Sylvamo Corp

Previous wording

Second quarter 2024 net income was $83 million ($1.98 per diluted share) compared with $43 million ($1.02 per diluted share) for the first quarter of 2024. Net sales were $933 million in the current quarter compared with $905 million in the prior quarter. Cash from operations was $115 million compared to $27 million in the prior quarter. Adjusted EBITDA was $164 million and our adjusted EBITDA margin was 18% compared to $118 million and an adjusted EBITDA margin of 13%. Free cash flow was $62 million compared to $(33) million in the prior quarter.

Current wording

Third quarter 2024 net income was $95 million ($2.27 per diluted share) compared with $83 million ($1.98 per diluted share) for the second quarter of 2024. Net sales were $965 million in the current quarter compared with $933 million in the prior quarter. Cash from operations was $163 million compared to $115 million in the prior quarter. Adjusted EBITDA was $193 million and our adjusted EBITDA margin was 20% compared to $164 million and an adjusted EBITDA margin of 18%. Free cash flow was $119 million compared to $62 million in the second quarter.

Previous wording

Comparing our performance in the second quarter to the first quarter, price and mix improved, reflecting the implementation of pulp and paper price increases previously communicated in all regions as well as better mix in Latin America. Volume increased primarily driven by seasonally stronger demand in Latin America. Operations and costs decreased reflecting solid operations and seasonally lower costs in Europe and North America. Planned maintenance outage expenses increased slightly while input and transportation costs decreased slightly, driven primarily by North America. During the third quarter, we announced the refinancing of our long-term debt to extend our maturity profile. After the first half of the year, we now have almost 75% of our planned maintenance outages for the year completed.

Current wording

Comparing our performance in the third quarter to the second quarter, price and mix was unfavorable, primarily driven by North American mix, while volume increased in North America. Operations and costs were stable reflecting solid operations across our mills in all three regions. Planned maintenance outage expenses decreased significantly as we had no major planned outages during the third quarter. Input and transportation costs increased slightly, as higher fiber costs in Latin America more than offset lower energy and transportation costs in North America.

Previous wording

Looking ahead to the third quarter of 2024, we expect price and mix to be slightly unfavorable due to mix. Volume is expected to improve driven by Latin America and North America. Operations and costs are expected to increase due to higher unabsorbed fixed costs from economic downtime in North America and Europe as we continue to manage our production to our customer demand. Additionally, we expect input and transportation costs to be higher due to unfavorable fiber costs in Latin America and energy costs in North America. Lastly, we expect planned maintenance outage costs to improve significantly as we have no major planned outages during the third quarter.

Current wording

Looking ahead to the fourth quarter of 2024, we expect price and mix to be unfavorable due to pulp and paper price decreases in Europe, higher export mix in Latin America and unfavorable customer mix in North America. Volume is expected to improve driven by Latin America. Operations and costs are expected to increase slightly due to expenses for a planned ten-year turbine generator maintenance event at our Eastover mill that will be partially offset by better fixed cost absorption from less economic downtime in North America. Additionally, we expect input and transportation costs to be higher mostly due to transportation and seasonally higher energy costs. Lastly, we expect planned maintenance outage costs to increase due to the planned outage at Eastover during the fourth quarter.

Previous wording

(a) Net special items represent income or expenses that are incurred periodically, rather than on a regular basis. Net special items in the periods presented primarily include integration costs related to the Nymölla acquisition, professional and legal fees related to negotiations resulting in a shareholder cooperation agreement in 2023, the impact of the step-up of acquired Nymölla inventory sold during the first quarter of 2023 and other charges.

Current wording

(b) Special items represent income or expenses that are incurred periodically, rather than on a regular basis. Net special items in the periods presented primarily include legal fees related to the Brazil Tax Dispute, a loss related to forest fires in Brazil, certain severance costs related to our salaried workforce, integration costs related to the Nymölla acquisition, professional and legal fees related to negotiations resulting in a shareholder cooperation agreement, the impact of the step-up of acquired Nymölla inventory sold during the first quarter of 2023 and other charges.

