Sylvamo Generates Strong Operating Cash Flow, Returns $127 Million in Cash to Shareowners in 2023

Sylvamo, the world’s paper company, is releasing fourth quarter 2023 earnings.

Financial Highlights – 2023 Full Year

• Net income from continuing operations of $253 million ($5.93 per diluted share)
• Adjusted operating earnings¹ of $278 million ($6.51 per diluted share)
• Adjusted EBITDA² of $607 million (16% margin)
• Cash provided by operating activities from continuing operations of $504 million
• Free cash flow³ of $294 million
• Paid regular and special dividends totaling $57 million
• Repurchased 1,574,133 shares of our common stock for approximately $70 million, resulting in 41.2 million shares outstanding as of Dec. 31
• Ended the year with net debt of $730 million ($950 million of gross debt and $220 million cash on hand)

Financial Highlights – Fourth Quarter vs. Third Quarter

• Net sales of $964 million vs. $897 million (7.5% increase)
• Net income from continuing operations of $49 million ($1.16 per diluted share) vs. $58 million ($1.37 per diluted share)
• Adjusted operating earnings¹ of $49 million ($1.16 per diluted share) vs. $72 million ($1.70 per diluted share)
• Adjusted EBITDA² of $117 million (12% margin) vs. $158 million (18% margin)
• Cash provided by operating activities from continuing operations of $167 million vs. $197 million
• Free cash flow³ of $104 million vs. $155 million

Commercial and Operational Highlights – Fourth Quarter vs. Third Quarter

• Price and mix decreased by $25 million due primarily to prior paper price decreases as well as unfavorable mix in Latin America and North America
• Volume increased by $20 million due to seasonally stronger sales volume in Latin America and positive trends in Europe and North America
• Operations and other costs increased by $12 million due to seasonally higher costs in Europe and North America, including $5 million for an unexpected reliability issue with a third-party energy provider at our Saillat, France, mill and unfavorable foreign exchange variances. These costs were partially offset by lower economic downtime costs versus the prior quarter.
• Planned maintenance outage expenses increased by $25 million due to planned outages in all regions
• Input costs improved by $1 million, driven primarily by favorable chemical costs, more than offsetting seasonally high energy costs

First Quarter Outlook

• Adjusted EBITDA of $105 million to $125 million
• Compared to the fourth quarter:
  • Price and mix are expected to decrease slightly by $5 million to $10 million, primarily reflecting a seasonal, geographic mix shift in Latin America
  • Volume is projected to decrease by $10 million to $15 million, with seasonally weaker industry demand in Latin America
  • Operations and other costs are expected to improve by $20 million to $25 million due primarily to lower economic downtime
  • Input and transportation costs are projected to increase by $5 million to $10 million due to increased transportation costs, mainly in North America and higher fiber costs in Latin America
  • Total planned maintenance outage expenses are expected to decrease by $3 million

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

In 2023, we earned $607 million in adjusted EBITDA, generated $294 million of free cash flow and returned $127 million in cash to shareowners. We are proud of the way our teams adapted when challenged by uncoated freesheet market conditions that were significantly less favorable than expected. We continued to deliver on our promises to customers and shareowners.

We remain focused on allocating capital to drive long-term shareowner value. Last year, we invested $210 million to strengthen our low-cost assets and acquired a 500,000-ton uncoated freesheet mill in Nymolla, Sweden, for $167 million. In 2023, this mill generated strong cash flow, benefiting from the $40 million pulp mill modernization project completed just before the acquisition. We are also on track to deliver $20 million annual run rate synergies by the end of 2024. The Nymolla mill is strengthening our performance while enabling us to serve customers across Europe and around the world more effectively.

By the end of 2023, we exhausted our initial $150 million share repurchase program authorization and have approximately $150 million remaining on our September 2023 authorization. We will continue to return substantial amounts of cash to shareowners and look for opportunities to repurchase shares at attractive prices. Our board of directors declared a first quarter dividend of $0.30 per share, which we paid Jan. 25th.

In the second half of last year, we reduced overhead expenses by $15 million from budgeted levels in response to industry conditions. We also announced a structural cost reduction program, Project Horizon, to streamline our overhead, manufacturing and supply chain costs. Before inflation, we are targeting run rate savings of at least $110 million by the end of 2024.

Our Brazil forestlands are a significant competitive advantage. These eucalyptus plantations provide a material cost advantage relative to most other global competitors. In 2023, we invested $34 million, and this year, we will invest $35 million in our forestlands to increase our wood self-sufficiency and reduce wood costs.

In addition, we are investing $20 million this year and $12 million in 2025 for a three-year, third-party wood supply agreement to ensure adequate wood supply from 2024 through 2026.

Our forestlands have significantly increased in value. In December, a third party appraisal valued these assets at 4.8 billion reais (approximately $1 billion), an increase of 3 billion reais (roughly $600 million) from a 2021 appraisal. Increasing demand for land and wood in Brazil has driven this increase in valuation. Our forestlands are a significant global competitive advantage and an enduring repository of shareowner value.

1 Adjusted Operating Earnings (non-GAAP) are net income (loss) (GAAP) excluding discontinued operations, 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 (loss), provides for a more complete analysis of the results of operations. Net income (loss) 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 Consolidated Statement of Operations and related notes included later in this release.

2 Adjusted EBITDA (non-GAAP) is net income (loss) (GAAP) excluding discontinued operations, net of tax, plus the sum of income taxes, net interest expense (income), depreciation, amortization and cost of timber harvested, transition service agreement expense, 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 (loss), provides for a more complete analysis of the results of its operations. Net income (loss) 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 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 from continuing operations. 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.

For the full results, click here.

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.

Contact:

Hans Bjorkman – Investor Contact – hans.bjorkman@sylvamo.com – (901) 519-8030

Source: Sylvamo Corporation