Rayonier Advanced Materials (RYAM) 9 May 192019 Q1 Earnings call transcript

Company Profile

Participants

Mickey Walsh	Treasurer and Vice President-Investor Relations
Paul Boynton	Chairman, President and Chief Executive Officer
Frank Ruperto	Chief Financial Officer and Senior Vice President-Finance and Strategy
Kurt Yinger	D.A. Davidson
John Babcock	Bank of America Merrill Lynch
Paretosh Misra	Berenberg
Salvator Tiano	Vertical Research
Roger Spitz	Bank of America
Paul Quinn	RBC Capital
Dan Jacome	Sidoti & Company

Call transcript

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Operator

Good morning, and welcome to the Rayonier Advanced Materials First Quarter 2019 Earnings Conference Call.

During today’s presentation all parties will be in listen-only mode. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the call over to your host Mr. Mickey Walsh, Treasurer and Vice President of Investor Relations for Rayonier Advanced Materials. you. Thank Mr. Walsh.

begin. may You

Mickey Walsh

and first everyone. call quarter operator, Rayonier and again Advanced Materials XXXX good you, Welcome morning, to webcast. Thank earnings conference

Chairman, Officer; on and Senior Chief Vice me today's Finance are and Boynton, Joining and of Strategy. call Financial Officer Chief Frank and our Executive President Ruperto, our Paul President

will our made that presentation I'd like rayonieram.com. to and release last in earnings Harbor federal at presentation, were issued provisions statements evening securities remind website you include and the Safe Our laws. materials are pursuant today's we available forward-looking on of to

non-GAAP our filings Our to measures financial factors, the our presentation earnings X presentation. be on financial most non-GAAP measures release XX results the to as XX non-GAAP well directly but measures presentation believe cause information their make. alternative Today's Slide of may material. we list as to the referenced also our They comparable now of and of statements X materially investors, reference useful also certain the from provide to turn these with A GAAP should financial of on are as measures our Slide forward-looking I'll included over Slide reconciliation We some through measures. of measures actual will on differ SEC noted for which presentation. not may GAAP call an considered management Paul. are

Paul Boynton

value results the to then and key to start return I'm primarily before were drive our to by Company. them our I everyone. Look, Frank Hi. to call growth to quarterly discuss to as morning, well will today addressing quarter review the Thank as initiatives the turning you, our and Mickey, our issues disappointing over events. results two driven going by first results. key strategy impacting for good and mitigate financial

running online to Temiscaming, relatively in Canada. boiler constructed in cellulose This boiler brought First, quarter. downtime our boiler and new past global in design, until a we reliability leader high-purity a has this is had industrial due well been XXXX unplanned by plant in which

in quarter features million causing the to due However, initiated of primarily to economizer and allows energy economizer the us idling plant design XX failed, during days The to costs operations Temiscaming, higher the operations and drive about certain boiler EBITDA, costing this lose in section maintenance of produce that maximize run us fixed some to $XX steam of turbine electricity. sales. in to mill coupled were Tembec generator production and unique of the practices our lower ownership, with

issues Our plan has of solution optimize until install broader mill team impacting to part permanent put a to in outage has ordered have components which our during studied new the budgeted been solution should May a planned allow and we the The the run in at reliability. XXXX. as levels, boiler place of

more levels costly throughout a employed shipping stable made get most The our began hardwood satellite and leverage supply to hardwood inventory sourcing is we that issue using for last southeast, quarter. it costs. conditions maintain difficult more harvest throughout prolonged and of and have and summer in region lower hardwood plant. and hardwood. and hardwood the our costs facilities for availability U.S. due Historically, abnormally the second rainfall successfully into late wood wet experienced restricted our to Jesup, strategy high first forest These in key to Georgia continued suppliers We the the affecting and

downtime levels, during we to over with were for Now at fully take forced we depleted the a the Jesup of decade, from the unable strategy impact production mitigate severely to Ultimately, inventory sustained wet benefiting despite weather. hardwood quarter. were

we point reference, in U.S. pulp other the of six a mills aware are of As

hardwood. downtime take to to procure forced also were that to inability South due the

of rebuilt impact year. Since and hardwood quarter, lower remainder $XX the the have lower loss believe of allows end inventories a million already the in result, of the higher quarter. we the cost costs to our a hardwood XXX,XXX us production throughout of wood we that costs by EBITDA us As than level tons, more the

on Now from $XX in $X as first price, priced two and to higher the in impact raw decline due prices cellulose Despite expect are in cellulose decline XXXX price XXXX of to material levels, decline comparable for the sales of Chinese excluding XXXX X% full-year relatively XXXX due these Chinese tariffs. expected with well versus any the to tariffs stable for year, of EBITDA in X% and again the specialty approximately any Therefore, as a X% be excluding year's top we to High price periods Cellulose, quarter specialty experienced last shipments the impact operational sales Purity still issues sales flat remain lower tariffs. a and year-over-year remainder the the including recognized the million quarter to mix, tariffs. million of volume we of to

market Lastly, for the negatively segments, results and pulp for impacted lumber, paper, commodity our pricing period. including

declines issues in businesses and products mitigate we help the and pulp logistic Canada, forest and to in pricing inventory costs. manage our Given downtime took levels market

