Sylvamo Q1 2025 Earnings Call Transcript

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Operator

Good morning. Thank you for standing by. Welcome to Silvamo's First Quarter twenty twenty five Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, you will have an opportunity to ask questions.

Operator

As a reminder, your conference is being recorded. I'd now like to turn the call over to Hans Bjorkman, Vice President, Investor Relations. Relations. Sir, the floor is yours.

Hans Bjorkman
Hans Bjorkman
VP, IR at Sylvamo

Thanks, Sarah. Good morning, and thank you for joining our first quarter twenty twenty five earnings call. Our speakers this morning are Jean Michel Rivieres, Chairman and Chief Executive Officer and John Sims, Senior Vice President and Chief Operating Officer. Slides two and three contain important information, including certain legal disclaimers. For example, during this call, we will make forward looking statements that are subject to risks and uncertainties.

Hans Bjorkman
Hans Bjorkman
VP, IR at Sylvamo

We will also present certain non U. S. GAAP financial information. Reconciliations of those figures to U. S.

Hans Bjorkman
Hans Bjorkman
VP, IR at Sylvamo

GAAP financial measures are available in the appendix. Our website also contains copies of the earnings release as well as today's presentation. With that, I'd like to turn the call over to Jean Michel.

Jean-Michel Ribiéras
Jean-Michel Ribiéras
Chairman & CEO at Sylvamo

Thanks, Anne. Good morning, and thank you for joining our call. I'll start on Slide four, highlighting some news we announced a few weeks ago. After over three decades of working in the paper and packaging industry, I have decided to retire at the end of the year. Serving as the Chairman and CEO of Silbermo for the past four years has been one of the greatest highlights of my career.

Jean-Michel Ribiéras
Jean-Michel Ribiéras
Chairman & CEO at Sylvamo

I'm pleased that John seems to become the next CEO of Silvamo. John was elected Chief Operating Officer effective May 1 and will lead our commercial and operational functions. Following my retirement, John will assume the role of the CEO on 01/01/2026. As you know, John has served as the CFO of Silvamo since the spin off and has been instrumental in our work to build the world's paper company and drive our company's strong performance. Tom Devlin was then Senior Vice President and Chief Financial Officer, effective May 1, and he is with us here for today's call.

Jean-Michel Ribiéras
Jean-Michel Ribiéras
Chairman & CEO at Sylvamo

You'll hear more from Don in future earnings calls. He joined us from International Paper after twenty seven years of the company. Don has extensive international leadership experience with a track record of building teams, developing strategic plans and delivering results in diverse and challenging environment. He served in a variety of leadership roles, including Finance Director for European Paper, Chairman and CEO of IPs and Credit Suisse's business in India and most recently, Vice President Finance and Strategy for IP Industrial Packaging. I'm excited to have both John and Don in their new leadership roles to drive the company forward for future success.

Jean-Michel Ribiéras
Jean-Michel Ribiéras
Chairman & CEO at Sylvamo

Slide five shows our first quarter highlights. First, we successfully completed a heavy plant maintenance outage quarter in Europe and North America. Also these outages were executed well. We ran into some separate non outage related operational challenges, primarily in North America. John will talk more about the financial impact in a few slides.

Jean-Michel Ribiéras
Jean-Michel Ribiéras
Chairman & CEO at Sylvamo

We also began implementing the previously communicated uncoated free sheet price increases to customers in Brazil and North America. Lastly, we returned nearly $40,000,000 in cash to shareholders. We distributed $18,000,000 via the first quarter dividend. And as of today, we have repurchased $20,000,000 in shares this year. Let's move to the next slide.

Jean-Michel Ribiéras
Jean-Michel Ribiéras
Chairman & CEO at Sylvamo

Slide six shows our first quarter key financial metrics. We earned adjusted EBITDA of $90,000,000 with a margin of 11%. In addition to having almost $30,000,000 of planned maintenance outages costs, the first quarter is our weakest demand quarter every year in Latin America. We generated adjusting operating earnings of $0.68 per share. As expected, free cash flow was lower than the fourth quarter due to the timing of year end payment, onetime cash benefit in the fourth quarter from the monetization of working capital related to the closure of the IP Jawston mill and the payment of annual incentive compensation in the first quarter.

