Rayonier Advanced Materials Inc. · NYSE:RYAM
Rayonier Advanced Materials — Investor Day (March 2019)
144 slides from Rayonier Advanced Materials's investor day presentation, Mar 7, 2019
Slide 1: Investor Day
RAYONIER ) Advanced Materials.. INVESTOR DAY THURSDAY, MARCH 7, 2019 NYSE 11 WALL STREET, NEW YORK CITY
Slide 2: Safe Harbor
Safe Harbor Certain statements in this document regarding anticipated financial, business, legal or other outcomes including business and market conditions, outlook and other similar statements relating to Rayonier Advanced Materials’ future events, developments, or financial or operational performa
Slide 3: Non-GAAP Financial Measures
Non-GAAP Financial Measures These presentation materials contain certain non-GAAP financial measures, including EBITDA, adjusted EBITDA, adjusted EBITDA margin, adjusted free cash flows, adjusted operating income, adjusted net income, adjusted net income per share, adjusted diluted earnings per shar
Slide 4: Agenda
Agenda 9:00 AM Welcome Mickey Walsh, Treasurer & VP Investor Relations 9:05 AM Company Overview & Strategy Paul Boynton, Chairman, President & CEO 9:30 AM High Purity Cellulose – Commercial Dr. Erin Byers, SVP High Purity Cellulose 9:45 AM High Purity Cellulose – Manufacturing Bill Manzer, SVP Manuf
Slide 5: Investor Day – 2019
Investor Day – 2019 Paul Boynton Chairman, President & Chief Executive Officer
Slide 6: Rayonier Advanced Materials
Rayonier Advanced Materials NYSE Investor Day Values and vision You know us better than you think Over 90 years of continuous improvement and innovation RYAM today… Strategy to drive growth and value – Go-to-Market strategy – Pillars of growth – Portfolio evaluation – Disciplined capital a
Slide 7: Strategy to Drive Growth & Shareholder Value
Strategy to Drive Growth & Shareholder Value Go-to-Market Strategy Achieve long-term EBITDA growth in High Purity Cellulose Strategic of mid to high single digits Pillars Portfolio Evaluate strategic alternatives for Evaluation certain commodity assets Capital Disciplined allocation supports Allocat
Slide 8: Our Values Our Vision
Our Values Integrity Accountability Quality People Our Vision Creating value by applying science to nature. z z z From Renewable to RemarkableTM 8
Slide 9: You already know us…
You already know us… Highly Mercerized Fibers for Air and Oil Filters Paint High Tenacity Rayon Textile Cord for Tires 9 9
Slide 10: You already know us…
You already know us… Protective Polarizing Film for LCD Screens 10 10
Slide 11: You already know us…
You already know us… Time Release Coating Spacing Agent in Pharmaceuticals Thickening Agents 11
Slide 12: You already know us…
You already know us… Food Safe Sausage Casing Sponge Fibers Dietary Foods 12
Slide 13: Over 90 Years of Creating Value
Over 90 Years of Creating Value 13
Slide 14: Continuous Improvement and Innovation
Rayonier Advanced Materials Continuous Improvement and Innovation 1926 – Rainier Pulp and Paper Company 14
Slide 15: A Look Through Our History
A Look Through Our History Rayonier Acetate growth Advanced due to cigarette Acetate Materials Rainier Pulp and Fernandina for becomes stand Beach plant filters and Paper Company First viscose LCD alone company opens photographic founded grades at Tartas applications film 1926 1931 1939 1954 1950s 1
Slide 16: A Look Through Our History
A Look Through Our History Rayonier Acetate growth Advanced due to cigarette Acetate Materials filters and for becomes stand First viscose LCD alone company photographic grades at Tartas applications film 1926 1931 1939 1954 1950s 1960s 1970s 1980s 1990s 2000s 2014 2017 Partnered with DuPont Co-deve
Slide 17: A Look Through Our History
A Look Through Our History Partnered with J&J to optimize Rayonier an absorbent fiber in the first Advanced Materials Rainier Pulp and development of disposable becomes stand Paper Company baby diapers alone company founded 1926 1931 1939 1954 1950s 1960s 1970s 1980s 1990s 2000s 2014 2017 Partnered
Slide 18: A Look Through Our History
