Release Date: May 07, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Rayonier Advanced Materials Inc (RYAM, Financial) maintains a solid financial foundation with liquidity of $272 million and a net secured debt reduction of $624 million.
- The company is actively mitigating tariff risks through customer advocacy, market diversification, and operational adjustments.
- RYAM's biomaterials segment shows steady net sales and is expected to deliver modest growth driven by strategic investments.
- The company plans to continue pursuing high-return, low-risk strategic investments to improve operational efficiencies.
- RYAM's exposure to non-fluff commodities is expected to decrease as key cellular specialties and uses grow.
Negative Points
- RYAM reported an 8% decline in revenue and a 67% reduction in adjusted EBITDA compared to the first quarter of 2024.
- The company faced operational setbacks due to equipment failures and poor weather at cellulose plants.
- Higher energy prices in the Southeast United States negatively impacted operational costs.
- RYAM increased remediation reserves for legacy sites due to changes in regulatory scope.
- The company is challenged by a 125% tariff imposed by China on US source cellulose commodities, affecting approximately $85 million of annual revenue.
Q & A Highlights
Q: Can you discuss the current conditions in the fluff pulp market, particularly with China's retaliatory tariffs in place? What market diversification is possible, and over what timeline?
A: Delile Blomquist, President and CEO, explained that while some Chinese customers continue to place orders, they cannot sustain paying tariffs long-term. Rayonier is pivoting to non-tariff markets like India, Africa, and the Middle East. The company is also exploring opportunities in viscose, which may be exempt from tariffs, and paper pulp as a last resort.
Q: Could you provide more color on how CS volumes evolved following Liberation Day and how they might evolve for the rest of the year?
A: Delile Blomquist noted that CS volumes to China were initially lower due to pre-orders and tariff concerns. Orders paused in April but resumed in May, suggesting CS products might be exempt from tariffs. Rayonier expects volumes to normalize by Q3 and Q4, although Q2 will be lighter.
Q: What are the factors affecting your paperboard guidance for 2025, and what assumptions have you made around pricing?
A: Delile Blomquist stated that the risk of tariffs on paperboard imports has reversed, and mitigation actions are in place. Pricing is expected to decrease by about 5% due to new supply from Sappi. Long-term demand is expected to catch up due to trends toward sustainable packaging.
Q: Are you still able to sell CS products into China without tariff impacts?
A: Delile Blomquist confirmed that while there is no official announcement, conversations with customers and resumed shipments suggest CS products are not currently subject to tariffs. The company has assumed no tariff impact in its guidance.
Q: How do you feel about the current liquidity given the challenging environment?
A: Marcus Moltner, CFO, expressed confidence in the company's liquidity profile, with over $270 million available. Rayonier manages to maintain around $200 million in liquidity, ensuring financial flexibility despite the difficult quarter.
Q: What is driving higher energy costs despite lower oil and natural gas prices?
A: Delile Blomquist explained that the cold weather in January in the Southeast U.S. led to higher energy costs, particularly due to an OFO order that forced Rayonier to buy natural gas on the spot market. Energy prices have since normalized.
Q: How are you addressing raw material constraints at the Tartas plant for bioethanol production?
A: Delile Blomquist mentioned that running the Tartas plant at higher levels post-maintenance should improve feedstock availability. The company is also exploring operational changes and using GMO yeast to enhance yields, with improvements expected in late 2025 and 2026.
Q: What is the status of the Fernandina plant expansion for BSL, and how confident are you in obtaining necessary permits?
A: Delile Blomquist expressed confidence in the project's benefits and the company's legal position, despite ongoing litigation. Rayonier believes the expansion will provide significant environmental and community benefits.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