Previous wording

Europe operating profit was $19 million higher than the same period in 2023, driven primarily by lower outage costs ($20 million), lower input costs ($8 million), primarily for purchased chemicals, lower unabsorbed costs due to economic downtime ($8 million) and higher volumes ($3 million) which more than offset lower sales prices and less favorable product mix ($18 million) and higher operating costs ($2 million).

Current wording

Europe operating profit was $17 million higher than the same period in 2023, driven primarily by higher sales price and product mix ($4 million), higher volumes ($2 million), lower unabsorbed costs due to economic downtime ($9 million), lower input costs ($1 million), primarily for purchased chemicals, and lower operating costs ($1 million).

Previous wording

Our Europe business segment net sales decreased $27 million, compared to the same period in 2023, primarily due to lower sales price and mix ($64 million) which more than offset higher volumes ($46 million).

Current wording

Our Europe business segment net sales decreased $17 million, compared to the same period in 2023, primarily due to lower sales price and mix ($60 million) and foreign exchange and other which more than offset higher volumes ($56 million).

Previous wording

Europe operating profit was $8 million lower than the same period in 2023, driven primarily by lower sales prices and less favorable product mix ($64 million) and higher operating costs ($3 million) which more than offset the impacts of higher volumes ($10 million), lower input costs ($16 million), primarily for purchased chemicals, as well as lower distribution costs, lower outage costs ($20 million) and lower unabsorbed costs due to economic downtime ($13 million).

Current wording

Europe operating profit was $9 million higher than the same period in 2023, primarily due to higher volumes ($12 million), lower input costs ($17 million), primarily for purchased chemicals, as well as lower distribution costs, lower outage costs ($20 million) and lower unabsorbed costs due to economic downtime ($22 million) which more than offset the impacts of lower sales prices and less favorable product mix ($60 million) and higher operating costs ($2 million).

Previous wording

Our Latin America business segment net sales decreased $11 million, compared to the same period in 2023, primarily driven by a decrease in sales price and mix ($52 million) which more than offset higher volumes ($41 million).

Current wording

Our Latin America business segment net sales increased $1 million, compared to the same period in 2023, primarily driven by an increase in sales price and mix ($3 million) and higher volumes ($9 million), partially offset by foreign exchange and other.

Previous wording

Our Latin America business segment net sales decreased $5 million, compared to the same period in 2023, primarily driven by a decrease in sales price and mix ($18 million) which more than offset higher volumes ($16 million).

Current wording

Our Latin America business segment net sales decreased $10 million, compared to the same period in 2023, primarily driven by a decrease in sales price and mix ($49 million) and foreign exchange and other which more than offset higher volumes ($50 million).

Previous wording

Operating profit for Latin America was $11 million lower than the same period in 2023, as lower sales prices and less favorable product mix ($18 million), along with higher operating costs ($6 million) and higher outage costs ($2 million) more than offset higher volumes ($6 million) and lower input costs ($9 million), primarily for purchased chemicals and pulp.

Current wording

Operating profit for Latin America was $49 million lower than the same period in 2023, as lower sales prices and less favorable product mix ($49 million), along with higher operating costs ($18 million) and higher outage costs ($13 million) more than offset higher volumes ($13 million) and lower input costs ($18 million), primarily for purchased pulp and chemicals.

Previous wording

Our North America business segment net sales increased $19 million, compared to the same period in 2023, as higher volumes ($33 million) more than offset decreased sales price and mix ($12 million).

Current wording

Our North America business segment net sales increased $56 million, compared to the same period in 2023, as higher volumes ($69 million) more than offset decreased sales price and mix ($13 million).

Previous wording

Operating profit for North America was $32 million higher than the same period in 2023, primarily due to higher volumes ($11 million), lower unabsorbed costs due to economic downtime ($17 million), lower outage costs ($11 million), lower operating costs ($4 million) and lower input costs ($1 million) which more than offset decreased sales prices and less favorable product mix ($12 million).

