SLVM - Earnings call transcript Q1 2022

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Operator

Good morning and thank you for standing by. Welcome to Sylvamo's First Quarter 2022 Earnings Call. All lines have been placed on mute to prevent background noise. After the speaker’s remarks you will have an opportunity to ask questions. [Operator Instructions] I'd now like to turn today's conference over to Hans Bjorkman, Vice President Investor Relations.

Hans Bjorkman

Faith. Thanks, thank our and today. for you morning, call joining Good

Officer. Chairman are Executive Vice Our X Financial legal morning including Ribiéras, important President X and information contain Chief Senior speakers this disclaimers. Sims, Jean-Michel Chief certain and John Officer; and Slides and

to note Svetogorsk during subject noted. that unless and include call our all and that this It Russian otherwise uncertainties. example, will make earnings and For statements is mill business, forward-looking we are risks important to figures

non-US financial the are information. certain those present to US measures of also financial figures also will We GAAP appendix. Reconciliations GAAP in available

Our website presentation. press With the Jean-Michel. the quarter today's release will I XXXX to now turn contains earnings copies of that call as as well over first

Jean-Michel Ribiéras

our Thanks, Hans. call. X. on my Good Slide comments morning begin and joining for I'll thank you

our first results, quarter XXXX. to allow on thoughts share we Before discuss some me

to value We to are year. continue well positioned create this

want full Given business, our all guidance I metrics. share moving key our parts the XXXX to on in year

generate strong cost Russia's expect the inflation, invasion of We of and challenges results, impact to chain Ukraine. supply input despite

levels we're EBITDA to the year. on path even our XXXX, business achieve a full we pre-pandemic for fact, Russian if In exclude in

an generate to on this exclude adjusted million to million and $XXX update Russian business for cash EBITDA Russian our business. Slide million We $XXX provides year, year. to $XXX expect X free $XXX in we million in flow if full the

primary do value Our path right always our the in Russia to ways, by in for the reasons. right forward driven is things, the right

our environment is with operate values. an not in that will We inconsistent

full of assets control maintain orderly manner. want we will and exit operations, Russia. not an primarily made to as full That implementing in the because are have We to work exit our so Russia decision said, we of suspension we a to do

our sell to process offers. a of have a received business Russian conducting are significant numbers and nonbinding We

will the required situation meantime, to agreement provide Please from to the the execute sanctions. that Board government we the working as frequently as transaction. reach an comply obtaining updates approval approvals and And complete regulation keep and our promptly now as continue process to X. including public to mind with well all and are plan appropriate. in in We In Russia Slide this on changes we

execute to Global commercial discipline, reopened. freesheet XX.X% which and continue uncoated our first strengthen three-pronged We operational demand the adjusted North excellence for and quarter. of in in excellence, margin strategy America, offices resulted in continues schools financial as America EBITDA and Latin to a

transportation dynamic three and to remain costs, proud in we well, volumes of metrics to through industry of as and all-in-all, care by $XX as to cash Implementing team, key well us conditions. debt increase and price supply all realize Our also free balance each in We'll inflation. cost take by full prior pay quarter. all for chain input environment. another flow in of navigated increases, our challenging our X price a $XX in And outpacing the million, continue strong. benefit continued performance and operated our $XX other capacity regions. of million teams We work customers. in run at down cash the input our strong generated mix I'm million, the our resulted challenge, highlights strategy performance Slide to enabling

an Eastern $XXX million, and million. Europe First in adjusted quarter seasonally volume of $XXX America. net sales EBITDA were slow generated Latin reflecting We

$XX quarter. We we light per adjusted quarter. cash generated of maintenance was normalized quarter our If have free asset been outage XX% in had for outage first flow our $X.XX earnings expenses, the margin usual, million and would As EBITDA maintenance share. operating

performance in quarter detail? first our discuss you would John, Okay more

John Sims

everyone. morning, good and Jean-Michel Thanks

and of $XXX America forecast. first mix adjusted quarter, by contributed includes amount our improved million, This which our slide In million Let's X. in million Russian price North price and increase business, EBITDA. realizations Europe the in turn $XX we $XX exceeded to generated EBITDA. as adjusted We

to in by demand million, As decreased $XX volume due Eastern slower America. Europe expected seasonal and Latin

