SLVM - Earnings call transcript Q2 2024

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Operator

Good morning. Thank you for standing by. Welcome to Sylvamo's Second Quarter 2024 Earnings Call. [Operator Instructions] As a reminder, your conference is being recorded. I'd now like to turn the call over to Hans Bjorkman, Vice President, Investor Relations. Sir, the floor is yours.

Hans Bjorkman

Colin. Thanks, thank Call. our and Quarter Corporation for Earnings XXXX you morning, Sylvamo joining Second Good

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

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

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

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

Jean-Michel Ribiéras

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

reporting, by committed creates profits we ensure a first we a safety with members. of that for and format. Sylvamo commitment protecting putting of our greatest shareowners, to new while sustainable paper transparent those the cooperation environment well-being and this team likes report interact. in people Continuing our We're the sustainability in always. operating is Our improving before and as second also whom to the streamlined the our do for responsibility published We quarter,

communicate expanded website our more. up sustainability also sylvamo.com news, visit on efforts. and sustainability We content, regional and certification I to to the you about encourage sustainable our learn

Slide go to X. Let's

conditions. Now pulp let me uncoated go into some highlights of improved freesheet the quarter. and We experienced

from of announced quarter. $X.XX as We ran a we We our system the our per out well flow. strong us. successfully that And of for we almost to dividend now the maintenance paid to increase have in at generated share, completed planned XX% this end behind mill quarterly year Our outage July. heaviest XX% $X.XX planned our maintenance May, cash of

generation adjusted our results next the aggressive flow million, proud planned of $XXX share. XX%. adjusted $XX executing earned delivered our our a EBITDA move our million, Let's customers and system. We of we Free successfully of $X.XX slide. margin Slide cash [indiscernible] of was and while financial with shows of operating outages metrics. key taking X per earnings several across I'm care generated maintenance to

our in Now more performance detail. will John review

John Sims

Thank everyone. morning, Slide you, good I'm X. Jean-Michel, and on

from uncoated Over the freesheet improved half the year. of year, conditions last first

demand in Europe was was up Latin Argentina. Looking America our up America X%, by this across X%, industry was at a North regions, decreased drop significant XX%, but influenced however,

end supply well. Industry of would the A of closure to America rates capacity the end when converted the of supplier over machine X% the Pulp pulp up reduce announced across North improved moved in close regions first This a European by the year. will X%. our permanently June. European the year and half approximately Germany prices in by paper about uncoated of at they May, have as competitor operating in freesheet

Excluding stabilization most at pulp, we although of the input high a costs, saw also level.

Europe costs and by seasonally seasonally increased pulp Let's Slide quarter mix million. Planned move $X and outages and of $XXX operation our previously million in all paper to earnings the communicated by costs maintenance $X solid $XX regions reflecting outlook and than input $XXX transportation $XXX million, costs X contains our Operations in of and driven a America. $X improved second in reflecting Latin improved America. stronger price demand increased adjusted million. North well primarily Price America. costs EBITDA the $XX by Latin primarily and decreased next as better million, other by slide. lower Volume The to by better and of in million implementation was by mix million million as bridge. increases

to X. let's Slide move So

due of third to primarily be to project We million. and price deliver to We expect slightly adjusted million $XXX unfavorable $XXX EBITDA mix quarter mix. and

$XX to to million, by We America. manage expect customers' million million, increase unabsorbed $XX volume $XX and we Latin higher to costs primarily driven by America demand. Europe, and as North our costs production projected by to and our Operations continue fixed million to are North by economic in to downtime America, driven other improve $XX from

and no supply making track achieve run Horizon, good target rate We're to We progress $X Project on as have overhead, fiber streamline major million to outages expect input million $XX on improve this Latin program Planned and to our unfavorable chain in and $XXX quarter. transportation increase in $XX in are We're to projected North to America. year-end planned our costs by savings. costs. due of we by million to America outages energy million manufacturing maintenance

go Let's to Slide XX.

