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RYAM reports financial results for Q4 and full year of 2023

Rayonier Advanced Materials (RYAM) today reported results for the fourth quarter and full year 2023.

“Our EBITDA results for 2023 fell short of expectations reflecting soft demand for cellulose ethers products driven by weak construction activity, lower than expected demand in paperboard and weak pricing in high-yield pulp and commodity pulp products. In response to weaker markets, we implemented cost-cutting measures and strategically scheduled market-driven downtime across all segments. Our primary focus shifted to generating free cash flow, driven predominantly by improvements in working capital and adhering to our lending commitments,” said De Lyle Bloomquist, RYAM’s president and CEO. “As a result, we concluded the year with $139 million in Adjusted EBITDA and $53 million of free cash flow and remained in compliance with our original debt covenants with a net secured debt ratio of 4.2 times Adjusted EBITDA.

“With an improving outlook aided by a competitor’s closure, coupled with our sales priority of value over volume, we anticipate better results for 2024. Higher pricing for our key cellulose specialties products, along with lower unit production costs for our high purity cellulose business, driven by improved productivity and lower key input and logistics costs, are expected to generate higher earnings for this segment. Furthermore, our new bioethanol facility is expected to commence operations in the first quarter of 2024. Paperboard and high-yield pulp are also expected to deliver improved results due to lower costs and higher production due to normalized demand. In total, we project an Adjusted EBITDA of $180 to $200 million and free cash flow of $20 to $40 million in 2024,” concluded Bloomquist.

• Net sales for 2023 of $1,643 million, down $74 million from the prior year
• Loss from continuing operations for 2023 of $102 million inclusive of a $62 million non-cash impairment, down $75 million from the prior year
• Adjusted EBITDA from continuing operations for 2023 of $139 million
• Year-to-date cash provided by operating activities of $136 million; total debt of $777 million, a reduction of $76 million
• Adjusted Free Cash Flow year-to-date generation of $53 million; Net Secured Debt of $698 million
• Remained in compliance with our debt covenants with a net secured debt ratio of 4.2 times
• 2024 Adjusted EBITDA guidance of $180 million to $200 million expected to drive $20 million to $40 million of Adjusted Free Cash Flow

High purity cellulose

Net sales for the year ended December 31, 2023, decreased $23 million, or two percent, to $1,313 million compared to the prior year. Included in the current and prior years were $98 million and $115 million, respectively, of other sales primarily from bio-based energy and lignosulfonates. Despite an 11 percent increase in cellulose specialties prices, total sales prices decreased four percent during the current year due to a 13 percent decrease in commodity prices. Total sales volumes increased 4 percent during the current year driven by a 39 percent increase in commodity volumes, partially offset by an 18 percent decrease in cellulose specialties volumes. Despite a significant increase in volume in the first quarter of 2023 due to improved customer contract terms, overall sales volumes for cellulose specialties were negatively impacted by significant customer destocking and market-driven demand declines, particularly in construction markets.

Net sales for the fourth quarter decreased $37 million, or 10 percent, to $347 million compared to the same prior-year quarter. Included in the current and prior year quarters were $25 million and $31 million, respectively, of other sales primarily from bio-based energy and lignosulfonates. Despite an 8 percent increase in cellulose specialties prices, total sales prices decreased 6 percent during the current quarter due to a 22 percent decrease in commodity prices. Total sales volumes decreased 2 percent during the current quarter, driven by an 11 percent decrease in cellulose specialties volumes, partially offset by a seven percent increase in commodity volumes. Sales volumes for cellulose specialties were negatively impacted by persistent customer destocking and market-driven demand declines, particularly in construction markets.

Operating results for the quarter and year ended December 31, 2023, declined $59 million and $73 million, respectively, compared to the same prior year periods driven by a $62 million non-cash impairment recorded in the fourth quarter of 2023 as a result of the optimization and realignment of the company’s high purity cellulose assets. This realignment reflects a strategic decision expected to reduce commodity exposure and earnings volatility through the consolidation of commodity viscose production into the Temiscaming, Quebec plant and fluff production into the Jesup, Georgia plant’s C Line and allow the company to better manage excess capacity of cellulose specialties by operating assets based on current demand for each end market.

Year over year, the higher cellulose specialties sales prices and commodity sales volumes and decreased key input and logistics costs were offset by the lower cellulose specialties sales volumes and commodity sales prices and higher labor costs due to inflation. Also contributing to the year-over-year decline in operating results were $8 million of energy cost offsets in 2022 from sales of energy savings certificates associated with Tartas, France operations, compared to only $1 million in 2023. In addition, the Company earned income on its investment in LTF in 2023 as compared to a loss in 2022.

In the current quarter, the higher cellulose specialties sales prices and commodity sales volumes, decreased key input, logistics and labour costs and the impact of the timing and extent of maintenance outages were offset by the lower cellulose specialties sales volumes and commodity sales prices.

Compared to the third quarter of 2023, the operating loss increased $43 million, primarily due to the $62 million non-cash impairment recorded in the fourth quarter and higher labour costs. Partially offsetting these charges was a 19 percent increase in total sales volumes, driven by a 29 percent increase in cellulose specialties volumes, as demand improved in the fourth quarter and volume increased after the closure of a competitor’s facility, and a 13 percent increase in commodity volumes, primarily fluff. Total sales prices increased by three percent due to the product mix, with near-flat changes in both cellulose specialties and commodity prices. Lower key input and logistics costs and the impact of the timing and extent of maintenance outages during the year further offset the loss on impairment.

Paperboard

Net sales for the year ended December 31, 2023, decreased $31 million, or 12 percent, to $219 million compared to the prior year driven by a 13 percent decrease in sales volumes due to customer destocking. Sales prices increased slightly year over year. Net sales for the fourth quarter decreased $12 million, or 18 percent, to $55 million compared to the same prior year quarter driven by 7 percent and 12 percent decreases in sales prices and sales volumes, respectively, due to market-driven demand declines.

Operating income for the quarter and year ended December 31, 2023, decreased $1 million and was flat, respectively, compared to the same prior year periods. Year over year, lower purchased pulp, maintenance and logistics costs and the impact of maintenance and market-driven shutdowns were offset by the lower sales volumes. The current quarter decrease was driven by the lower sales prices and sales volumes that were largely offset by lower purchased pulp costs.

Compared to the third quarter of 2023, operating income decreased by $5 million, driven by 1 percent and 3 percent decreases in sales prices and sales volumes, respectively, partially offset by lower purchased pulp costs.

High-yield pulp

Net sales for the year ended December 31, 2023, decreased $24 million, or 15 percent, to $136 million compared to the prior year driven by 12 percent and 5 percent decreases in sales prices and sales volumes, respectively. Net sales for the fourth quarter decreased $33 million, or 57 percent, to $25 million compared to the same prior year quarter driven by 37 percent and 34 percent decreases in sales prices and sales volumes. These quarter and year-over-year decreases were due to lower demand.

Operating results for the quarter and year ended December 31, 2023, declined $17 million and $19 million, respectively, compared to the same prior year periods. The quarter and year-over-year declines were driven by lower sales prices and sales volumes and increased wood costs. The current quarter decreases were partially offset by lower logistics costs.

Compared to the third quarter of 2023, operating results improved by $1 million, driven by 3 percent increases in both sales prices and sales volumes due to improved market demand, partially offset by higher key input and logistics costs.