Our and favorable by increased everywhere costs million. absence fourth order higher the exchange unfavorable of These foreign adjustment in a Latin of North backlog charge costs and reflect outside $XX Russia. quarter remained in Operations strong, LIFO an America. America,

overall operations well. However, our ran

$XX hard As quarter. Três on rising less the million, we Eastover and energy for input European Input chemicals due regional with natural costs team higher successfully offset to our fiber inflation, increased outages and acting at of gas to and and of who for the in our impact mills recognize worked to $XX thank impact along high Jean-Michel mentioned, and transportation mill conducted quickly especially prices. reduce than teams, cost fourth million costs. distribution our record maintenance planned impact to the outages, costs Lagoas I spent want by with Saillat

brands. region slide Let's mills Each talented our strength X. look our at well, results performed team, low-cost regional on demonstrating iconic of and the

remain credit They realizations. supplier regional on increase reflect strengthening customer deserve contributions ensuring the Strong to their and continued remain focused propositions, we these teams commercial choice. price that Our for results. performances value of our

Our Operations were to regions in industry chain supply to remain regions outperform strong in good the some shipments. all in volumes started all bottlenecks. and continue improvement see and we we

The our headwinds points well details impacted appendix FX was basis as volume. margin America additional about a Latin negatively regional seasonally due lower the by in on contains as to Our performance. quarter XXX

year uncoated X.X% operating prior in X.X% by but to balances. continue Latin industry XXXX is quarter. capacity favorable projections. European throughout Supply down we all X.X%, is expect industry prices Let's turn American improve has to are prior prior America slide in industry conditions of projected increases to demand in in to industry balances the freesheet shutdown Selling versus demand favorable demand second high-cost favorable to remain and line which demand of and is the a strong. supply and now with and realize markets remain the resulted the decline. serve. regions demand in North XX is our rates grow forecast we to this discuss forecasted

improvements input and more than offset cost increases. mix Our continue transportation to and price

to is of look a continue excellence In some excellence of make improving XX are driver efforts. initiatives our our at and we earnings. Commercial move Let's earnings the to and key progress. Europe of slide commercial results non-price our

We with customers. our products of mix relationships have increased new developing are branded and

mix. we we're to business For more and gained notebook commercial expect XX,XXX example, customers domestic excellence new this and than improving Latin cut than our premium America, led XX In tons volume. initiatives of have our size new more

We also America we have business sales. from benefited industry offset publishing North have new to outperform strong a laid shipments. In continued

Europe. slide And our we Europe, have current and to simplify In offering in to improved our now margins of the in XX. want light to confident remain continue on also emphasize succeed realized from I challenges product ability value-added We services. our in that

reflects XXXX Our our Saillat profitability the mill. outlook of earnings increasing

producers, We tremendous earnings costs European nonintegrated pressure a energy have on the Europe. each XX% favor. have total cost elevated of represents significant expect works in to curve in of our quarter which improve this cost steepening uncoated These our and supply in the uncoated put resulted High about prices year. pulp which increases there, market freesheet freesheet

produces from credits. position pulp, mill carbon generate it's benefits energy Saillat a excess favorable Our own and

as that we as maintained partnerships mills. strong well our also serve European low-cost I channel also from customers Brazilian Europe. We note across Saillat

to review outlook. slide XX and move our quarter second Let's

guidance price to EBITDA We million, realize to million second guidance of as second million limit the will our to million. excludes Russian customers mix Given adjusted continue quarter business. $XX my including and and our $XXX I excluding intent Russia. $XXX improve we are deliver expect to we to though we our in providing communicated In exit increases to quarter, to that comments regions. to price Russia, project by all $XX the already

maintenance North offsetting America. to We America relatively in volume stronger be Latin outages with expect equally flat volume more

and increase by $XX to operations to expect We costs million $X million.