High on position on in to to ability I ways Cellulose am The does quarter of performance the confident first markets. and reflect earnings in not continue our also track. and back potential segment, our in to We Purity these reduce find our us get the improve costs financial team's competitive

structure to relied the the remainder our first actions year. be are are operational specific of which previous our guidance, the can significantly our quarter issues longer taking expected through and to improve performance restore While no we upon, financial the impact reliability cost

the me over call turn with let to that, Frank. back Now

Frank Ruperto

sales of reviewing and start quarterly results focusing an for Thank EBITDA segments. net by on you, the Paul. business I'll each and outlook our

by improvements % in the ago Slide the discussed volumes as commodity X prices. to Jesup impact CS million volumes million, on sales and a and quarter. $XX high-purity issues compared offset in The to million negatives energy largely price $XX outlined as timing, As operational compared from sales was the segment well and prior commodity and by Temiscaming $X EBITDA to period. year These attributable driven were the X, increased sales and cellulose year increase the higher for was decline chemicals by mix. due to in tariffs, that partially to Paul

While commodity an are benefiting prices from improvement towards mix volume. in viscose more

full upon. issues negatively of the relied longer For the high-purity the no previous year, our operational first cellulose which be impact should guidance, quarter

anticipate and EBITDA to back However, margins overall during in year. of segment remainder position changes ultimately of we year. through expect building commodity we our half through improvement see high-teens in in returning Subject significant the cost to this tariffs, the the year, financial prices sequential the and the the to improvement

Turning driven all on corresponding lower paid. these $XX the EBITDA Forest $XX vast of million majority lumber into to a expensed. In the price decline Products the the segment a million prior segment trade for disputes. the Slide this lumber of into in Canadian weaker partially sold these upon lower start period, from by $X duties paid settlement products by offset largely have related of duties ago X, XXXX, of sales fell declined quarter, lumber by softwood duties recovered to U.S. the for or and of sales been the price primarily XX% were the markets. XX% $XX year duties have year shipments Since by historically from million U.S. producers decline for a volume, duties in quarter, our the in million driven the

the lumber in Looking the remain to forward, prices expected are depressed second quarter.

the industry may in near-term. in in improved pricing result British However, Columbia curtailments recent

benefit below been have starts housing should first the expectations outlook housing Although longer-term more quarter, for prices. lumber stable for U.S. the

Turning due for off negatively taken These were to historical and in high quarter. by sales yield pulp decline X, segment of softening from impacted the to the Temiscaming highs to driven market decreased due in prices $XX million, a results Pulp corresponding an by XX% in XX% the demand in Slide decline export $XX which markets downtime volumes EBITDA million.

to Looking before high dynamics levels remain to online positive, the prices anticipated years pulp new as capacity expected next for lack several come forward, and yield the supply historically XXXX. at given demand of remain are attractive

in to newsprint partially offset our on increased higher and logistics in Sales sales segment paperboard primarily decline segment a Paper X% to production Turning $X volumes $X a our XX% X. XX% by decreased primarily by Canada. at due volumes. price, as newsprint decreased million, million, decline Slide due in well board paper issues to the lower and as constraints EBITDA for Kapuskasing prices newsprint plant and

while to pressure into exits newsprint prices American until Looking the increased forward, expected to demand likely decline paperboard U.S., the to weakness experience prices are including are competition, continued from market. capacity due North imports

$XX was year. the in Slide at a X. first drivers down came quarter major sales quarter. $XX of from EBITDA the quarter for prior basis, to were On the previously-discussed million a in of cellulose. million, decrease $XXX at decline from high-purity the consolidated for the ago year million Turning $XX income The operating variances million,

on $XX working shown we including Slide the in cash driven As from XX, increased operations, in capital Canada. of million wood million seasonal $XX harvest used by

of million should $XX ended to part capital of on of million $XX to market I and including course expenditures, $X of million repurchases. capital $XXX note borrowed We EBITDA $XX to million not our in operations under net million basis. a fund XX-months of invested and were also related debt net ordinary repurchases debt stock stock and returned the capital open X.X $X.XX of $X last billion We repurchases these with strategic approximately leverage and stock times and dividends program that adjusted incentive of stockholders million $X quarter program. long-term repurchase to million our through net

XX. Slide to Turning

We continue to allocation disciplined capital maintain a strategy.

increase reduction. I'd to weighted near-term turn more recent debt call With focus in net over the the to back be now our that, Given Paul. like will leverage, towards

Paul Boynton

you, Thank Frank.