Jean-Michel Ribiéras
Jean-Michel Ribiéras
Chairman & CEO at Sylvamo

Keep in mind that our free cash flow is heavily weighted to the second half of the year. The last two years, we generated almost 90% of our free cash flow in the second half. Now John will review our performance in more detail.

John Sims
John Sims
SVP & COO at Sylvamo

Thank you, Michel, and good morning, I also want to thank Don, who's sitting right next to me. We're in a transition of moving the CFO of all quickly over to him. I look forward to working in the future with Don. Slide seven contains our first quarter earnings bridge versus the fourth quarter. The $90,000,000 of adjusted EBITDA was in line with our outlook of $85,000,000 to $105,000,000 As Jean Michel mentioned, we had some operational issues in North America, which impacted us by roughly $10,000,000 half from lower sales volume and half from operations and other costs.

John Sims
John Sims
SVP & COO at Sylvamo

This also includes less volume from IP's Riverdale mill than was planned. Price and mix was unfavorable by $10,000,000 driven by the expected seasonally unfavorable mix in Latin America, lower pulp prices and paper price decreases in Europe and in our export regions. These were partially offset by paper price increased realizations in North America and Brazil. Volume decreased by 30,000,000 driven by the seasonally weakest demand quarter in Latin America, lower North America volume from IP's Georgetown mill exit and the operational challenges in North America. Operations and other costs were unfavorable by 12,000,000 primarily driven by unfavorable FX plus the North America operational challenges we mentioned earlier.

John Sims
John Sims
SVP & COO at Sylvamo

Planned maintenance outage costs increased by $9,000,000 as we executed major outages at our Syat and East River mills. Input and transportation costs increased by $6,000,000 primarily driven by seasonally higher energy prices and the longer than expected extreme cold weather across The United States in the first quarter. Let's move to Slide eight. We expect to deliver second quarter adjusted EBITDA of $75,000,000 to $95,000,000 We project price and mix to be favorable by 5,000,000 to $10,000,000 This is primarily due to favorable mix in Latin America and North America. We expect volume to be stable.

John Sims
John Sims
SVP & COO at Sylvamo

Volume would have been sequentially higher as we have the orders, but anticipate being unable to fill them all during the quarter. This is due to low inventory levels in North America as a result of our operational issue. In addition, we expect to get less volume from IP's Riverdale mill in the quarter. Therefore, some of our orders may get pushed into the third quarter. Operations and other costs are projected to be favorable by 10,000,000 to $15,000,000 due to better operations and seasonally lower operating costs in North America and Europe.

John Sims
John Sims
SVP & COO at Sylvamo

We expect input and transportation costs to improve by 5,000,000 to $10,000,000 primarily due to energy. Planned maintenance are projected to increase by 36,000,000 as we execute the heaviest outage quarter of the year across all three regions. Let's go to slide nine. This slide illustrates the planned maintenance outage scheduled for the full year. We spent $27,000,000 in the first quarter and expect to spend $63,000,000 in the second quarter.

John Sims
John Sims
SVP & COO at Sylvamo

By midyear, we'll spend over 80% of the total annual planned maintenance outage cost. Unlike last year, we had no major planned maintenance outages in Europe. This year, we have outages in both mills in the first half of the year. Let's move to Slide 10. I'll now shift to talk about overall uncoated freesheet conditions across our region.

John Sims
John Sims
SVP & COO at Sylvamo

In Europe, demand is down 7% year over year through the first quarter, while imports appear stable. As a reminder, industry supply was reduced by 7% after two uncoated freesheet machines closed late last year. In Latin America, demand is up 3% year over year through the first quarter with most of the increase in Brazil, largely due to strong demand in the publishing segment. In North America, apparent demand is down about 1% year over year through the first quarter driven by higher imports. This brings imports to almost 15% of overall North America supply, which is on the higher end of historical ranges.

John Sims
John Sims
SVP & COO at Sylvamo

We still believe that real demand will be down about 3% to 4% this year. As another reminder, domestic industry supply was reduced by 10% after a few machines, including IP's Georgetown mill, closed in the second half of last year. We have strong order books across our region, and all of our mills are running full. We have more demand than we can supply right now due to our commercial team's success, combined with the supply issues we've been dealing with in North America. Consequently, going forward, we're going to take advantage of our global footprint to improve our mix and serve our customers in North America.

