Sylvamo Quarterly Results Exceed Outlook, Generates Strong Free Cash Flow

MEMPHIS, Tenn. (News release) -- Sylvamo, the world's paper company, is releasing third quarter 2024 earnings.

Financial Highlights - Third Quarter vs. Second Quarter

Net income of $95 million ($2.27 per diluted share) vs. $83 million ($1.98 per diluted share)
Adjusted operating earnings¹ of $102 million ($2.44 per diluted share) vs. $83 million ($1.98 per diluted share)
Adjusted EBITDA² of $193 million (20% margin) vs. $164 million (18% margin)
Cash provided by operating activities of $163 million vs. $115 million
Free cash flow³ of $119 million vs. $62 million

Commercial and Operational Highlights - Third Quarter vs. Second Quarter

Price and mix decreased by $4 million due to mix in North America
Volume improved by $10 million due to higher shipments in North America
Operations and other costs increased slightly by $1 million
Planned maintenance outage expenses decreased by $28 million due to no major annual outages
Input and transportation costs increased by $4 million, primarily driven by higher fiber costs in Latin America

Fourth Quarter Outlook

Adjusted EBITDA of $150 million to $165 million
Compared to the third quarter:
- Price and mix are expected to be unfavorable $20 million to $25 million due to pulp and paper price decreases in Europe, higher export mix in Latin America and customer mix in North America
- Volume is projected to improve by $15 million to $20 million, with seasonally stronger volume in Latin America
- Operations and other costs are expected to increase up to $5 million due to an $8 million operating expense for a planned ten-year turbine generator maintenance event at our Eastover, South Carolina, mill, which is partially offset by better fixed cost absorption from less economic downtime in North America
- Input and transportation costs are projected to increase by $5 million to $10 million, mainly due to transportation and seasonally higher energy
- Total planned maintenance outage expenses are expected to increase by $17 million

Management Summary from Chairman and Chief Executive Officer Jean-Michel Ribiéras

We delivered strong earnings with a 20% adjusted EBITDA margin and outstanding free cash flow in the third quarter, driven by solid operational performance, good commercial execution and stable input costs. The quarter also had no planned maintenance outages.

On Oct. 31, we announced we are mutually terminating a supply agreement for uncoated freesheet, bristols and specialty papers from International Paper's Georgetown, South Carolina, mill, effective Dec. 31, 2024. We will continue to optimize our North America region by leveraging strategic initiatives to simplify the business, unlock efficiencies and drive earnings growth.

We have seen encouraging increases in industry demand across our regions and expect recent capacity reduction announcements to lead to more favorable supply and demand balance trends in 2025. We are confident in our strategy to grow earnings and cash flow by continuing to invest in high-return projects in our mills and processes.

We continue to allocate capital to generate long-term shareowner value. So far 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 $0.45 per share dividend in the fourth quarter, which we paid Oct. 17. As of today, we have distributed $62 million through four 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 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 exceed our $110 million run rate savings goal by up to $10 million by the end of 2024.

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.

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.

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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