XX. Slide to Turning

While value. we our first and Company. the solutions of am to growth right potential quarter to on so the I put that reflective and we results behind us, have can long-term are stockholder back they earnings strategy get of these not drive strategies issues focusing that the were to confident disappointing,

our Day, components. March on four is As key our Investor strategy X focused we outlined at

market First, price reducing assets margins and cellulose cellulose to our go-to-market improving specialties capacity to EBITDA specialties strategy realigning revolves growth. the drive including around and long-term needs,

the continue new high-purity with generating will EBITDA of transformation, single strategy, growth the achieve on value Combined market long-term products investments. focus pillars four in mid-to-high to of and go-to-market initiatives we digits. these segment optimization, cellulose to our designed Second, from cost are strategic

in In alternatives midst addition and we of assets. commodity are for strategic evaluating the thirdly, certain

a of nearing expect the end of our quarter. market end these assets and on We test we conclusion by the are second the

our on open potential to we you stockholder stockholders. to and cost input executing material disciplined the issues call plans To remain and to value conclude, generate capital if first you realize business purity of disappointed allocation the fully and our business. morning. are drive this growth grow to in understand we in strategy raw implemented approach time Lastly, in and full to and this the for operational to our our quarter have your to please We questions. for would earnings address them. remain committed value Operator, Thank again high

Operator

Yinger question Kurt with Please question. first of from comes with line Our D.A. Instructions] Davidson. [Operator the proceed your

Kurt Yinger

Yes. Thanks morning, everyone. and good

Paul Boynton

Good morning, Kurt.

Kurt Yinger

off full-year So on cellulose just the pricing. for specialties starting guide

mentioned over a talked believe pickup remainder the you of and I mix, but acetate nice that You of now. the are kind at parity about year ethers and

understand So impact kind us help would what could you mix that be? of positive

Frank Ruperto

Yes.

some of the a and Kurt. price mix is, is, we worth the remember, of incremental in that One more a sell landed the took as was in we products so XXXX, XXXX we shipments than which significant well. there's if of that the you was profit. big and XXXX acetate things. decrease other $X roughly things first One – first So, first And you had in But of XXXX, in between acetate in from obviously saw couple what million a are landed quarter quarter into couple XXXX. ether,

that tariffs, down take last if go guidance. of X% deck relatively down quarter which X% that year in and the year's first to a decline for forward prices look to our the prices flat at back the for X% the will impact and pricing you of to year before those remainder So the Chinese ramp be will

Kurt Yinger

quarter? kind Okay. of I And mean, Is helpful. costs, maybe any what experienced into on in just Thanks. to that headwinds, first quarter? issues looking those I the to of and way the kind hardwood should at we there potentially was the relative size mean trickling That's second then, be Temiscaming fiber how the over

Frank Ruperto

Yes, Kurt.

to inventories Let me are where our hardwood here. we've talked obviously now the about start pressure our with seen we comfortable hardwood back hardwood at had costs. we've we're more this and accumulated from cost And anticipated with that We than targeted, first we've noted inventories. in quarter so

now, place, higher planned. inventories get we've take it'll got will originally are the time through where year in of time we now to elevated However, back balance but and prices had the prices the still to and the little it take unwind a them

So, I quarter in would then, move quarter second ended wrapping up to issue, down be And We with to balance the to through of elevated boiler up starting in a yes, With expect in the the year. hardwood the Temiscaming unfortunate. solution that. costs. the very April third early regard

And coming had into on so, bit spillover a the little issues we April. of production

little And of any like otherwise, should not that elevated the we bit behind had And but in means. by so, we'll costs, first see us. be a quarter

Kurt Yinger

is of or attributable much it of weaker year-over-year operational decline just in demand? Paper in production kind business just or the volumes the And issues were to Okay. how then lastly,

Frank Ruperto

mix things, in we Europe of in the of Kurt. What the and businesses in it's is from demand from I and increased some saw Paper segment think three in U.S. weakness these a competition some particular,

there that so, was And side and demand side. a the bit on the competition of

Secondly, the as overall logistics volume as piece impact there issues sales that Canada. the was much in probably lower those in significant a production businesses, didn't obviously, but equation of

first So, or of Canadian some weakened issues demand in core companies in these operate that businesses the many in Canada core had quarter logistics globally as businesses.

impacts saw out on that and just to market. the shipping down getting You product warehousing slowed

a So, Tale Cities. Two A of little it's bit of

Paul Boynton

of a mandatory a kind competition bit to over end spilled terms more U.S. the talked provincial have year. newsprint just clarify the comments, had And into can increased and Good operations. curtailment, related the it about And anything. curtailment and on at did spillover December in a we We Frank. there. side I that's than on the Frank paperboard in new to just of that energy – of of take That really more add the to

with shipments And driven so, well, first as a agree in Frank, I by that affected logistics but little of the bit issues our quarter. largely

Kurt Yinger

Great. over. Thanks. turn I'll it

Operator

Babcock America question comes with of John next Merrill with Our Bank from question. your proceed line the Lynch. Please of

John Babcock

is in follow the at morning. on to like segment Good you in much want And of get the can I any production for the really Rayonier providing cellulose. doesn't point look this detailed some high-purity It up just guidance so, color issues there? I that. just want to some or you're with get solutions color until there's other that too a uncertainty sense provide any using for whether or you of around parts XXXX just new the