A Look Through Our History Rayonier Acetate growth Advanced due to cigarette Acetate Materials Rainier Pulp and Fernandina for becomes stand Beach plant filters and Paper Company First viscose LCD alone company opens photographic founded grades at Tartas applications film 1926 1931 1939 1954 1950s 1
Slide 19: A Look Through Our History
A Look Through Our History Acetate growth due to cigarette Rainier Pulp and Fernandina filters and Paper Company Beach plant First viscose photographic founded opens grades at Tartas film 1926 1931 1939 1954 1950s 1960s 1970s 1980s 1990s 2000s 2014 2017 Partnered with Jesup Co-developed Perfected ul
Slide 20: A Look Through Our History
A Look Through Our History RYAM introduces Acetate growth XV20 - highest Rainier Pulp and Fernandina due to cigarette viscosity wood-based filters and Paper Company Beach plant First viscose photographic ethers pulp available founded opens grades at Tartas film 1926 1931 1939 1954 1950s 1960s 1970s
Slide 21: Who we are today…
Who we are today… At A Glance Global HQ Matane, QC Global Headquarters Canadian Headquarters Jacksonville, FL Kapuskasing, ON High Purity Cellulose Plant Hearst, ON Cochrane, ON Pulp & Paper Products Facility Canadian HQ La Sarre, QC Forest Products Facility Chapleau, ON Bearn, QC Fiber Facilit
Slide 22: RYAM by the Numbers
RYAM by the Numbers 2018 Revenue by Geography USA Canada China Europe Other 36% 12% 17% 17% 18% 2018 2018 Revenue by Product Adjusted EBITDA by Segment Pulp Forest 7% Paper Products Acetate 16% 21% Forest Products 24% High Yield $364 High Purity Cellulose Pulp $2.1 16% billion Ethers million 55% 12%
Slide 23: RYAM Diverse Business Segments
RYAM Diverse Business Segments High Purity Cellulose Forest Products Paper Pulp • Dissolving Wood Pulp • Dimensional Lumber • Packaging • Mechanical o Acetate • Framing Materials • Multiply Coated Hardwood Pulp Products o Ethers • Wood Chips Board (Maple & o Specialties • Fuel (Chips, Sawdust, • New
Slide 24: Acquisition of Tembec – November 2017
Acquisition of Tembec – November 2017 Rationale Results Complementary product offerings and Attractive purchase price leveraged down technical capabilities across High Purity by synergies, investment opportunities Cellulose grades and strong commodity markets Additional growth opportunities in
Slide 25: Strategy to Drive Growth & Shareholder Value
Strategy to Drive Growth & Shareholder Value Go-to-Market Strategy Achieve long-term EBITDA growth in High Purity Cellulose Strategic of mid to high single digits Pillars Portfolio Evaluate strategic alternatives for Evaluation certain commodity assets Capital Disciplined allocation supports Allocat
Slide 26: 5 of 8 Major Cellulose Specialties Lines
5 of 8 Major Cellulose Specialties Lines RYAM to align assets to meet market needs and lower costs Borregaard GP Cellulose Bracell Others Domsjo Nippon Cosmo 26
Slide 27: Cellulose Specialties Pricing
Cellulose Specialties Pricing Prices settle – potential inflection point Price $/ADMT Stabilization Convergence 2012 2013 2014 2015 2016 2017 2018 2019 Acetate Ethers Other CS 27
Slide 28: Go-to-Market Strategy
Go-to-Market Strategy Asset Realignment Commercial Actions Five CS lines to optimize grades and geographies to Market conditions have changed better serve customers and reduce costs • CS prices have stabilized • Align assets toward most productive use • Acetate prices at parity with other CS product
Slide 29: Strategy to Drive Growth & Shareholder Value
Strategy to Drive Growth & Shareholder Value Go-to-Market Strategy Achieve long-term EBITDA growth in High Purity Cellulose Strategic of mid to high single digits Pillars Portfolio Evaluate strategic alternatives for Evaluation certain commodity assets Capital Disciplined allocation supports Allocat
Slide 30: Strategic Pillars of Growth
Strategic Pillars of Growth $61 million* generated in 2018; On track to deliver $155* million from 2018-2020 Cost Transformation New Products Reduced costs by $53 million 2 commercialized products — $25 million from legacy plan brought to market — $28 million from synergies — Optisilk – lower co