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

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

Let's the the refinancing next on cash. Last each our Details are long-term extend maturity also the we to the look X-K appendix. at we uses week, announced few our filed of X and in talk in included and of of slides debt through August profile. these

XX, see our all we after and X% on X. redeem can before profile you outstanding the Slide on notes maturity Here of after September picture

to balance strong throughout the provides the address macro invest flexibility conditions, in us high-return Our downside to cycle. and sheet risk opportunities

Slide to XX. move Let's

to shareowners We share repurchases. via dividends to return cash continue will substantial and

our initiated and more dividend we we regular year graph per fourth raised after doubled than within share financial to $X.XX in spin-off it In this significant our shows, strengthening a of XXXX, then and first our down dividend the paying position. again the debt quarter. As

and raised shares. to share. per XXXX, we XX% far Thus via in This of by dividends share. dividend $X.XX in million have We distributed $XX the have X a quarterly issued also special year, we per $XX million a dividend regular repurchased $X.XX

Let's move to Slide XX.

$XXX about while $XX we at have projects will projects, since end the our high-return invest our -- how cash which million of funded of We line have increasing in reforestation we we by strengthen business billion maintenance, On and spin-off. At spin-off, earnings had the capital time projects high-return have can spending continue of to sight you year. slide, ramped by and of this our flow. our of high-return this funded to on least see up in

We of to projects capital million us with These to have our another sizes now on the in cash grow varying are and high-return develop coming mill, of to years. $XXX flow. projects are providing identified and starting flagship invest largely our focused opportunities earnings

turn generate over well cost such capital back return. With Jean-Michel, it We you. above that, to I'll expect investments to of

Jean-Michel Ribiéras

to comments Thanks, Slide a is our against conclude XX. we John. I'll thesis. cash my and story Sylvamo continue deliver investment on flow

invested our flow to cash a to shareholder leverage will of capital, returns and strategy. our that value. cash free use strengths We drive generate discipline increase is Financial on component high key

profile. we discussed, debt John to our extend long-term our As maturity have refinanced

return least free this to committed year. at cash are shareowners XX% We our of to

cash which We capital to and are cost and a coming enable grow in reducing our years. structure earnings projects, will of pipeline us the have high-return flow great

ahead. With We to turn are call our future Hans. confident back that and in that, motivated I'll opportunities the the lie by

Hans Bjorkman

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

Okay, ready to take questions. we're Colin,

Operator

[Operator Instructions] Jefferies. is with Our first question from Hathorn Cole

Cole Hathorn

Two from my side.

on The wood costs. first one is

can to mill? that going that what Is from stable seeing and a positive you called gives because the we've in your [ Latin able various of the Europe, having of a then ]. inflation talk with issues in bankrupt. on just negative cost you're Are seen French you distributors your kind middleman other in wondering I forward or still And cost more for basket? financial in in relative higher seeing market markets about out Europe wood Sylvamo a of others? And out Nordics, versus seen with cost color Love in thoughts You just you ] structurally that? a kind going of cut some within effectively, wood bit think wood your the America. are I'm But here, you there. any [ advantage paper sticking some changes we've structure a

Jean-Michel Ribiéras

thanks and the call. joining -- me let So for

me we non start by Brazil, wood is the Let Brazil, [indiscernible] wood the in buy. increase cost. started The wood cost to the due all by

have because investment years X was the got need buy we been got to the word where First, X not more we in we Sylvamo, years, when there to sufficient. forestry

made we So we've for up out. and investment, cut this

which wood Scandinavia of cost in to impact expensive. In and And woodchips, we've whole it's the increase, price, wood mentioned, sorry. only and we Europe, the bit wood, not So little whole has but top There Russia little which a more you Belarus increased. stop that, exporting as demand need bit supply Scandinavia. wood buy of is the some seen, more on a of other in reduced -- has

in Sweden, high up on Brazil, is roughly increase level. some is stable U.S. So which and Saillat for a stable roughly the make it. will increase in

wood good merchant advantage Europe, So have in cost with that's In you, say agree to U.S. Brazil, and the with would we us. on an side the forestry it's we very side. But wood have neutral in in I our the I

have glad channels. it have We ready would in I in neutral be, area great to or has us, if another. there the these call merchant but changes or one would we're is be some it in to the for more direct, If we customers. partners Europe, more and We're way

Cole Hathorn

and across the in by some saw call general, restocking. then LatAm? saw demand of And graphic have trends. region paper could North see lot you markets trends to demand the paper America, restocking a any if I We including is items various which Do have good in follow-up, just a an underlying end around and perspective? Europe you [indiscernible] or Where do on visibility out demand office

