RYAM - Earnings call transcript Q2 2019 | Rayonier Advanced Materials Inc.

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Operator

Good morning. And welcome to the Rayonier Advanced Materials Second 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 conference over to your host Mr. Vice Investor and Advanced for Treasurer Materials. Walsh, President Relations of Rayonier Mickey you. Thank Mr. Walsh.

You may begin.

Mickey Walsh

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

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

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

SEC results of cause X material. may on Our which may of differ factors, to make. list referenced presentation some forward-looking earnings well They with release, as statements actual the Slide our from as materially the our also we are the filings

noted financial investors, but Today's presentation measures and information management will as non-GAAP for believe presentation. provide also X non-GAAP useful financial non-GAAP reference measures our We of on certain measures Slide comparable XX not financial on alternative considered GAAP directly measures. be measures reconciliation these of through measures their most Slide should are of XX our presentation. included to to A an GAAP

the turn call Paul. now over to I'll

and morning, Mickey, everyone. good you, Thank

Officer. sale including years on announced and First of closely let ongoing worked June who corporate which focused development joined recently senior Marcus ago introduce our [ph] the overseeing me initially Chief review, optimization has the I've through in just since McCann he company recognize Tembec two team acquisition, portfolio been the Moeltner, Financial the promoted changes our we made with leadership to was Marcus to

career ideally our a strategies, products, assets drivers financial Not XX the and of a him has and CFO suited in does forest only that businesses, breadth of for knowledge role. bring finance Marcus he make but year

Marcus. welcome So

last CFO. Frank call know as earnings was you last quarter as Ruperto And

our of and and was time developing, pivotal spent is leading integration the cost five and key finance and to our and company's Frank market go customers his our business. he strategy part He our High result which strategy. Tembec, new brings a Cellulose to I'm relationships the a as In those addition significant and transformation very past purposely successful about developing key over excited was Yield years our acquisition strength Vice of Senior to role group, with Purity High subsequent of the experience to President as

Senior President Erin to Erin bring to our Additionally, him Dr. and as Vice his we technical commercialization expertise, Development, paper and Research chemistry has of role structure objectives. a and more positions Ph.D. our acceleration XX people and Byers will growth focus new in we in right which deliver with has begun years cellulose product the leadership With right the on this have quickly believe development process. new new brings

quarter Now our review before we second results.

in commodity comment me a macro-economic issues. on strategic our in of of by cyclical decline and the trade significant the objectives, prices, Let context driven progress

clear. Our priorities are

cash to First, we flow. want maximize free

key with enhancing at contracts securing customers prices. by strategy commercial our optimize Second, margin

returns believe a We stronger volatility challenging credit our plan we through to Third, asset have an good amendment than maximize reduce more manage focus portfolio emerge and and negotiating to markets our to our by company. flexibility more facility. enhance financial a and these finally resilient

to and in performance rebuilt demonstrated as drive weather. costs higher results cellulose a purity core improved whole. drier hardwood purity delivered and sequential growth took on segment more as EBITDA, our down company X. we of quarter both second the In cellulose, we with and inventories as we for the high Slide reliably sequential high ran Turning We advantage much started

impacting severe paper high our pricing by pulp However, as fluff costs and products, negatively purity high well are lumber viscose and cellulose price for for operations for benefits of offset our products. being yield improved products, commodity the and decline as

negatively to have price Year date, by impacted declines profitability $XX million.

preserve flows cash capital and working in optimization As we reductions immediate through challenging these we're face extremely expenditures. taking capital actions our markets, to

focus, flows $XX generated million With this of we for keen quarter. the cash free

We are cash which upon also both flows I'll measures taking additional move expand profitability to later. and

addition managing long key on remain in significant In to against value. to decline drive we through commodity shareholder our objectives executing term focused prices, strategic

our sale pulp transaction of by exposure of around $XXX core, million, strategic volatility X, our Sappi XXX,XXX and our half high is step business. we focusing a mitigating facility attractive reduces Slide cellulose to week last metric very to to portfolio towards as purity business optimization It a. our This significant buyer part Limited commodity to our tons. Turning initiative, for announced Matane the valuation.

is quarter Now fourth asset that our in Temiscaming The with customary close co-located closing please board we ownership note of our facility conditions. yield in high will it's the anticipated our retain subject paper to transaction as and Quebec the pulp purity line. high cellulose Matane to integrated with