Slide 31: Strategy to Drive Growth & Shareholder Value
Strategy to Drive Growth & Shareholder Value Go-to-Market Strategy Achieve long-term EBITDA growth in High Purity Cellulose Strategic of mid to high single digits Pillars Portfolio Evaluate strategic alternatives for Evaluation certain commodity assets Capital Disciplined allocation supports Allocat
Slide 32: Portfolio Evaluation
Portfolio Evaluation Evaluating strategic alternatives for certain commodity assets Portfolio became more diverse with Tembec acquisition Some assets are integrated with the core High Purity Cellulose business Formal asset review Evaluating highest value owner for certain commodity assets (R
Slide 33: Strategy to Drive Growth & Shareholder Value
Strategy to Drive Growth & Shareholder Value Go-to-Market Strategy Achieve long-term EBITDA growth in High Purity Cellulose Strategic of mid to high single digits Pillars Portfolio Evaluate strategic alternatives for Evaluation certain commodity assets Capital Disciplined allocation supports Allocat
Slide 34: Disciplined Capital Allocation
Disciplined Capital Allocation Cash Flow From Operations Maintain Assets $100-110 million of annual capex Adjusted Free Cash Flow Reduce Leverage Target 2.5x Net Leverage Value Driven Approach Focused on Risk Adjusted Returns on Invested Capital Investment in the External Strategic Return of Capital
Slide 35: Strategy to Drive Growth & Shareholder Value
Strategy to Drive Growth & Shareholder Value Launch new “Go-to-Market” strategy designed to: Go-to-Market • Improved Cellulose Specialties price and margin Strategy • Realign assets to market needs and sales mix Achieve long-term • Drive long-term High Purity EBITDA growth EBITDA growth in High Puri
Slide 36: High Purity Cellulose Commercial
High Purity Cellulose Commercial Erin Byers SVP, High Purity Cellulose
Slide 37: 90 Years Advancing Cellulose Chemistry
90 Years Advancing Cellulose Chemistry Repeating Units Cellulose Polymer Chain 37
Slide 38: Market Pulp Industry Value Chain
Market Pulp Industry Value Chain* Market Pulp Industry: 73 MMT Dissolving Pulp: Cellulose Specialties 1.6 MMT Dissolving Pulp: Commodity Viscose 7 MMT Acetate 43% Ethers Fluff 6 MMT 28% Other CS Increasing 29% Commodity Specialization Market Pulp 58 MMT & Sales Prices RYAM is a market leader in high
Slide 39: Global Customer Base
Global Customer Base USA 28% Asia ROW 3% 38% Europe 31% *illustrative customers Based on sales volumes 39
Slide 40: A Renewable Building Block In Everyday Products
A Renewable Building Block In Everyday Products 40
Slide 41: Exceeding Customer Needs
Exceeding Customer Needs Performance Reliability Broadest range of high Reliable supply from multiple plants performance products and multiple lines Proprietary high purity Customer service and supply chain technology expertise Exacting specifications Multi-year sales agreements Onsigh
Slide 42: Cellulose Specialties Product Overview
Cellulose Specialties Product Overview Primary Demand Size Products End Markets Competitors* Outlook (000s tons) Acetate Pulp ~(1)% 660 Ethers Pulp 3-4% 440 Cotton Linter Pulp Other CS 2-3% 450 Total Cellulose Specialties 1,550 *Other competitors include Domsjo, Nippon, Cosmo Source: Hawkins Wright
Slide 43: Cellulose Specialties Pricing
Cellulose Specialties Pricing Convergence of Acetate and Ethers Sales Price Price $/ADMT $2,200 Significant EBITDA impact $2,000 from price erosion $1,800 $1,600 Stabilization $1,400 $1,200 Convergence $1,000 $800 2012 2013 2014 2015 2016 2017 2018 2019 Acetate Ethers Other CS * Excludes benefits of
Slide 44: Cellulose Specialties Go-to-Market Strategy
Cellulose Specialties Go-to-Market Strategy Drive long-term EBITDA growth Committed to all Cellulose Specialties products – Reduce exposure to declining acetate market – Grow with ethers and other CS markets – Displace cotton linter pulp to expand ethers volumes Improve price and margins Exit
Slide 45: Commodity Product Overview and Strategy