Paul Boynton

jump I'll morning. let into Frank John. this well, as Good

you we that in probably we're the not of margins. all, teens on guide guidance, the to high of providing you towards half the back First try said did but of year kind

the the Temiscaming for into here's spillover quarter. balance second year. a put of situation one, equation of at However, than the the be other plan would We into I not little running should bit maybe the

into decline winds months. in us on Probably, cost the year. think through through the down push bigger gauge the will take and I coming push elevated. in in inventories to is for the solution have want. And that that costs a really how the We'll to market just are Kurt. effect back for always of of be side and got got You harder one They balance the that's us that hardwood May taking still quarter. the on mentioning was We the in will think but we able issue We've upset, we've back start to a potential place don't another here the prices we XXXX. third

it's through always on function we a hard it's And cost decline else. and you be that always of the future go the but does anything everything and hardwood the weather half our to able to it's year. slope weather back subject the again do estimate again, plan how it, should of we as But would it's just to add Frank, so, And conditions. of

Frank Ruperto

down the of John. pointed and at One is, we're next is, as the ramp-up out, the One two-fold. of I’d add Yes, the a that are course things normalizes one and three why comes quickly couple over how issues quarters. how a of hardwood just Paul looking

getting directionally, sequential, with feel or sequential know that improvement So with high-teens EBITDA that margin that to we we teens feels right. multiple high

The is have that is other and quarter thing I'd large shutdown a running second little shutdown in no to us of the bit completed. really shutdown. with is the Temiscaming It's Temiscaming. we're we regards The out in and Jesup the variances in in reference Jesup later shutdowns coming June. And or behind and up quarter, back material

first we due anticipate to or One behind That's for historically. to is typically is half talked better have have be half about but two quarter several as the we over year being things that of we'll in years two to is in costs the that, first those why would we the stronger so the typically than higher And in that One second two have shutdowns. the half have half elevated second and typically year. slightly reasons. do shutdowns us mix is to case the and the we've last volumes this the historically we and well tend the

John Babcock

going And on Okay. is could that. Thanks trend? there also or to that that's to also a this details benefit going just be is the all you any going to new for Temiscaming, cost? for some insurance And here if hit much how provide parts get is that essentially then, direct from you're

Paul Boynton

Yes.

put be planned year, John no on be on will going The it's to in put don't them standing but but again, by, and be be into be May we be already few but the of XXXX anything XXXX. out to capitalized. have the so will the would capitalized in would expenditure should we'll expect insurance it, and range, will It Actually, again order, a here in So in but it'll that plan again be $X million that is components them are capitalized. we that place. over all the months,

John Babcock

And and any commodity on products also, clarity there a bit mix mix? Okay. impact that just to with Was specialties little outage. the cellulose of

Paul Boynton

Yes.

the So, we product that you tons, just there be noted – probably as tons. below viscose side. of at XX,XXX have north will think side. be we've of commodity the now, would where XX,XXX on have And originally Temiscaming. we and that guided will slightly we on hit commodity guided that that's may we And come noted, And most as was so it out pulp now in hit the because

John Babcock

at happen the this Did March? end of

Paul Boynton

We saw early as through in kind in place. way the we we as the through signs put of and it starts starting the ran course February in, all when fits early April of solution finally and

along. So, one of it's of we And limped to those, kind gauge. again, hard it's

and work modification again running this, what of April. back you a us was boiler we You're kind one. solution again, of design out to and continue And finally we on it as little on need we're the working we takes the another around give to to us it winning take into part to right this And effect unfortunately key and long in May modifications up early took design figure XXXX. of a a noted making that design to we're down us And fix solution then as back was it. that of it bit to place put

John Babcock

I last question turn it before Okay. just over. And then

that, about that talk and but more issue Kapuskasin, that just around of the just other… provide can't I that downtime production to just also can impact – a could you little you pronounce pulp detail in If and the

Paul Boynton

comment the Again, referencing needed our of curtailment newsprint that mandatory of energy. had up is our around take us and asked a Ontario to power facility there. facility to in control. government newsprint Ontario. it's user made take We This the that's down Kapuskasing, a because outside power. John's Yes. of they

very time. we conditions XX, the plan online bring there, took end which little under had and down it's a not below It's cold wouldn't we their it imagine it start to created bit back of normally to So then up and which up as down startup, take easy it request difficult to can an back and in very you XX that at Fahrenheit. year

issues So, a gave it external slow that was outside in start. us came and just

that volume shared, product was customers. that as which was Frank the and certainly part warehouses to issue an And the of issue. is But part so, Canadians to and our we around out other getting all noted, just

the logistics lot quarter. it's So through of just a in first issues the Canada

John Babcock

And then pulp? the downtime in

Frank Ruperto

was as done The market those the markets levels, pulp reduce pulp Temiscaming in cooling areas. because export in downtime it Yes. to help saw was in in some facility. we inventory the And

modest will on have or a the the So, It equation. side impact impact on a a impact won't large side. of have it sell the cost likely material

conditions in think will the the on market happens pulp side I dictate what sell the business.

John Babcock

you. Thank

Paul Boynton

John. Thanks,

Operator

line from comes proceed of question. with the Misra question Paretosh next with Please your Our Berenberg.