of America. expenses due we input continue million $XX sale. clear, higher pursue increase increasing and natural North outages. as expect operate the transportation outage fiber maintenance conduct delivery and America To We planned by a and to diesel of our costs costs gas million, the in Latin largely Russian to by to million, project affecting We $XX more to we in while cost be business increase own to we maintenance $XX

understand excluding Once sale report by our to the the expect entire our Russian can would We we are operations business as we year. Board, showing you so approved a EBITDA in scenario. Russia, either including been for has perform and how discontinued

Slide to XX. turn Let's

As I fundamentals and favorable. Jean-Michel industry discussed, remained

advantages us competitive Our the this conditions shown on position to industry benefit slide. from

talented Our unique team strongest positions committed strong key with and cash. are our our combined earnings our in regions, and the advantages strength the attractive include partnerships our low-cost mills focused growth strategy channel and three-pronged paper regional driving world's in brand,

with cash to and turn remain how focused on Slide flow XX Let's cash. discuss free generating allocate to discipline. We cash we

to free one Even cash strong we $XX generated the Paper International after, fourth day for $XX As paid in Jean-Michel we inventory. quarter mentioned, million flow million. the Riverdale

our our flow spending the of further recovery spending we and cash will You in reflected capital at fourth extended we benefit day may Riverdale Since quarter will other both XXXX. improve that the capital boiler, of fund spend for to terms $XXX We'll outside business. high-return Russia to Svetogorsk IP on inventory mill. payment our to Georgetown million not one the increase cash use on recall of projects

one IP, second the pay in will day inventory of the incremental Georgetown million $XX the We final quarter.

of is onetime This less and $XX pay in though our costs. than estimate we've onetime Additionally, $XX $XX million, of expenses. as million spin-off we'll transition successful been service reducing last million amount

free change spinoff one quarter see service So in a step been expect starting in transition flow day and after completed. we inventory, have cash to all costs onetime fourth the

to the now intend I'll We continue which slide. reduction, on further also debt discuss next

allocate So review judicially let's how to Slide XXXX. to would in go we XX cash

in sufficient to With payments than we I will debt inventory the capital increasing this spinoff mentioned, costs. we going macro all on, are $XXX million As environment, continue to fund year and this more spending, cash uncertainty and onetime reduction. of prioritize generating

value. improve of set have billion. reduce should This gross increase our increase $X level debt flexibility, risk, equity will flow free targeted and cash our generation a We

million the long-term we billion. In April we repaid $X.XX $XX first debt just million of quarter, in repaid addition, to under the in resulting in $XX

advancing have Svetogorsk's capital we're million our projects with we than XXXX cost spending project, includes will strategic plan of these high-return not Since million outside greater strategic high-return XX%. XX%. Russia proceed projects, Our in projects, boiler in for reduction weighted going of over be to IRRs forward. $XX $XXX internal returns and some recovery the fact included with of And plan,

returning them. discussions Importantly, with we are cash conducting we'll continue to and to about dialogue shareholders Board-level

Let's turn goodwill of to update XX, a Slide tax brief dispute. for the Brazilian

we our During not Brazil we a enacted told amnesty legislation this year you during election to the expect call, be in did presidential that last tax year.

They the ball will issued Brazilian However, a rule, mind goodwill Service Revenue call now settle Also maximum over whether in have specific on in the that as apply decide million. Paper's not right is a turn tax May or to to liability to back the reminder, to is Keep Internal the Jean-Michel. our for X, sole a I'll companies settlement. that International as $XXX though, disputes. Court. allow

Jean-Michel Ribiéras

remarks Thanks, John. Slide our I'll conclude XX. on

We to positioned cash in and if, year. well continue a levels we We free committed full flow. even ability increasing our to our remain confident to and exclude Russia, pre-pandemic XXXX our remain achieve but exit in decision we earnings XXXX. to value principle-based Russian to for the create in are earnings business earnings flow, made strong cash We and committed to generating

Russia $XXX other we has high-return debt on free generate in $XXX path to level $X billion million and strategy are we the projects. the cash to targeting now adjusted a gross we full for excluding accelerating we although and not of EBITDA $XXX full million project Even to in year, year million $XXX are a flow. changed, million are for Our

appreciate cost investment how who the that, Our We challenges the execute by working in to chain to being our and from safely call turn our global With over achieve the success We and and and of inflation, made continue is through I'll the Ukraine. the to possible in navigate supplier input war ability customers. spin-off to impact pandemic, plan employees, supply works through Hans. confident our and remain serving choice. of employer, our back vision,

Hans Bjorkman

thank and Jean-Michel you, Thank you, John.

now Okay we're Faith, to take the ready questions.

