Third Quarter 2023 Earnings
November 9, 2023
© 2023 Sylvamo Corporation. All rights reserved.
Cautionary statement concerning forward-looking statements | 2 |
This presentation contains information that includes or is based upon forward-looking statements. Forward-looking statements forecast or state expectations concerning future events. These statements often can be identified by the fact that they do not relate strictly to historical or current facts. They typically use words such as "anticipate," "assume," "could," "estimate," "expect," "project," "intend," "plan," "believe," "should," "will" and other words and terms of similar meaning, or they are tied to future periods in connection with discussions of Sylvamo's performance.
Examples of forward-looking statements include those relating to: our strategies, plans, expectations and projections concerning our business, performance, shareowner value and cost reduction, including Project Horizon; our outlook for Adjusted EBITDA; our selected guidance; our industry's outlook and trends; planned maintenance outages; and our future uses of cash, including returning cash to our shareowners and capital spending.
Forward-looking statements are not guarantees of future performance. Any or all forward-looking statements may turn out to be incorrect, and actual results could differ materially from those expressed or implied in forward-looking statements. Forward-looking statements are based on current expectations and the current economic environment. They can be affected by inaccurate assumptions or by known or unknown risks, uncertainties and other factors that are difficult to predict. Although it is not possible to identify all of these risks, uncertainties and other factors, the following factors, among others, could cause our actual results to differ from those in the forward- looking statements: the deterioration of economic and political conditions where we operate such as continuing inflation that increases our costs of operating, conditions such as economic recession decreasing demand for our products, and the war in Ukraine potentially spreading or causing significant economic disruption, particularly in Europe where we operate; workforce, natural gas, fuel and transportation shortages experienced by us and our suppliers creating challenges for our and their operations to overcome, increasing suppliers' prices charged us and increasing our costs of operating; a resurgence of the COVID-19 pandemic or the occurrence of another public health crisis that results in new governmental measures implemented to address it that impede our, our suppliers' or our customers' operations, and that exacerbates inflation, workforce and transportation shortages; climate change and physical and financial risks to us associated with fluctuating regional and global weather conditions or patterns; reduced truck, rail and ocean freight availability resulting in higher costs to us or poor service; information technology risks related to potential breaches of security which may result in the distribution of company, customer, employee and vendor information; extensive environmental laws and regulations, as well as tax and other laws, in the United States, Brazil and other countries in which we operate, which could result in substantial costs to us as a result of compliance with, violations of or liabilities under these laws; failure to attract and retain senior management and other key and skilled employees, particularly in the current tight labor market; the loss of our commercial agreements with International Paper; failure of our separation from International Paper to qualify as a tax-free transaction for U.S. federal income tax purposes; our indebtedness and its impact on our ability to operate and satisfy our debt obligations; the limited trading history of our common stock; and the factors disclosed in Item 1A. Risk Factors in our annual report on Form 10- K for the year ended December 31, 2022, as such disclosures may be amended, supplemented or superseded from time to time by other reports that we file with the Securities and Exchange Commission, including subsequent quarterly reports on Form 10-Q, annual reports on Form 10-K and current reports on Form 8-K.
We assume no obligation to update any forward-looking statements made in this presentation to reflect subsequent events, circumstances or actual outcomes.
© 2023 Sylvamo Corporation. All rights reserved.
Statement relating to non-U.S. financial GAAP measures | 3 |
While Sylvamo reports its financial results in accordance with accounting principles generally accepted in the United States ("U.S. GAAP"), during the course of this presentation, certain non-U.S. GAAP financial measures are presented. Management believes that these non-U.S. GAAP financial measures, when used in conjunction with information presented in accordance with U.S. GAAP, can facilitate a better understanding of the impact of various factors and trends on Sylvamo's financial condition and results of operations. Management also uses these non-U.S. GAAP financial measures in making financial, operating and planning decisions and in evaluating Sylvamo's performance. The non-U.S. GAAP financial measures in this presentation have limitations as analytical tools and should not be considered in isolation or as a substitute for, or superior to, an analysis of our results presented in accordance with U.S. GAAP. In addition, because not all companies use identical calculations, our presentation of non-U.S. GAAP financial measures in this presentation may not be comparable to similarly titled measures disclosed by other companies, including companies in our industry. These slides, including the reconciliation, are also available on Sylvamo Corporation's website at sylvamo.com.
The following is a list of all non-U.S. GAAP financial measures included in this presentation. See the Appendix for a reconciliation of all presented non-U.S. GAAP measures (and their components) to U.S. GAAP financial measures.
- Adjusted EBITDA and Adjusted EBITDA Margin
- Adjusted Operating Earnings per Share
- Free Cash Flow
© 2023 Sylvamo Corporation. All rights reserved.
