SLVM - Earnings call transcript Q1 2024

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Operator

Good morning. Thank you for standing by. Welcome to Sylvamo's First Quarter 2024 Earnings Call. [Operator Instructions].

As a reminder, your conference is being recorded. turn Relations. over to Vice Hans like Investor President, now the to call Bjorkman, I'd floor yours. the Sir, is

Hans Bjorkman

Thanks, Leah. Good our First morning, and thank XXXX Call. you Earnings Quarter for joining

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

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

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

as the Our the that, presentation. contains call copies website turn also earnings of release I'll as well today's over Jean-Michel. to With

Jean-Michel Ribiéras

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

X, to Let's turn please. Slide

which resulted improved experienced book. we in uncoated anticipated, pulp improving quarter, condition and order As first freesheet in the

our supply remain much with Project system near reflect downtime. making streamline and to chain and program capacity full overhead good earnings We're mill manufacturing costs. Horizon, progress economic less Our our

of run track on are We target to in our year-end savings. rate $XXX meet million

We of also the And this to dividend. shareholders. first repurchased quarter to million as cash distributed year. $XX We we million in via have XX shares return today, continue substantial

our to slide. next move X financial Slide Let's metrics. shows the key

$XXX of We generated margin of XX%. with adjusted EBITDA million a

second in about second generated $X.XX half. of in reduction earnings cash our was and generated due than adjusted XX% year-end inventory annual quarter the the expected, per of free the As flow payment is cash free and flow first half. In the the benefit heavily compensation XXXX, to the in XXXX, in operating of cash weighted incentive we quarter lower the Keep fourth in We timing of the second mind free in share. fourth payments nonrepeat of quarter. XX% flow almost and half, that

Now performance review more John detail. John? first our in will quarter

John Sims

earned all the On $XXX good outlook pulp price in the was of regions. Thank by of better North adjusted lower we normal in other Volume morning, you, in and driven contains $XXX projected. Latin million reflects decreased we increases quarter as million $XX downtime than seasonally The by in projected. to early Price primarily bridge. everyone. and trends the were EBITDA Volume million reflecting communicated we first late in by and weaker the This of million. quarter $XXX mix paper that Slide earnings favorable regions. million, $XX which had and across within and X, Jean-Michel, and first our implementation America fourth demand quarter Operations all cost improved America. were economic Europe our

costs by outage $X and $X maintenance input increased million. costs Planned transportation And million. by decreased

downtime we Slide was tons Let's move which XXXX quarter shows last the XX,XXX of the and of nearly first last quarter XX% an quarter X the took our over In X. downtime, XX% quarters. this the in This year. peak graph third year, reduction from from economic of decrease to economic first a the

improve. continue Slide Uncoated to move Let's conditions to X. freesheet

price communicated all Our XXXX well. pulp all as levels. paper at order input a regions of experiencing regions strengthened previously also implemented in increases books versus across stabilization have both costs. We and We're

X. to Slide move Let's

primarily and all EBITDA project $XXX quarter regions. improve We We increase adjusted to expect mix million price million. across of reflecting $XX million, second million $XX to $XXX deliver price by to to realizations

in a America. Latin We're impact mix also favorable expecting

primarily North Operations North Europe costs due lower operating in stronger are million North to to America, million downtime as Latin lower expect by Europe to America projected improve to in and to by continued America. momentum well $XX economic and seasonally driven America. in $X $XX and in improve costs other We by $X volume plus million, as demand million,

better to improve to increase to costs million projected America. offset due costs in outages and by maintenance transportation unfavorable by transportation and input million. Latin costs America, expect Planned fiber up $X in energy $X We partially North by to

maturer to must products we cost a company. order cyclical go [ commodity Slide Project and markets, demand, Let's our improve initiated XX. In stronger ] become to to producer leaner low-cost and a we That's organization streamline in sold remain why structures. Horizon our of

We are supply by to reductions $XX to on our deliver cost million track million manufacturing inflation. reduce $XX cost and before overhead chain

the have rest the eliminations of quarter. X/X of completed already by nearly and these globally. position Approximately XXX end will the We communicated third have occurred be all

this on meet of are track rate to run We year. by the end our targets savings

$XX spend America $XX spent planned midyear, and XX. in In this annual second America. quarter, in and X/X move in quarter. the outages North the maintenance We conduct about outages we'll first maintenance Let's spent quarter Slide total have for million year. costs Latin million on outages of planned second we'll to the to the expect By