John Sims

I'll John. about little talk is bit a demand. this Cole,

half, that some seen improvement. in restocking we So have the the about of talked [indiscernible] we drove and first

we You XX% flat. North look at issue and up where about in industry, Argentina. Europe, at there we're region, relatively in was LatAm an around was are by year-to-date, Again, looking the X% America,

for other and the we seeing year, experts. forecast actually demand we're forward, industry be positive Going with that full from consistent will expect this is the

of Some of the half. to comp driven the of that because because weak but is restocking, second not

a relative a America Western I and stable. be it's now particularly from going to comp year. easy relatively perspective, Europe last So demand our is characterize to But in perspective, positive North and comp would

and at full X%. full LatAm around probably Europe looking X% America we're around up year, X% So round year North

Jean-Michel Ribiéras

the you long-term on that long I see America to about trends, And returning is talked also, and think Europe North we decrease. slight in which trend,

Operator

Matthew Markets. Our the RBC of from Capital with line next McKellar question is

Matthew McKellar

more color follow Latin first are expectations maybe costs in to question a around of of cost around Latin with And what's purchase little fiber the give happens in just in bit like quarters? Could your Cole's what what America. America happening over you terms I'd few with costs? next just fiber on

John Sims

This thanks. is Matt, Yes, John Sims.

that So seen we in talked to that Brazil. of in wood and what continue, that kind -- But when compare just cost it's talk Brazil, expect we go when the and to of about And and our fiber our but about seen of land increased increased price, not we've have you maybe own what actually to valuation the terms inflation I we're at -- harvesting rate. in we cost of wood. we've Xx drove, when market market, about of growing, that's the

we're reaching of you in now, increased We're distances, around But out our are down Is why reinvesting market additional so some you the of what's We're so increases needs. And also wood, the historically. self-sufficiency is our had -- own is supplying when This XX%. higher to for plantations. further what those that's we've freight. our about. Right We'd reach what we investments our in prices pay for the out have like about been and driving higher. Brazil. talked probably than XX% be seen Jean-Michel cost lower to

So said, And that's the this your our as are question America. is or is things trend. us But some impacting increasing I we're Latin we investments reforestation. reinvesting why finally, think the in of in that

in increase down We fiber expect the that cost continue to to Latin increase, of America.

Matthew McKellar

bit be the Any That's Could mostly there? Great. Is next, QX, also paper helpful. assumption there? Maybe sales? would pulp that export Is you out unfavorable mix price more around into you somewhat on just mix called a provide an maybe in prices happens in sequential for color more what progression there Okay. helpful. color and mix. if

John Sims

more all pricing, Mexico. mix, that really can't predominantly where it going, we said is variance talk going America. export is about North and And mix, that we particularly in future that's Matt, but that is to

based that aware the gives advantage don't may countries Mexico of us that trade on are implemented a tariffs that. and that You be for companies taking agreement, so like next we're that the advantage have to an in U.S., X years

more mix So exporting accounting that's for what's Mexico the to we're and change.

Operator

of George line Next, to we'll America. the of go with Bank Staphos

George Staphos

me the for okay? Thanks hear you details. Can

Jean-Michel Ribiéras

Yes, George. joining. Thanks for

George Staphos

to spread? they're might capital are queue. cost what this of projects So color they you presumably and and in with now, that what's regular I'll back bit about the full degree question opposed maybe questions return start XX%? on dividend. in the all one. Question the in all cost another differential latest and what think above then X us to dividend the any to What on are a still terms the working side give and you raising How doing raising on That's Congratulations the pipeline capital, go the dividend? a increase. lesser you more same varies did thresholds? two, on raise pipeline return a detail Can of pipeline be? as to raising amount above it the special been you to processes, Or the in how it, and of gave have the basically relative little you on So been comfort on approaches with did the sizable

Jean-Michel Ribiéras

John take I I'll guess. we both answer question. second take But the will and So the one it, first could maybe

So investment a very high capital return. of have still threshold yes, we

So minimum we're a XX% all looking the at of is projects strict return.

why is on this very attractive. So Those sides. it's projects different have

Some are small larger. are very some and

standing attractive to and to for plan ] the the coming then on both But earnings [ our very working we're are this on incremental with pipeline, investment. cash them they're Board and years and Sylvamo. We