3Q23 Highlights | 4 |
$158
million
Adjusted
EBITDA
$155
million
Free Cash
Flow
$1.70
Adjusted
EPS
- Price & Mix, Operations and Input & Transportation costs favorable to outlook
- Continued channel inventory destocking and weaker than expected demand
- Net Debt of $796 million, 1.2x Adjusted EBITDA
- Deposited $60 million in escrow and returned $24 million of cash to shareowners
Net debt-to-adjusted EBITDA as of September 30, 2023, excluding $60 million of restricted cash in escrow. Gross debt of $990 million as of September 30, 2023; 1.5x Adjusted EBITDA.
© 2023 Sylvamo Corporation. All rights reserved.
3Q23 Key Financial Metrics | 5 |
Net Sales
$968 | ||
$919 | $897 | |
3Q22 | 2Q23 | 3Q23 |
Adjusted EBITDA
and Margin
$216 | ||
$158 | ||
$124 | ||
22% | 14% | 18% |
3Q22 | 2Q23 | 3Q23 |
Free Cash Flow
$155 | ||
$114 | ||
$33 | ||
3Q22 | 2Q23 | 3Q23 |
Adjusted Operating Earnings per Share
$2.51 | ||
$1.70 | ||
$1.14 | ||
3Q22 | 2Q23 | 3Q23 |
All figures are $ million, except adjusted operating earnings per share
© 2023 Sylvamo Corporation. All rights reserved.
Adjusted EBITDA higher than the 2Q23 earnings call outlook | 6 |
3Q23 vs. 2Q23
$ Million
3Q23
Outlook
(August 9, 2023)
($60) - ($65)
$15 - $20
($5) - ($10)
$54
$15 - $20
$130 - $150
$124 ($55)
Price & Mix
Paper (35)
Pulp (20)
14%
$27$158
$55
$6$1
Includes $13 million of unabsorbed fixed costs from economic downtime
18%
2Q23
Price & Mix
Volume
Operations and
Other Costs
Maintenance
Outages
Input and
Transportation
Costs
3Q23
© 2023 Sylvamo Corporation. All rights reserved.
World Graphic Paper Demand | 7 |
UFS remains the most resilient grade.
We believe in the long-term demand for education, communication and entertainment.
CFS | ||
18% | ||
2022 | ||
53% | 101 Million | 13% |
UFS | Newsprint | |
Tons | ||
UMEC | ||
8% | ||
CMEC | ||
8% |
Thousand short tons
70,000
60,000
50,000
40,000
30,000
20,000
10,000
-
Uncoated
Freesheet
Coated Freesheet
Newsprint
Coated Mechanical
Uncoated Mechanical
Source: RISI World Graphic Paper Demand as of August 2023
© 2023 Sylvamo Corporation. All rights reserved.
UFS estimated consumption better than demand data suggests | 8 |
• Year-over-Year change %
North America
BUYING more than USING | USING more | |
4% | 4% | than BUYING |
0% | ||
-2% | ||
-6% |
Demand | |||||
Estimated consumption | -17% | ||||
2021 | 2022 | 1H23 |
Source: Pulp and Paper Products Council - N.A. Printing and Writing Outlook - September 28, 2023
© 2023 Sylvamo Corporation. All rights reserved.
Current industry conditions showing signs of improvement | 9 |
- Improved European order books
- Seasonal improvement in Latin America
- Increasing U.S. advertising spending
- Channel inventory corrections completed by year end
© 2023 Sylvamo Corporation. All rights reserved.
4Q23 Adjusted EBITDA Outlook: $90 - $110 Million | 10 | |||
4Q23 vs. 3Q23 | ||||
$ Million | ||||
Price and Mix | Decreasing: ($20) - ($25) | |||
Primarily prior paper price decreases in Europe and unfavorable mix in | ||||
the Americas | ||||
Volume | Improving: $20 - $25 | |||
Seasonally stronger in Latin America and positive trends in North America | ||||
Operations and Other Costs | Increasing: ($25) - ($30) | |||
Primarily seasonally higher costs in Europe and North America | ||||
Input and Transportation Costs | Increasing: ($5) - ($10) | |||
Seasonally higher energy | ||||
Planned Maintenance | Increasing: ($25) | |||
Outage Expenses | ||||
Adjusted Operating Earnings per Share
$0.55 - $0.90
Total Maintenance Outage Expense is the sum of direct maintenance outage expense and related unabsorbed fixed costs
© 2023 Sylvamo Corporation. All rights reserved.
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Sylvamo Corporation published this content on 09 November 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 17 November 2023 08:43:00 UTC.