Operator

first [Operator comes America. Instructions] from Staphos George question line the of from Our Bank of

open. is line Your

George Staphos

morning. wanted nitty-gritty ask a environment. very Good the everybody. Hi, of on Congratulations more progress I a start much. very so far in all details. for the obviously to question. challenging Thanks to Thanks

the kind So from cash operations kind adjusted and midpoint to of EBITDA bridge -- of and from guidance. of using

number I that I midpoint remember think you you are I book those about if of tax. recognizing correctly, said roughly million interested about we'll the you're $XXX about million, So ex-Russia. have think million it's this targeting $XXX a use $XX Tax in

and costs mentioned another Riverdale You million. transition $XXX Georgetown that the onetime are

working operation $XXX would of or to basically million. get begin? cash the I'm And to get assume either missing you follow-ons. or in Should to just my have we I the is $XXX to guys. like that we from that so else something Thanks, in rest capital, million and had And of is a couple there gap calculation

John Sims

George, got account into take spending? you to capital the

George Staphos

Well, I'm going to from cash operations.

need I cap, -- yes. don't not I'm So

John Sims

Yes.

So it's working capital.

George Staphos

Very best wanted to Saillat your to as thing you Okay. next that can showing you talk rest what they this you is said increases and did hands gives this job did the proprietary possible check the me I recovery on the did And this energy without as cost a of what to year. accomplish -- isn't then -- good. great avoiding in paraphrasing in of wording. But you

John Sims

to I of an but Saillat it's integrated a couple things mill. of your to it's is draw it -- So attention around want most

George Staphos

sorry. Yes,

John Sims

most And the energy -- own from part biofuels. produce for we

how So XX% to situation. do And of Saillat lot so significant in just energy that we different of sophisticated gas. mitigate operations. situation team the course Europe caused adjust that could don't consume Russia the a much a saving. of in that gas, the what use supplies as And significant consumption as of but burned they they just increases due developed absolutely well a there about their Ukrainian was gas model they we did to And

of of the a Saillat that we're actually in is alluded to but increases that seller point is thing carbon EU credit. comments significant the in one seeing our I ranging we to been Europe €XX net our that other is out The gas had. of tax it It's Saillat to want kind mill about €XX, from

costs. So use credit the we so some actually were that able to energy have and offset to of we

George Staphos

the John generate or that's also to on But able helped not you that's this great were development, and that but credits offset new -- then a which more to quarter pressure?

John Sims

development. Yes, more knowing of their to they not the terms flexing gas implemented energy consumption. new George, first and that's in that in model where also and the of It's their quarter conserve used consumption

George Staphos

are Can one bottlenecks I and it higher to mentioned you that Okay. One the for starting turn you transportation. expect in improve to comment -- think over. Last me that? you to said relation I'll And on you earnings a expect year Thanks, in you Europe quarter. over improve Was year-on-year rest the each in each earnings the the or quarter in earnings Europe in to each do guys. of of that -- sequentially improving quarters?

Jean-Michel Ribiéras

improvement Thanks Hi, some truck. in the US quite seeing availability call. improvement some for George, it's joining of business Jean-Michel. In the not the truck input we're terms in the of in but especially cost

we Saillat expect – but get year-over-year really significant say We to it year yet our on it haven't would I it's is trucks. fluid. more better. quarter rail seen this We earnings of in we and expect Considering improvement both every

George Staphos

That's you. great, turn Jean-Michel. over. Thank I’ll

Jean-Michel Ribiéras

you. Thank

Operator

Quinn Our comes Capital. of Paul question RBC from next

open. is line Your

Paul Quinn

guys. morning, much. so Good Thanks Yeah.

positive in the significant further pressure the in industry environment anticipating XXXX? the right given cost price or you anybody are demand increase else Just and now