John Sims

flow. is A perspective. And and George, a allocation dividend. sustain that can the doesn't us from balance can our And that first you dividend our to and to priority strategy, shareholders. a and forever, core is question in and to earnings goes sheet; reinvest where believed we back the will. our to your to third flexibility that is to And have cash back confidence strong have business second we a that foremost, returning second we grow cash is then if have a And restrict strategic dividend capital

for by operate a because right competitive lot that your forward. we in executing and of to to flow through a increasing our, of that in of able advantages question of projects smart forward, terms first business this now. markets high-return we sustain dividend what to, to have we confidence which there opportunities we're and us we sight and good the had dividend we And on the driven we increase we believe earnings in pertains be believe, and -- and us line lot because So of have that confidence mostly a put give is in reinvestments cash going

George Staphos

business think as shape your increase and a John, the sit that Would staging? is and I you suggest side Maybe sheet next mean quick incorrectly. special tag I'm any I balance -- could on develop maybe more again if the return cash are way [indiscernible] be right great reading turnover. increases to as do of at pipeline as the the sort the lines generation between we next cadence that here moment, the of But the reinvestment. you presumably in of to once maybe through the about does dividend

John Sims

want wouldn't to foresettle that. I Yes.

we to as about that, And the I case we we did dividend. may that may there view that sustainably the with buying prior business. will -- Board. cash, or increase be review we better we think do think I We that issue the we strategic our last that think such or we the that do like for we uses think a dividend dividend plans may in or believe reinvesting that special [indiscernible] in and that we'll we back a special year, back as shares can

Operator

McKellar with line the back go Capital to Markets. of RBC we'll And Matthew

Matthew McKellar

to far can freesheet seeing closer demand as to discern? fall impacts as terms you the you election, get we in As uncoated are what of

Jean-Michel Ribiéras

us, volume. an not for opportunity but big it's always a So the balance is

we our to between it's the have largely something So us competition in and North America, capacity, supply.

not So nothing an significant. few ], it's a very opportunity, [ a big but It's it's silent deal. tones

John Sims

and election used Matthew, significant on be become I it but seen mean demand. less. pretty we've less freesheet impact uncoated to that's a driver,

Matthew McKellar

Okay. Fair enough.

like thinking how North looks market market It year? relates imports. about the you as concern imports Can perspective to how higher the to continue shifting maybe the updated tick more of you're about maybe at here. provide the to some today thinking you're it versus just of just landscape maybe a Next America. they in start Are

Jean-Michel Ribiéras

maybe freight let they varied between XXXX, X% have since [indiscernible] And to So exchange. depending foreign rates, the Imports wood America, me give-back XX%. really North on story. in vary market,

So have early we been this 'XX year. in same since range and the even

So And And than think range. I something read due U.S. don't more think be that. to always XX%, been to that we on like the I freight. of some the have the done importers XX%, should I

[indiscernible]. Some to to market have opportunity been done local

because North it's interesting through always years. in you very the same look It's changes region it at the it, it's also the come of. kind opportunistic where If imports America, not because

So that still significantly we have I range change. Nothing today. that on and it see opportunistic

Matthew McKellar

I helpful. in to a And just system I bit color one if happened on sneak provide you Okay. maybe in surprised That's economic the was little pulp just QX. could in. European more Can what see little some downtime there? a

Jean-Michel Ribiéras

that sorry. [indiscernible] I'm again?

John Sims

answer that I'll [indiscernible] question.

So yes, And both just to North matter a downtime, us matching Europe in our an demand. of customer America. we and had economic that's capacity

third we bit in the expecting second the quarter. look So in you than the quarter -- the and we're had had -- quarter, we outages. a significant But in little in second outlook, more

our not to supply So although being to build volumes are we're up, we're demand, inventories. our unnecessary and still matching customers' careful

Matthew McKellar

looks to fairly confirm? downtime it's small tons the had thousand as and that's just couple economic side recognizing but of you pulp volumes, of to of And like true Okay. where it confirm, wanting well, just a Europe in