John Sims
John Sims
SVP & COO at Sylvamo

As a result, we expect to have less exports to non core markets. We are not going to give a full year guidance with all the uncertainty. However, we do expect a significantly better adjusted EBITDA performance in the second half. This is due to lower planned maintenance outage expenses, improved commercial results and better operations. Tariff uncertainty aside, we expect 2025 Latin America and North America combined full year adjusted EBITDA to be slightly better than 2024.

John Sims
John Sims
SVP & COO at Sylvamo

Europe's '20 '20 '5 performance will be significantly worse than 2024 due to the $39,000,000 of planned maintenance outage this year and worse market conditions as we're seeing signs of the pulp market weakening. Let's go to Slide 11. I want to take some time to discuss our European business. As we look back on the Newmala Mill acquisition, the mill generated about $70,000,000 of free cash flow before overhead allocations in its first two years as part of Savamo. We exceeded over $20,000,000 run rate synergy target by $5,000,000 The pulp mill modernization project exceeded its projected benefits as well.

John Sims
John Sims
SVP & COO at Sylvamo

Unfortunately, compared to 2022, last year, the mill experienced a $41,000,000 increase in wood cost and a cumulative $63,000,000 over the last two years. This increase in wood cost is due to the war with Russia and Belarus stopping the export of wood fiber, reducing overall wood supply to the region. Additionally, high demand from the energy sector in the Nordic increased overall wood demand. Stepping back and looking at our entire European business, our earnings performance is below our expectations. In addition to numerous escalating wood costs, high input costs and challenging industry conditions have impacted demand and pricing.

John Sims
John Sims
SVP & COO at Sylvamo

We're not satisfied with our performance and have installed a new Senior Vice President and General Manager effective May 1 to lead our talented team, further develop our strong customer relationship and improve our performance. We are focusing on reducing costs across the region. We'll be improving our product mix by upgrading some capabilities at Syat. We are working to reduce wood costs and are targeting best in class efficiency at the New Mala Mill. I'll now turn the call back over

John Sims
John Sims
SVP & COO at Sylvamo

to Jean Michel.

Jean-Michel Ribiéras
Jean-Michel Ribiéras
Chairman & CEO at Sylvamo

Thanks, John. I'm now on Slide 12. We understand that one of the main risks in today's environment is a global economic slowdown due to the current tariff situation, which could impact uncoated free sheet demand. Some shift in uncoated free sheet and pulp trade flows are already starting to materialize.

Jean-Michel Ribiéras
Jean-Michel Ribiéras
Chairman & CEO at Sylvamo

We also anticipate higher risk of inflation on our raw material, transportation and capital spending. While this represents possible challenges, this risk currently appear manageable. Our global sourcing teams are already working on mitigation strategies as well as alternative sourcing options for some raw materials plus optimizing modes of transportation. Regarding our major capital spending plans for the year, the business cases for this project include the possibility of higher costs, which are not expected to be material at this point. Let's move to Slide 13.

Jean-Michel Ribiéras
Jean-Michel Ribiéras
Chairman & CEO at Sylvamo

Although there is a lot of uncertainty around the tariffs and the impact on the economy, we are well positioned to manage through this environment. Over 90% of our raw materials are sourced locally, with very little coming from China. Regarding our shipments, the majority stay within their respective region. In Europe and North America, more than 90% of our shipments stays within their respective region. Latin America, 80 Percent of our shipments remain in the region.

Jean-Michel Ribiéras
Jean-Michel Ribiéras
Chairman & CEO at Sylvamo

Although we export about 20% of our products from Latin America, we are well positioned as our Brazilian mills are some of the world's most competitive and low cost uncoated free sheet facility. Lastly, I want to remind everyone that even though import tend to rise and fall for a variety of reasons, import historically represents less than 15% of uncoated free sheet industry supply in each of our three regions. Let's move to Slide 14. I will take this opportunity to remind everyone of all the work we did to deleverage our balance sheet over the past three years. After launching with close to €1,400,000,000 debt net debt and a leverage ratio of 2.6 times, we have reduced our debt by about half, and our leverage ratio is now 1.1 times.