Commodity Product Overview and Strategy Optimal mix of fluff and viscose based on market conditions and highest margins over time Maximize commodities at Temiscaming and Jesup C line Positive fixed cost contribution Primary Demand Size Products End Markets Competitors* Outlook (000s tons) Visc
Slide 46: Rayonier Advanced Materials History
Rayonier Advanced Materials History Rayonier Acetate growth Advanced due to cigarette Acetate Materials Rainier Pulp and Fernandina for becomes stand Beach plant filters and Paper Company First viscose LCD alone company opens photographic founded grades at Tartas applications film 1926 1931 1939 195
Slide 47: History of Innovation
= | i uf i History of Innovation
Slide 48: New Product Portfolio
New Product Portfolio GOALS: 20% of revenue derived from new products produced in past 5 years $15 million of EBITDA improvement from 2018-2020 – $6 million achieved in 2018 48
Slide 49: Two recent new product launches
Two recent new product launches OptiSilk Biofloc XV 20 Optisilk: Novel cost effective technology for The –highest Novelviscosity wood based cost effective viscose pulp production cellulose on the market technology for viscose pulp Southern pine fiber production Viscosity = 1,800 ml/g+ – Southern pi
Slide 50: High Purity Cellulose Growth Drivers
High Purity Cellulose Growth Drivers Industry leading product portfolio Long-term customer partnerships New product pipeline Cellulose Specialties Price stabilization in 2019 Go-to-Market strategy matches assets to markets and drives price and margin improvement Positioned to grow long-t
Slide 51: High Purity Cellulose Manufacturing
High Purity Cellulose Manufacturing Bill Manzer SVP, Manufacturing Operations
Slide 52: Decades of Learning and Developing
Decades of Learning and Developing 4 Sites, 6 HPC lines, 5 CS capable Fernandina , Florida 1939 Jesup , Georgia 1954 Temiscaming, Quebec 1973 (Tembec start) Tartas ,France 1996 (conversion to CS) 52
Slide 53: Customized for each Customer application
Multiple Production Lines and Products The “Rayonier Advanced Material Recipe” Hardwood Softwood Customer application Customized for each Kraft Sulfite Pulping Bleaching Finishing Customer End Uses Acetate Ethers/MCC High Strength Viscose Specialty High Value Filter Plastic LCD/Film Food Pharmaceuti
Slide 54: Global HPC Manufacturing Presence
Global HPC Manufacturing Presence Temiscaming, QC Tartas, France Jesup, GA Fernandina, FL Facilities Capacity Jesup, GA 575,000 MT Fernandina Beach, FL 155,000 MT Tartas, France 140,000 MT Temiscaming, QC 150,000 MT 54
Slide 55: A Global Leader in High Purity Cellulose
A Global Leader in High Purity Cellulose 775,000 MT Cellulose Specialties Capacity + 245,000 MT Commodity Capacity = > 1,000,000 MT Total Capacity RYAM Line Wood Tech Capacity Fernandina Softwood Sulfite 155,000 Hardwood/ Jesup A Kraft Softwood 330,000 Jesup B Hardwood Kraft Jesup C* Softwood Kraft
Slide 56: Cost to Produce
Cost to Produce Wood Fiber Average Cost* across High – U.S. Southern Pine Purity Cellulose Segment – U.S. Southern Hardwood – France Maritime Pine Chemicals, 17% – Canada Spruce, Pine and Fir from lumber chips Energy, 6% Chemicals Wood Fiber, 27% – Caustic Labor, 10% – Sulfur Energy Other, 40%
Slide 57: Cellulose Specialties Asset Alignment
Cellulose Specialties Asset Alignment Acetate Ethers MCC Nitration Other CS Commodity Temiscaming Tartas Jesup A Jesup B Jesup C Fernandina • Other CS includes filtration, casings and tire cord products MCC Regulated in Temiscaming Today 57
Slide 58: Cellulose Specialties Asset Alignment
Cellulose Specialties Asset Alignment Acetate Ethers MCC Nitration Other CS Commodity Temiscaming Tartas Jesup A Jesup B Jesup C Fernandina • Other CS includes filtration, casings and tire cord products MCC Regulated in Temiscaming Today 58
Slide 59: Cellulose Specialties Asset Alignment
Cellulose Specialties Asset Alignment Acetate Ethers MCC Nitration Other CS Commodity Temiscaming Tartas Jesup A Jesup B Jesup C Fernandina • Other CS includes filtration, casings and tire cord products MCC Regulated in Temiscaming Today 59