Paretosh Misra

in My and What Thanks. cellulose and for for expectations the viscose the on you on the is rest market pricing? and second maybe side? are year for Great. question the fluff the there your commodities seeing are quarter what of

Paul Boynton

guidance all, Paretosh. bigger put both fluff different, but really forward. and part mix. that out but on of now some have And as me there that's necessarily if in look around those probably we at haven't can at It's pressure the do viscose, well as think Frank tell a we as terms go we that he of in I markets see pricing the I can out levels in market. is We don't

to You'll some of pricing as going see product elevated amount larger market. probably of viscose result the a

there likely we will again, of said, over that. slightly It to north we As below incremental probably XX,XXX guided XXXX. out originally tons be

So price, in the over you'll any year-over-year other that – drive change see as will mix. more that to on probably we that Frank, move color... viscose bigger

Frank Ruperto

accurate. that's think I

Paretosh Misra

go sorry, – then ahead. And it. Got

Frank Ruperto

Paretosh. ahead, Go

Paretosh Misra

topic like that forward. just saying it Paper sounds you're think hear I Paper the I go down Did cost in In right? actually business, going should No, on. different business

Paul Boynton

guidance but don't impact of have the we Well, We cost on the specific won't issues the operational which newsprint. obviously given cost we those the based in equation, start-up, piece. that paper same haven't anticipate side on

Paretosh Misra

Thanks. Understood.

Frank Ruperto

the just of The costs And these driven facilities to reliability the in Paretosh, facilities. that. by in generally production would are the I add

the So if costs run better. look we well,

Operator

proceed question line next the with comes Dillon question. Please from your Vertical Our Research. with of Chip

Salvator Tiano

Hi, Salvator filling How you? in for is this are Tiano Chip.

Paul Boynton

good morning. Hey,

Frank Ruperto

Good.

Salvator Tiano

Good morning.

So reliability – little issues with my think Tartas. you this but bit is Tembec broad had a last also some I since year is first based, you question issues, bought

You've how spoken – three will France Temiscaming in two mill it like year or the Kapuskasing. both And wood and least for about see also one you at costs. have and now chip elevated perhaps seems

forward? issues are acquired the So did coming the as mean periodically had perhaps these also you XXXX came these you And when maintenance I of you going chips, about in prevent essentially different are all with that $XXX your these that Tartas unique online the to or aware to CapEx discover in design them like things Jesup higher million issues. the or adjusted some guess the XQ approach I secondly, also you Tembec energy the boiler, up? mill, maintenance wood be this and gradually all of issues Does curtailments they newsprint think, has are

Paul Boynton

certainly prioritizing and certainly to prioritized issues. it's of these place million the has maintenance in be Well, that have we appropriately CapEx around reliability we $XXX are

they fixed Tartas, Georgia very asset large it issue. do very indications And an as fairly but there noted, create you've here and go four run and down, in are France produce that we when noted do they now got facilities high-purity and large Jesup are facilities, does by and Temiscaming As and complex, large obviously we've Fernandina, cellulose, Florida. they reliably

will acquisition But things, are discover, that aware discovering still these go which we we that forward. were through some issue just Temiscaming not and noted was And These run able – are it's more up just well as that the that issues these is but facilities to a and as in believe of would issues and reliably we time one on be never it relatively find happened normal that we the type and this Salvator, – process. maintenance are procedures. being addressed that overall of. We you opened saw years again this five the a issue and ran solved not new an until this due had old, thing the the we we diligence boiler to

we And the running you year, XX burn. been have noted one our after for Tartas, unfortunately, straight. last fine there was just a those. acquisition. it to That's And correct failed sulfur right years So, in

budgeting that these yes, So one-offs. unfortunately is always to But we trying the our that We're capital bit process. facilities of prioritize get reliably forward. our thing more there's into running bigger plan to a little going

Frank Ruperto

Yes. I'd cost have you leverage. Paul. operating running referenced I are large And they to when cost add well. benefits, And the just very Hence, that they're and think this. high assets fixed These

We also have significant certain concentration like on caustic. key inputs wood and

of And are performance to magnitude of rest the up be hardwood, and in just a the can result, years issues ability Temiscaming nature, the unlikely of so, the also some mills made be certain volatile quarterly as have through order those of make financial quarter, issues. up in these last year. but the to shorter-term In Jesup this

Salvator Tiano

sense. makes That Okay.

due that this from imagine – guess your – just for in still lot didn't this was I a very Just of there XQ, down but higher said, the a million lower I little quarter $XX I production during think volumes a sold any was And Temiscaming. on issue? to the bit expense – Is you to sold early was the exclusively or of the goods products in to you commodity it inventories. almost material good also given know you from clarify fixed cost there – April, that impact your issue incurred you

came I'm of of talking of have? the how that cost April, we think And of about not again sold XQ goods much goods I'm cost online cost quarter. will unit unit the as in about flow line Temiscaming elevated just sold about an costs, second and So how in the the early fact the talking impact should

Frank Ruperto

question. I Salvator, think Yes, good

of the look $X on capitalize on $X expense lack of to as because don't the We boiler the There production. run. those million maintenance preponderance the fixed vast was related probably fixes, at was it expense the So we we Temiscaming that. to million in

we shutdown most But because we of have goes as have part. in into referenced the some key hit that that's will So higher QX earlier, the a costs QX we hit. but inventory of that took in would cost

what did more April did shutdown although to issues. is the quarter costs, the you're large going not reference, normalized really bit very go these – with little see with into So necessarily spillover, type we a of a Paul