I you on to update with Next an go market to want strategy. provide our

purity actions specialties March, pricing margins. and strategy our improve on assets to As realigning is and cellulose the high focused announced we in taking commercial

microcrystalline Temiscaming into months the to produce as specialties cellulose viscose the with commodity cellulose. and this realignment started pleased Five with regulated asset of progress. process implementation our we're only facility strategy, the known We product a in slated

moved the As to second operating lines attractive the specialties of more of margins. been more has we at out than transfer quarter half that to cellulose volume other Temiscaming plan of

customers qualified therefore Temiscaming we to diversifying product, Additionally, accept its viscose opportunities. new end market two have

third year pricing On for commercial upcoming in negotiate cellulose the front, we quarters. specialty the and fourth typically the

good early already discussions. our momentum we seeing from However, are

contracts significant and margins contracts. multi-year improved the Thus of life have those two existing pricing over signed with customers far, we at

conclusion a provide our estimates in our will volume We and price update on investor further likely negotiations, call on February. XXXX at of the

pulp, U.S. business dispute is and much upon the as commodities, X. robust trade viscose, on yield on of rapidly our of markets commodity key Chinese were this high very the have dependent in to Slide including as that Turning shown demand. XXXX heels deteriorated, fluff China

an wet weather of oversupply construction which regional in price American caused in along shown. Additionally, continued half lumber year, product housing as reduced first the with of the markets North pressure the

reduction XX% prices. further American newsprint a declines in demand in Lastly North drove

decline debt efforts, will manage commodity order are financial flows, declines, commodity Despite reducing eliminating markets In markets put rapid the working capital through in our The issues. we and to and these capital actions to covenants spending. our to including difficult taking these cash expenditures, curtailing we to trade across response, price nonessential the results. of on underperforming pressure assets these need current improve has increased mitigate management impact amend these global

Slide financial two secured credit facility senior covenants. contains detail in out X, laid on our maintenance As

if compliance As debt of these with the covenants quarter end of the all we and agreements. in both

we lenders amendment sight be covenants we commodity loan will to to of However, file expect an no the in we agreement when in discussions our third negotiate us quarter with near-term engaged our markets. have in breach to we our weaker results. recovery allow Therefore navigate our to

as Now commercial for banks we farm with lenders reminder, many years. well-known whom providers and credit have our are a worked with

managing uncertainty. the together and believe to provide third with amendment discussed, As quarter. such We this expect complete markets amendment confidence in trade I us through actions just of implementing great this with the challenging these we

turn go our well as ahead the as let covenants, financials. Marcus and to Now the more a of for call detailed course of over me review

Marcus Moeltner

detail our I will X. Slide start on with on bit Staying a Paul. covenants. you, Thank more

the reminder, of tied senior at facility of funded a loans $XXX As million of quarter. credit was and secured covenants which million key our million end the $XXX are our $XX revolver term includes a to which

the These term debt XXXX. agreements until $XXX are XXXX revolver not million with set million loans remaining the the for term dollars due of $XXX to mature of loans November and in

our maintenance X.X both Net times less leverage covenants. end the compliance the and is five of are of in to financial quarter, compared As than covenant three we at second times. a secured of with of

times. XXXX. debt versus is both our or reported compensation a $XXX While deducts that in of covenant adds notes compared EBITDA Note for three back of mature as interest senior restructuring charges Secured such includes coverage outstanding to expenses greater certain EBITDA. and debt in stock which or of except than all times adjusted covenant non-cash million cases at onetime our X.XX

net I of business and our EBITDA focusing an Next, quarterly and provide the on will outlook each overview for results segments. an of sales

As tariffs, higher sales Chinese Cellulose a decreased by sales decline This driven $XX due the Purity sale and by High price, X% partially Slide X% outlined million, the to by sales mix was of X. in commodity volumes. in on offset cellulose XXXX. business specialties resin

quarter compared $XX in to segment even the was in higher period. and were negatives decline and year cost price continuing million procurement to well for year as the maintenance declines by largely EBITDA the impact activities hardwood ago. from as a and mix, attributable in CS The $XX sales to was million production These of Jessup improvements prior elevated higher partially offset volumes compared notably costs costs. commodity the

prices down be CS X% expect XXXX, X% as we to XXXX to Chinese the of guided. excluding impact previously tariffs, For from

are volumes due markets. X% automotive in X% expected decline However, global economic end to to to acetate and weakness

to also significantly products. pricing pressure experience trade price continued for a expected impacted Commodity global products have are as these disputes

half wood of With in our back than of other the [indiscernible] the we the improved production anticipate year. majority maintenance costs and planned outage complete

range reliability EBITDA million. we should Overall, I of segment $XXX to the for expect had adjusted note to upset million Temiscaming the full minor in the year in a to quarter. now third $XXX be

by declined driven million to offset lumber in the This sales in largely $XX partially period, was a prior Forest and an productivity increased segment products. from price due XX% Products increase by volumes Turning X, to XX% reductions. inventory year decline for Slide our by

segment by year to million of and and down the this of higher the write $X a costs EBITDA fell from sales million driven ago transportation wood value. price, market for impact inventories $XX quarter, lower

$XX $X shipments duties duties the disputes. start producers resolution a these trade all vast the of the quarter, duties Canadian softwood the in have majority been into also historically XXXX, were a of In total lumber of or million upon the of on of paid. recovered of these expensed. have duties million U.S. Since

starts remained are housing basis, weather has Looking although impacted lumber demand. earlier drivers annual and U.S. poor relatively on stable starts this have the activity key remodeling negatively an for year. forward, housing U.S. starts

abundance of British producers tariffs a Canadian of impacting curtailments publicly in supply seen Columbia. announced we and for prices, an number With current have

we will prices expect any absent With of improvement we once at the expected. prices be also actions production third be current in prices reductions these lumber levels, such, the and improve further quarter reached curtailing market. in As should the lumber impact to

offset focused which we on to in million. Turning decline $XX as sales pulp sales drove driven were highs reducing decreased decline XX. dollars, by demand markets. %XX by historical volumes, and a softening X% cash was partially price export from inventories due flow. off The increase in for improving to pulp, XX% a prices segment down yield high by EBITDA Paul results million Slide These

expected the the Looking are high pressure cash Chinese as quarter, continues amidst as to expected economy in third yield near trade forward, highest weakness the pulp costs are prices of in experience to prices the bottom Prices producers. cost pricing disputes.