Jean-Michel Ribiéras
Jean-Michel Ribiéras
Chairman & CEO at Sylvamo

We have no majority major maturities until 2027, plus we have availability on a revolver of 400,000,000 Our strong balance sheet, available cash on hand, plus the availability on our revolver provides us with the ability to take care of our customer, run our business and invest in our future. Our capital allocation strategy is to maintain a strong financial position. We invest in our business to improve our competitive advantages and return cash to shareholders. Our position of financial strength allow us to navigate this uncertain environment without changing our thoughtful long term approach to capital allocation. It allow us to serve customers by navigating economic headwinds.

Jean-Michel Ribiéras
Jean-Michel Ribiéras
Chairman & CEO at Sylvamo

It also enables us to invest in our business even during times of uncertainty. And it preserves the flexibility to return cash to share owners. We will continue to evaluate opportunities to repurchase shares at attractive price with the $62,000,000 available on our current share repurchase authorization. I'll conclude my remarks on Slide 16. All of the work we have done to strengthen our financial position the past few years is providing us with flexibility.

Jean-Michel Ribiéras
Jean-Michel Ribiéras
Chairman & CEO at Sylvamo

Our financial strength and regional businesses have us well positioned to navigate the current tariff uncertainty. We are reinvesting in our business through a great pipeline of high return capital projects, which will enable us to grow our earnings and cash flow in the coming years. This Vambo is creating shareholder value through strong cash generation and disciplined capital allocation. And we are in the process of executing a seamless CEO and CFO succession plan as we prepare for my retirement at the end of the year. We are confident in our future and motivated by the opportunities that lie ahead.

Jean-Michel Ribiéras
Jean-Michel Ribiéras
Chairman & CEO at Sylvamo

With that, I'll turn the call back to Hans.

Hans Bjorkman
Hans Bjorkman
VP, IR at Sylvamo

Thanks, Jean Michel, and thank you, John. Okay, Sarah, we're ready to take questions.

Operator

Thank Your first question comes from George Staphos with Bank of America. Your line is open.

George Staphos
George Staphos
Managing Director at Bank of America Merrill Lynch

Hi, everyone. Good morning. Thanks for the details. Jean Michel, John and Don, congratulations. Yeah.

George Staphos
George Staphos
Managing Director at Bank of America Merrill Lynch

And all the best on the next chapters. And Jean Michel, thanks for all the help, obviously. And you're not retiring yet, but thanks for all the help with our our research or everybody on this call, since you've been public. I guess the question I had, I didn't really follow what the operational issues were. If you could give us a bit more detail in terms of what happened.

George Staphos
George Staphos
Managing Director at Bank of America Merrill Lynch

And then I know you're not guiding on third quarter, but you mentioned you won't be in a position to recover some of the orders in 2Q. It sounds like some of that might be pushed into 3Q. Is there a way for you to size what that benefit might be as you recapture some of those orders, particularly as regards seasonality? Brazil typically picks up in the third quarter as well. Thank you.

John Sims
John Sims
SVP & COO at Sylvamo

Yes, George, and thank you. Issues we had was actually the multiple reliability issues both at our Ticonderoga mill and our Eastover mill. Majority of that is behind us. We do have one issue that's intermittent, so it makes it hard to troubleshoot on one paper machine at Eastover. That actually is in our outlook in the second quarter, we think we're going to have that resolved we should have that resolved by this quarter.

John Sims
John Sims
SVP & COO at Sylvamo

The other thing I'll make a point about is the impact of the Riverdale volume because that doesn't show up in the operations, but it's certainly showing up in the volume. In fact, they've obviously been having some runnability issues themselves, and it really started in the fourth quarter, translated into when it continued into the first, and it's also continuing into the second quarter. That in itself been about almost 30% of what they should be supplying us we haven't been getting. So you can see it actually comes to build up. In the first quarter, we said the impact of all these issues was roughly about $10,000,000 I would say that the Riverdale conditions also are continuing into the second quarter.

John Sims
John Sims
SVP & COO at Sylvamo

Some of that is in our outlook. But if you're trying to get to a number of what would the improvement be in the third quarter, something a little bit less than $10,000,000

George Staphos
George Staphos
Managing Director at Bank of America Merrill Lynch

Okay.

George Staphos
George Staphos
Managing Director at Bank of America Merrill Lynch

You.