We have European no planned for XXXX. outages maintenance scheduled mills our in

Slide to move Let's XX.

and freesheet iconic long-term create value in teams, continue through and mills will talented our We low-cost locations. favorable brands are on to uncoated focused

Our to strong improve maintain position, to competitive and business cash in our advantages owners. our capital return to financial allocation continue substantial strategy a reinvest to share

financial invest for and Let's shows color [ position Slide on slides ]. next these cycle. of the some to to commitment maintaining throughout allow look XX to each the operate additional a our cash us at few strong

XX% opportunities $X since We our our macro conditions, below almost address million, This and target. the allows invest $XXX and billion remain downside the spin-off cycle. risk to reduced retain debt to us have high-return to in across flexibility, healthy gross by position

the Let's at Slide share to look owners on returns cash XX.

and graph share since $XXX million We have owners returned we repurchases. this dividends will XXXX, shows repurchases. opportunistic in -- share cash via graph share On this as continue substantial to return to cash via

or X% a our repurchased of of price $XX XX% show of based average repurchases million a outstanding shares just have price These on shares almost an share. We per X.X at $XX. initial share over of return

via regular also and We cash opportunities repurchase special to return prices will continue to right. look attractive and dividends. at All for shares to

on in let's discuss So our business XX. shift gears and Slide reinvesting

invest at of million continue our strengthen we high-return this have our high-return We spin-off, funded $XX time projects, end increase business by in about flow. $XXX which to cash the to of At year. least have projects we million we'll funded will of of our and the projected

We allow identified our which us to $XXX capital million flow have now of and will the grow high-return projects, cash earnings another in future.

annual Antonio We up expect capital ramping investments above returns. In well cost X projects, slide million low-cost start of with that the in year. we specific generate up XX%. X project This we're an of to Eastover, take at of we'll of such wood opportunity that to the had savings X up Eastover a highlights later already $X.X chips. IRR supply quarter, started and of at project this and new Luis we advantage first This

recovery the evaporator allow to system project capture in Eastover. up us We This reuse evaporator and will also started heat. heat

We expect of annual return savings of XX%. $X with million a

self-generated the turbine annual increase This Antonio. and our power is new expenses. example Luis maintenance will in third The reduced

I'll We back expect to of $X annual you. XX%. million savings turn with it of return over Jean-Michel, a

Jean-Michel Ribiéras

John. Thanks,

strengthening conditions to TV story, create across Sylvamo freesheet throughout our ability deliver [ are our cycle. Uncoated ]. shareholder flow the is are value We strengthening against investment all to regions. and a continues cash

continues still near full price to is capacity running mix system improve. and our Our and

Financial is of As the a key strategy. result, the cycle. component earnings a from bottom are discipline our our of improving

returns invested cash value. that cash flow We on and to capital, generate continue use free to drive leverage share to high our owner increase strength

back cost reducing are call ahead. flow. we I'll structure future grow the discussed, We're by that, turn motivated John see we and confident lie the earnings our As and opportunities free With to to our opportunities in cash and that Hans.

Hans Bjorkman

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

Okay. Leah, ready to we're take now questions.

Operator

George with from [Operator question Bank Staphos Instructions]. And first of America. is our

George Staphos

I line The at you in looks end with with TheStreet to your is. performance expectations. have Slide guidance go at to of And least in want the date, for waterfall. the X was your to line where XQ the where look

a on congratulations costs, all of and elsewhere. or sort performance will, miss, and Ops being just you of midpoint So if better was versus that. line on the range of the slight the other in But because there

was was driving to negative? performance America, across either warm And the America? Just that? expectations you relative and across to your maybe Europe, then regions, out curious call to if up positive how start what Anything off Latin could North or

John Sims

your and things then And that John. we we not a occurred of planned One was Thank inventory Brazil. question. for Ops, down Europe. below not couple were had were that slightly George, had range revaluation our forecasted. or a in We paying in you an it's tax in

roughly those about into were million So us things two our put have would range. closer $X that

