hey, Matt so.
John Sims: Saïa, to answer your first question, we've invested on a new and revised winder. This is giving us the capability to sell roles in Saïa in interesting segments, more specialty role segments in Europe. We are in quite a different position, I don't know if you get that in mind. In Nouméa, we sell 50% of our business in roles and we are very successful, 50% in cut size. In Saïa today, we sell 90% in cut size and only roughly 10% of roles. This is going to give us the capability to sell much more roles and enter a Schultz.
Speaker Change: <unk> to answer your first question, we've invested on the UN revised Winder. This is giving us the capability to set of rules inside.
Speaker Change: The interesting segments more specialty rules segments in Europe.
Matt: We are quite a different position I don't know.
Matt: Got that in mind.
Matt: We sell 50% of our business and rules and we are very successful and 50% in cut size insight today, we said, 90% and cut side than on the roughly 10% of groups. This is going to give us the capability to send much more roads and enter into this.
Matt: The <unk> segment.
John Sims: Thank you. So I hope I'm answering your first question.
Matt: So I hope I am.
Matt: Answering your first question.
John Sims: on Europe. Meda. We have great opportunities in operations. We don't run Nimera Mills at the same bench OEE or... want cost performance that we run the other mills. We've done some investment in capital but also in people and we're continuing to do that. And that gives you quite a lot of cost. Opportunity you to improve pneumonia. And in SIA it's in mostly mix and also looking at our fixed costs mostly.
Matt: On Europe.
Matt: In general.
Matt: Pneumonia.
Matt: We have great opportunities in operations, we don't run numerous mill at the same bench or your.
Matt: Fuel cost performance that we ran the other mills.
Matt: We've done some investments in capital, but also in people.
Matt: And we're continuing to do that.
Matt: And that gives you quite a lot of cost.
Matt: Opportunities.
Matt: To improve pneumonia.
Matt: And in <unk>, it's in the mix and also looking at our fixed costs mostly.
John Sims: Yeah, and I'll just add to that, uh, Matthew, you asked about the leverage that we have in reducing the wood cost. So when we purchased the new mill, it was an agreement that we would continue to source the wood. from a company that's owned by a store. One of the options we have is to go there directly right to the landowner. which cuts out some of the cost around that. The other opportunities we have is actually importing in the lower cost wood and then there's operational improvements where we increase of wood going forward. Those are some of the levers that we're pulling.
Speaker Change: Yes, and I'll just add to that Matthew.
Matt: You asked about the levers that we have been reducing the wood costs. So when we purchased the new molar mill. It was an agreement that we will continue to source the wood.
Matt: From our covenants and bus store one of the options. We have is to go directly to the landowners.
Matt: Which cuts out some of the costs around that.
Matt: As we head is actually importing in.
Matt: The lower cost wood and then there is operational improvements, where we increase the yield and reduce the consumption.
Matt: Going forward as some of the levers that we're pulling in terms of the levers how much and what we.
John Sims: In terms of the levers, how much You know, we're looking at and targeting at least a 10% I think Matt, you asked also a question on Europe profitability in general. And as we mentioned, we're clearly not satisfied. We are clearly expecting. a significant improvement in 2026 and now building programs to be back to cost of capital in 2027. So that's the plan we have as of today. That's helpful. Thank you for all the detail.
Matt: We're targeting for is.
Matt: We're looking at.
And targeting at least a 10% reduction.
Matt: I think Matt yet.
Speaker Change: Ask also a question on Europe profitability in general.
Matt: And as we mentioned we are clearly not satisfied.
Matt: We are clearly expecting.
Matt: A.
Matt: Significant improvement in 2026.
Matt: And now building programs to be back to cost of capital in 2027.
Matt: So thats. It then we have as of to date.
Matt: That's helpful. Thank you for all the detail last one for me.
Matthew Mckellar: Last one for me, there was a comment that some shifts in uncoded free sheets and pulp trade flows are already starting to materialize.
Matt: There was a comment to some shifts in uncoated freesheet in pulp trade flows.