Slide 60: Cellulose Specialties Asset Alignment
Cellulose Specialties Asset Alignment Acetate Ethers MCC Nitration Other CS Commodity Temiscaming Tartas Jesup A Jesup B Jesup C Fernandina • Other CS includes filtration, casings and tire cord products MCC Regulated in Temiscaming Today 60
Slide 61: Cellulose Specialties Asset Alignment
Cellulose Specialties Asset Alignment Acetate Ethers MCC Nitration Other CS Commodity Temiscaming Tartas Jesup A Jesup B Jesup C Fernandina • Other CS includes filtration, casings and tire cord products MCC Regulated in Temiscaming Today 61
Slide 62: Continuous Improvement
Continuous Improvement 58% of $140 million cost transformation savings from manufacturing Key Areas of Manufacturing Focus Cost Savings by Area Chemical Reductions Support Energy Efficiency Jesup Maintenance $140 Sourcing million Wood Procurement Fernandina Wood 62
Slide 63: Fundamentals of Continuous Improvement
Fundamentals of Continuous Improvement Every person, every day, driving continuous improvement Everything we do is a process Continuous Improvement is a part of everything we do; it is not a separate activity It is all about Teams, at all levels Standard work is critical to building and sust
Slide 64: Maintenance Capital Process
Maintenance Capital Process A Rigorous and disciplined system $80 Million annual High Purity Cellulose budget $100 Million RYAM total budget Maintenance Capital Process Compliance requirements Maintain operations 5 Year Plan Prioritized risk ranking Executive review 64
Slide 65: Strategic Capital Process
Strategic Capital Process Strategic projects High-return projects 2018-2020 capital plans* – $30 million of capital, net – $15 million annual EBITDA improvement** * High Purity Cellulose Strategic Capital benefits both Investment Pillar and Cost Transformation Pillar, depending on size and sco
Slide 66: High Purity Cellulose – Key Highlights
High Purity Cellulose – Key Highlights Core-business contributes greater than 50% of Company EBITDA Long successful history in this market with global customer relationships dating back over 90 years Most capable assets base in the industry Efficient operations built on continuous improvemen
Slide 67: Questions?
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Slide 68: High Yield Pulp
High Yield Pulp Ken Duffy VP, Sales & Marketing, High Yield Pulp
Slide 69: Global Market - Paper Pulp
Global Market - Paper Pulp Total Demand High Yield Pulp 65 million MT 4.5 million MT (7%) h d Paper Excellence Other Europe Co. Softwood Kraft 26 Million MT 400 525 90 Russia (BSK ) 40% Other Chinese 640 High Yield Pulp SWD 1,550MT 4.5 million MT 7% Hardwood Kraft 325 West Fraser 34 Million MT 300 (
Slide 70: High Yield Pulp Overview
High Yield Pulp Overview Two High Yield Pulp mills Facility Details – ~60,000 MT sold internally to High-Yield Pulp tonnes Temiscaming’s Paperboard facility Hardwood high-yield - Temiscaming, QC 300,000 Hardwood high-yield - Matane, QC 270,000 100% hardwood grades Total 570,000 – Maple & aspen
Slide 71: Pulp Sales Mix
Pulp Sales Mix Top 10 Customers = 70% of sales Largest Customer = 10% of sales 2018 Sales by Region 2018 Sales by End Use 9% 8% 38% 45% 21% 55% 24% China Europe Korea North America Other Paperboard Printing & Writing Diversified customer base – North America customer mix growing – Chinese market s
Slide 72: Major Paper-Grade Market Pulp Capacity Changes
Major Paper-Grade Market Pulp Capacity Changes 65 MT Global Market Pulp 2% Demand Growth = 1.3 Million MT per year (000) MT’s No significant announced capacity expansions expected until 2021 Source: Hawkins Wright. Announced capacity changes only, not committed. 72
Slide 73: Favorable Market Conditions
Favorable Market Conditions Quarterly NBSK/BEK US$ List Prices in China 1100 Positive supply-demand outlook CIF Chinese Port, Actual Prices Through Q3 2018 1000 No new major capacity NBSK 900 additions expected until 2021 800 US$/ADMT BEK 700 Pulp demand forecasted to 600 grow 2% per year RYAM
