Sylvamo Corporation Q3 FY2025 earnings call

Key Highlights - Uncoated freesheet sales volume increased by 7% quarter-over-quarter. - Returned $60 million in cash to shareowners via $18 million dividend and $42 million share repurchase, and Board approved new $150 million share repurchase authorization. - Adjusted EBITDA of $151 million was in line with outlook of $145 million to $165 million. - North America and Brazil industry conditions solid; Europe and other Latin America challenged. - In Europe, improving product mix, reducing wood cost at Nymolla, reducing fixed costs and improving operational efficiency. - In Latin America, securing new strategic Brazilian customers, developing partnerships, investing to improve wood sales efficiency. - In North America, focused on strategic commercial initiatives to improve volume and margin. - Investing in Eastover mill to lower costs, enhance efficiency, increase capacity by 60,000 tons. - Long-term capital allocation strategy includes maintaining financial position, reinvesting, and returning cash to shareowners; dividends and share repurchases are part of this.

In the third quarter, Sylvamo earned adjusted EBITDA of $151 million with a margin of 18%. Free cash flow was $33 million and adjusted operating earnings were $1.44 per share. Uncoated freesheet sales volume increased quarter-over-quarter by 7%.

Fourth Quarter Outlook - Expect adjusted EBITDA of $115 million to $130 million. - Price and mix expected to be unfavorable by $20 million to $25 million, primarily due to paper prices in Europe and mix across regions. - Volume expected to be favorable by $15 million to $20 million, largely due to Latin America and North America. - Other operations and other costs projected to be unfavorable by $5 million to $10 million, primarily due to seasonally higher costs. - Input and transportation costs expected to be stable. - Planned maintenance outages to be unfavorable by $18 million due to 1 outage in North America planned. - Expect to build about 60,000 tons of inventory to bridge to Eastover incremental capacity; Riverdale to supply ~260,000 tons in 2025 and ~100,000 tons in 2026.

Risks - Uncertainty caused by U.S. tariffs which may take a while to settle out. - Europe market conditions very challenging with pulp and uncoated freesheet prices under pressure; some Latin American countries having economic challenges leading to demand decline and pricing pressure.

Q: Regarding North America, with stable demand even with higher imports earlier, wondering if normalization of inventories from imports will translate into more stable or improved pricing environment into 2026.

A: John Sims said that inventory is being worked down from the import surge earlier due to tariff threat, imports have started to decrease, and closure of Chillicothe mill, so operating rate should improve and strengthen going into next year.

Q: Follow-up on Riverdale, how far along in inventory consumption, inventory to build to bridge to Eastover incremental capacity, working capital investment, and impact to 2026 EBITDA.

A: Don Devlin said they're approaching normal levels now; plan to build about 60,000 tons of inventory, most in first half leading to Eastover outage; impact to 2026 EBITDA is still estimated at ~$30 million as before, which hasn't changed