Sylvamo (NYSE: SLVM), 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.
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.
Select Financial
Measures
(In millions)
Second Quarter 2024
First Quarter 2024
Second Quarter 2023
Net Sales
$
933
$
905
$
919
Net Income
83
43
49
Business Segment Operating Profit
122
72
82
Adjusted Operating Earnings
83
45
49
Adjusted EBITDA
164
118
124
Cash Provided By Operating Activities
115
27
77
Free Cash Flow
62
(33
)
33
Segment Information
Sylvamo uses business segment operating profit to measure the
earnings performance of its businesses and is calculated as set
forth in footnote (e) under the "Sales and Earnings by Business
Segment" table (page 7). Second quarter 2024 net sales by business
segment and operating profit by business segment compared with the
first quarter of 2024 and the second quarter of 2023 are as
follows:
Business Segment
Results
(In millions)
Second Quarter 2024
First Quarter 2024
Second Quarter 2023
Net Sales by Business Segment
Europe
$
206
$
207
$
210
Latin America
245
216
250
North America
493
490
474
Inter-segment Sales
(11
)
(8
)
(15
)
Net Sales
$
933
$
905
$
919
Operating Profit by Business
Segment
Europe
$
8
$
(4
)
$
(11
)
Latin America
37
14
48
North America
77
62
45
Business Segment Operating
Profit
$
122
$
72
$
82
Operating profits in the second quarter of 2024:
Europe - $8 million compared with $(4) million in
the first quarter of 2024. Earnings were higher due to higher price
and mix and lower operating and input costs which more than offset
higher unabsorbed costs due to economic downtime.
Latin America - $37 million compared with $14 million in
the first quarter of 2024. Earnings were higher due to higher price
and mix, higher volumes, lower operating costs and lower planned
maintenance outages which more than offset higher input costs.
North America - $77 million compared with $62
million in the first quarter of 2024. Earnings were higher due to
higher price and mix and lower operating and input costs which more
than offset higher planned maintenance outages.
Effective Tax Rate
The reported effective tax rate for the second quarter of 2024
was 27%, compared to 28% for the first quarter of 2024. The higher
rate for the first quarter was due to the mix of earnings in our
regions.
Excluding net special items, the effective tax rate for the
second quarter of 2024 was 27%, compared with 28% for the first
quarter of 2024.
The effective tax rate excluding net special items is a non-GAAP
financial measure and is calculated by adjusting the income tax
provision and rate to exclude the tax effect at the applicable
statutory rate of net special items. Management believes that this
presentation provides useful information to investors by providing
a more meaningful comparison of the income tax rate between past
and present periods.
Effects of Net Special Items
Net special items in the second quarter of 2024 amounted to a
net after-tax charge of $0 million ($0.00 per diluted share),
compared with a net after-tax charge of $2 million ($0.05 per
diluted share) in the first quarter of 2024.
Earnings Webcast
The company will host an audio webcast at 10 a.m. EDT / 9 a.m.
CDT. All interested parties are invited to listen at
investors.sylvamo.com.
Parties who wish to participate should call +1-844-867-6169
(U.S.) or +1-409-207-6975 (international) and use access code
4990882. Participants should call in no later than 9:45 a.m. EDT /
8:45 a.m. CDT.
Replays are available at investors.sylvamo.com for one year and
by phone for 90 days, beginning at approximately 2 p.m. EDT / 1
p.m. CDT the day of the call. To listen to the replay by phone,
call +1-866-207-1041 (U.S.) or +1-402-970-0847 (international) and
use access code 8081310.
About Sylvamo
Sylvamo Corporation (NYSE: SLVM) is the world's paper company
with mills in Europe, Latin America and North America. Our vision
is to be the employer, supplier and investment of choice. We
transform renewable resources into papers that people depend on for
education, communication and entertainment. Headquartered in
Memphis, Tennessee, we employ more than 6,500 colleagues. Net sales
for 2023 were $3.7 billion. For more information, please visit
Sylvamo.com.
Forward-Looking Statements
This news release contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934, including the
information under the headings "Third Quarter Outlook" and
"Management Summary from Chairman and Chief Executive Officer
Jean-Michel Ribiéras." Any or all forward-looking statements may
turn out to be incorrect, and our actual actions and results could
differ materially from what they express or imply, because they
involve known and unknown risks, uncertainties and other factors,
many of which are beyond our control. These risks, uncertainties,
and other factors include those disclosed in the heading "Risk
Factors" in our Annual Report on Form 10-K for the year ended Dec.