But we Across to expected. we markets export ended our and still where regions, In than were. bit we the what line little North expectations thought bit selling into in mostly we a Brazil Europe issue, in general, into because less. we terms better, And -- with up were of regions little and maybe less pretty much a into America, mix also more a expected. all of in we close by in

Jean-Michel Ribiéras

After weakest I is continued [ Latin ] one the America, first seen of quarter, think in you were we the is one. have which quarter always asking, what improvement of we've regions. first in momentum every seasonally a the

is to outlook. see come our it should it So in and just up, the continuing rest progress, can you

Operator

Capital the to line with McKellar Matthew we next, Markets. And RBC of go

Matthew McKellar

these each with you $XXX invest can And time First, share set That over across could Is color you projects project share bit you provide pipeline segments? What million projects? -- projects? the you've of would then little geographic be there's the high-return over of frame on the maybe weighted you there helpful. be a more to share anything anything associated can of capital average IRRs identified? in what around expect if would

John Sims

Sure, Matthew.

said about of will we year, invested think on the this that by in million. we have I the call $XX end

look $XXX high-return at million you will probably on about next we projects. year, spend If

I weighted we're the -- our than -- that spending what annual or on, an share projects, in If about you than even on in you look showing terms almost across greater the XX% repurchases. higher we're trajectory. think what about it's at returns But think of those return if basis, average it's on

through years So it $XXX about go return X million projects. us took to

million, but projects continue evaluate. -- to million identified be Board projects on look to And on capital XX% There There need those at that when continue are We'll project them several returning $XX $XXX million. well another returns. at. to we're you probably of million above $XX we be Now course, these of is still that of are generally may approval average things that about rate. internal looking we've at are that rates above $X most getting average, of

Matthew McKellar

That's Okay. helpful.

$XX within annualized And And run how Horizon on generally, you rate may much you would Project could be As achieved million an maybe be QX? much a for in on encompassed incremental that how QX? might expect then this benefit in talk about just more follow-up, year basis Project Horizon. you

John Sims

we're that particularly manufacturing. reductions some of in cost seeing, these projects Yes, high-return are driving our

are they regions. competitive our also for strategy core our and So strengthen assets across in be the we forward incorporated part we're doing will our this say of going Horizon our into targets as to positions

In this to $XX $XX shared the because inflation. of of clearly in we terms this million $XX expect first line, about million roughly benefit we quarter, bottom we last time, remember, what of the saw of million year

So be year, we'll rate. said run that. going to we $XXX million end $XX of By deliver run million against this to inflation be rate. Horizon, at will the netted have that of we're of

most So towards we year. second expect the of to And the year. $XX this loaded of back-end that $XX is half million million

reduce these implement and we position. As projects also

back-end the bottom probably second So that nor first is loaded. much didn't in be we answer the quarter will see the

Operator

we a Bank have with from And Staphos follow-up America. of George

George Staphos

to maybe you your And cushion business us earlier possible, the How trade have I operating should about material to conceptually? about sort we've some that planned. have in of had this think America the scaled difficult some But trying the XXXX. of quarter leave year heard producers be, year, a outages had and so, been would to build driver back not if thing perhaps where live, some into in in issues entered Has that it's business? either should contacts, a and/or Mike. North in our first the in know talk leave from we you that that little of other they extent the later

quarter then other least bridge conceptually yet. I'll as turn And we about I XQ that Are you about and at XQ? I the us do there second would it know guide a you're know is. over. any question think what think have not items on third significant had, We maintenance then to guiding

Jean-Michel Ribiéras

ask I'll mind, I the question. question don't you first if I can George, answer your question. to think first get repeat didn't the you I because second

On a high level.

as [indiscernible] So the you is thing said. the [indiscernible]

in seasonality is say the as much America half. Latin a always is The second we other half than thing better first the

And guide may our if the had too year. half, is of boost of ]. first two [ this the that in improvement the which first important seen So continuation of on we've course, I quarter to then, things, be

momentum, Lat probably it. to the a So is And Am I'm at look sure... way and good outage

George Staphos

Momentum, other what was thing the Lat you Am and said?