Current wording

Operating profit for North America was $23 million higher than the same period in 2023, primarily due to higher volumes ($19 million), lower unabsorbed costs due to economic downtime ($17 million), lower outage costs ($1 million) and lower input costs ($2 million), primarily for purchased chemicals, as well as lower distribution costs, which more than offset decreased sales prices and less favorable product mix ($13 million) and higher operating costs ($3 million).

Previous wording

Our North America business segment net sales increased $4 million, compared to the same period in 2023, as higher volumes ($50 million) more than offset decreased sales prices and less favorable product mix ($47 million).

Current wording

Our North America business segment net sales increased $60 million, compared to the same period in 2023, as higher volumes ($119 million) more than offset decreased sales prices and less favorable product mix ($60 million).

Previous wording

Operating profit for North America was $3 million lower than the same period in 2023, primarily due to decreased sales prices and less favorable product mix ($47 million), higher outage costs ($3 million) and operating costs ($13 million) which more than offset higher volumes ($16 million), lower unabsorbed costs due to economic downtime ($23 million) and lower input costs ($21 million) primarily for purchased wood, energy and chemicals, as well as lower distribution costs.

Current wording

Operating profit for North America was $20 million higher than the same period in 2023, primarily due to higher volumes ($35 million), lower unabsorbed costs due to economic downtime ($40 million) and lower input costs ($23 million) primarily for purchased wood and chemicals, as well as lower distribution costs which more than offset decreased sales prices and less favorable product mix ($60 million), higher operating costs ($16 million) and outage costs ($2 million).

Previous wording

(b) Net special items represent income or expenses that are incurred periodically, rather than on a regular basis. Net special items in the periods presented primarily include integration costs related to the Nymölla acquisition, professional and legal fees related to negotiations resulting in a shareholder cooperation agreement in 2023, the impact of the step-up of acquired Nymölla inventory sold during the first quarter of 2023 and other charges.

Current wording

(a) Special items represent income or expenses that are incurred periodically, rather than on a regular basis. Net special items in the periods presented primarily include legal fees related to the Brazil Tax Dispute, certain severance costs related to our salaried workforce, integration costs related to the Nymölla acquisition, professional and legal fees related to negotiations resulting in a shareholder cooperation agreement, the impact of the step-up of acquired Nymölla inventory sold during the first quarter of 2023 and other charges.

Previous wording

Cash provided by operating activities totaled $142 million for the six months ended June 30, 2024, compared with cash provided by operating activities of $140 million for the six months ended June 30, 2023. The increase in cash provided by operating activities in 2024 relates primarily to timing of cash flows related to working capital.

Current wording

Cash provided by operating activities totaled $305 million for the nine months ended September 30, 2024, compared with cash provided by operating activities of $337 million for the nine months ended September 30, 2023. The decrease in cash provided by operating activities in 2024 relates primarily to timing of cash flows related to working capital.

Previous wording

Cash used for working capital components (accounts and notes receivable, inventories, accounts payable and accrued liabilities, and other) was $72 million for the six months ended June 30, 2024, compared with cash used for working capital components of $94 million for the six months ended June 30, 2023. The six months ended June 30, 2024 working capital components primarily reflect $7 million, $20 million, $26 million and $19 million of cash used for our accounts and notes receivable, inventories, accounts payable and accrued liabilities balances, and other operating activities, respectively. The six months ended June 30, 2023 working capital components primarily reflect $91 million and $22 million of cash provided by our accounts and notes receivable and other operating activities, respectively, offset by $60 million and $147 million of cash used for our inventories and accounts payable and accrued liabilities balances, respectively.

Current wording

Cash used for working capital components (accounts and notes receivable, inventories, accounts payable and accrued liabilities, and other) was $44 million for the nine months ended September 30, 2024, compared with cash provided by working capital components of $3 million for the nine months ended September 30, 2023. The nine months ended September 30, 2024 working capital components primarily reflect $28 million, $21 million and $11 million of cash used for our accounts and notes receivables, inventories and other operating activities, respectively, offset by $16 million of cash provided by our accounts payable and accrued liabilities balances. The nine months ended September 30, 2023 working capital components primarily reflect $99 million and $72 million of cash provided by our accounts and notes receivable and other operating activities, respectively, offset by $46 million and $122 million of cash used for our inventories and accounts payable and accrued liabilities balances, respectively.