Matt: We're already starting to materialize could you just elaborate on what Youre seeing.
John Sims: Could you just elaborate on what you're seeing and kind of how that's affecting you by markets? Thanks.
Matt: And kind of how that's affecting you by market.
John Sims: Yeah, I'll take that one.
Matt: Yes, I'll take that one.
John Sims: You know, this is what makes it difficult around trying to assess the impact of tariffs, because some of it is probably the most impactful to us could potentially be the secondary effects of the negotiations that are ongoing. And give you some examples that we've seen, like we talked about increased imports into the U.S. Some of that we believe could be due to pre-buying or getting ahead of the tariffs in North America, as an example. We also have seen in Europe, just reported this month by FastMarket Theresa, that pulp prices decreased almost 40 euros a ton on BK coming out of Brazil.
Matt: This makes it difficult to well I'm trying to.
Matt: Assess the impact of tariffs because some of it is probably the most impactful to us to potentially be the secondary effects of the negotiations that are ongoing and give you. Some examples that we've seen like we talked about increased imports into the U S.
Matt: Some of that we believe could be due to.
Matt: Pre buying of getting ahead of the tariffs.
Matt: <unk> America as an example.
Matt: We also have seen in Europe, just reported this month by fast market to receive that.
Matt: Pulp wood pulp prices decreased almost 40 units.
Matt: And on.
Matt: Sure.
Matt: B K coming out of out of Brazil, and Thats really driven because of this significant decrease in pulp demand in China, and then that's coming over to the to Europe. So there is some of the impacts that we're seeing as a result of this tariff.
John Sims: And that's really driven because of this significant decrease in pulp demand in China. And then that's coming over to Europe. So that's some of the impacts that we're seeing as a result of this tariff. situation here in the U.S.
Speaker Change: The situation here in the U S.
John Sims: Thanks to all the caller. I'll turn it back.
Speaker Change: Thanks for all the color I'll turn it back.
Daniel Harriman: Your next question comes from Daniel Harriman with Sidoti. Your line is open. Thank you.
Speaker Change: Your next question comes from Daniel Herman with Sidoti Your line is open.
Daniel Herman: Thank you good morning, guys and I Echo the congratulations given by Matt and <unk> and George.
Daniel Harriman: Good morning, guys, and I echo the congratulations given by Matt and George. I had a question about your capital spending for the balance of the year. If we look at what you spend in the first quarter, that run rate won't get you to your guidance of 220 to 240 for the year. So I'm just curious how we should think about that over the last three quarters. Understanding that you don't guide to cash flow, but just trying to get a sense of what we should be looking for the last nine months. Daniel, we haven't changed the revision on the full year capital, and whereas most of our outages in the first half of the year, the second half will be somewhat influenced by the large capital projects we have associated with Eastover, both the speed up and the new sheeter.
Daniel Herman: I had a question about your capital spending for the balance of the year. If we look at what you spent in the first quarter that run rate wont get you to your guidance of $2 20 to $2 40 for the year. So I'm just curious how we should think about that over the last three quarters understanding that you don't guide to cash flow, but just trying to get a sense of what.
Daniel Herman: What we should be looking for the last nine months.
Daniel Herman: Hey, Daniel.
Daniel Herman: We do we haven't changed our original full year capital and.
Daniel Herman: Whereas most of our outages in the first half of the year.
Daniel Herman: Second half will be somewhat influenced by the large capital projects we have.
Daniel Herman: Associated with Eastover.
Daniel Herman: Both the speed up in the new Cedar.
John Sims: So, the full year guidance will still be.
Daniel Herman: So.
Daniel Herman: The full year guidance, they'll still be $2 20 to $2 40.
John Sims: Hi, Daniel, John, I would just maybe add something to your question. I think when you look at free cash flow, and we've had the, I would call it the issue last year and the one before, we are very strongly... second half of the year cash flow. Our two last years were at 90% of our cash flow the last two quarters of the year. We expect about the same this year. So I know sometimes in your modeling, it's a little bit difficult to do, but this is what we've seen. Historically speaking, you've got it in our appendix slide and we we expect about the same thing this year.
