SLVM

• Strategic Capital Projects & Facility Investments

  • The Eastover mill strategic modernization project (woodyard upgrade, paper machine optimization, new sheeter) is progressing on schedule and on budget: the hardwood woodyard line has operated successfully since May 2026; the softwood line startup remains scheduled for Q1 2027; the paper machine speed-up project will be completed during the Q4 2026 extended outage, adding 60,000 annual tons of uncoated free sheet capacity that will ramp up in early 2027. The new sheeter passed acceptance testing in June 2026 and is currently being prepared for installation. The full set of Eastover projects is expected to generate $50 million in annual benefits, with $30-40 million of that realized in 2027.
  • A third-party financed 300,000 square foot warehouse expansion at an existing sheet plant via a sale-leaseback transaction is on track for completion in Q1 2027, expected to deliver $5 million in annual supply chain cost savings.
  • Total annual benefit from all four active strategic projects is projected at $55 million.

• Lean Transformation & Operational Improvement

  • Rollout of the company's lean continuous improvement transformation is progressing across regions: it has been kicked off at Latin America's Moji Gua Su and Trace Lagos mills, introduced at the Ticonderoga, New York mill, Sumter, South Carolina cut-sized seed plant, and across all corporate functions. The goal is to embed employee-driven, systematic, self-sustaining performance improvement.

• Long-Term Strategic Goals (to be achieved by 2030)

  • Safety & well-being: Eliminate serious injuries and build a resilient safety culture
  • Employee engagement: Increase employee net promoter score from the current 46 to over 50
  • Customer centricity: Achieve a 20 point improvement in customer net promoter score and over 90% perfect order performance (complete, on-time, defect-free deliveries)
  • Operational excellence: Improve overall equipment efficiency by 400 basis points
  • Cost leadership: Achieve an annual cash cost improvement rate 3-5x the 2022-2025 average, enabled by lean and digital transformation
  • Sustainability: Continue responsible operations to protect forests, support communities, and reduce environmental impact

• Pricing Implementation

  • Uncoated free sheet price increases have been implemented across all regions, with additional incremental price increases announced and in the process of being realized through Q3 2026, as current margins remain at unacceptable levels in some markets.

• Full-year 2026 free cash flow will be concentrated in the second half of the year, consistent with historical patterns, and Q1/Q2 2026 represented the low point for 2026 free cash flow generation.
• Management expects a $75-85 million total improvement in price and mix for H2 2026 compared to H1 2026, with approximately 70% of this benefit coming from price, concentrated in North America and Europe. Most price increases will flow through in Q3 and hold steady into Q4, with the full run rate of implemented pricing expected to be achieved by the end of Q4 2026.
• H2 2026 volumes will see positive momentum from stronger seasonality in Latin America, which will be more than offset by lower North American volumes from the termination of the Riverdale Supply Agreement and the extended Q4 2026 outage at Eastover, leading to a net lower North American volume for the second half.
• Input and transportation costs are expected to be net favorable in H2 2026: lower fiber costs in Latin America and Europe will more than offset higher energy, chemical, and transportation costs driven by the ongoing Middle East conflict across all regions. Fiber costs have declined roughly 20% from their Q4 2025 peak, with the impact beginning to flow through to results in Q3 2026.
• Once industry conditions stabilize, capital spending normalizes, and strategic investment benefits materialize, Silvamo expects to reach a run rate of over $300 million in annual free cash flow and greater than 15% return on invested capital.
• No change to the company's long-term annual free cash flow and return on invested capital targets was announced.

The call does not break out formal financial performance by separate product segments. Aggregate company-level results for Q2 2026 are: adjusted EBITDA of $60 million (more than doubling sequentially from $29 million in Q1 2026), with an adjusted EBITDA margin of 7%. Adjusted operating earnings were $0.03 per share. Free cash flow was negative $23 million, representing a $36 million sequential improvement. Sequential Q1 to Q2 bridge items: price and mix contributed +$32 million (reflecting implemented paper and pulp price increases across all regions and better mix in the Americas); volume contributed +$3 million (driven by seasonally stronger demand in Latin America); operations and costs contributed +$22 million (driven by European green energy credits and lower overhead, offsetting factors); planned maintenance outage costs were -$24 million (scheduled outages across all regions); input and transportation costs were -$2 million (higher purchased wood costs in Latin America and higher transportation costs in North America, partially offset by the absence of a $10 million Q1 one-time charge related to high natural gas costs at the Riverdale mill).

• Ongoing Middle East conflict continues to put upward pressure on energy, chemical, and transportation costs across all regional operations, creating uncertainty around near-term input cost trajectories.
• European industry supply and demand conditions remain challenging, and current performance of European operations is below management's long-term targets.
• Recent tariff changes have eliminated the cost advantage of importing additional product from Brazil into North America, leading to lower than planned imported volumes and an earlier return to the original $85 million negative impact estimate that had been reduced earlier in the year.
• The extended Q4 2026 outage at the Eastover mill is longer than the originally planned 45 days, further reducing near-term North American production and sales volumes.
• Low operating rates in Europe limit the pass-through of higher pulp costs to paper prices, constraining margin improvement.
• 2026 is a transition year marked by ongoing operational disruptions from major capital projects and supply agreement changes.

Q: What drove the sequential margin improvement in North America in Q2, and how much working capital build from the first half of the year will unwind by year end, and what will end-of-year leverage look like?

A: The Q2 North America margin increase from 10% in Q1 to 15% in Q2 was driven primarily by price and mix improvements, with smaller contributions from lower operations costs and modestly lower input costs. The working capital build, which was concentrated in North America (roughly 50,000 tons of inventory built ahead of the Eastover outage) will mostly unwind by the end of 2026, with inventory drawdowns starting in Q4.

Q: Why is lower North American volume expected in H2, and what is the source of the variance from prior volume targets? Will all announced price increases be fully realized by the end of Q4?

A: Lower H2 North American volume is both production and sales related, driven by two main factors: the permanent loss of 90,000 tons of annual supply from the terminated Riverdale Supply Agreement, and the extended Q4 outage at the Eastover mill for modernization work. The original plan for offsetting this loss with cost-effective imports from Brazil is no longer viable due to new tariffs. Price increases across all regions will be mostly realized in Q3, will hold into Q4, and the full run rate of all announced pricing will be achieved by the end of Q4 2026 across North America, Latin America, and Europe.

Q: What is the current status of the strategic review of European operations, and when will a final decision on the future of the segment be made? What performance level is targeted for Europe?

A: A new European management team hired 12 months ago has delivered accelerated performance improvement, and the current strategy focused on mix improvement enabled by prior mill investments is ahead of plan. While European market conditions remain difficult, management is focused on delivering targeted cost reductions and mix improvements to get the segment to mid-cycle cash positive returns that exceed the cost of capital. If performance does not meet targets, management will consider all options (including continued investment, shutdown, or sale) and will make a final no later than 2027, with the timing flexible based on performance progress. Management estimates that roughly $50 million in total combined cost and mix improvements are needed to hit long-term targets for Europe.

Q: What changed with the expected volume from Brazil that was previously expected to offset the North American Riverdale volume loss, and what is the softwood fiber used for at Eastover?

A: Following new tariff changes, importing additional tonnage from Brazil into North America is no longer cost effective, so the prior $20 million positive earnings adjustment that was made to offset the original Riverdale volume loss is now gone, and earnings will revert to the original $85 million negative estimate from February 2026. At Eastover, softwood fiber makes up 30-40% of the total fiber mix, and is primarily used to add strength to converting grades such as envelope paper.