Jean-Michel Ribiéras

Momentum I mentioned. outage [indiscernible] the region. and outages -- in And the general in that the

George Staphos

My heard first of some portion No. freesheet some point, first in we had year. operating the issues other the had of the producers

go substance there is think, the an with I was was the the it of accrue in you? are I those once more one that think Did that producers running away did, I unplanned press outage. And business an, guess, does it question. any to back if of normally,

Jean-Michel Ribiéras

XX%, of was April -- and competitors. And which between we direct very put saw statistics our a the about think of happens high. we to rate our first saying I month But for is is operating estimate book relation just we it the don't and order can can we Yes, too. what heard it

two think those independent. I are

Operator

And a to go McKellar we follow-up RBC back Capital Markets. with Matthew with

Matthew McKellar

pressure XXXX. cost I whether And of here. I as of at in think least talked fiber you Can your what 'XX headwinds each talk in think on about country you cost talk maybe on expecting near mentioned America, Sweden in trends term you progresses? are wood the continued Latin wood in in the about the cost latest the fiber in also moderation fiber and any expect about upward you

John Sims

be the stabilized, situation elevated. for stabilized it's wood, the lack exports of Russian higher also we said the bioenergy to wood continues for Sweden, the but in Matt, has a that levels. the situation is that Remember, cost for reason it demand Yes, and at wood. higher of It and

we're So seeing decreases. we're -- seeing not in nor Sweden, seeing we increases are not but

it increased there. the rate. at stabilized Brazil, market much thing open where on And is but prices was pretty Brazil certainly that the it's also higher same side. So in And have stabilized,

Matthew McKellar

That's helpful. Brazil import U.S. freesheet the on sneak either you opportunities in. And from more Indonesia? China one if new could and seeing you I from duties imposing that Are in Mexico could Mexico serve uncoated or with

Jean-Michel Ribiéras

is balance Brazil, for had taxed, created because So it's some which export from be we North is the Mexico and side opportunity us a America. to from going

than balance export anything. opportunity when correct. more the America two. That's more So But are I looked -- it's But net-net, think we it's we been a from at you're an which it's it, to to North between opportunities yes, seeing probably Mexico.

Operator

George another We do have follow-up from Staphos.

George Staphos

Just last one for me.

that said, X/X in head be done number the for great. And then the recognize with for give what that Paper you cited if Just if what wait region? look. we'll count reduction say year this did is number year? coming a one, Horizon snapshot us you by quickly, had if Q, quick total? capacities possible, And I and/or would pulp? that it's could is deck you the already the what versus the you in you in But was from on but or

John Sims

and ] the the is I'll answer Horizon XXX [ globally. the -- that positions cost first. question George,

On the region have by is what uncoated. perspective, it capacity for we

So give these to you. I'll numbers

Paper. remember, it's we So for in for market. in Latin $XXX,XXX pulp. uncoated uncoated for for $XXX,XXX and it's it's And But market agreement And have freesheet International Europe, per facilities, papers freesheet America, Both pulp. in our supply $XXX,XXX. $X.X North and $XXX,XXX for it's for with million a $XXX,XXX America, uncoated Europe, market

supply of So And the is agreements Riverdale, with it's the and appendix. $XXX,XXX in Georgetown freesheet. that uncoated for both

Operator

to closing Instructions] call no questions. turn comments. Hans have back We the for now Bjorkman other over [Operator I'll

Hans Bjorkman

Leah. Thanks,

Jean-Michel, any Before thoughts? call, wrap we closing up the

Jean-Michel Ribiéras

a Just few.

joining all, thank the call. you So for first of

financial same to the our we cash and Core year. We're position, in much. and shareholders second to confident demonstrated our is very returning Thank cycle this we've strategy throughout to our balance earnings between generate cash our And the since for business. business reinvesting quarter maintained increase looking to advantages. a a in continue flow and to go reinvesting you the competitive our spinoff, ability healthy we As to the and direction. in strong forward

Hans Bjorkman

we to We us conversations coming in forward Thanks weeks interest joining in and continued for months. your and Sylvamo, look appreciate today. the

Operator

participating again, Earnings XXXX for thank like your Once First Sylvamo's to in we'd you Quarter Call.

You may now disconnect.

Sylvamo (SLVM) 10 May 242024 Q1 Earnings call transcript