SLVM - Earnings call transcript Q2 2022

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Operator

Good morning and thank you for standing by. Welcome to Sylvamo’s Second Quarter 2022 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, we will have an opportunity for questions. [Operator Instructions] I would now like to turn the call over to Hans Bjorkman, Vice President of Investor Relations. yours. is floor the Sir,

Hans Bjorkman

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

this Ribiéras. Our X are morning speakers Jean-Michel information, certain contain Slides including legal disclaimers. important and X

forward-looking this we risks during uncertainties. are example, For and will make subject statements call, to that

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

to as Slide of also second quarter want release contains X, press On presentation. copies the a on well website update today's Our earnings as business. brief our provide we XXXX Russian

will to all note made I Russia and complex communicated in Jean-Michel. exclude on this reported for as operations meantime, decision that our operations conducting first update comply As our into now to second to Russian as prior our quarter turn and the frequently. in now to regulations an provide have will discontinued that our in process and to figures continues ops, situation operations. the In we The and are when mind all is Please we exit sanctions. earnings the will keep Russian current began call, that, business earnings process otherwise continue sell appropriate. and in and the outlook noted. material continues, in well we periods with we presentation developments any In the business, change unless With call Russian over the to quarter, Russian our the Russia business. sell It discontinued to important transitioned a is

Jean-Michel Ribiéras

I'm quarter pleased comments joining our highlights. on to you share Good Hans. Slide I'll call. for second Thanks, begin and our thank my very X. morning

point and $XXX another adjusted in have quarter to improvement EBITDA our a good operational our million, basis XXX results commercial improvement. a We continue Quarter-over-quarter, and margins, grew we to we had execution. excellent of with XX%

with in million of Board per We to $XXX per in million. $XX We to we also repaid $XX July the and payment grew million program share. XX% and share generated free in earnings share a cash repurchase up quarter-over-quarter first adjusted debt. dividend $X.XX a flow Our authorized initiated our

Our strong and customers talented performance base, continued low-cost people our our our help result succeed. asset efforts to a is of

Let's move to Slide X.

execute EBITDA on discipline, three-prong and and excellence, North margin. schools continued to deliver continue XX.X% our offices financial reopened. a of Latin in operational adjusted to uncoated commercial for We resulted as and strategy Demand and in which strengthen excellence freesheet America America

we and across remain volumes focus. in our demand Our strong, we basis with points regions, remain regions full at by outperformed industry XXX customer all capacity our

In up fact, our year. to raw mix materials levels. remain percentage cut sales size is And year-to-date Brazil, almost overall current in operated the well of chain supply XX% We stretched. now the branding in of where environment in pre-pandemic our a as sales are against last availability back Europe, many

well quarter-over-quarter. used as and continue a We metrics of that sales prior Executing navigated each take other increases, key our the $XXX quarter. our generated strong XX% free X for Slide to we Net flow which cash dividend. debt highlights have million, strategy a pay performance up down was significant results and pay landscape were our word teams benefit proud cost customers. how to care outpacing as current the our price/mix I'm price inflation. result in to and of of realize this the

million, EBITDA was over which mentioned XX% improvement we an of first quarter. generated of As $XXX an earlier, adjusted the

maintenance quarter EBITDA margin especially outage Our a the since heavier XX.X%. was adjusted at quarter. strong was second

our adjusted EBITDA which year. per delivered for our XX%. of half first performance an adjusted since the operating share margins pandemic. seen summarizes not demonstrates an quarter-over-quarter $X.XX, million, our substantial several performance have is million $XX thesis. we continue by We generated debt. This this before deliver of ability flow, one-time We up to margin to XX% EBITDA payments. of million We the spin-related XX.X%. strong strengthen in Slide to cash investment on down of adjusted $XX the And earnings up sheet $XXX in high our continue free X We delivered cash million achieving after and flow balance generated of paying free $XX

teams John? Our to discuss more now stakeholders. for value well, it performed in our second creating all over performance detail. turn our to I'll quarter of John

John Sims

Good Jean-Michel. morning, Thanks, everyone.

