Sylvamo NYSE: SLVM reported second-quarter adjusted EBITDA of $60 million, more than double the $29 million recorded in the first quarter, as the company implemented uncoated freesheet paper price increases across its regions. Adjusted operating earnings were $0.03 per share, while free cash flow was negative $23 million, an improvement of $36 million sequentially.
Chief Executive Officer John Sims characterized 2026 as a transition year as the company manages the termination of its Riverdale supply agreement and an extended outage at its Eastover, South Carolina, mill. He said Sylvamo expects most of its annual free cash flow to be generated in the second half.
Price and Mix Drive Sequential Improvement
Chief Financial Officer Don Devlin said favorable price and mix contributed $32 million to adjusted EBITDA versus the first quarter, reflecting paper price increases in all regions, improved mix in the Americas and pulp price increases in Europe. Higher Latin American seasonal demand added $3 million from volume.
Operations and costs improved by $22 million, largely because of green energy credits in Europe and lower overhead. Those benefits were partly offset by $24 million of scheduled maintenance outage costs across all regions and $2 million of higher input and transportation costs. The company also benefited from the non-repeat of a $10 million first-quarter charge from International Paper’s Riverdale mill related to high natural-gas costs.
North American margins rose to 15% in the second quarter from 10% in the first quarter, with Devlin attributing the improvement primarily to price and mix, lower operating costs and modestly lower input costs.
For the second half, Sylvamo expects price and mix to provide a $75 million to $85 million benefit compared with the first half. Devlin said roughly 70% of that improvement is expected to come from pricing, with the majority generated in North America and Europe. Management said pricing benefits should flow through both the third and fourth quarters, with a slightly larger contribution anticipated in the fourth quarter.
Regional Conditions and Costs
In Europe, management said industry supply-demand conditions remain challenging, though pulp prices improved through the first half and appear to have stabilized. Sylvamo is implementing another European paper price increase announced for mid-June, with realization expected through the third quarter as costs continue to rise and margins remain at what Devlin described as unacceptable levels.
The company expects higher seasonal demand in Latin America during the second half, supporting volume and geographic mix. It is also continuing to realize price increases in other Latin American export markets, the Middle East and Africa.
In North America, Sylvamo said industry dynamics have improved after International Paper’s Riverdale paper-machine conversion removed 7% of annual uncoated freesheet industry supply. However, the company saw imports rise in the second quarter in response to a 10% global tariff window.
Management expects North American sales and production volumes to decline in the second half because Riverdale supply is no longer available and Eastover’s planned outage will be longer than originally expected. The company also expects to import less product from Brazil and Europe because of tariff changes. Devlin said the company is returning to an estimated $85 million impact from the Riverdale footprint alignment, as a previously anticipated $20 million benefit from Brazilian imports has effectively been eliminated.
Sylvamo expects lower fiber costs in Europe and normalized wood costs in Latin America to more than offset higher energy, chemical and transportation costs associated with the Middle East conflict. Sims said wood costs at the Nymölla mill in Sweden have declined about 20% from their fourth-quarter 2025 peak, with benefits beginning to appear in the third quarter.
Eastover Investments Advance
Sims said strategic projects at Eastover remain on track. The mill’s hardwood wood-yard line has operated since May with improved reliability and chip quality, while the softwood line is scheduled to start in the first quarter of 2027.
The Eastover paper-machine speed-up project remains on schedule and budget for completion during the fourth-quarter maintenance outage. It is expected to add 60,000 tons of annual uncoated freesheet capacity, with production ramping early next year.
A new sheeter passed equipment acceptance testing in June and has arrived in the U.S. Sylvamo expects the speed-up project and sheeter to produce $50 million in annual benefits, including an estimated $30 million to $40 million in 2027. The company also completed a sale-leaseback transaction to expand an attached warehouse by 300,000 square feet. That expansion is expected to be completed in the first quarter of 2027 and generate more than $5 million in annual savings.
- Eastover paper-machine speed-up: 60,000 additional annual tons of capacity.
- Paper-machine speed-up and new sheeter: $50 million in expected annual benefits.
- Warehouse expansion: More than $5 million in expected annual savings.
- Total expected benefit from the four Eastover-related projects: $55 million annually.
Long-Term Targets and Europe Review
Sylvamo is advancing a lean transformation program across its operations, beginning with value-stream mapping at its Mogi Guaçu and Três Lagoas mills in Latin America and expanding to its Ticonderoga mill, Sumter sheet plant and corporate functions in North America.
The company set 2030 goals that include eliminating serious injuries, increasing employee net promoter score above 50, improving customer net promoter score by 20 points, exceeding 90% perfect-order performance, and raising overall equipment effectiveness by 400 basis points. It also aims to achieve annual cash-cost improvement at three to five times its 2022-2025 average rate.
On Europe, Sims said management has made progress through improved execution, mix initiatives and cost-reduction efforts at the Saillat and Nymölla mills. Still, he said the company could consider other options in 2027 if it is not satisfied with the long-term outlook. He did not commit to a specific timeline.
Sims said Sylvamo believes it has the potential to generate more than $300 million in annual free cash flow and achieve return on invested capital above 15% as industry conditions improve, capital spending normalizes and investment benefits materialize.
About Sylvamo (NYSE:SLVM)
Sylvamo Corporation, trading on the New York Stock Exchange under the ticker SLVM, is a leading global producer of uncoated freesheet paper. The company was established in October 2021 through a spin-off from International Paper, creating an independent entity focused exclusively on the development, manufacturing and marketing of high-quality uncoated paper products. Headquartered in Memphis, Tennessee, Sylvamo draws on decades of industry experience inherited from its predecessor, positioning itself to meet evolving customer needs in paper-based communications and packaging applications.
The company’s core product portfolio includes office and digital print papers, direct mail and marketing materials, catalog and commercial printing papers, and a range of specialty and value-added grades.
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