Turning Slide to a by the $X were $XX XX% with XX% decline million credit million, on curtailments. due decline as associated related decreased the of our and due in partially curtailment. XX, sales newsprint a prices EBITDA issues in sales energy segment receipt and electrical reliability offset an volumes paper by to decreased to energy segment primarily for lower

continued remains paper redirect newsprint capacity weak increased supply imports forward, demand global pressure to stable, pressure. to decline likely resulting remain Meanwhile, board Looking continues producers markets, China. principally as to due prices industry in under are from as production pricing volumes from

Turning basis prior XX, year operating from consolidated $XXX period. a comparable to million the Slide declined first half income on

We our target. year focused our meeting on strategic and on remain continue strides make full to pillars

declines commodity the the from quarter reliability sales, in $XX are and year first driven cost markets. actions. costs were our majority which overshadowing transformation benefits from million sales from higher the price by decline impacts A was are mostly However, of from prior incurred primarily

quarter. impacted volumes shortages issues, at in spacing Additionally, including [ph] boiler, by the production the lower hardwood in operational which Temiscaming first campus and newsprint occurred Jessup were mostly

costs to contributed by levels issues productivity continue improve and mostly half behind should Wood to as the decline, costs With also us, wood, leverage improved in year. back expect Higher the reliable costs these of take the with more results maintenance. drier of also and advantage operations. Maintenance driven we and transportation we improve weather. reliability inventory

million for Slide million from EBITDA quarter down came driven and Price of a decrease to quarter the primarily $XX $XXX ago sales higher costs. million, million alone from from year. for the million, quarter. at was Turning the in commodity represented decline year lower second $XX $XX year, prior $XX prices by the XX, prior of

net $XX generated the we quarter. times. total billion to rose of of $X.XX flow XX million focused based months challenges, flow. in on cash Adjusted pricing last enhancing debt current the and With on are EBITDA adjusted We net leverage X.X free the declined to cash

Cash on hand $XX totaled million.

a proceeds to substantial is close of Additionally, million we which in receive expected Matane, $XXX quarter. net amount fourth of the expect to from sale the

to With that, I'd back call the Paul. now like over to turn

Paul Boynton

Thank you, Marcus.

As environment of our business headwinds, number on our you liquidity, we are significant as can focused this see, market efficiently as a In maximizing our to running we commodity sustainable ultimately particularly generating cash free facing in of the and diligently our context businesses. levels. are possible, reducing leverage flow elevated related

and to to of to the While coming the debt our other narrows our to some volatility, us our commodity to expect amend our flexibility. initiatives, business and Matane optimization, to it evaluate our only also improve quarter, Certainly, the in HPC strategic a reduce portfolio we proactively debt focus sale ratios. led continue which to leverage of one core ways covenants better strategic we has improve net positions buyer, mitigate not financial facility

are very working assets we nonessential actively and focused managing of curtailing our including actions, reducing spending, eliminating on capital, capital un-performing Additionally, controllable fully spending. all

as to confident we and these stronger times manage are difficult a our the will be know in We company result. ability through much

Operator, questions. please call the open up to

Operator

[Operator Vertical to Dillon Research. Chip come question the of is Thank you. line with Instructions] First

Q –UnidentifiedAnalyst

Hi. Howard This filling Chip. for is in

can last little to and hear my with that So I was is question situation know, first about time understand debt the – covenants, me? I'm sorry, the you personally you if trying discussion a recall, the the bit

PaulBoynton

ahead. go Yes,

Q –UnidentifiedAnalyst

Okay. sorry. down. landline I guess am I broke was The

the of term there yeah, quarter $XX Canadian So, expense - covenants. And I dent we now part was side loans, around the $XXX that old I think the covenant on discussed in million in last the was loans. is what missing that think you're for million notes slides presenting term a

less are covenants here, total? actually So than what missing based are that at the the $XXX we less around on debt, million

MickeyWalsh

Hey, this speaking. Miki

million are does related Canada, as secured $XXX include That what as debt the as [ph] debt this million senior as call based or there's so term to our yes, the that $XX Cogen in other I’ll things Cogen secured, notes are covenants well capital such So page, on or a revolver we there of as small the not ratio. a left that of well few facility leases. off of the senior leverage loans,

Q –UnidentifiedAnalyst

Okay.

types – yes, as has of – essentially So to think been trying it $XX is about. just million, these I'm we're two debt

Okay, that's clear. Thanks.

