Sylvamo Corp Q4 FY2024 earnings call

• In 2024, the company achieved a 23% return on invested capital and strengthened its competitive advantages in the core uncoated freesheet market.
• Project Horizon, the cost reduction program, exceeded the $110 million year-end run rate savings goal by $34 million, with over 180 initiatives across 3 regions targeting cost reductions and productivity improvements.
• At the Luiz Antonio mill in Latin America, high-return projects included a $7 million investment in turbine/gearbox upgrade (25% IRR) and a $1 million investment in reel transition system (40% IRR).
• The Eastover mill had a major planned outage, contributing to increased planned maintenance outages costs by $17 million in the fourth quarter.

In 2024, Sylvamo generated an adjusted EBITDA of $632 million with a 17% margin. Free cash flow was $248 million. For the fourth quarter, adjusted EBITDA was $157 million with a 16% margin, and free cash flow was $100 million. The company repaid $154 million in debt, achieving a net debt-to-adjusted EBITDA of 0.9x, and returned $130 million to shareowners while reinvesting $221 million across its manufacturing network and Brazil forestland.

• First quarter 2025 adjusted EBITDA expected to be $85 million to $105 million. Price and mix unfavorable $10 million to $15 million, volume unfavorable $20 million to $25 million, input/transport costs increase $5 million to $10 million, planned maintenance outages increase $15 million.
• Expect quarterly earnings to improve throughout 2025 due to seasonally stronger volume, realization of price increases, and less maintenance outages in the second half.
• 2025 capital spending planned at $220 million to $240 million, including $125 million in maintenance/regulatory spending, $35 million in Brazil forestland, and $50 million to $70 million in high-return projects.

• Geopolitical events and macroeconomic uncertainties impacting business performance.
• Potential tariffs and retaliatory tariffs affecting the business.
• Seasonal demand variations in regions, particularly in Latin America's first quarter.
• Fluctuations in pulp and input costs, as well as maintenance outage impacts on costs.

Q: Can you talk about the impact of pricing being implemented on first quarter guidance and volume weakness in North America?

A: Price increases in Brazil and North America are being implemented, with realization more in the second quarter. Volume was lower than expected in North America, particularly in commercial printing and envelope market due to weak November.

Q: How would tariffs on Canada/Mexico affect the business?

A: Difficult to assess, but 25% tariffs on aluminum/steel may impact equipment costs, but retaliation uncertainties are a question mark.

Q: Cadence of 2025 capital spending?

A: More heavily weighted to first half due to 80% of outages in first half, but spending on Eastover projects spread throughout the year.

Q: Cost curve shift in Europe and industry operating rate?

A: Cost curve increased due to Ukraine-related factors, uncoated freesheet pricing stabilizing, industry operating rate in mid-80s including closures.

Q: Free cash flow guidance and one-timers in fourth quarter?

A: No free cash flow guidance, first quarter cash flow typically more challenging. Fourth quarter one-timers included $5 million insurance payment and $7 million LIFO adjustment.