John Sims
John Sims
SVP & COO at Sylvamo

That's what the George, that's the thought. So they'll show up in both offset volume.

George Staphos
George Staphos
Managing Director at Bank of America Merrill Lynch

Okay. And the related question, that I had there was just in general, can you remind us then seasonally what goes well third quarter versus 2Q? As I recall, LATAM volumes pick up. Is there a way to size that for us? I know you're not guiding on 3Q, as we're trying to build out our bridges or refine them.

George Staphos
George Staphos
Managing Director at Bank of America Merrill Lynch

Thank you.

John Sims
John Sims
SVP & COO at Sylvamo

Yeah. George, you know, the best thing I would do is just look at what we've done historically.

George Staphos
George Staphos
Managing Director at Bank of America Merrill Lynch

Okay.

John Sims
John Sims
SVP & COO at Sylvamo

And we, you know, we break it down by region, we don't see much difference in that.

George Staphos
George Staphos
Managing Director at Bank of America Merrill Lynch

Okay. Thank you, John.

Operator

Your

Operator

next question comes from Matthew McKellar of RBC Capital Markets. Your line is open.

Matt McKellar
Matt McKellar
Vice President at RBC Capital Markets

Good morning. Jean Michel, congratulations on your upcoming retirement and congratulations also to John and Don for their appointments.

Jean-Michel Ribiéras
Jean-Michel Ribiéras
Chairman & CEO at Sylvamo

Hi, Matt.

John Sims
John Sims
SVP & COO at Sylvamo

Thank you, Matt.

Matt McKellar
Matt McKellar
Vice President at RBC Capital Markets

I'd like to start by asking just around the changes at SIAD to Nimala. Could you tell us maybe just a bit more about what the upgrades to your capabilities at SIAD to entail and the market opportunity that's leading you to reposition your product mix, maybe whether that's entirely serving demand in North America or if there's anything else going on there? And then at Nebula, what levers do you have to reduce your wood costs and improve efficiency? And as we kind of think about putting this all together, how do you have us think about how financially meaningful these changes could be and over what timeline? Thanks.

Jean-Michel Ribiéras
Jean-Michel Ribiéras
Chairman & CEO at Sylvamo

Hey, Matt. So in Saia, to answer your first question, we've invested on the new and revised winder. This is going giving us the capability to sell rolls in Saia in interesting segments, more specialty roll segments in Europe. We are quite a different position. I don't know if you get that in mind.

Jean-Michel Ribiéras
Jean-Michel Ribiéras
Chairman & CEO at Sylvamo

In Numero, we sell 50% of our business in growth and we are very successful and 50% in cut size. In Saia today, sell 90% in cut size and only roughly 10% of growth. This is going to give us the capability to sell much more rules and enter into the specialty segment. So I hope I'm answering your first question. On Europe, in general, in Newmola, we have great opportunities in operations.

Jean-Michel Ribiéras
Jean-Michel Ribiéras
Chairman & CEO at Sylvamo

We don't run Newmola mill at the same bench OEE or you want cost performance that we run the other mills. We've done some investments in capital, but also in people and we're continuing to do that. And that gives you quite a lot of cost opportunity to improve Lumina. And in Saia, it's in mostly mix and also looking at our fixed cost mostly.

John Sims
John Sims
SVP & COO at Sylvamo

Yeah. And I'll just add to that. Matthew, you asked about the levers that we have in reducing the wood cost. So when we purchased the new mill, there was an agreement that we would continue to source the wood from a company that's owned by a store. One of the options we have is to go directly right to the landowners, which cuts out some of the cost around that.

John Sims
John Sims
SVP & COO at Sylvamo

The other opportunity we have is actually importing in the lower cost wood. And then there's operational improvements where we increase the yield and reduce the consumption of wood going forward. Those are some of the levers that we're pulling. In terms of the levers, how much and what we're targeting for is we're looking at and targeting at least a 10% reduction.

Jean-Michel Ribiéras
Jean-Michel Ribiéras
Chairman & CEO at Sylvamo

And I think that you had asked also a question on Europe profitability in general. And as we mentioned, we're clearly not satisfied. We are clearly expecting a significant improvement in 2026 and now building programs to be back to cost of capital in 2027. So that's the plan we have as of today.