The given a have XX. second covenants be much show on would Is until that to bit November, That correct? you the the even by will good happen a thinking you [indiscernible] is XX-Q, be that little the filed essentially with in the guess million, filed though yield, breach. technically this a be even mentioned pretty your a know certainly that that you time covenants so how breach look process means of very chance could I of though compliance you your there's won't be you Q again $XXX in a in you should met amount covenants September by high

MickeyWalsh

as feel of confident So that Well, look your me we covenants have Sal, we'll that ongoing amendments have in our as we we running had that get business think understand around let certainly with question. we need some banks continue all the ongoing the I the if and the call to discussions indicated we first and should.

us leverage a helpful, it’s The think partner also perspective. we debt and helpful a in is Sappi about sale which I our would it, sale not just net this a just Matane occasion, from of is good think only but

we think fourth the that should of about see it so, and I quarter. those terms you're the benefit in So right in would

Q –UnidentifiedAnalyst

some ideas may but it getting December as of just little may math, Well, XXth compliance. you're of is you The seems when as the we in know of that kind a elaborate bit. you reduce compliance, in of a be that you know you proceeds XX back envelope September not be lot given

how of are negotiations. very lot obviously understand. for a not breaching breaching that could but this if to know taking simply have that's work during that of not you XQ? leeway covenants would would temporary you it sale that's first, of fact I Basically you have you as if so or trying reached that breach, the The are I'm you September the sale, a put a covenants of give as what following it was So them, your place end covenant projections them XX breached the

MarcusMoeltner

here. Marcus it's Yeah,

obviously you question we downturn last. can't the that might the in we here predict covered call your commodity to certainly our So how in markets know, given long that

context renegotiating will runway plan downturn of discussion. the in So the proceeds Matane that all of part part business this covenant a overall a in that markets that our of such is package of be and

PaulBoynton

that against It’s EBITDA that about. our really covenant function we constraints of a rights talked

to challenge. you going at look the the cash from the that. And we're So unrelated it's inflows - to deal obviously Matane that's again if

So…

Q –UnidentifiedAnalyst

indication, And cash Sure. easier down half, think should looking flow, to it's first still we capital the squeezed you year how kind capital full – given working know, the we're break I in of lower, $XX you're working cash go million, obviously of a as would on the use you're how the the much it what's - kind could about happening still little think as use just of CapEx I but maintenance more? imagine it go, and bit can for be lows you did

PaulBoynton

Yeah.

on second the and of Marcus part So first I’ll that, take part. let the ask me

lot of be that our about of of right. spent the $XX go? of from that can how our in off A XX was We in indicated committed. spent terms capital investment, the first million taking either so year or Just that, guidance part guided and original down that they will low

down one that have and of a with France. because XXXX amount exception only that for of at we our have maintenance pull facility So Tartus already occurred in can again shutdowns certain all the we

to is go. So that yet

some pull see that we we will there do are in down. $X light can that. that's we And we'll the But million coming look as XXXX So have levers where refocus planning. in that you we at where term and short we today again, of

MarcusMoeltner

your to conversion focused working our on still And cycle. capital, on we of part improving cash second question your remain

for have segments our the towards products targets there's and established inventory some still further those business We work across targets. finished

the in into obviously September out look incorporate make should December seasonal log that our timeframe. modeling is the as you will on you you inventories sure What your start to build

Q –UnidentifiedAnalyst

Thanks very much.

Operator

is of question Bank line next of Our Spitz from with the Roger America.

RogerSpitz

Thank you, very much good morning. and

clarification June. one is says the Matane, on that $XX as that’s it LTM of Was as is of as deal, Just million, that LTM the on March? slide, LTM

PaulBoynton

No, that's of as LTM June. Correct.

RogerSpitz

Okay.

the to ’XX by You half EBITDA wouldn't have have first chance?

PaulBoynton

First half ’XX.

RogerSpitz

As back. that question I'll ask come another now. as And and far

PaulBoynton

Yeah, of first - the half ’XX, right, first asked? half you

RogerSpitz

’XX.

PaulBoynton

Okay, yeah, ’XX.

RogerSpitz

down ’XX. Can the under it maybe availability zero why It revolver have you Oh, release on I further you $XX under I draw to incorrectly. you correctly, million, - your sorry. press am can't the currently? read looks I read if revolver, explain like draw

MickeyWalsh

Roger. the of end three quarter of that at at we X.XX the to to we'd that draw the at times right were quarter. Hey, be At up Micky, the least Its again. end allowed so times,

RogerSpitz

right have now? the some you availability so And revolver do under

MarcusMoeltner

able make that yes, you're three Yeah to as the able long times at you're the less you're borrowing, point than then the of as borrow. rough to

RogerSpitz

release. to okay. I reread the ought That's thought, press why I

back CapEx. once Just on coming the

configured might just for basis, in number this a how a As maintenance what is bones but perhaps in what we and look an what like it's mind - if to your a bare as as have annual different – today? not refer figure on general a CapEx year number CapEx you're nationally do matter,

