MEMPHIS, Tenn. (News release) -- Sylvamo, the world's paper company, is releasing second quarter 2024 earnings.
Financial Highlights - Second Quarter vs. First Quarter
- Net income of $83 million ($1.98 per diluted share) vs. $43 million ($1.02 per diluted share)
- Adjusted operating earnings1 of $83 million ($1.98 per diluted share) vs. $45 million ($1.07 per diluted share)
- Adjusted EBITDA2 of $164 million (18% margin) vs. $118 million (13% margin)
- Cash provided by operating activities of $115 million vs. $27 million
- Free cash flow3 of $62 million vs. $(33) million
Commercial and Operational Highlights - Second Quarter vs. First Quarter
- Price and mix improved by $26 million due to pulp and paper price realizations in all regions and a better mix in Latin America
- Volume increased by $8 million due to seasonally stronger demand in Latin America
- Operations and other costs improved by $10 million due primarily to solid operations and seasonally lower costs
- Planned maintenance outage expenses increased by $4 million
- Input and transportation costs decreased by $6 million, driven primarily by North America
Third Quarter Outlook
- Adjusted EBITDA of $170 million to $185 million
- Compared to the second quarter:
- Price and mix are expected to be slightly unfavorable up to $5 million due to mix
- Volume is projected to increase by $10 million to $15 million, driven by Latin America and North America
- Operations and other costs are expected to increase by $10 million to $15 million due primarily to higher unabsorbed fixed costs from economic downtime
- Input and transportation costs are projected to increase by $5 million to $10 million due to fiber in Latin America and energy in North America
- Total planned maintenance outage expenses are expected to decrease by $28 million
Management Summary from Chairman and Chief Executive Officer Jean-Michel Ribiéras
In the second quarter, price and mix were favorable and input costs largely remained stable compared to last quarter. Uncoated freesheet conditions improved in the first half of the year, with year-over-year demand up in Europe and North America and down slightly in Latin America. After successfully completing our heaviest planned maintenance outage quarter of 2024, we have more than 70% of our annual planned maintenance outages behind us.
On July 31, we refinanced long-term debt to extend our debt maturity profile and take advantage of a favorable financing market. We also sent notice for the redemption of all outstanding 7% notes and will use a new term loan facility with a 2031 maturity to pay for it. Our long-term debt balance remains stable. The terms, conditions and credit spreads are generally consistent with those in place before refinancing. Our strong balance sheet provides us the flexibility to address macro conditions and downside risks while investing in high-return opportunities through the cycle.
We continue to allocate capital to generate long-term shareowner value. This year, we repurchased $30 million of our shares and have $120 million remaining on our $150 million share repurchase authorization from September 2023. Our board of directors declared a 50% dividend increase for the third quarter from $0.30 per share to $0.45 per share, which we paid July 29. This was the third dividend increase in the last two years. As of today, we have distributed $43 million through three quarterly dividends in 2024. We are committed to return at least 40% of our free cash flow to shareowners this year through share repurchases and dividends.
We continue to develop a pipeline of more than $200 million of high-return capital projects, which will allow us to grow our earnings and cash flows as we reinvest in our business in the coming years.
We are making good progress with Project Horizon, our structural cost reduction program to streamline overhead, manufacturing and supply chain costs. Before inflation, we are on target to achieve run rate savings of $110 million by the end of 2024.
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1 Adjusted Operating Earnings (non-GAAP) are net income (GAAP), net of tax and net special items. Management uses this measure to focus on ongoing operations and believes it is useful to investors because it enables them to perform meaningful comparisons of past and present combined operating results. The Company believes that using this information, along with net income, provides for a more complete analysis of the results of operations. Net income is the most directly comparable GAAP measure. For more information regarding net special items, see the information under the heading Effects of Net Special Items and the Condensed Consolidated Statement of Operations and related notes included later in this release.
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2 Adjusted EBITDA (non-GAAP) is net income (GAAP), net of tax, plus the sum of income taxes, net interest expense (income), depreciation, amortization and cost of timber harvested, stock-based compensation, and, when applicable for the periods reported, net special items. Management uses this measure in managing the operating performance of our business and believes that Adjusted EBITDA and Adjusted EBITDA Margin provide investors and analysts meaningful insights into our operating performance and Adjusted EBITDA is a relevant metric for the third-party debt. The Company believes that using this information, along with net income, provides for a more complete analysis of the results of its operations. Net income is the most directly comparable GAAP measure. For more information regarding net special items, see the information under the heading Effects of Net Special Items and the Condensed Consolidated Statement of Operations and related notes included later in this release.
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3 Free Cash Flow is a non-GAAP measure and the most directly comparable GAAP measure is cash provided by operating activities. Management utilizes this measure in connection with managing our business and believes that Free Cash Flow is useful to investors as a liquidity measure because it measures the amount of cash generated that is available, after reinvesting in the business, to maintain a strong balance sheet and service debt, and return cash to shareowners. It should not be inferred that the entire Free Cash Flow amount is available for discretionary expenditures. Free Cash Flow also enables investors to perform meaningful comparisons between past and present periods.
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