John Sims

I'm question. misunderstood your sorry, I

-- matter pulp that and second for misbalance, in constraints nothing pulp we asking it. if that. a the to our demand we a of the just we pulp quarter. really And our move about than pulp. in the some was to more had were just was dryer, plenty with production didn't our pulp that do There It's balancing you production You driven ability the by paper in say, produced of that

that's So what was. that

Jean-Michel Ribiéras

can want in how We Europe. we pulp in sell

issue We have all. at no

Operator

back And to with we'll of America. go Bank Staphos line George of the

George Staphos

view that's the So to gentlemen, relative to that capital, of maybe to you the be the further I be you want of cost be with some are more true, going to any you strong to in way the leveraging see it's balance what from the mixture, competitively? us down be bit give X on some questioning. return do know you to really I that one. a Again, of curve, but moving could if some to you where a the going standpoint. you the size do weighted it's presumption? sheet Can to the to If back business? Secondly, all the degree number more know regions can that's a benefit? a and term I there's in have it Sylvamo of talk How market this are regions. investments which a likely line that position talk that might longer for project on will

Jean-Michel Ribiéras

the question. mills. We So in as let first essentially -- me answer to we flagship we invest our mentioned, intend

in our mostly in to So Antonio, in and Eastover, in you know, and North lowest America, Nymolla. is we Brazil, Europe, invest as intend which Luis mills,

are is returns. This the low-cost invest mills. where high intend we to continue So to with those

we back to to our as cash want give said, of terms the shareholders. In to continue cash, we

we right bit now, more had debt policy -- also we now little a is we even a back. cash right debt. We flow. cash, our a have XX% reduce we have could thing, if of could free could of also more give If low which a We good our

of opportunity plenty ]. have of [ we cash reuser So

George Staphos

are asking in standpoint cutting projects Jean-Michel, put market versus if designed these not the And... a I peers even you guess, to your was what can me, of in an position hear you better really? from some I or cost

Jean-Michel Ribiéras

oriented Completely, impact. are they are -- cost most of them or cost

direction. really they on are So that

be cost even lower We cost. are want the we to low and

Operator

Instructions] [Operator

Jean-Michel Ribiéras

the Just George. with discussion maybe finish to

you did. give one of me Let a we project example just

wood. forecasted that and $X you -- yearly supply to the purely increased was Eastover it's a gives actually, capacity about boost cost. our we're that of woodchip million, saving $X.X We and low-cost sell million This million We to was a $X.X investment. our on mill. basis, So XX%,

we of example project one that's cost have. So

Operator

to And back we'll George the go Staphos. of line

George Staphos

me, Last gentlemen. question from

return, you and a it So we of are to, time months are so. commercial you and all has and year ago? appropriately What X How with grow relative leveraging and commercial maintain turning and customers profitably a cost are the market in now your high margin? requests coming for in are the that best say, on spend you changed? rightly capital to your How presence How customers? whatever at lot into your a asking that, like

Jean-Michel Ribiéras

sure I'm I question, what understand trying your George. make to

think we've been... I

George Staphos

months asking or turning customers have case been How now, higher ordering, it's revenue whatever your it's an you you are year -- whether whether that's per I how whether are online ago? old ton? that What you Jean-Michel, [indiscernible] that, ago one. differently And service, are for SKUs, a might X the it's mean

Jean-Michel Ribiéras

So customers a the different actually demand bit is regions. of in little

because they and more supporting partner, the we having common allow us more to are say service capacity bring sustainability. asking exclusive are How with capacity be in brands [indiscernible] I side company, it's is service brands around including there in the and they the worldwide supply the it's you merchants the unique they brand. In optimize Europe, for. and what especially to the of chain. Europe. In trend in this it because if want U.S., more the very positioned, very more and well would you're are can strong is a importance the are which and U.S., [indiscernible] Brazil, integrations to service. the And customers, a lot Brazil continuing our are key sustainable we of more and demand develop aligned to in If the on around of

Operator

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

Hans Bjorkman

any All right. closing Jean-Michel, you, Colin. comments? Thank

Jean-Michel Ribiéras

our of call for joining appreciate your first it. thanks questions, So all, and we really

confidence our When to to cash reinvesting our competitive returning and core earnings cash in ability that to Let is me a business strategy financial cycle. in advantages generate increase -- flow strong the our shareholders. strong our position, throughout you to managing and remind

have So again, a you, day. good thank and

John Sims

you. Thank

Operator

XXXX Once to Sylvamo's participating Earnings like would Quarter in Call. we again, Second thank for you

may You now disconnect.

Sylvamo (SLVM) 9 Aug 242024 Q2 Earnings call transcript