MarcusMoeltner

Marcus. It's,

like based were cash And you we that. flow down in that based to $XX on perhaps CapEx, So for in then business state each million we we the steady you just know XX number took seeing. to would a million you performance example X%, should business the what of we such know to work that, $XX it range. initially And obviously continue evaluate this maintenance with of on modulate

PaulBoynton

we that as as unfortunately a and of introduce we're quite investment Roger running, you are - they pull these know take past capital well. fact and back large you capital would you you the are when in expense do these see reliability can it fixed mindful issues that noted of of may as the and lot So we're that assets the

good everything So be it's that the going below and look we'll done but we taper for fine that Marcus the guidance a is give to near at a has be where needs bit looking we'll Marcus that capital, balance, maintenance back to back so kind everything rate indicated run in pulling be that that not can future of and you at for down a but better number we're provided. as kind term somewhere would periods of to

RogerSpitz

that a Sure. Matane of much away once would And to the would sense of do maintenance go that… XX XX that you CapEx be would Matane have saw how or you

PaulBoynton

with $X $X million. can You million work range to a of

RogerSpitz

was And you issue? - three the that issues spoken or boiler QX that was about in you you if talk interruptions, a lastly, to had haven't two different can the about related to it, it, discussed Temiscaming

PaulBoynton

It's more nature given reliability of general the that the facility. complex integrated across

RogerSpitz

much. very you Thank

Operator

question A. is next of D. with Chercover line Steve from Our the Davidson.

SteveChercover

morning. Good

PaulBoynton

Steve. Morning,

SteveChercover

figures not speech. that but So great, it's look,

if didn't was and the you'd operate need paper with actually pulp shortfall opinion that operations. at for levels your the you So in and the biggest cash can't based of know chips source negative lumber, my imagine starting I you

So can facilities? you operate them chipping more like as

PaulBoynton

a So all, $X to of part of big in that almost our a market write keep was mark you're to were of of if will. was down you a guided that inventory - if negative, kind is mind, right, to related you first million

So chunk. that was that a was

some these part - rise. But so future it. the point prices of in that's at You get that back if

as this facilities, communicated can Yes, of chips a and a we we'll pull, makes the have chip the levers for got from doing curtailments run outside, like we some look, don't you intermittently but operate can in we know equation mind down sense. and no our in in moving to come you we are get keep the we while it to facilities buy Steve, be negative our forward then as environment up where we can back and well providing to as different supply. so

run be it make what to pulling sense we'll does those all assets. So lumber those that levers to

SteveChercover

Quebec mill, had Well, lumber had paper to still you in is as a in I recall time produce order get I you once rules upon the to effect? chips. that in a mean

PaulBoynton

Yeah.

If to lumber you think connected usually and with facility, it the our rights about the this way, harvest least in are at a cut case they are.

And chips, do get facilities. need so to run you yes, to those you those need

Now got we know of outside facilities buy from other also we've the as you from chips lots partners. and

and And can can so different facility our increase our flex the greater facility. at supply local flex downtime we we purchasing again chips what take based our is that runtime, on that for

facilities those but will do we the are plans. correct, with the are connected harvest things, lumber you So in that

And so balances. mind all you have to keep all and that sure in that make

chain tricky the from we of all of the Canada the kind that it's supply those the to making beginning, have we the from know mills to our lumber you And part assets. that pumping is connections forest said in

SteveChercover

you something effect of question, duties consider factor $X.XX on as Canadians dollar you overwhelming paid? but you majority kind historically when Okay. you've this that somehow get duties to know refunds. that in received have of or the balling the I'm the that on the spit that the cents Can

PaulBoynton

that Marcus past his willing is spit nodding And haven't do I It's anything there to Steve. good is also like of experiences. no. out heard know head a if that. ball from don't that I anybody

good that. like So aware I'm question, no – a but, not of it's but anything

SteveChercover

Okay. decommission becoming with CS a Then the commodity the been you switching C Jessup? of the elsewhere, has volume half you capabilities did more the any mill. of Temiscaming, way definition Did to shifted it's at actually if by line of

PaulBoynton

facility commodity so it. across That not to viscose run suited No, much. is ideally just a

So that viscose, volume cost per lower the the there the efficiencies, tonne. better can uniform we is higher throughput, the put on more commodity

said the it know do set of that's analysis we continue that, So there. to model to we there we outside our so acquisition, again run did microcrystalline you after well the the is and should all up cellulose, as keep as we'll

and high a And so the purity run cellulose more become right, that it'll we'll area. product way of it into you're commodity

SteveChercover

I blown correct it if considered But full to core was at that then might If mill also be advanced to cellulose? it especially the be commodity assume business thinking transitioned a non-core. we of the could [indiscernible] extreme true are

PaulBoynton

better see I think Again, a equipment that was where ownership you're that available to that's that's that prior such invested look open - going is facility of in not the it an for has facility it our that commodities. other that high specialty. one the think suited way with struggles the facilities I and that purity for It's does Ryan I and cellulose suited had make that is have even three equipment a that Yeah, are in ideally and was thought. in

certainly to we right make is comment goal of on against and thought But now commodities in is the thing that facility front that do. can just it we're us lowering good lost is sure in us. that a cost it's not running and and So it's our the best