Salvator Tiano

makes sense. That Okay.

couple a bit to other Just a little on segments. clarify the of

asterisk you they Firstly, a in grade on appropriate of mentioned abroad you – your think that I noticeable do I grade slides, but what in you're the make. declining what started you look know was the price, BCTMP more realizations. kind for Eucalyptus comparable with talk and decline line about the you early-XXXX, – especially Bleached when have There China, benchmark, Kraft in pulp in in realizing. you And probably BCTMP is

the or that further any from had in highest make, of declines? we I product XXXX, think to discounts to not – don't was is the in that's track think should lower in any they any – any up material kind at contracts, even pricing, it's addition there XQ not Is though the steep the to best flatten long-term we end list quarter contracts you or your decline explains I XQ, give decline did what of of so your this protected perhaps guess you it How pricing but the nature I it that was end how XXXX. XQ? realization? with you

Paul Boynton

Yes.

to check have my double think and here, numbers I'll I Salvator.

saw you experienced out a decline in the about and that sequentially basically same XX% impact. there we industry think I

on materials see If you referenced XX, our Slide there. that in noted you'll

the increasing of products we the expectation. going align we out And back these And so going a of half through about, that stable in with with year. talked in the environment look, I priced our most pretty forward, think has fully industry

think it if I So at we always but the look indices you and can out talk right look in – offline the think we there, with were I line indices. at

Salvator Tiano

just a sense. – makes I That think last couple of question. Okay. And –

I obviously capacity doesn't mentioned is mill and really newsprint, going newsprint, it – that So it it's Essentially, or the that just kind – to a of balance? affect How that closed firstly didn't they there's so – newsprint will it of help, prices the the produced and exit their later. on restarted leaving. months temporarily barely it was effect demand any what's think few White supply Birch unless commercial decline

Paul Boynton

Yes.

I think the right. latter,

should period out came a think as and came for on it have. I it back short

is right to So and prices we're some the through I That announced a that. in happens start a prices demand over year. trend what pushes repeats bit again, closures, the a you stabilize, facility against they it of the someone – expect weaken, very market until And go happens, couple the falls we if would a course of up maybe to then as this of decades, in we've next little cost think you'd kind where position out, itself. got now, see and look decline, the Kapuskasing last which is there until continue – low that again,

North decides go America are to kind see of the right ahead to shut decline and next we in player bit shop. now. where We're going that's So until up price little a

Salvator Tiano

Okay.

turn thing over. – before last I one last Just question it

was think a I what for clear have And is – your in products, prices prices, been down And as think also is viscose. on realization lower. going pulp an pretty go the that not trending automotive mainly what commodity strong. we fluff obviously viscose, been safe assume you the from personally to effect actually price only Was mix? from understand, But prices down. have level? that can I of based obviously QX, it I realized And it

Paul Boynton

Yes.

So Salvator, good observation.

as so the viscose going from more mix of year. have quarter, we did previous inventories the some we in down the So sold

a had price that realization mix. due So we to higher

prices quarter, we’ve those first more areas through recently. this of in some with moderating moderation the see seen did You

Salvator Tiano

you very Thank much. Great.

Paul Boynton

you. questions. Thank Nice Yes.

Operator

of your from line comes of Bank the question with Roger Spitz with proceed America. Please question. next Our

Roger Spitz

you. Thank Good morning.

Paul Boynton

Good morning, Roger.

Roger Spitz

On would be around the or somewhat view be negative? positive provide Forest you Products, willing area, to of would or EBITDA flattish whether XXXX any

Paul Boynton

pricing. think we've Look, in we talked of our calls. just to I'm kind what the Roger, last there, got of out in – of trying terms we

will took see, $X we a expect QX similar. of can – and EBITDA. negative quarter that said you be And here As we pricing somewhat million we

the where on we again, being of duties sitting of think returned. below year, we But without the at again you slightly call we're now. the So project our overall, as and can go look ahead of I pricing, balance would kind outside break-even, improving that

a benchmark positive lumber more forward. And us so, put I would of have that's pretty year. out going if of kind kind position that where Most you up And year, be the then think prices good to course, half I of approximate of folks we think going on of look far a could back the that in the year.