Slide 74: Attractive Mill Profiles
Attractive Mill Profiles Low cost mills – Both mills in second quartile – Delivered Costs < $475/tonne (CIF China) – Geographically located to deliver to key market Low capital requirements – Total CapEx of $3.5 million average per year High cash flow conversion 74 74
Slide 75: Pulp Segment EBITDA
Pulp Segment EBITDA $120 $100 $100 $80 $60 $43 $40 $20 $11 $9 $8 $0 2014 2015 2016 2017 2018 Note: 2014-2017 calendar year results based on Tembec published historical reported segments, converted to US Dollars 75
Slide 76: Pulp – Key Highlights
Pulp – Key Highlights Versatile high yield pulp mills – High-bulk maple and aspen desired fiber for paperboard and printing and writing markets – Leading producer of FSC Certified High Yield Pulp Low cost producer – 2nd Quartile on the cost curve – Favorable transportation options Pricing stre
Slide 77: Forest Products
Forest Products Chris Black SVP, Forest Products & Paper
Slide 78: Forest Products Overview
Forest Products Overview Facility Details SPF Lumber Capacity (mbf) Produce a wide range of commodity Stud lumber - La Sarre, QC 135,000 Stud lumber - Cochrane, ON forest products used primarily for Stud lumber - Kapuskasing, ON 125,000 105,000 residential and commercial Random lumber - Bearn, QC
Slide 79: Wood Usage by Different Grades
Wood Usage by Different Grades Random Length Mills Premium Grades M.S.R., #2 & Better No. 3, Economy Stud Grade Stud Mills 79
Slide 80: Internal Supply & Demand – Chips
Internal Supply & Demand – Chips RYAM currently uniquely balanced Sawmill Chip Production Chip Consumption Chip Plant Temiscaming 7K bdmt Kapukasing 89K bdmt Hearst 64% 36% 78K bdmt Chapleau 124K bdmt 218K bdmt Cochrane 14% 64% 94K bdmt Temiscaming Pulp Bearn 69K bdmt 360K bdmt Kapuskasing Newsprint
Slide 81: Lumber Market Outlook
Lumber Market Outlook Lumber consumption expected to grow slowly but steadily over the next several years Supply side constraints will hamper the North American industry’s ability to keep pace with growing consumption Tightening demand supply 2.5 conditions along with 2.0 2.1 Single-Family 2 i
Slide 82: U.S./Canada Softwood Lumber Dispute
U.S./Canada Softwood Lumber Dispute 2018 Canadian exports to the U.S. fell 1,800 BBF to 13,500 BBF – Represents 28% U.S. market share (down from 30% in 2017) AD & CVD rates at 20.2% RYAM current deposits to December 31st total US$37 million. No ongoing negotiations and no agreement anticipat
Slide 83: Cost Position & Breakeven
Cost Position & Breakeven Improving our competitive position over next two years 2018-2020 Strategic Capital $420 $43 With $390 $30 million of investment with $15 million 400 duties in returns Total Cash Cost – $8 million from cost reductions $USD/mmbf – $7 million from margin improvement $377 Wit
Slide 84: Sawline Modernization
Sawline Modernization $10$10M Investment million Investment 1. Cost Improvement – Better log recovery through curve sawing • Cost Reduction $4M 2. Margin Enhancement – Better quality products/more grades • Price improvement $1M 84
Slide 85: Forest Products Segment EBITDA
Forest Products SegmentEBITDA (Only Current Sawmills) $50 $46 $45 $40 $35 $31 $30 $25 $20 $16 $15 $15 $10 $10 $5 $- 2014 2015 2016 2017 2018 Note: 2014-2017 calendar year results based on Tembec published historical reported segments, converted to US Dollars 85
Slide 86: Forest Products – Key Highlights
Forest Products – Key Highlights Well-managed and maintained FSC Certified wood basket Opportunity to lower our costs through investments and synergies at all sawmills Demand/Capacity ratio of over 90% forecasts favorable conditions for sawmills 86
Slide 87: Paper
Paper Chris Black SVP, Forest Products & Paper
Slide 88: Video
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Slide 89: Paperboard Overview
