Release Date: November 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Rayonier Advanced Materials Inc (RYAM, Financial) reported a robust Q3 2024 performance with adjusted EBITDA reaching $51 million, marking a 113% increase from the previous year.
- The High Purity Cellulose segment saw a significant EBITDA increase of $32 million, driven by higher cellulose specialty prices and volumes, and decreased costs for key inputs.
- The company successfully refinanced its debt, providing flexibility to execute its long-term business strategy and strategically deleverage.
- RYAM increased its full-year adjusted free cash flow guidance to $115 million to $125 million, reflecting improved visibility into year-end cash flows.
- The company is making substantial progress in its biomaterials strategy, with the Tartas bioethanol facility producing to feedstock availability and plans for further strategic investments in green energy and renewable markets.
Negative Points
- The Paperboard segment experienced a $6 million EBITDA decline due to reduced sales prices and increased pulp costs.
- A fire at the Jesup, Georgia facility is expected to impact EBITDA by $10 million in 2024, with additional maintenance capital of $3 million required.
- Corporate expenses increased by $5 million, driven by unfavorable foreign exchange rates and higher variable compensation and environmental expenses.
- The High-Yield Pulp segment, despite a $6 million EBITDA improvement, still faces challenges with ongoing price pressures from stranded pulp capacity in China.
- RYAM's exposure to China, particularly in the High-Yield Pulp and viscose markets, presents risks due to potential economic slowdowns and competitive pressures.
Q & A Highlights
Q: Can you clarify Rayonier Advanced Materials' exposure to the slowing Chinese market and any benefits from government stimulus there? Also, what are you seeing in the European construction market?
A: DeLyle Bloomquist, President and CEO, explained that about 20% of RYAM's sales are exposed to China, primarily in acetate and some commodities like viscose. Acetate demand is stable and not directly tied to China's GDP. The company is reducing its exposure to viscose. High-Yield Pulp faces challenges due to stranded capacity in China. In Europe, there's a modest uptick in ethers demand, partly due to restocking and a slight increase in underlying demand.
Q: What is the demand outlook for acetate and other cellulose specialties (CS) heading into 2025?
A: DeLyle Bloomquist noted that acetate demand is stable and expected to remain so, serving as a cash cow for the company. Other CS products show some economic sensitivity, but demand is expected to improve in 2025, aided by a competitor's plant closure in late 2023, which has allowed RYAM to gain additional sales and production.
Q: How are the CS price increases being implemented, and what are the expectations for 2025 pricing and cost inflation?
A: DeLyle Bloomquist stated that it's early in the process, but the company is focusing on value over volume. Price increases will vary by product grade, and discussions are expected to culminate during the London Pulp Week.
Q: What is the expected spending for repairs at the Jesup facility over the next few years?
A: DeLyle Bloomquist mentioned that it's too early to provide an estimate as investigations and engineering assessments are ongoing. The plant can operate safely in 2025, and repairs will be deferred to ensure they are done correctly.
Q: How does the growth in biomaterials contribute to RYAM's sustainability goals, and what market factors are driving this growth?
A: DeLyle Bloomquist emphasized that biomaterials are central to RYAM's ESG objectives, leveraging the 60% of wood not used in HPC production. The company aims to replace nonrenewable resources with renewable ones, tapping into a market trend favoring sustainable products. The success of the Tartas bioethanol plant exemplifies this demand.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