Previous wording

The total cash used for investing activities for the six months ended June 30, 2024 decreased from the six months ended June 30, 2023, primarily due to the purchase of the Nymölla mill which occurred in the prior year.

Current wording

The total cash used for investing activities for the nine months ended September 30, 2024 decreased from the nine months ended September 30, 2023, primarily due to the purchase of the Nymölla mill which occurred in the prior year.

Previous wording

Cash used for financing activities for the six months ended June 30, 2024 primarily reflects the payments of $23 million, $13 million, $10 million, and $8 million on our outstanding principal debt balances for the AR Securitization, Term Loan F, Revolving Credit Facility, and Term Loan A, respectively. These amounts are primarily offset by draws on our Revolving Credit Facility of $10 million and our AR Securitization of $6 million. During the six months ended June 30, 2024 the Company also paid $25 million in dividends and repurchased $30 million of our shares pursuant to our share repurchase program. Cash used for financing activities for the six months ended June 30, 2023 primarily reflects the payments of $35 million, $30 million, $13 million, and $4 million on our outstanding principal debt balances for the Revolving Credit Facility, AR Securitization, Term Loan F, and Term Loan A, respectively. Additionally, $360 million was paid to bond holders as part of our tender offer. These amounts are primarily offset by the issuance of Term Loan A, draws on our Revolving Credit Facility, and AR Securitization of $300 million, $70 million, and $70 million, respectively. During the six months ended June 30, 2023 the Company also paid $21 million in dividends and repurchased $40 million of our shares pursuant to our share repurchase program.

Current wording

Cash used for financing activities for the nine months ended September 30, 2024 primarily reflects the payments of $117 million, $44 million, $23 million, and $10 million on our outstanding principal debt balances for Term Loan F, Term Loan A, the AR Securitization, and Revolving Credit Facility, respectively. Additionally, payments of $93 million were made to redeem, at a premium, the full value of our 7.00% Senior Notes and pay $5 million in debt issuance costs in connection with the debt refinancing in the third quarter. These amounts are primarily offset by the issuance of Term Loan F-2, draws on our Revolving Credit Facility, and AR Securitization of $235 million, $10 million, and $6 million, respectively. During the nine months ended September 30, 2024 the Company also paid $43 million in dividends and repurchased $30 million of our shares pursuant to our share repurchase program. Cash used for financing activities for the nine months ended September 30, 2023 primarily reflects the payments of $60 million, $34 million, $20 million, and $8 million on our outstanding principal debt balances for the Revolving Credit Facility, AR Securitization, Term Loan F, and Term Loan A, respectively. Additionally, $360 million was paid to bond holders as part of our tender offer. These amounts are primarily offset by the issuance of Term Loan A, draws on our Revolving Credit Facility, and AR Securitization of $300 million, $70 million, and $70 million, respectively. During the nine months ended September 30, 2023 the Company also paid $32 million in dividends and repurchased $53 million of our shares pursuant to our share repurchase program.

Previous wording

For the six months ended June 30, 2024, we have invested approximately $113 million, or 6.1% of net sales, in total capital expenditures. Over that period, we spent approximately $102 million, or 5.5% of net sales, in maintenance, regulatory and reforestation capital expenditures, and approximately $11 million, or 0.6% of net sales, in high-return capital projects. Our annual maintenance, regulatory and reforestation capital expenditures are expected to be in the range of approximately $175 to $190 million per year (before inflation) for the next several years, which we believe will be sufficient to maintain our operations and productivity. In addition, we expect to spend approximately $30 million to $35 million on high-return projects in 2024.