Let's turn X. Slide to

of as price in adjusted over EBITDA and from pricing, As improvement Again, book Jean-Michel basis we and improved Volumes we as with million, Latin are several We mix demand generated a publishing America operational forecast, $X our first excellence and outpacing $XXX mentioned, back-to-school gains by inflation. commercial margin was our initiatives. cost excellence this price mix XX.X%. with in optimization point million a benefited the XXX seasonal million exceeded by as increased realizations strong. stronger in $XX was have quarter

Operations the operations $X regions. mill our improved rising input than costs Overall, Eastover chemicals, energy, remained maintenance of on by well. with and planned backlog distribution. first conducted at order more cost We ran Our Ticonderoga outages in and and $XX $XX transportation the also million. in The spent million costs quarter. outages all million successfully our strong increased fiber by and and

low-cost resilience Slide perform strength teams, and at Each Let's very on region favorable talented as iconic our as XX. to regional our results well, industry of look our well mills, demonstrating conditions. brands take the continues a

customers and key We positions in win our increase with segments. continue to

right on choice. food are Brazil, America, high-margin our publishing. earning be in we are book retail in we And example, our channel. the supplier remain growing on-demand North in of presence to For expanding customers’ We focused

industry strong all outperform we continue regions, and to volumes shipments. remain in Our

Supply as pressure. reflects were continued value good two performance realizations. compelling all America. while costs increase commercial North in annual chain Operations remain well executing price our as Our under proposition customer in outages regions, large

improve However, we’re America. truck in starting availability seeing North to

decade. into team the has been of remind European global selling footprint. our Sylvamo to a And want that advantages Brazil competitive One products of our over for from is I you Europe

discontinued margins much business represents sales Now the in a European that operations, is percentage Europe. volume our our higher our in of Brazilian reported total impacts and Russian EBITDA

team the adjusted sold volume XX%. details performance. where only margin exclude commission, European regional contains a by sales Brazilian second we on The receive to our closer EBITDA appendix if So been would additional quarter have Europe’s they

there. through to So months XX. Slide freesheet COVID operating tight, year, from as let’s into remain demand rebound the to rates the is American to declined demand turn XX%. the favorable X.X% Six continue and be year, shutdown global Western Europe of growth conditions but in the effects of capacity uncoated continues be realize positive throughout prior believed European third is industry are that balance demand continue particularly noted prior demand levels first demand. operate. Latin regions high-cost across industry supply the regions is remain inventory favorable, to prices growth Year-to-date still levels to It is North America where due X%, while below favorable this in should supply industry quarter. industry and the conditions. that results negatively tight of in June, supply increases historical all we expect tight Selling to industry and half It impacting we demand the

than to improvements transportation price offset costs. Our and mix input more continued and

expect to Slide to realize we to to outlook. to to in communicated Price quarter look $XX million let’s and So we increases the XX is third quarter, $XXX our million regions. third In to move $XX $XXX EBITDA million continue at price improve mix million. as of projected deliver already our an customers adjusted by and all

We million. million increase million in million seasonally volume $XX America. $XX $X to costs expect are with by to to improve Operations volume $X by stronger to and North projected

and increase this transportation financial to expenses costs to transportation and to decrease XX million, further conduct $XX by on input projected million for Maintenance expect outages costs. as we contains $XX Slide outage details due largely We energy, $XX maintenance quarter. chemicals, quarter are planned the outlook. fiber to third additional metrics million less by higher

are Now you want let’s up shareowners. plan to to our to and We value. cash XX. remind intend our to create our frames to to invest on cash cash we and This strengthen I return use balance high-return to projects slide we allocate capital. planning sheet how turn to in Slide allocate how

plan debt how our flexibility the $X on for our capital; We a interest invest our XX. reduces we believe our puts into that diving achieve balance will opportunities strengthen this to by start us it quarter, and Last to of with expense, value-creation cycle; and Let’s you billion. reduces position are gross we in the targeting of I increases shared Slide sheet risk the other our business cost in following: through now businesses throughout cycle.

since have we debt $XXX see repaid debt steadily in have spin, EBITDA million our can gross driven on and quarter. our ratio every down to we the adjusted you As slide,

debt this in repaid level the million able months addition in repaid In to public first we within $XX puts stand-alone our $X.X XX now company. all the gross July. the of We $XX another billion. of our This a accomplish month million were also second below to of being quarter,

Slide XX, will our more competitive. on look high-return to how at business, a our we Here we invest assets costs closer even lower improve make to in projects plan our and take

far. have of to mix-related identified of of XX XXXX. are this of on. projects over illustrate shows returns we projects six a capital This $XXX executed million. been and reduction working been cost We are and reduction million what projects. point so have of $XX cost slide portfolio total be These a volume projects high and XXXX at developing high-return cost approved these Over capital balance strategic the with with capital will some projects of

these excess annual focused We million in from of on reducing up second internal starting million of projects well energy, of as to projects XXXX. investment projects have from $XXX,XXX to achieve fiber most the ranging these savings XX% rate indirect XX%. investments range are in expect and All savings. have an savings the of returns and to $XX to half chemical $X.X cost in return costs These as with of

In share Board-level in $X.XXXX to around call, cash to shareowners. of that to cash a owners. turn were that to paid approved returning Board our was On XX mentioned July. we quarterly returning conducting we discuss May, Let’s our per dividend share discussions Slide last

to repurchase authorized Our a Board also share $XXX of program up million.