Frank Ruperto

the Roger, break-even on think guidance in operations the range. operations. our realizations more call those $XXX mills in – to normal And of Under $XXX put some Yes. normal out we as million on the I last in under directional million are

And see they're those start normal it, you'll should profits. above so, we given they're probably operations, modest to, produce if If and trending numbers, break-even negatives. slightly trending below

Roger Spitz

out rest difficult outflows of should recognize for it can working you question the inflows the quarters? that. for But for you be Thank This given lumber. to XXXX, the what we capital be how next three how of about it'll I timing pricing said figure Jesup the or last hardwood hard, think

Frank Ruperto

Yes.

we So reduce program capital. targeted working a to have

The to was to for net important all and quarter first realize of because always log $XX I in think quarter. the tends the first in lumber round most that's harvesting negative that cash And that build roughly is costs. million is first be our Canadian thing

to decline wood of that So, turned lumber gets sold. the we – should just the lumber round that need remember gets as year, that and that, into course as over

that So help. should

would inventories the in the market caused of higher some than commodity weakness our target. businesses has we to Additionally, be of some levels typically at

cash there sell deal should the some move In some those to to downtime inventory goal be the always, to may, But with weaker inventories And we the the capital improved issues well some us. these in the – working behind increase profitability in flows the as as through of for positive change in both the get those the businesses operational as we're of forward. as we look down working working business, those is change we levels. at markets, capital market as so,

Roger Spitz

lastly, think you're the through you Got how working various it. these one repurchases here? about share hand, issues. On And obviously

On hand, your – moving you. stock Thank have the other you price.

Frank Ruperto

quarter, than we would X.X That's Yes. Roger, roughly we're EBITDA. like greater levered to this typically times out net at coming of to right now, debt see.

quarters is for X.X comfortable in buying those we ran sit and first last shares think be times. back material four to leverage levels. right around that We've some target at Our we're three leverage primary times, the going on when is our times here focus – reducing X.X I area. But

Roger Spitz

very much. Thank you

Paul Boynton

Roger. Thanks,

Operator

Please from with of with question line question. comes Quinn next Our Capital. proceed RBC Paul your the

Paul Quinn

thank Good much. Yes, so morning guys.

Paul Boynton

Good morning, Paul.

Paul Quinn

I've conference being of year one if if – time. calls Sorry be short to same three all calls the on I before, described this same at of but on you've three I'm had and sort time the able

with what on in it paper, pulp lumber the much yield you're and So, cellulose side. specialty high expected line on as was we really

fiber? into diving is two Temiscaming costs quarterly I there and a than over is costs, hardwood $XX hardwood million What spend increase just percentage So the hardwood higher their that issues delta on kind the on the lot on thought. of

Paul Boynton

facility. largest XX% order higher on on that that's our obviously input Yes, the of into somewhere Jesup going

Paul Quinn

years you a Okay. it, And for then, covered their through and boiler number construction. call of Tembec

boiler. very new So it's a

specific sounds hopped because implementing maybe a solution boiler? the got at was that in you're you – what call it be wondering the like understand And me issue help this just mid-XXXX, to could I you've going later, to Just that.

Paul Boynton

of the on one and was inside, that which flow boiler, tubes It's erosion, me really but it through causing you're quite around which but very is design. causes very reputable gas fail. really poor the boiler anticipated And honestly, part. a boiler, just bit, Yes. in that Paul, needed are little old put by right. a a going greater thinness these so creates a fluid than to a builder, That clarify it's let five-year

to solution tried and temporary in a that we've that allows – alleviates place put issue. put So

was part – it to is Temiscaming maintained. RYAM and put contributor key to practice And how legacy being soon. process we our boilers. was And think second as we've in got The And on rigorous that rigorous a we just failure. now that very follow a we that place and very how unfortunately a that, the well maintain

is design the in years So that the on found place exact of those or solution a have way, they we remedied permanent three actual boiler in a that another the go couple had through And same ago. to been exact going producer had XXXX. and May another thing design by

we redesigning followed So, we're have that. how their lead on

is being quite and two the of how one are around those it's honestly one components It's is that. So really, design maintained. the other

Paul Quinn

potential bit a the And little Okay. then, you sales. call, non-core talked asset about last

that of I to the what your the of should a with decision is is kind assets think decision referenced release, as or in have you end some decision QX, and which to by a sale you assets? that do

Paul Boynton

Yes.

talk process, we do and communicated we we Let make about about rightful to about ran way. investors some that this of originally it at me when made a And one owners just well, point, Yes, these this this we when assets. talked we is going we're spoke right. this This the we've process, these actually through understood acquisition. them we'd market stabilized sure facilities all and the really Once check.

this in ownership. us to certain either value check assets. for the say there real question good market there out got or is we compelling interest I'd we're right for commodity various us our through in going is these keep value And more So, the now. them compelling to release facilities these

information see value And understand so, that more we'll once again share have in hopefully what quarter really decision is out we to there. of we this that the

Paul Quinn

able pretty decent just to pressure. And allocation. most And buybacks. likely represents up just will times, then, Okay. is leverage do to certainly question at under some opportunity stock today a capital I significant some it last be your X.X come the on understand but

going are it couple this just Is one-offs sounds you that to back are another they get major you're stock would at If one-offs and pretty point? think which forward? there. that these much issues like you buy of fear Why going

Paul Boynton

debt not our we of but Paul, to obviously, we're all. at pieces No. And issue capital focus consider repayment. that allocation, going on all it's

relative I to going got think quarters that anniversarying of you've today. into to QX very commodity be in we're take XXXX strong QX to account and

that levels table extent, projects as maintain that very or leverage either sure in of will makes And other on feel making forward. we always to focused return components they are. to that's sense. stock And obviously, that comfortable we investing so, the on we've high going back got Then the buying be the key be

Paul Quinn

That's Thanks. helpful.

