Sylvamo Corporation · NYSE:SLVM
Sylvamo — Q1 2022 Earnings Presentation
36 slides from Sylvamo's earnings presentation, May 11, 2022
Slide 1: First Quarter 2022 Earnings Review
1 First Quarter 2022 Earnings Review May 11, 2022 © 2022 Sylvamo Corporation. All rights reserved.
Slide 2: Cautionary statement concerning forward-looking statements
Cautionary statement concerning forward-looking statements 2 This presentation contains information that includes or is based upon 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. Forward-looking statem
Slide 3: Statement relating to non-U.S. financial GAAP measures
Statement relating to non-U.S. financial GAAP measures 3 While Sylvamo reports its financial results in accordance with accounting principles generally accepted in the United States ("U.S. GAAP"), during the course of this presentation, certain non-U.S. GAAP financial measures are presented. Managem
Slide 4: Remain committed to generating strong earnings and cash flow
Positioned to continue to create value in 2022 4 • Remain committed to generating strong earnings and cash flow despite input cost inflation, ongoing supply chain hurdles and geo-political challenges • On a path to achieve pre-pandemic earnings levels, even excluding our Russian business in 2022 Exc
Slide 5: Conducting process to sell Svetogorsk mill and Russian business
Conducting process to sell Svetogorsk mill and Russian business 5 March 7 May 11 Sylvamo to Begin Orderly Suspension of Russian Operations Working to Exit Russia • Unwilling to operate in an environment • Need to maintain full control of our Russian inconsistent with our values assets through the tr
Slide 6: Solid 1Q22 performances generated 19.1% Adjusted EBITDA Margin
Solid 1Q22 performances generated 19.1% Adjusted EBITDA Margin 6 Commercial • Outperformed industry demand with strong customer focus Excellence • Price & Mix exceeded Input Cost increases • Continuing efforts to achieve injury-free operations and protect Operational employees during the global pand
Slide 7: Strong 1Q22 results in a challenging environment
Strong 1Q22 results in a challenging environment 7 Net Sales Adjusted EBITDA Free Cash Flow Adjusted Operating $ Million $ Million $ Million Earnings per Share $972 $977 $187 $162 $778 $170 $1.97 $123 $73 $1.71 $65 $1.41 15.8% 17.5% 19.1% 1Q21 4Q21 1Q22 1Q21 4Q21 1Q22 1Q21 4Q21 1Q22 1Q21 4Q21 1Q22 A
Slide 8: Another well-executed quarter
Another well-executed quarter 8 1Q22 vs. 4Q21 Adjusted EBITDA $ Million 250 $53 ($17) ($22) $26 ($24) $187 200 $170 LIFO (14) FX (6) 150 100 50 17.5% 19.1% 0 4Q21 Price & Mix Volume Operations Maintenance Input and 1Q22 and Costs Outages Transportation Costs All earnings and figures include our Russ
Slide 9: Regional performances exceeded expectations
Regional performances exceeded expectations 9 1Q22 Adjusted EBITDA Region 1Q22 vs. 4Q21 Highlights $ Million Margin • Realization of prior price increases Europe $46 16% • Outperformed industry shipments • Seasonally weaker demand in Eastern Europe and Latin America Latin $57 27% • Good operations A
Slide 10: Positive industry momentum continues in all regions
Positive industry momentum continues in all regions 10 Favorable Supply & Demand • Healthy operating rates • Public announcements indicate net capacity reductions in Western Europe and North America Favorable Pricing Offsetting Input Costs • Improved pricing continues as we realize prior increases •
Slide 11: Commercial Excellence is a key differentiator in 1Q22
Commercial Excellence is a key differentiator in 1Q22 11 • Non-price initiatives improving bottom line Europe • 13% y-o-y increase in our brands - now at 44% of total mix Latin • Outperforming industry in core regions America • $15 million y-o-y mix improvement North • Outperforming industry shipmen
Slide 12: Positioned to succeed in Europe
Positioned to succeed in Europe 12 • European UFS cost curve has steepened significantly • High market pulp prices have increased costs for non-integrated mills • Energy costs remain elevated • Our Saillat, France mill is fully integrated, benefits from a favorable energy position and generates exce