SteveChercover

you. Got

North question, cost American curve. cap mill quartile on I if recall newsprint the Final Okay. first was the

So still it case? confirm Is the that? could you

PaulBoynton

it still a still It's tough a operational it a We've Confirmed, market. case. facility. it. overall had cost and cost issues low is the runs It's newsprint we've - despite decline asset It's world. talked low it's it, in that associated well but got a with about some secular

SteveChercover

it the I mean, up [indiscernible]? it's geographically, there of last one be should but

PaulBoynton

you've know, would one two facilities there's get - - a lot world they market but drop that facilities the do America year - you you in be continue newsprint North facilities, or shutdowns there in a operate, the out. to order. tend should the Yeah, if newsprint operating it we've the in be out come to the XX to comes somewhat think probably plus seen in of should And that I probably that as

SteveChercover

right. All Thanks.

back get to You covenant negotiations. the

PaulBoynton

Steve. Thanks,

Operator

The the is Babcock line with America. next from question John of Bank of

JohnBabcock

of on Good how was to cash the to is measures cost. taking you out, the just And of then some how also additional know, offset focused want you declines? that across you focused these like of you’re costs much generally equation. talked to I about, seeing I wondering on is just much the reduce guess morning. side what I system start earnings in flow know also that rest

PaulBoynton

that just working we can is levers that Obviously, shared, be the the to right. completely Again, going around focused would capital things management. one control Yeah. back we on, that

that's focus receivables So on payables that of course of our that. and have a we'll and lot

As and that. on focus maintain inventories the to we've continue already had we'll

family underperforming another these certainly Drawing one down spend, more. the bleed that that's assets in capital certainly right, cash that curtailing that the stops helps keep

We will we critical just And then time at on of can hey be on spending. focused lot a this spending and look, got point what's we've that. critical not on what's pull things

And quality so team making really that on serving producing customers is for be focused every the out our goes best and product will highest sure whole dollar the possible.

So And John. have those and we one cash focused on are all of of are the in opportunities those some just we'll those balance with others improvements are the flow. sheet key out be more certainly and straight levers again time

MarcusMoeltner

piece to can has impact. an immediate Paul's And something we is obviously and capital just comments, echo working directly influence

will be So that a lever we focused on. that's certainly key

JohnBabcock

the quantify impact you time? And is it have at this curtailing don't if know to rough possible in of any facilities. point the estimates I

MarcusMoeltner

wise dollar anything to this have don't in We point prepared put at John. we're time that out

JohnBabcock

this year had know steep? good hearing you volumes to so what's to if forecast the more I a a the mid-year and was driving is question on reduced remembered on And next for pretty just visibility the detail so provide you wondering your that can in high sense I just want there then you Okay. get really and just for bit the revision why purity, volume past,

FrankRuperto

John, it's Yeah. Frank.

we which is a we've good CS volume, it. into continue so roughly not we volume know, XXX,XXX moved XXXX we're have very do I talking on in here, percent Remember visibility You to typically but to shifts factors. or that point two tons about huge - see tons so about of

that secondly and issues from the bit filtration given customers in trade we're impact European into to the And acetate has some demand then seen a here is import One able lower tire backed domestic up and China China. being the automotive sector we've of business. court seeing

and those huge to said some know we're move we're and so minus some have wiggle here we've plus X% contracts what within plus and seeing base volumes minuses. about you're not you room So really to typically think or at I and our that's before and talking volumes

JohnBabcock

Okay. reasonable a you steep to know And that the through clearly is XXXX in half volume of the are given mean, seems anticipate it it like it declines the second expected will I at similar continue half. declines first to level? the

PaulBoynton

you where there. going our in we know to the go it's we're half know, out what's our we're -as to products for You in negotiation tell volumes setting XXXX, second we're the the in of year and in as hard period happen both pricing

to referenced in areas in that which and have going dependent and are said our at and focusing higher know just acetate world go business higher on we Now you margin I've we to business it. margin look to growth you market that exiting strategy, is less on lower becoming

the gross But that. overall from margin decline do modest some gross as see goal may margins to you that. improve is we So

- where as go again all to it's this comes we into discussions. John those tell So too out but early

JohnBabcock

wiggle those X% on do long the How was the for as so is those what X% the that like room adjustments. of for? the back from when maybe far or I I make X% guess though, mean prior year. last typically to adjustments they half kind year of As mean that that I

PaulBoynton

into don't visibility You the the order as goes on, adjustments typically what know, patterns. - you you I the we more last, tell year this get

XX So perspective from CS XX, our end business. or on XX, a typically we're - volume back front end XX

And lower those just normal usually in seasonal. usually when the out and coming see first they're that’s – volumes we half so we we're

that is some volumes What last the order going in lower than one X% worse time though roughly now actually out. we're came seeing we

And so that's what guidance we're into today. that factoring

In as up that go sector regards to into the know we the XXXX. in China and carryover, impact know shapes we how you obviously year trade back the global the will the issues into weakness half as go you GDP of the overall

JohnBabcock

or on Okay. was impact, spread the multiple just And sectors volume clarification across concentrated? one that was more issue - this, that

PaulBoynton

was tell in sector automotive it I [indiscernible] would you the sector. in and this

JohnBabcock

Okay.

some out? spread So more

PaulBoynton

Yeah.