XX. Slide to turn Let’s

the note inventory payment, spin-related that as is year of transition of of debt service we not XXXX Riverdale our million repeat. have from can became settle shares costs. further pipeline as value. that Brazil, any important $XX for maturity onetime to create now million option the do opportunistically help to and program These benefit in disputes ramps and up Also also have spin-off available to as we one our a that also high-return So that that buy Georgetown due we XXXX. $XXX project back to It settlement the have of million our amortization until to $XX $XX call I’ll We’ll include goodwill in million see of not the of the the and dispute expired to balance the and agreement you significant determined profile goodwill, program. over in expenses dispute beyond, directs turn over it which note back day Paper, Jean-Michel. will we tax not payments at that now International look there, maturities July.

Jean-Michel Ribiéras

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

are XXXX in We strong positioned continue and earnings cash value to pre-pandemic well flow committed level and ability create generating achieve in to beyond. to and XXXX. We our to earnings remain in confident

increasing guidance year of we our to million $XXX from $XXX a are $XXX fact, In to million range million. to EBITDA adjusted million $XXX full

We full a to $XXX to million from $XXX are $XXX flow million our $XXX cash guidance of to free increasing also million. million year range

proposition strong second improving see continue as half, cash execution, outpace expect price/mix the Our have sustainable expect We operational commercial continued favorable flow. and second to inflation. has conditions reasoning half, industry strengthen, value we excellent to in In and EBITDA our the adjusted follows. free and to we to continues that our margins customer is remain

Our good strategy we not changed. has not targeting billion. are of a level $X Also, debt

are we project, work business. and accelerating to our We to the continue strengthen improve company high-return our and hard

conditions and shareowners. talented delivering because Our and to teams. achieve working on our of dedication our engaged their safely industry is to our ability employees, We to customers success navigate and while dynamic appreciate promises

vision ability and of our all our We supplier back to that, choice. stakeholders continuing investment on to achieve I’ll thesis. for our being our deliver are investment employer, call the of remain value over confident We With to turn to the committing in Hans. by delivering

Hans Bjorkman

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

take questions. to Okay, we’re ready now Tony,

Operator

Thank you. you. Instructions] [Operator Thank

Please question of Quinn first the Markets. will come ahead. with Capital from Our line RBC go Paul

Paul Quinn

morning. Yes. Thanks, Good guys.

America increases. question increases North in a price Just marketplace. I’ve a seen in price competitors the of number introduce September on

Latin in suit? Just if the follow wondering you And status what’s America?

Jean-Michel Ribiéras

I pricing, trends. press there’s informed think media specialists, but have which on or we don’t or our comment some price been

So for I North think it’s America. public

Paul Quinn

here. just Then Okay. just maybe bonus a question

your about guidance to last was in has X.XX wrong ex-Russia, reported moved Just X.XX this made as that right? but up opposed on guidance, essentially, the I that you’ve million on was I But right? $XX I midpoint, quarter, guidance think assuming QX the

Jean-Michel Ribiéras

is about upgraded This We’ve a by all million correct. midpoint you’re Yes. $XX at ex-Russia. especially And the bit more.

Paul Quinn

I all had. That’s right. All Thanks.

Jean-Michel Ribiéras

Thanks, Pau.

Operator

Instructions] do have Please you. Hathorn now in. I’ll turn ahead. the that [Operator to we from a One moment Jefferies. come call go back Hans And Thank question that’s moment, for with just closing Bjorkman you. Thank over Cole comments. last

Cole Hathorn

your I America. North office Good from you. inflation. you morning. trends like the demand wood of paper of Thank that, your a Thanks base trends And calling my on like paper seeing cost seeing are strength interested the that any by up that Some cost follow-up hearing following then seeing competitors taking those hear the office to wood just Europe about more you’re you’re costs? in divergence customer bit question. particularly order for to seeing the you’re for in what in in on to Are region, European markets relative books? wood little out

John Sims

it’s Cole, John Yes. Sims.