Danielle Jones: Hi, Danielle Jones.
Speaker Change: I would just maybe add something in Europe.
Speaker Change: I think when you look at free cash flow.
Danielle Jones: And we've had data.
Danielle Jones: I would call it the issue last year and the one before.
Danielle Jones: Very strongly.
Danielle Jones: Second half of the cash flow or two last years with 90% of our cash flow the last two quarters of the year.
Danielle Jones: We expect about the same this year.
Danielle Jones: So I know sometimes in your modeling, it's a little bit difficult to do but this is what we've seen historically speaking you've got it.
Appendix slides.
Danielle Jones: And we we expect about the same thing this year so.
John Sims: So a very significant increase in cash flow for the second half.
Danielle Jones: <unk> seen us get the increase in cash flow from the second half of the year.
Daniel Harriman: Okay, thank you guys so much.
Danielle Jones: Okay. Thank you guys so much.
Danielle Jones: Thank you.
George Staphos: The next question is a follow-up from George Staphos with Bank of America. Your line is open. Thanks. John, Jean-Michel, Don, you mentioned on one of the slides that you... North American Demand. down 1%, but that I guess, if you will, higher than underlying demand because it reflects import. So I guess two parts. imports you think are going into inventory right now, and pre-buying, putting that common together with another one you just... That will be, I guess, something that has to do with the Weissenrieder, Daniel Harriman, Fredrik Weissenrieder, Sylvamo I think you said overall you think demand...
Speaker Change: The next question is a follow up from George Staphos with Bank of America. Your line is open.
Danielle Jones: Thanks.
Speaker Change: John John Michelle Don You mentioned on one of the slides that you think.
Speaker Change: North American demand is down 1%, but that is.
Speaker Change: I guess, if you will higher than underlying demand because it reflects.
Speaker Change: Imports.
Speaker Change: So I guess two parts.
Speaker Change: <unk> do you think are going into inventory right now and pre buying putting ticket common together with another one you just made.
Speaker Change: That will be I guess somebody has to be absorbed and be an overhang for a little while and then.
Speaker Change: Thank you said overall, you think demand is 3% to 4% on an underlying basis.
John Sims: Is that what your expectation will be? you know, over the rest of the year. You know, how would those figures map? I think they should ultimately align demand versus shipments, 3Q, 4Q. and the like. I'll show you. Yeah, so the comment there was the apparent demand, and we call out the word apparent because of the calculated, you know, when it looks at domestic shipments, plus imports, you know, it might exports. And, you know, that's being reported as down negative 1%, but we believe that underlying demand is really down 3 to 4%, to the point you just, you made George because you count the imports as soon as it hits the ports.
Speaker Change: What's your expectation will be for industry shipments.
Speaker Change: Over the rest of the year end.
Speaker Change: How would those figures map when do you think they should ultimately align.
Speaker Change: <unk> versus shipments in Q3 Q4 Q.
Speaker Change: I'll turn it over there.
Yes.
Speaker Change: Comment there was the apparent demand and we call out the word apparent because of the calculated it looked at domestic shipments.
Speaker Change: Plus imports minus.
Speaker Change: Exports.
Speaker Change: And that's being reported is down negative 1%, but we believe the underlying demand is really down 3% to 4% to the point you just made.
Speaker Change: Georges.
Speaker Change: Because the account you count the employees as soon as it hits the ports.
John Sims: And typically, you know, that, and there was a large surge of imports, particularly in January in the first quarter. And so we think that that has made demand look stronger than it actually is. But yes, it's in inventory, and that will be probably consumed going forward. If you look at the numbers, February numbers, import numbers were a little bit lower. Not full, but they were they were lower than than January. So we think some of this is due to, you know, just the timing of the Howard Coker, Daniel Harriman, Fredrik Weissenrieder, Sylvamo and Wendy. Thank you all.
And typically you know that.
Speaker Change: There was a large surge of imports, particularly in January in the first quarter.