Paperboard Overview Printing Market Facility Details – Market optimization Facilities Capacity focused on improving Paperboard (Temiscaming) 180,000 MT board overall quality and cost structure and capitalizing on unique Folding Box Board (FBB) lightweight advantage Temiscaming, QC Packaging Mark
Slide 90: Paperboard – RYAM Key End Markets
Paperboard – RYAM Key End Markets BUSINESS SEGMENTS MARKET SEGMENTS END PRODUCTS Commercial Printing Menus Direct Mail Calendars Banners Commercial Material Writing pad covers Presentation Folder Inserts Posters Reply cards POP Flyers Display Boxes / Trays Merchant Greeting Cards Coupons Door Hanger
Slide 91: Paperboard - Market Drivers
Paperboard - Market Drivers Segments traditionally served by RYAM in decline; higher caliber segments growing Commercial print – Instant lottery Declining ~1%/yr1 – Gang run printing Stable in 20192 Book publishing – eBooks and digital platforms Declining 3-10%/yr3 Packaging (bleached cartonboard) –
Slide 92: Paperboard Pricing History and Forecast
Paperboard Pricing History and Forecast 1250 1210 1200 1140 1150 1100 1060 1050 1047 1000 950 900 850 800 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2013 2014 2015 2016 2017 2018 2019 2020 RYAM RISI Index Market Indicators Price Index, SBS coated
Slide 93: Newsprint Overview
Newsprint Overview Newsprint has one facility Facility Details located in Kapuskasing, ON Facilities Capacity Kapuskasing Key markets include daily Newsprint 205,000 MT newspapers and commercial publications, as well as Sales By Geography Key North American Producers controlled bulk paper for ma
Slide 94: Newsprint Market Commentary
Newsprint Market Commentary Newsprint demand declining 10% year over year Similar trend in Bulky Book grades in book publishing markets – eBooks – Digital publishing Commercial print continues to decline – Advertising spend shifting to digital platforms Reduction in supply from high-cost pro
Slide 95: Newsprint Pricing History and Forecast
Newsprint Pricing History and Forecast Newsprint 48.8 gram, US East Source: RISI online February 2019 and Company 95
Slide 96: North American Newsprint Mill Cash Cost Curve
North American Newsprint MillMill CashCash Cost Curve Cost Curve $650 Based on 0.775 $CDN/$US $625 $600 US$/Delivered MT (incl. SGA) $575 $550 RYAM $525 $500 $475 $450 $425 $400 1) Excludes the impact of lumber duties. RED Canadian assets BLUE U.S. assets *source: PPPC and Company Data GOLD RYAM 96
Slide 97: Paper Segment EBITDA
Paper SegmentEBITDA $70 $60 $58 $54 $49 $50 $40 $31 $30 $20 $20 $10 $- 2014 2015 2016 2017 2018 Note: 2014-2017 calendar year results based on Tembec published historical reported segments, converted to US Dollars 97
Slide 98: Paper – Key Highlights
Paper – Key Highlights Paperboard Well-established and highly-regarded Kallima brand Strong share in the large lottery ticket market Opportunity to produce more products for the high growth packaging sector Newsprint Low cost producer Diversifying into more stable commercial print and book
Slide 99: Sustainability
Sustainability Carla Yetter VP, Environmental & Regulatory Affairs
Slide 100: Renewable Business Cycle
Renewable Business Cycle 100
Slide 101: Forestry Stewardship
Forestry Stewardship Knowledge and experience Research Community engagement Conservation Certification 101
Slide 102: Responsible Operations
Responsible Operations Culture of Continuous Improvement Conserve resources Reduce impacts Energy focus 102
Slide 103: People
People The Foundation of Success Commitment to Safety Everyone injury-free everyday Growing talent 103
Slide 104: Communities
Communities RYAM Foundations Employee involvement Partnerships with schools Community Advisory Councils 104
Slide 105: Governance
Governance Core Values Code of Conduct Board of Directors 105
Slide 106: Turning the Renewable into the Remarkable
Turning the Renewable into the RemarkableTM 106
Slide 107: Looking Forward
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Slide 108: www.rayonieram.com
Invested in Nature, Investing in the Future. 4 =" www.rayonieram.com RAYONIER Advanced Materials. RAYONIER)) ae Advanced Materials.
Slide 109: Questions?