Current wording

For the nine months ended September 30, 2024, we have invested approximately $157 million, or 5.6% of net sales, in total capital expenditures. Over that period, we spent approximately $140 million, or 5.0% of net sales, in maintenance, regulatory and reforestation capital expenditures, and approximately $17 million, or 0.6% of net sales, in high-return capital projects. Our annual maintenance, regulatory and reforestation capital expenditures are expected to be in the range of approximately $175 to $190 million per year (before inflation) for the next several years, which we believe will be sufficient to maintain our operations and productivity. In addition, we expect to spend approximately $30 million to $35 million on high-return projects in 2024.

Previous wording

The Company has included in the 2023 Form 10-K a discussion of these critical accounting policies, which are important to the portrayal of the Company’s financial condition and results of operations and require management’s judgments. The Company has not made any changes in these critical accounting policies during the first six months of 2024.

Current wording

The Company has included in the 2023 Form 10-K a discussion of these critical accounting policies, which are important to the portrayal of the Company’s financial condition and results of operations and require management’s judgments. The Company has not made any changes in these critical accounting policies during the first nine months of 2024.

Previous wording

Although it is not possible to identify all of these risks, uncertainties and other factors, the impact of the following factors, among others, on us or on our suppliers or customers, could cause our actual results to differ from those in the forward-looking statements: deterioration of global and regional economic and political conditions, including the impact of wars and other conflicts in Ukraine and the Middle East; physical, financial and reputational risks associated with climate change; public health crises that could have impacts similar to those experienced as a result of the COVID-19 pandemic; increased costs or reduced availability of the raw materials, energy, transportation (truck, rail and ocean) and labor needed to manufacture and deliver our products; reduced demand for our products due to industry-wide declines in demand for paper, the cyclical nature of the paper industry or competition from other businesses; a material disruption at any of our manufacturing facilities; information technology risks including potential cybersecurity breaches affecting us or third parties with which we do business; extensive environmental laws and regulations, as well as tax and other laws, in the United States, Brazil and other jurisdictions to which we are subject, including our compliance costs and risk of violations and liability; our reliance on a small number of customers; a failure by us to attract and retain senior management and other key and skilled employees; loss of our commercial agreements with International Paper; our indebtedness having a material adverse effect on our financial condition, or our inability to generate sufficient cash to service our indebtedness; and the factors disclosed in Item 1A. Risk Factors, as such disclosures may be amended, supplemented or superseded from time to time by other reports we file with the U.S. Securities and Exchange Commission (the “SEC”), including subsequent annual reports on Form 10-K and quarterly reports on Form 10-Q.

Current wording

Although it is not possible to identify all of these risks, uncertainties and other factors, the impact of the following factors, among others, on us or on our suppliers or customers, could cause our actual results to differ from those in the forward-looking statements: deterioration of global and regional economic and political conditions, including the impact of wars and other conflicts in Ukraine and the Middle East; physical, financial and reputational risks associated with climate change; adverse environmental events, including forest fires on our lands in Brazil; public health crises that could have impacts similar to those experienced as a result of the COVID-19 pandemic; increased costs or reduced availability of the raw materials, energy, transportation (truck, rail and ocean) and labor needed to manufacture and deliver our products; reduced demand for our products due to industry-wide declines in demand for paper, the cyclical nature of the paper industry or competition from other businesses; a material disruption at any of our manufacturing facilities; information technology risks including potential cybersecurity breaches affecting us or third parties with which we do business; extensive environmental laws and regulations, as well as tax and other laws, in the United States, Brazil and other jurisdictions to which we are subject, including our compliance costs and risk of violations and liability; our reliance on a small number of customers; a failure by us to attract and retain senior management and other key and skilled employees; loss of our commercial agreements with International Paper; our indebtedness having a material adverse effect on our financial condition, or our inability to generate sufficient cash to service our indebtedness; and the factors disclosed in Item 1A. Risk Factors, as such disclosures may be amended, supplemented or superseded from time to time by other reports we file with the U.S. Securities and Exchange Commission (the “SEC”), including subsequent annual reports on Form 10-K and quarterly reports on Form 10-Q.