31, 2023, filed with the U.S. Securities and Exchange Commission
(SEC) and in our subsequent filings with the SEC, available on our
website, Sylvamo.com. These forward-looking statements reflect our
current expectations, and we undertake no obligation to publicly
update any forward-looking statements, whether because of new
information, future events or otherwise.
SYLVAMO CORPORATION
Condensed Consolidated
Statement of Operations
Preliminary and Unaudited
(In millions, except per share
amounts)
Three Months Ended June
30,
Three Months Ended
March 31, 2024
Six Months Ended June
30,
2024
2023
2024
2023
Net Sales
$
933
$
919
$
905
$
1,838
$
1,860
Costs and Expenses
Cost of products sold
684
(a)
721
716
(c)
1,400
1,390
(e)
Selling and administrative expenses
82
(b)
76
74
(d)
156
(b)
159
(f)
Depreciation, amortization and cost of
timber harvested
37
34
39
76
69
Taxes other than payroll and income
taxes
8
6
7
15
12
Interest expense (income), net
9
12
9
18
19
(g)
Income Before Income Taxes
113
70
60
173
211
Income tax provision
30
21
17
47
65
Net Income
$
83
$
49
$
43
$
126
$
146
Earnings Per Share
Basic
$
2.02
$
1.16
$
1.04
$
3.06
$
3.44
Diluted
$
1.98
$
1.14
$
1.02
$
3.00
$
3.40
Average Shares of Common Stock
Outstanding - Diluted
42
43
42
42
43
The accompanying notes are an
integral part of this condensed consolidated statement of
operations.
Three Months and Six Months Ended June 30, 2024
(a)
Includes pre-tax gain of $1 million ($1
million after taxes) for the three months ended June 30, 2024, to
adjust the recognition of a foreign value-added tax refund in
Brazil.
(b)
Includes pre-tax loss of $1 million ($1
million after taxes) for the three and six months ended June 30,
2024, for certain severance costs related to our salaried workforce
and a pre-tax loss of $2 million ($1 million after taxes) for the
six months ended June 30, 2024, for integration costs related to
the Nym�lla acquisition.
Three Months Ended March 31, 2024
(c)
Includes pre-tax loss of $1 million ($1
million after taxes) for other charges.
(d)
Includes pre-tax loss of $2 million ($1
million after taxes) for integration costs related to the Nym�lla
acquisition.
Six Months Ended June 30, 2023
(e)
Includes incremental expense of $9 million
($7 million after taxes) related to the impact of the step-up of
acquired Nym�lla inventory sold during the first quarter.
(f)
Includes a pre-tax loss of $4 million ($3
million after taxes) for transaction costs related to the Nym�lla
acquisition and a pre-tax loss of $4 million ($3 million after
taxes) for professional and legal fees related to negotiations
resulting in a shareholder cooperation agreement.
(g)
Includes $9 million ($6 million after
taxes) of interest income related to tax settlements and a pre-tax
loss of $5 million ($4 million after taxes) related to debt
extinguishment costs.
SYLVAMO CORPORATION
Reconciliation of Net Income
to Adjusted Operating Earnings
Preliminary and Unaudited
(In millions, except per share
amounts)
Three Months Ended June
30,
Three Months Ended
March 31, 2024
Six Months Ended June
30,
2024
2023
2024
2023
Net Income
$
83
$
49
$
43
$
126
$
146
Add back: Net special items expense
(income)
—
—
2
2
11
Adjusted Operating Earnings
$
83
$
49
$
45
$
128
$
157
Three Months Ended June
30,
Three Months Ended
March 31, 2024
Six Months Ended June
30,
2024
2023
2024
2023
Diluted Earnings Per Common Share as
Reported
$
1.98
$
1.14
$
1.02
$
3.00
$
3.40
Add back: Net special items expense
(income)
—
—
0.05
0.05
0.25
Adjusted Operating Earnings Per
Share
$
1.98
$
1.14
$
1.07
$
3.05
$
3.65
SYLVAMO CORPORATION
Sales and Earnings by Business
Segment
Preliminary and Unaudited
(In millions)
Net Sales by Business Segment
Three Months Ended June
30,
Three Months Ended
March 31, 2024
Six Months Ended June
30,
2024
2023
2024
2023
Europe
$
206
$
210
$
207
$
413
$
440
Latin America
245
250
216
461
472
North America
493
474
490
983
979
Inter-segment Sales
(11
)
(15
)
(8
)
(19
)
(31
)
Net Sales
$
933
$
919
$
905
$
1,838
$
1,860
Operating Profit by Business
Segment
Three Months Ended June
30,
Three Months Ended
March 31, 2024
Six Months Ended June
30,
2024
2023
2024
2023
Europe
$
8
$
(11
)
$
(4
)
$
4
$
12
Latin America
37
48
14
51
94
North America
77
45
62
139
142
Business Segment Operating
Profit
$
122
$
82
$
72
$
194
$
248
Income Before Income Taxes
$
113
$
70
$
60
$
173
$
211
Interest expense (income), net
9
12
9
18
19
(c)
Net special items expense (income)
—
(a)
—
3
(b)
3
(a)
18
(d)
Business Segment Operating Profit
(e)
$
122
$
82
$
72
$
194
$
248
Three and Six Months Ended June 30, 2024
(a)
Includes pre-tax loss of $1 million ($1
million after taxes) for the three and six months ended June 30,
2024, for certain severance costs related to our salaried workforce
and a pre-tax loss of $2 million ($1 million after taxes) for the
six months ended June 30, 2024, for integration costs related to
the Nym�lla acquisition. Also includes pre-tax gain of $1 million
($1 million after taxes) for the three months ended June 30, 2024,
to adjust the recognition of a foreign value-added tax refund in
Brazil.