Speaker Change: So we think that that has.
Speaker Change: May demand looks stronger than it actually is yes, it's an inventory and that will be.
Speaker Change: Probably consumed.
Forward, if you look at the.
Speaker Change: The numbers, it's only I think it is reported that.
Speaker Change: Where a number of important numbers were a little bit.
Speaker Change: I guess Oh.
Speaker Change: They were lower than.
Speaker Change: In January.
Speaker Change: So we think some of this is due to just.
Speaker Change: The timing of the imports come in yet.
Speaker Change: The first quarter demand, maybe look stronger than what we actually see okay.
Speaker Change: And when do you think.
Jean-Michel Rivieres: Go ahead, John. No, that was Jean-Michel. Sorry.
Speaker Change: Go ahead, John I'm sorry.
John: No that was so Michele so just wanted to reintegrate.
John Sims: I just wanted to reintegrate, when we look in terms of demand, especially for Sylvamo, I'm talking, our order flow, not only because we've had some issues in the mills, but in general, the demand we're seeing with our customers is strong. We have food. Yeah, I think you were asking about domestic shipments, George. So my comment on this was that, you know, there was some capacities that closed last year. So domestic, you know, just that in itself would lower domestic shipments. And then there was a mill that was recently announced that may be shutting down at the end of this year.
John: When we look in terms of demand, especially for Sigma ammo I'm talking our order flow not only because we've had some issues in EMEA, but in general the demand we are seeing with our customers is strong.
John: Okay, we have food.
Speaker Change: Yes, I think you're asking about the caustic shipments George So my comment on this let's say there was some capacity that closed last year. So the domestic just that in itself with lower domestic shipments and then there was a mill that was recently announced.
Speaker Change: That may be shutting down at the end of this year.
John Sims: But so we would expect the method. down just because of the capacity closures, but as Jean-Michel said, operating rates are in the mid, you know, low 90s. Very good. Another question I had, and I'll turn it over, actually. Thank you for going through those earlier. Do they affect at all? progress on Eastover with your your bigger projects and if you can just give us a quick update on how Uh, no they do not. They did not impact that. And actually, those projects are great. Staphos, John Sims, Cole Hathorn, Matthew McKellar, Hans Bjorkman, Fredrik Weissenrieder, No impact there.
Speaker Change: But we.
Speaker Change: We would expect domestic shipments to be down just because of the capacity closures.
Speaker Change: Michelle said operating rates are in the low nineties.
Speaker Change: Domestically.
Speaker Change: Very good.
Speaker Change: Another question I had and I'll turn it over actually so.
Speaker Change: The operational issues.
Speaker Change: Thank you for going through those earlier do they affect at all.
Speaker Change: The progress on east over with your bigger projects and if you can just give us a quick update on how thats going thank you.
Speaker Change: No. They do not just to be Frank with you David did not impact.
And hopefully those projects are going well from a timing perspective.
Speaker Change: We're still seeing startup next year on that its onto on schedule on time.
Speaker Change: No impact there okay. Thank you John.
Operator: Okay, thank you. Again, ladies and gentlemen, if you have a question, it is star one on your telephone keypad.
Speaker Change: Again, ladies and gentlemen, if you have a question. It is star one on your telephone keypad.
Hans Bjorkman: I'll now turn the call back over to Hans Bjorkman for closing comments. All right, thank you everybody for joining our call today. We appreciate your interest in Sylvamo and we look forward to continued conversations in the coming weeks. Thank you very much. Thank you, everybody. Once again, we would like to thank you for participating in Sylvamo's first quarter 2025 earnings call. You may now disconnect.
Speaker Change: I'll now turn the call back over to Hans Blackman for closing comments.
Speaker Change: Alright, Thank you everybody for joining our call today. We appreciate your interest in survival and we look forward to continued conversations in the coming weeks. Thank you very much. Thank you everybody.
Speaker Change: Once again, we would like to thank you for participating in South Atmos first quarter 2025 earnings call you may now disconnect.
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