JohnBabcock

primarily there like and clearly pretty Okay. I I benchmark. And was the down on so it realizations even came question last had sharply mean the lumber, more seems just than then

of impact there out any from inventories? was You pricing your know clearing

PaulBoynton

the as did noted Yeah, I out on mean move we certainly I would side. volume say inventory that e

sales the took mix range. have out we on well that. any know, and bit take But little we You fire you the like within there. Obviously, probably a you can that them anything didn't or opportunity where herd some of

market moving our was relative that was a more out mix market will I'd perhaps than two indices, and out. where yes partly change in what see you say volume of of the point decline the But if incremental to look you the or partly out the was that sales at

JohnBabcock

Thank over. turn Okay. you. it I’ll

Operator

from with is the Berenberg. line Paretosh Your Misra question of

ParetoshMisra

Thank other in you parties with portfolio terms in you. in Yea, of where other any the selling in assets it dialogue active there is are QX?

PaulBoynton

out you to thanks this launched So the goal about know assets by have our to [ph] talked process for we transactions year you of the in we this recent launched into question, kind know QX. any evaluated - there had paradox announcement. we Obviously, - end our the was of and and evaluated earlier as announced time, slipped a QX that this potential

We quarter. by the process are committed closing this of end to this

we whatever we'll If like we'd and So it be announced more can have have. anything not, wrap there's if up. to

time. - our at assets all the plan else So that this and at anything it commodity to pre-announced we if nothing that's have time is go or wrapped our And looking ahead we're announce you we'll this up to know. current quarter. have as there's at But

ParetoshMisra

expedite of in could QX, any there any the kind is Got it. Matane sale that for terms critical any you're of way waiting of step, just it? And you approval closing in then

MarcusMoeltner

It's, Marcus here.

just you a this. closing You expect you know, have everything know, we transaction conditions, like customary that in would

PaulBoynton

don't I any there's right. out unusual way I think don't any Marcus in say significant that you'd hurdles there or

know and over it's thing. else little go everything and But systems takes time. So transfer [indiscernible] all as a to time a unfortunately still have and just I it through just standard these just bit you think takes then just

ParetoshMisra

of cost Okay. in in the year, is half you. versus how you for last opportunities second this the inflation of one, Thank business, structure half half thinking then second part how the segments? and the are any the material first And other cost raw commodity in about any the the to mostly just cut operating

MarcusMoeltner

it's Yeah, Marcus.

know, trending You we our to direction. in wood see alluded call, the that as are the reliability we in improving. the We costs mentioned right

the in our happening seeing pricing chemical economy, what's well. favor Given in as we're

chemical we look if of where wood and I costs at operating running the can it's prices down. rates, taking the our levers key think to trend advantage these So you that

ParetoshMisra

Thanks, guys.

MarcusMoeltner

You're welcome.

Operator

Our the the Research. next from Vertical line question is Dillon of Chip

UnidentifiedAnalyst

Hi, guys. Have again. here up Sal, a of questions. follow couple

we you lumber, about thing, negative. your know, especially you discuss and one profitability know, pulp operating is lumber First

can was seems sales to inventory let - lumber for volumes to between it were the you yield and seems Firstly, sales us sales high the due how you both volumes it elevate difference know, pulp? productions elevated mentioned, and much

PaulBoynton

quarter In we up feet, %XXX about around XXX. and that moved disclosed a million volume of as was we from

inventory move we targets. reduction our as we volume focus on higher did So the mentioned to

UnidentifiedAnalyst

and - you unit we I board you're your million think I about think trying think think on than unless XXX high Q know costs the a we're given operating the elevated lumber probability, – producing to would wrong. a cost volumes, feet there sorry, know, it yield basis especially more You bit into outside I'm seems not simply in in

much you understanding So are I'm just much producing versus you're how how trying to get selling? the

PaulBoynton

XXX, to know, others we all QX delta you what across lumber sold. produced about Yeah. a up In we mills so our XX

Sorry on question? yield pulp is high your

UnidentifiedAnalyst

pulp? What for this was number Yes.

PaulBoynton

Yeah, sales we versus XXX,XXX. the tons of XXX,XXX produced

UnidentifiedAnalyst

Okay. a you questions know broader the sale just et little know you cetera. about And a of bit picture Matane, of to number you go -

of in are a You of kind know, the you is fact the matter difficult situation.

program, I like referred the an somewhat now one hand And seems your basis much billion. of know probably conversion – you - to a one to know, sale think trying other up sense where on middle workout to if right you we be opportunity XXX, evaluate would much you're You entire hand does value a of you sell the your that an like $X.X $X.X enterprise of enterprise higher, higher. billion, we've kind asset well, - have stock company asset on things as sale worse know would it you the the are on Does be but know work said wrap it's given you sale you a value bigger going? makes

PaulBoynton

you share trading prices answer from right than facilities. our worth me a they're Look, of let perspective XXX%, at it's lot just is an of value the interesting question, but with now. our agree the I what more

basis. is one to to on which the That just I of assets a be that specialties them million. mind think you if of our value higher facility be a - really much type keep cellulose on to Matane, per again in yield in sale would not high of compared tonnage $XXX each is

at of value And so much compared t it's think overall if absolutely you're where that's company terms trying what values to the it's But greater our and I than certainly of trading message not on quite equity - the it's do this there. the point.