Three Months Ended March 31, 2024
(b)
Includes pre-tax loss of $2 million ($1
million after taxes) for integration costs related to the Nym�lla
acquisition and pre-tax loss of $1 million ($1 million after taxes)
for other charges.
Six Months Ended June 30, 2023
(c)
Includes $9 million ($6 million after
taxes) of interest income related to tax settlements and a pre-tax
loss of $5 million ($4 million after taxes) related to debt
extinguishment costs.
(d)
Includes pre-tax loss of $4 million ($3
million after taxes) for integration costs related to the Nym�lla
acquisition, a pre-tax loss of $4 million ($3 million after taxes)
for professional and legal fees related to negotiations resulting
in a shareholder cooperation agreement and incremental expense of
$9 million ($7 million after taxes) related to the impact of the
step-up of acquired Nym�lla inventory sold during the first
quarter.
(e)
As set forth in the chart above, business
segment operating profit is defined as income before income taxes,
but excluding net interest expense (income) and net special items.
Business segment operating profit is a measure reported to our
management for purposes of making decisions about allocating
resources to our business segments and assessing the performance of
our business segments.
Reconciliation of Net Income
to Adjusted EBITDA and Adjusted EBITDA Margin
Preliminary and Unaudited
(In millions)
Three Months Ended June
30,
Three Months Ended
March 31, 2024
Six Months Ended
2024
2023
2024
2023
Net Income
$
83
$
49
$
43
$
126
$
146
Adjustments:
Income tax provision
30
21
17
47
65
Interest expense (income), net
9
12
9
18
19
Depreciation, amortization and cost of
timber harvested
37
34
39
76
69
Stock-based compensation
5
8
7
12
15
Net special items expense (income)
—
—
3
3
18
Adjusted EBITDA
$
164
$
124
$
118
$
282
$
332
Net Sales
$
933
$
919
$
905
$
1,838
$
1,860
Adjusted EBITDA Margin
17.6
%
13.5
%
13.0
%
15.3
%
17.8
%
Adjusted EBITDA and Adjusted EBITDA
Margin by Business Segment
Three Months Ended June
30,
Three Months Ended
March 31, 2024
Six Months Ended June
30,
2024
2023
2024
2023
Adjusted EBITDA
Europe
$
17
$
(3
)
$
5
$
22
$
28
Latin America
55
67
34
89
130
North America
92
60
79
171
174
Total Business Segment Adjusted
EBITDA
$
164
$
124
$
118
$
282
$
332
Net Sales (excluding inter-segment
sales eliminations)
Europe
$
206
$
210
$
207
$
413
$
440
Latin America
245
250
216
461
472
North America
493
474
490
983
979
Total Business Segment Net
Sales
$
944
$
934
$
913
$
1,857
$
1,891
Adjusted EBITDA Margin
Europe
8
%
(1
)%
2
%
5
%
6
%
Latin America
22
%
27
%
16
%
19
%
28
%
North America
19
%
13
%
16
%
17
%
18
%
SYLVAMO CORPORATION
Condensed Consolidated Balance
Sheet
Preliminary and Unaudited
(In millions)
June 30, 2024
December 31, 2023
Assets
Current Assets
Cash and temporary investments
$
145
$
220
Restricted cash
60
60
Accounts and notes receivable, net
411
428
Contract assets
32
27
Inventories
412
404
Other current assets
40
54
Total Current Assets
1,100
1,193
Plants, Properties and Equipment, Net
955
1,002
Forestlands
346
364
Goodwill
121
139
Right of Use Assets
59
58
Deferred Charges and Other Assets
110
116
Total Assets
$
2,691
$
2,872
Liabilities and Equity
Current Liabilities
Accounts payable
$
389
$
421
Notes payable and current maturities of
long-term debt
28
28
Accrued payroll and benefits
65
63
Other current liabilities
172
183
Total Current Liabilities
654
695
Long-Term Debt
894
931
Deferred Income Taxes
162
189
Other Liabilities
151
156
Equity
Common stock, $1 par value, 200.0 shares
authorized, 44.9 shares and 44.5 shares issued and 41.0 shares and