Paul Boynton

Thanks, Paul.

Operator

Our question. with Please Company. proceed next Sidoti your question comes line of Jacome from & with the Dan

Dan Jacome

Good morning. you Can hear me?

Paul Boynton

Dan. morning, Good Yes.

Dan Jacome

Terrific.

Just to X. March on hard you February in again, you the manifest a Analyst to Day, boiler give said began not but the anything, issue at it time or

at wondering going that that the Just investment you was that gas operational somewhat was least just to were Or you thought there Do specific point surpass? mention didn't event? that you why to to issue at something to able community be flow the just at minor was to you begin it something think structure?

Paul Boynton

historically you is don't not Yes, we uncertain magnitude by business Well, changes annual And guidance. positive both And is Dan, policy relatively experience as our changes quarterly guidance. guidance. update and and can to of our negative the know, give quickly. do We And give the nature. duration that

here assets experience as fixed little facilities generally raw term these Paul nature. bit In out they And – of the call, energy. are that themselves, disruption they of on and large directions to pointed lot big chemicals other we And so, were swings we can half through the buy the in quarter. regards to see a and in a fits up typically shorter hardwood the impact and other earlier so which materials, in things. and We some back the can in starts

we have going to up. on point, quarter. where obviously, that to most us at picture so, that the And through And said didn't the of end full that we've dog was continue

Dan Jacome

Right.

Okay.

outlook on in then Temiscaming your deck next plant? the like Can And cautious. provided with Analyst Day sounds paperboard slide couple is somewhat more that prices, Now quickly on understood. over you of I your near-term reconcile paperboard on pricing years bullish totally you industry it

Paul Boynton

deck this paperboard some increasing putting is for under materials coming the paperboard. Right of kind years. the Yes, to States is environment. lot that going now, on I Dan, out was paperboard, quite in here of macro and our a indicators we industry trying We talk find product. noted that couple there global home about United that provide call, in just the more are in around next some pressure we of sure over we people our have the just a of What think pressure did up folks, market

or changing we that at paperboard some have folks well and terms now. to on we analyst and We give look the that VC not The thing and more look producers. the anticipated their of But a just course, out to that of industry fundamental as does an to a trying look is any any are as is who We'll update gone market we'll and seeing watch say, fundamentally the projection in than say taking through of It's revisit producers saying say we're out also back there is different way. hey, out U.S. in only pressure quarter. find change in U.S. all. largely of out tend and from pressure everybody we in China And gone And others dynamic we back the at first some their change European just back have there to here on there. as to issues is on putting have there what future the pricing. believe you home it's that our not trying outlook the to related some a product for

we as still we're investing the should that now, some go pressure, but fact right on lifting it So we've be got forward.

Dan Jacome

check long-term much, right. cause with good still data very of guys. the you outlook. It Thank luck All VC to The and appears bullish. wanted you perfect. with the I rest very quarter. just Yes,

Paul Boynton

Dan. Thanks, Yes.

Operator

is Vertical with your question Dillon, Please question. Research. from Our Chip Instructions] up proceed a next follow [Operator

Salvator Tiano

else specifically, think maturities maturity maturity. sure and covenants, near-term target schedule, keep big a here to take debt a shooting I expense Is prudent XX-month that closer again, the on there regard with think remains leverage. your Hi you – what follow-up obviously, in your any guys. leverage Besides check. Obviously, is debt correct? making to and X.X Salvator a down that times, trailing there's is gradually base, to With you want we the how kind quick anything should four Tiano regard mind? up your and in interest I these to on don't to and just times. of mentioned it

Frank Ruperto

on of against covenants. coverage our leverage million sit There's of first your maturities. loans, those two got our obviously, less end in greater interest EBITDA QX, net We've near-term covenants, term times. approximately to three covenants maturities here those we no XXXX times of got the and than we've on three of secured $XX on we In tranche question than and at loans. term have And as cushion regards of

Salvator Tiano

much And you debt this point? the is since mentioned leverage, secured secured so at how the just

Frank Ruperto

We of senior $XXX million have roughly notes.

all is So the remainder debt. secured

be would on million. roughly debt net a basis, that $XXX So roughly

Salvator Tiano

coverage is an EBIT on Okay. And basis? the an EBITDA or interest that

Frank Ruperto

certain is EBITDA like non-cash adjusted covenants comp. on an incentive add-back It of allow and items basis, for our the

Salvator Tiano

so Okay. mean, Perfect. Yes, comfortable there you're on EBITDA. very much. I Great. Thank pretty you

Operator

and like have the reached would of gentlemen, we Ladies Paul to the for the And call end I question-and-answer turn remarks. session. back to Boynton closing

Paul Boynton

and recent portfolio optimize our strategy thanks on again Look, the long-term everybody And for you morning. not growth Thank earnings our time investors potential. of our our drive plans with and our that reviewed this to is your reflective performance highlights the shareholders. X March for we

positive with for So time. you outcome Appreciate more your future. the I again to forward a look updating

Operator

Ladies conference and concludes gentlemen, this our call.

day. have You may great a and now disconnect

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