UnidentifiedAnalyst

a Yeah, that available formulas basis. more exactly. that know on you you you That's the [ph] much have yet XX are person and idea, sold

to operating, understand of continue equity you lot amend So code have you know any I you there's a - announce if we it hand, you be price? is but know the lenders, the you getting get comes to enough - issue get with this you stock on of have cash to all option clearly, do that bigger if and know a the you back all hey, than company shareholders if say you're more an your shareholders you kind debt get the sell everything also and know would lot or

PaulBoynton

board sense. on to or discusses and going something whether evaluating that large That's value. its not time that time not the speculate make transactions We're to like Sal. Yes,

UnidentifiedAnalyst

you much. very Thank Perfect. Okay.

Operator

the next [Operator question Instructions] Jacome with Daniel line Your of from is Sidoti.

DanielJacome

Hi, Thanks good morning. the for time.

Temiscaming? about little incremental just on maybe last question. the reliability questions. I that production you any could or can more there quick then it days a talk at was a digester, kind quantify by of was chain, you boiler where material was it and bit in isolate a - my if chip first of equipment like these you wondering Can two a the was you saw issues Just if

MarcusMoeltner

Marcus. it's Yeah,

of operating the take mill It didn't it know, reduced just down. facility. the You the performance

looking you're impact. $X.X if directionally to $X million So million of

DanielJacome

That's very Okay. helpful.

just have time it deleverage margin and kind fixed take cost sour a you to short of don't had You went like? for sounds it down, some

PaulBoynton

Dan, trying earlier level. get where on broad that we're the when indicated performance to them higher this that just Again, question to facility, challenges a kind at we of much got Marcus back it's reliability

they So are bit. across board the a

it. of should we'll on note that's team reliability the so just $X third thought these for in We've got continue quarter. work the of you Marcus helping there. the know local type range issues to incremental million issue we up out And So it the and there on teams put we

not first the earlier issue that continues we just the challenging best in thought us. close still to know to quarter, but So we interests the you in for had we be disclosure anywhere of that it let

DanielJacome

Appreciate that. to question. me And brings my second that

needed be guys expected date to the for a have of and on any update closure where see XXXX some some I like would still is the equipment same or think you next? Is of mill it. that to receipt just sort wait expecting that you that's kind least you're there at May - of just it there finishing wanted fully or

PaulBoynton

in that to address downtime referring in that think a operating needed XX much you're with annual know, we've the made have overall, we're issues then. boiler the maintenance we with number And the we on I about time at Yeah, that point challenges even first time quarter. address this XXXX. if for - in May changes But these boiler that got you with we'll boiler any way. the we're improved scheduled we've And you at talked know already of to bigger prepared yes, saying it's her

in if or we've the any by, had already but standing change either went at a make do time. time to equipment and point ahead ordered So that we have that - we'll that before at that assess time,

DanielJacome

of luck Good with quarter. third details. rest the you the thank Terrific, Okay.

PaulBoynton

question have we person. probably operator And one for one time more more or

Operator

Certainly.

the Our question Paul Quinn line from of RBC. is next with

PaulQuinn

Yeah. Thanks, morning. Good guys.

PaulBoynton

Good Paul. morning,

PaulQuinn

you multi-year hear, signed. significant I contracts two mentioned

specialty give those on additional could of if the increase? and wondering you side were the magnitude if the color on Just

PaulBoynton

Yeah.

tell We specialty the the tell you at So they terms on you this volume a both perspective. get I price pleased I on that with that are outcome will were into - contract Paul, the don't contracts side. but and those of point the we would want to

PaulQuinn

right. And All That’s luck. I all best had.

PaulBoynton

Paul. Thanks,

Operator

end like Boynton We’ve would the session. closing of our Paul floor you. the now to comments. I reached for to question-and-answer Thank Okay. turn back

Paul Boynton

touch Yes. Thanks as time and be today. forward. your we'll We everybody for in audience move we appreciate the

Operator

This teleconference. concludes today’s

your And your may lines You participation. disconnect at this time. you thank for

Mickey Walsh	Treasurer and Vice President-Investor Relations
Paul Boynton	Chairman, President and Chief Executive Officer
Marcus Moeltner	Chief Financial Officer and Senior Vice President, Finance
Frank Ruperto	Senior Vice President, High Purity and High Yield Cellulose Business
Roger Spitz	Bank of America
Steve Chercover	D. A. Davidson
John Babcock	Bank of America
Paretosh Misra	Berenberg
Daniel Jacome	Sidoti
Paul Quinn	RBC

Rayonier Advanced Materials (RYAM) 8 Aug 192019 Q2 Earnings call transcript