41.2 shares outstanding at June 30, 2024 and December 31, 2023,
respectively
45
45
Paid-In Capital
60
48
Retained Earnings
2,317
2,222
Accumulated Other Comprehensive Loss
(1,397
)
(1,256
)
1,025
1,059
Less: Common stock held in treasury, at
cost, 3.9 shares and 3.3 shares at June 30, 2024 and December 31,
2023, respectively
(195
)
(158
)
Total Equity
830
901
Total Liabilities and Equity
$
2,691
$
2,872
Condensed Consolidated
Statement of Cash Flows
Preliminary and Unaudited
(In millions)
Six Months Ended June
30,
2024
2023
Operating Activities
Net income
$
126
$
146
Depreciation, amortization, and cost of
timber harvested
76
69
Deferred income tax provision (benefit),
net
—
4
Stock-based compensation
12
15
Changes in operating assets and
liabilities and other
Accounts and notes receivable
(7
)
91
Inventories
(20
)
(60
)
Accounts payable and accrued
liabilities
(26
)
(147
)
Other
(19
)
22
Cash Provided By Operating
Activities
142
140
Investment Activities
Invested in capital projects
(113
)
(105
)
Acquisition of business, net of cash
acquired
—
(167
)
Cash Provided By (Used for) Investment
Activities
(113
)
(272
)
Financing Activities
Dividends paid
(25
)
(21
)
Issuance of debt
16
437
Reduction of debt
(54
)
(443
)
Repurchases of common stock
(30
)
(40
)
Other
(2
)
(6
)
Cash Provided By (Used for) Financing
Activities
(95
)
(73
)
Effect of Exchange Rate Changes on
Cash
(9
)
9
Change in Cash, Temporary Investments
and Restricted Cash
(75
)
(196
)
Cash, Temporary Investments and
Restricted Cash
Beginning of the period
280
360
End of the period
$
205
$
164
SYLVAMO CORPORATION
Reconciliation of Cash
Provided by Operations to Free Cash Flow
Preliminary and Unaudited
(In millions)
Three Months Ended June
30,
Three Months Ended
March 31, 2024
Six Months Ended June
30,
2024
2023
2024
2023
Cash Provided By Operating
Activities
$
115
$
77
$
27
$
142
$
140
Adjustments:
Cash invested in capital projects
(53
)
(44
)
(60
)
(113
)
(105
)
Free Cash Flow
$
62
$
33
$
(33
)
$
29
$
35
SYLVAMO CORPORATION
Reconciliation of Net Income
to Adjusted EBITDA - Third Quarter 2024 Outlook
Estimates
(In millions)
Three Months Ended
September 30, 2024
Net Income
$84 - $94
Adjustments:
Income tax provision
33 - 38
Interest expense (income), net
10
Depreciation, amortization and cost of
timber harvested
37
Stock-based compensation
6
Adjusted EBITDA
$170 - $185
The non-GAAP financial measures presented
in this release have limitations as analytical tools and should not
be considered in isolation or as a substitute for an analysis of
our results calculated in accordance with GAAP. In addition,
because not all companies use identical calculations, the Company’s
presentation of non-GAAP measures in this release may not be
comparable to similarly titled measures disclosed by other
companies, including companies in the same industry as Sylvamo.
Management believes certain non-U.S. GAAP
financial measures, when used in conjunction with information
presented in accordance with U.S. GAAP, can facilitate a better
understanding of the impact of various factors and trends on the
Company’s financial condition and results of operations. Management
also uses these non-U.S. GAAP financial measures in making
financial, operating and planning decisions and in evaluating the
Company’s performance.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240809181404/en/
Investor Contact: Hans Bjorkman, 901-519-8030,
hans.bjorkman@sylvamo.com Media Contact: Adam Ghassemi,
901-519-8115, adam.ghassemi@sylvamo.com
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