Jean-Michel Ribiéras

We we that, price on we future don't But prices. can't exception Russia. with we've the globe comment all second are But around future realizing prices. make comments the quarter announced in of increase on

So, we realization the still to as come. have see quarter in more our can you outlook second in

Paul Quinn

don't we right? Latin Europe announced the Okay. else has price increase or have that say for America too exposure But in nobody great

Jean-Michel Ribiéras

I cannot competitors. I our comment apologize. on

Paul Quinn

to the do that you process sell be done the in then to And expect Okay. in Russia, QX? mill

Jean-Michel Ribiéras

that's more and than a could get timing process two think a could government, in agreement the have is happen through which process the it with process. you find Then Russian we that. there's So the One potential complex to be and buyer authorized to longer of the that QX. parts an

Paul C. Quinn

on what is the then the paid, And IP, expect the after do ongoing is – Okay. the million cost services just what's services? $XX the and onetime amount? after that lastly guess – transition agreement we transition that ongoing with What to I of

John Sims

should agreement end and target about is the us for date to $X TSA that That's quarter. October. million the what Well exit a in it's

Paul C. Quinn

had. guys. I luck, Best all Thanks. of That's

John Sims

Thank you.

Operator

Staphos question follow-up America. a George have do from Bank We from of Instructions] [Operator

Your open. line is

George Staphos

new Thanks truly tight tank out eighth you very left of cliche bit in you some pads Two that. excellence? half finding given is, regards SKUs you're premium? for them And much. or is what on want your how it slicing doing customers the or you use Europe. metaphor like things the to to and Well, and speak out so half you Can said is inning talk How about you're full more at third whatever bottom use a rolling terms you're commercial won me. much you as empty, all particularly the in of inning products new are premium not that your rolling around notebook market to

would us color give could great. you there If be some that

Jean-Michel Ribiéras

the say So and may George. it's all above, if I

We have are still of but we seeing in different we're seeing And a lot of a improvement, lot categories. it opportunities.

You in them. seeing one also with in product customers. rules innovation. new We're mix. in business it seeing We're seeing rationalization products of of mentioned SKUs that's We're the terms

initiatives, a got we're we've to we've large So which of started implement range continuing. and

I some the have So, XX% say potential we quite would of to done come. probably still

George Staphos

percentage that for Thanks Okay. there.

of what a And to quarter can first a again talk to from how there? talk was for benchmark understand. if and Thanks in you up these to? share And doing. then think release helped costs, one it not I if you about XX% and I than little benefit model anything said you to might choose that was or can the can quick avoid Just it are how -- for the you correct you your expect is some Saillat you bit industry misphrased I back sort you and correctly? guys. you of that X.X% you Did you the America. if better What the North correctly which hear in industry grow heard I your developing see I read correctly

Jean-Michel Ribiéras

the Saillat I mill, can on So, an give ID. you

Our about XX% gas we've consumption was exactly. -- to gone X% XX% normal and about down

XX% improvement you metric significant. see, this North our in is was versus as QX. America, can So market In the

we winning So will -- the aligned. are I well winning customers and call with

George Staphos

industry did ahead. about think I'm go sorry the What Okay. -- you that.

Jean-Michel Ribiéras

recall In if few me to for X% industry a first number, want seconds. the was you quarter. North it America, give I

regions. about If all X.X% was I'm the you take it regions, our talking

George Staphos

turn I’ll Jean-Michel. over. Thanks, Understood. it

Operator

Jonathan Luft comes next Partners. from Our Eagle question from Capital

Your line open. is

Jonathan Luft

guys. great my Thanks results. taking for question and Hey

I'd to you do with particularly the is shutting you of question happening America first product about guys ask notebook down what's better or a have winning and capacity, some love Latin you stuff, you're The some talk Are products, why people that business? in new there? can like and

Jean-Michel Ribiéras

Jon, call. some I replace to I this people of said. thanks morning, mix what new and you and are and a joining for exiting taking the exit. it's say, the mean we're Good opportunity products develop would

other say, supply where going those to developed The we -- because one what's we've chain been were can we've segments of now will and were the America. present up perfectly a Latin specifically managing you but segments. products on maintained also, in manage and is with not And we've services, I level not talking nobody fit perfectly to everything,

customers be think this term see be player customers, area. reliable. to try our the with And like customers to aligned Importantly a And to are our long-term think, we I our be company. going in long paper we world to I

on some So, the contracts new businesses. all new difference those we're winning I think why things make