Slide 13: 2Q22 Adjusted EBITDA Outlook excluding Russia
2Q22 Adjusted EBITDA Outlook excluding Russia: $170 - $180 Million 13 Adjusted EBITDA Outlook including Russia: $180 - $190 Million Category Changes Excluding Russia Including Russia ($ Million) ($ Million) Improving: $50 - $55 Price and Mix $60 - $65 Continued price increase realizations in all reg
Slide 14: Key factors contributing to our 2022 projections
Key factors contributing to our 2022 projections 14 Industry Factors Sylvamo Factors Price and mix continue to outpace input Favorable supply and demand dynamics cost inflation Best-in-class commercial teams and strong Strong operating rates in all regions channel partnerships Better demand than exp
Slide 15: Generating strong Free Cash Flow and allocating cash with discipline
Generating strong Free Cash Flow and allocating cash with discipline 15 Free Cash Flow 2022 Uses of Cash $ Million $180 $162 • $175 million in capital spending, incl. high-return projects $160 • $77 million day-one GT and RD inventory payments $65 $73 • $57 million one-time and transition services c
Slide 16: Generating and judiciously allocating cash in 2022
Generating and judiciously allocating cash in 2022 16 2.8x Leverage Ratio¹ 2.1x Reduce Debt 09.30.21 03.31.22 $157 million in Last Six Months • Strong balance sheet • Target gross debt of $1 billion Generate Cash Invest in ≥ 25% IRR 50% + $725 - $775 million High-return Projects • No $220 million Sv
Slide 17: Update on Brazilian Goodwill Tax Dispute
Update on Brazilian Goodwill Tax Dispute 17 • On May 3, Brazilian IRS issued a rule to settle goodwill tax disputes • International Paper holds the right to apply for a settlement • Applications must be submitted by July 29, 2022 • Sylvamo’s liability is a maximum of $120 million © 2022 Sylvamo Corp
Slide 18: Positioned to continue to create value in 2022
Positioned to continue to create value in 2022 18 • Remain committed to generating strong earnings and cash flow • On a path to achieve pre-pandemic earnings levels, even excluding our Russian business: • $725 - $775 million in Adjusted EBITDA • $160 - $180 million in Free Cash Flow © 2022 Sylvamo C
Slide 19: Appendix
19 Appendix © 2022 Sylvamo Corporation. All rights reserved.
Slide 20: Contacts
Contacts 20 Hans Bjorkman Vice President, Investor Relations Investor Relations +1-901-419-3525 hans.bjorkman@sylvamo.com Adam Ghassemi Senior Manager, Corporate Communications Media +1-901-419-4436 adam.ghassemi@sylvamo.com © 2022 Sylvamo Corporation. All rights reserved.
Slide 21: Protecting long-term value for all shareholders
Protecting long-term value for all shareholders 21 • On April 22, board of directors adopted a limited-duration shareholder rights plan to protect the interests of all shareholders • Reduces the likelihood that any person or group could gain control of the company without appropriately compensating
Slide 22: Free Cash Flow Reconciliation
Free Cash Flow Reconciliation 22 FY 2022 $ Million 1Q21 4Q21 1Q22 Outlook (excl. Russia) Cash Provided by Operations $82 $184 $92 $335 - $355 Cash Invested in Capital Projects ($17) ($22) ($19) ($175) Free Cash Flow $65 $162 $73 $160 - $180 All earnings and figures include our Russian business unles
Slide 23: Adjusted EBITDA and Margin Reconciliation
Adjusted EBITDA and Margin Reconciliation 23 2Q22 2Q22 FY 2022 $ Million 1Q21 4Q21 1Q22 Outlook Outlook Outlook (excl. Russia) (incl. Russia) (excl. Russia) Net Income $62 $62 $26 $65 - $72 $70 - $77 $267 - $302 Depreciation, Amortization, Cost of Timber Harvested 36 35 34 33 36 130 Interest (Income
Slide 24: Adjusted EBITDA and Margin Reconciliation
Adjusted EBITDA and Margin Reconciliation 24 $ Million 1Q21 4Q21 1Q22 Adjusted EBITDA $123 $170 $187 Europe 32 27 46 Latin America 57 81 57 North America 34 62 84 Total Business Segment Adjusted EBITDA $123 $170 $187 Net Sales (excluding Inter-segment Sales) $788 $989 $1,002 Europe 238 297 279 Latin