On mostly the by that’s increase seeing driven diesel. cost wood but regions, costs to cost, across due transportation all we’re our wood

it’s going wood we of to it’s wood harvesting because that. from is Saillat our down, indexed Although mills in there. And operation mostly lag sources And a diesel particular to France. Europe, have actually is

particularly things there. impacted the to some and seeing either other that’s like wood ban going you in Nordic places, Russian on of being pressures the seeing Poland the not are in We’re because other other see and that that you’re places

that transportation in than cost – increase Saillat. seeing other we’re So in Europe, that type not

I of Europe, X.X%. we – also the terms stockouts there around the down of are the in your tight that is, demand on conditions of lot call, there. on you as on it Europe. But that demand. we impacting And question think we’ve Eastern believe the situation. Europe not and XX%, really believe because that’s that have we’re We impacting driven The a that mentioned we In do that from Europe. freesheet some demand down of been our in most much, printed really paper us predominantly freesheet mostly demand printed Western decline but conditions think Ukrainian we mentioned seeing down, that. And of doesn’t in as Saillat, shelves reported have it’s that which is significant though availability on is is don’t a we so shipments – that’s is in despite that almost impact How Western that reported is is it. view there

Cole Hathorn

Thank you.

one If you permit follow-up.

in drought any competitors’ producing be issues have seeing color any Given level water on market? regional your – some water or give for potentially imagine of I you would production of level the helpful? any you impacting your some that Are don’t you France, issues.

Jean-Michel Ribiéras

making of as and some attention about is competition as Europe. bad be water. it is, don’t drought. in drought, know, know as We given instruction people There other might lot on not of has countries Yes. on There France, you some also government

paying we has fire the could, more thing one us to is now, that. forestry are paying not which yet, attention, So we not directly but too the which affected attention impacting but are – we’re fire, wood right the fire. The

disruptions. As especially this big some summer one There’s in Southwest and know, created one has of you that been lot a the – France.

the some wood So side. but has far, it, it mange on able created we’ve disruption been to

Cole Hathorn

Thank you.

Jean-Michel Ribiéras

Thank you.

Operator

line Thank of And Capital Please we have from ahead. a Jonathan you. Eagle go do Partners. question [Operator Instructions] with the Luft

Jonathan Luft

my Hey guys. Thanks for taking question.

just your situation. I Can walk The there? maybe exposure us talking Europe energy and about question is just the through first have you

John Sims

Yes. Jonathan, here. this is John

because have most demand mill some will, needs. our of almost produce and but you for energy XX% there, of represents our if really it Saillat do energy positioned integrated well We gas we’re our needs. mill with We’re

Jonathan Luft

the little now operations. it this And the And Perfect. like guidance Russia business, ex-Russia? relates how how you is pre-pandemic? XXXX without Can back about discontinued XXXX, looked that maybe Russia to went part if a talk the the of us business what to year to would’ve and bit we

John Sims

at almost Yes, levels approaching actually pre-pandemic we where back and better – had produce did is that than to producing, mentioned margins we are where then. machine, or we higher we had in in XX we than even even our had earnings more Jonathan, EBITDA actually Riverdale machine Russia think we it, projecting was earnings and another today I without back of with XXXX

$XXX you if with So terms of million. that contributed margin think about in what million $XXX Russia during to pre-pandemic EBITDA of north timeframe

Jonathan Luft

is, on people pretty Okay. some last pricing capacity from is that margins you That’s question turn a me you trying What could very about there? Are seeing helpful. the into market? sell talk just now, seeing machines are And the then environment, you attractive incremental up. are competitive if or given

Jean-Michel Ribiéras

We’re know And difficult, think the in and And I in bulk energy, other say remains changes. major position there’s the main in chemical wood will your price if not seeing change regions. you and capacities I with non-integrated any the in no Europe a are probably. I position price

right now, we So operating we’re regions anything not very in significantly rates remains every saying high operate.

Jonathan Luft

right. much. thank so All Well, you

Jean-Michel Ribiéras

you. Thank

Operator

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

Hans Bjorkman

Thank and in in you appreciate the we Tony interest Thank a ahead. great for coming the day. Have forward today. do to Sylvamo, you, days, your thank We everyone conversations months you. and us weeks and look continuing joining

Operator

second Once to thank again, we’d XXXX you Sylvamo’s earnings participating quarter like for call. in

You disconnect. may now

Sylvamo (SLVM) 11 Aug 222022 Q2 Earnings call transcript