Jonathan Luft

you people given there? given Europe, people in and terrific. That's profitability capacity you some in both you're you are Are can seeing what the Europe? North What cost are capacity America capacity taking about adding in your or seeing mentioned comments advantage the talk And about maybe out? in

Jean-Michel Ribiéras

in to lot America in the two last we've a North lot in but both packaging. in Recently move capacity down, years of Europe seen quite a sometimes shut and also

year. uncoated net-net uncoated machine a in freesheet capacity both to quite or decrease But and have from lot. packaging, paper in a restarted of we dumped still no So one Europe just North America this seen new freesheet

John Sims

other which And paper seeing Jonathan, has increased to uncoated before, our coated products. but of in said caused we're customers this supply has the of tight move of markets this markets particularly John. demand because coated like for to freesheet, freesheet, and freesheets, We've lack very is which also

other uncoated all impact. And So is it's that's not or regions. coated our paper markets also but converted, we're shut freesheet and an freesheet across only having seeing been down that

Jonathan Luft

good That's Okay. know. to

John Sims

Europe, Jonathan And is Russia but out The stopped. too to course of Russian that all We another of I impact out point we did exported into did. the situation. export guess that's -- then Russia

that Russia of went the away So situation. supply because

Jonathan Luft

last relative are inventories about mean I Okay. inventories which talk from maybe can is inventories you or your Got me question industry historical and to you. given are norms? just And one growth building where your relative you the situation? to

Jean-Michel Ribiéras

low Our inventories to the are between normal on depending regions.

Jonathan Luft

Okay.

Jean-Michel Ribiéras

building. not certainly But

Jonathan Luft

results Well, right. you and so I’ll great turn All it Thank Yes. much. over.

Jean-Michel Ribiéras

you. Thank

Operator

We have question Staphos America. follow-up [Operator Instructions] Bank George from from a of

line open. Your is

George Staphos

recognizing might to Hi. too we be not ask. Thanks And much here nonetheless Last share you guys. couple from again me. wanted able to

from can and would as to your Thanks you the discussions you how or you and you in the Jean-Michel remind I interest the in priorities mill. can you is how dividend you guys or Russian market may is, what finding non-Russian local increasing have us potential value last delever can just you talk the for think type about interested it changed, and luck quarter. question obviously at dispersed preference return overtime? Svetogorsk is really value in buyback versus And more had again for business investors return First then the between buyers? talk local of party purchasers all Are about good

Jean-Michel Ribiéras

So -- correctly. sure just answer make it to I

The the in the in process a process. We bit middle of Russia is complex. are

to comment want We'll that the in I will of process on being the update... you understand. So middle too. don't

George Staphos

Understood.

Jean-Michel Ribiéras

we can. when Everybody

not Our have changed. priorities

that, our reduction. continue priority debt invest we we've continue the the in to projects. little the everybody might strategy I want is mean to we -- done with bit invest a high-return too uncertainty our and and we one. with accelerate getting a term That's with we Once to nervous can our deliberate. have long which happen bit same want We number little economy, think what

have term. We We've high-return really some return seeing high mentioned before, short projects. we're this

to especially about have savings. to then with talking Board would started these of do cash our to cost buybacks around time do we are to dividends. because to than returning can able like shareholders And more we everything So, projects. be it We takes probably through talk the actually or discussion all and

So has step. decided the been that not that's yet, but next

priority dividend. high-return So, and steps at with form and the debt or our in repayment looking options buyback to projects next talking board

George Staphos

you much. Thank very

Operator

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

Hans Bjorkman

Thanks your in weeks again great for in Have days, today. months us look we everyone week. continued joining interest great coming and to a And truly Sylvamo. We appreciate forward the a day conversations and ahead.

Operator

Quarter Thank for in Sylvamo's Earnings First you participating XXXX Call.

may disconnect. You now

Sylvamo (SLVM) 11 May 222022 Q1 Earnings call transcript