Slide 25: Adjusted Operating Earnings per Share Reconciliation
Adjusted Operating Earnings per Share Reconciliation 25 2Q22 2Q22 $ Million 1Q21 4Q21 1Q22 Outlook Outlook (excl. Russia) (incl. Russia) Net Income $62 $62 $26 $65 - $72 $70 - $77 Special Items Expense (Income) - 13 61 10 10 Adjusted Operating Earnings 62 75 87 75 - 82 80 - 87 Adjusted Operating Ear
Slide 26: 1Q22 vs. 1Q21 Adjusted EBITDA
1Q22 vs. 1Q21 Adjusted EBITDA 26 $ Million 350 $169 $11 ($20) ($3) ($94) 300 250 $187 200 $123 150 100 50 15.8% 19.1% 0 1Q21 Price & Mix Volume Operations Maintenance Input Costs 1Q22 Outages All earnings and figures include our Russian business unless otherwise noted © 2022 Sylvamo Corporation. All
Slide 27: Europe Adjusted EBITDA
Europe Adjusted EBITDA 27 1Q22 vs. 4Q21 60 $21 ($3) $46 $17 ($6) 50 ($12) 40 $27 30 20 9% 16% 10 0 4Q21 Price & Mix Volume Operations Maintenance Input Costs 1Q22 Outages $ Million 1Q22 vs. 1Q21 $46 ($1) 90 ($13) 80 $0 ($19) 70 9% $46 60 19% 50 $32 40 30 20 13% Maintenance 16% 10 0 1Q21 Price & Mix
Slide 28: Latin America Adjusted EBITDA
Latin America Adjusted EBITDA 28 1Q22 vs. 4Q21 120 $10 ($14) $81 100 ($13) ($0) ($7) 80 $57 60 40 35% 27% 20 0 4Q21 Price & Mix Volume Operations Maintenance Input Costs 1Q22 Outages $ Million 1Q22 vs. 1Q21 120 $45 ($0) ($17) $0 ($28) 100 9% 80 19% $57 $57 60 40 34% 27% 20 Maintenance 0 1Q21 Price &
Slide 29: North America Adjusted EBITDA
North America Adjusted EBITDA 29 1Q22 vs. 4Q21 120 $3 $5 ($14) $26 $3 $84 100 $62 80 60 40 13% 17% 20 0 4Q21 Price & Mix Volume Operations Maintenance Input Costs 1Q22 $ Million Outages 1Q22 vs. 1Q21 160 $10 ($3) ($47) $12 140 $78 9% 120 $84 19% 100 80 60 $34 40 9% 17% 20 Maintenance 0 1Q21 Price &
Slide 30: Quarterly Business Segment Operating Results
Quarterly Business Segment Operating Results 30 Sales D&A Adjusted EBITDA $ Million 1Q21 4Q21 1Q22 1Q22 1Q21 4Q21 1Q22 Europe $238 $297 $279 $8 $32 $27 $46 Latin America $168 $229 $215 $15 $57 $81 $57 North America $382 $463 $508 $12 $34 $62 $84 Segment Total $788 $989 $1,002 $34 $123 $170 $187 All
Slide 31: 1Q22 Shipments
1Q22 Shipments 31 Latin North 000 Short Tons Europe Sylvamo America America Uncoated Papers 255 252 393 900 Market Pulp 47 30 33 110 Coated Board & Other 23 - - 23 Total 1,033 All earnings and figures include our Russian business unless otherwise noted © 2022 Sylvamo Corporation. All rights reserved
Slide 32: Price & Mix outpaced Input Costs in 1Q22
Price & Mix outpaced Input Costs in 1Q22 32 Change of Price & Mix 1Q22 vs. 4Q21 Input Costs vs. Input Costs Change By Region ($ Million) ($ Million) +$75 Europe Latin America North America $169 3 (2) (2) (2) (3) (2) (3) +$29 $94 (1) (3) ($3) (4) $53 ($7) (1) $24 (4) 1Q22 vs 4Q21 1Q22 vs 1Q21 ($14) P
Slide 33: Strengthening our balance sheet
Strengthening our balance sheet 33 3.31.22 Debt $ Million Maturity 1Q22 Secured Farm Credit Term Loan F $514 2027 • Repaid $33 million of debt Secured Term Loan B $400 2028 • $229 million cash balance Gross Debt-to-Adjusted EBITDA Unsecured Bonds $450 2029 2.8x 2.4x 2.1x Total $1,364 2.1x Gross Debt
Slide 34: Selected Guidance
Selected Guidance 34 2022 2022 2021 $ Million Outlook Outlook Actual (2.11.22) (Revised) Direct Maintenance Outage Costs $69 $61 $64 Maintenance, Regulatory & Reforestation $76 $145 $155 High-return Projects - $18 $20 Capital Spending Svetogorsk Recovery Boiler¹ - $15 - Total $76 $178 $175 Depreciat
Slide 35: Direct Maintenance Outage Costs - 2022 Outlook
Direct Maintenance Outage Costs - 2022 Outlook 35 FY 2022 $ Million 1Q22 2Q22 3Q22 4Q22 Outlook Europe - $7 - - $7 Latin America - - $6 $5 $11 North America $7 $18 $3 $18 $46 Total $7 $25 $9 $23 $64 All earnings and figures include our Russian business unless otherwise noted. Direct maintenance outa
Slide 36: Building a better future for people, the planet and our company
36 Building a better future for people, the planet and our company © 2022 Sylvamo Corporation. All rights reserved.