Matt McKellar
Matt McKellar
Vice President at RBC Capital Markets

That's helpful. Thank you for all the detail. Last one for me. There was a comment that some shifts in uncoated freesheet and pulp trade flows are already starting to materialize. Could you just elaborate on what you're seeing and kind of how that's affecting you by market?

Matt McKellar
Matt McKellar
Vice President at RBC Capital Markets

Thanks.

John Sims
John Sims
SVP & COO at Sylvamo

Yeah, I'll take that one. This is what makes it difficult around trying to assess the impact of tariffs because some of it is probably the most impactful to us could potentially be the secondary effects of the negotiations that are ongoing. And give you some examples that we've seen, like we talked about increased imports into The U. S. Some of that, we believe, could be due to pre buying or getting ahead of the tariffs in North America as an example.

John Sims
John Sims
SVP & COO at Sylvamo

We also have seen in Europe, just reported this month by Fast Market, the REC, that pulp prices decreased almost €40 a ton on The UK coming out Brazil, and that's really driven because of this significant decrease in pulp demand in China. And then that's coming over to Europe. That's some of the impacts that we're seeing as a result of this tariff situation here in The U. S.

Matt McKellar
Matt McKellar
Vice President at RBC Capital Markets

Thanks for all the color. I'll turn it back.

Operator

Your next question comes from Daniel Harriman with Sidoti. Your line is open.

Daniel Harriman
Analyst at Sidoti & Company

Thank you. Good morning, guys. And I echo the congratulations given by Matt and George. I had a question about your capital spending for the balance of the year. If we look at what you spend in the first quarter, that run rate won't get you to your guidance of $220,000,000 to $240,000,000 for the year.

Daniel Harriman
Analyst at Sidoti & Company

So I'm just curious how we should think about that over the last three quarters, understanding that you don't guide to cash flow, but just trying to get a sense of what we should be looking for the last nine months.

John Sims
John Sims
SVP & COO at Sylvamo

Daniel, we do. We haven't changed the revision on full year capital. And whereas most of our outages in the first half of the year, the second half will be somewhat influenced by the large capital projects we have associated with Eastover, both the speed up and the new sheeter. So the full year guidance will still be 02/20 to two forty.

Jean-Michel Ribiéras
Jean-Michel Ribiéras
Chairman & CEO at Sylvamo

Daniel, Jean Michel. Would just maybe add something in your I think when you look at free cash flow and we've had the, I would call it the issue last year and the one before, We are very strongly second half of the year cash flow. Our two last years were 90% of our cash flow the last two quarters of the year. We expect about the same this year. So I know sometimes in your modeling, it's a little bit difficult to do, but this is what we've seen historically speaking.

Jean-Michel Ribiéras
Jean-Michel Ribiéras
Chairman & CEO at Sylvamo

You've got it in our appendix slide and we expect about the same thing this year. So a very significant increase in cash flow for the second half of the year.

Daniel Harriman
Analyst at Sidoti & Company

Okay. Thank you guys so much.

John Sims
John Sims
SVP & COO at Sylvamo

Thank you.

Operator

The next question is a follow-up from George Staphos with Bank of America. Your line is open.

George Staphos
George Staphos
Managing Director at Bank of America Merrill Lynch

Thanks. John, Jean Michel, Don, you mentioned on one of the slides that you think the North American demand is down 1%, but that is, I guess, if you will, higher than underlying demand because it reflects imports. So I guess two parts, imports you think are going into inventory right now and pre buying, putting to that common together with another one you just made, that will be, I guess, something that has to be absorbed and be an overhang for a little while? And then I think you said overall, you think demand is 3% to 4% on an underlying basis. Is that what your expectation will be for industry shipments over the rest of the year?

George Staphos
George Staphos
Managing Director at Bank of America Merrill Lynch

And how would those figures map? When do you think they should ultimately align demand versus shipments in 3Q, 4Q and the like. I'll turn it over there.

John Sims
John Sims
SVP & COO at Sylvamo

Yes. So the comment there was the apparent demand. And we called out the word apparent because of the calculated. When it looked at domestic shipments plus imports minus exports. And that's being reported as down negative 1%, but we believe that underlying demand is really down 3% to 4% to the point you just you made, George, because you count the imports as soon as it hits the port.

John Sims
John Sims
SVP & COO at Sylvamo

And typically, that and there was a large surge of imports, particularly in January in the first quarter. And so we think that that has made demand look stronger than it actually is. But yes, it's in inventory and that will be probably consumed going forward. If you look at the numbers, and it's only I think it's reported, but February numbers import numbers were a little bit more, I guess, not full, but they were they were lower than than January. So we think some of this is due to just the timing of the imports coming in, like the first quarter demand maybe look stronger than what we actually see.

George Staphos
George Staphos
Managing Director at Bank of America Merrill Lynch

When do you think go ahead, John. I'm sorry.

Jean-Michel Ribiéras
Jean-Michel Ribiéras
Chairman & CEO at Sylvamo

No, that was Jean Michel, sorry. I just wanted to integrate when we look in terms of demand, especially for Silvan, what I'm talking, our order flow, not only because we've had some issues in the mills, but in general, the demand we're seeing with our customers is strong. Have food.

John Sims
John Sims
SVP & COO at Sylvamo

Yes. I think you were asking about the caustic shipments, George. So my comment on this was that there were some capacity that closed last year, so domestic just that in itself would lower domestic shipments. And then there was a mill that was recently announced that may be shutting down at the end of this year. But so we would expect domestic shipments to be down just because of the capacity closures.

John Sims
John Sims
SVP & COO at Sylvamo

But as Jean Michel said, operating rates are in the mid low nineties domestically.

George Staphos
George Staphos
Managing Director at Bank of America Merrill Lynch

Very good. Another question I had, and I'll turn it over actually. So the operational issues, thank you for going through those earlier, do they affect at all the progress on Eastover with your bigger projects? And if you can just give us a quick update on how that's going. Thank you.

John Sims
John Sims
SVP & COO at Sylvamo

No. They do not. Just to be, frank with you, David, did not impact, that. And actually, those projects are are going well from a timing perspective. So we're still seeing start up next year on that.

John Sims
John Sims
SVP & COO at Sylvamo

It's on schedule, on time. No impact there.

George Staphos
George Staphos
Managing Director at Bank of America Merrill Lynch

Okay. Thank you,

Operator

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

Hans Bjorkman
Hans Bjorkman
VP, IR at Sylvamo

All right. Thank you, everybody, for joining our call today. We appreciate your interest in Slovamo, and we look forward to continued conversations in the coming weeks. Thank you very much.

Jean-Michel Ribiéras
Jean-Michel Ribiéras
Chairman & CEO at Sylvamo

Thank you, everybody.

Operator

Once again, we would like to thank you for participating in Salvamo's first quarter twenty twenty five earnings call. You may now disconnect.

Executives
    • Hans Bjorkman
      Hans Bjorkman
      VP, IR
    • Jean-Michel Ribiéras
      Jean-Michel Ribiéras
      Chairman & CEO
    • John Sims
      John Sims
      SVP & COO

Key Takeaways

  • CEO succession plan: Jean Michel Rivieres will retire at the end of 2025, John Sims becomes COO on May 1 and will assume the CEO role on January 1, 2026, while Tom Devlin joins as CFO effective May 1.
  • Silvamo delivered Q1 adjusted EBITDA of $90 million (11% margin) and $0.68 adjusted EPS, with free cash flow down sequentially due to ~$30 million of planned maintenance and typical seasonal weakness in Latin America.
  • Q1 faced ~$10 million of North American operational issues and $10 million of unfavorable price/mix, partially offset by price gains in North America and Brazil; Q2 adjusted EBITDA is guided at $75 million–$95 million amid the heaviest maintenance quarter.
  • Regional demand trends differ: Europe demand is down 7% (wood cost inflation and weaker pulp markets), Latin America up 3%, and North America underlying demand down 3–4% amid rising imports, leading Silvamo to use its global footprint to optimize mix and prioritize core markets.
  • Strong balance sheet and capital strategy: Net debt has been halved to a 1.1x leverage ratio with $400 million revolver availability; nearly $40 million was returned to shareholders in Q1, full-year capex remains $220 million–$240 million, and free cash flow is expected to be heavily weighted to H2.
AI Generated. May Contain Errors.
Earnings Conference Call
Sylvamo Q1 2025
00:00 / 00:00

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