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Slide 110: Strategic Pillars of Growth
Strategic Pillars of Growth Frank Ruperto Chief Financial Officer and SVP, Finance & Strategy
Slide 111: RYAM Strategic Pillars
RYAM Strategic Pillars Cost Market New Investments / Transformation Optimization Products Investments Rapidly reshape Maximize Develop a Create a faster the company’s earnings by pipeline of growing business cost position optimizing customer-valued with disciplined product and new product and and ba
Slide 112: Cost Transformation
Cost Transformation VISION Cost Transformation Rapidly reshape the company Achieve a sustainable globally competitive cost MISSION position in any market environment through continuous improvement and creativity that enables our customers, company and employees to pursue growth opportunities 112
Slide 113: Legacy Cost Transformation Complete
Legacy Cost Transformation Complete $140 million of Cost Transformation achieved from 2015-2018 $150 $25 $100 $30 $50 $50 $35 $0 2015 2016 2017 2018 *Cost Transformation improvements before inflation and changes in commodity prices 113
Slide 114: Cost Transformation Management Structure
Cost Transformation Management Structure Cross-functional leadership team with the common objective to drive performance Global Improvement Team(1) Human Manufacturing Sales Technology Finance Supply Chain Resources Manage portfolio of actions – address risks & clear hurdles – Continuous Improvement
Slide 115: Cost Transformation Improvements
Cost Transformation Improvements Significant Cost Transformation EBITDA improvement since 2015 ($ million) $300 $250 $20 $200 $27 $75 Cost Transformation “Synergy” $150 $28 $25 $100 $30 $90 Cost Transformation $35 $50 $15 $35 $0 2015 Actual 2016 Actual 2017 Actual 2018 Actual 2019 Target 2020 Target
Slide 116: Cost Transformation Synergies
Cost Transformation Synergies Significant Synergies across business with less than 1x cash costs to achieve 15% 10% 15% 7% $75 47% $75 35% million* million* 16% 40% 15% Sales & Marketing Supply Chain & Procurement Manufacturing S&GA HPC Pulp Paper FPG Corporate By Functional Area By Operating Segmen
Slide 117: Integration Progress for Tembec
Integration Progress for Tembec Day 1 of Acquisition: Day 365+ of Acquisition New management team and Major progress in key business organizational structures in place processes standardized Few integrated business Implementing Global ERP processes technology with priority in HPC Disparate
Slide 118: Strategic Sourcing
Strategic Sourcing Strategic Sourcing changes have led to significant savings opportunities • 2016 - Move to Strategic Sourcing model (11 Step Process) • 2017 – Focus on improving sourcing opportunities • Expanded our Sourcing organization • Developed, trained and implemented a Strategic Souring pro
Slide 119: Cost Transformation – Examples
Cost Transformation – Examples Corporate and Backoffice synergies Eliminate redundancy in management teams Implement technology to automate transactional business processes Outsource certain transactional or support function to be more cost effective and efficient Drive functional back offic
Slide 120: Market Optimization
Market Optimization Market Optimization VISION Maximize earnings by optimizing product and market mix MISSION Identify and achieve optimum sustainable sales mix based on RYAM production capabilities, end markets and customer attractiveness 120
Slide 121: Go-to-Market Strategy
Go-to-Market Strategy Commercial Actions and Realignment of Assets Drive Long-Term EBITDA Growth Review Cellulose Specialties volumes to improve margins Reduce exposure to acetate and grow with the market in ethers and other CS Exit lowest margin business Realign production assets Goal to
Slide 122: New Products
New Products New Products VISION Develop a pipeline of customer-valued new product and service offerings MISSION Improve profitability by generating 20% of sales from new products developed in the prior five years 122
Slide 123: New Products Goals
New Products Goals RYAM’s New Products Pillar is anticipated to generate approximately $15 million in opportunities across the portfolio through 2020 Focus on developing high value, cellulosic products Leverage specific cellulose knowledge and production capabilities to identify new opportunitie
Slide 124: Investments
Investments Investments Investments VISION Create a faster growing business with disciplined and balanced capital allocation Allocate capital in a disciplined and balanced method MISSION focused on manufacturing assets, managing debt levels and investing for risk adjusted returns to drive shareholde
Slide 125: Investments Goals
Investments Goals RYAM has significant opportunities to invest capital in its existing business and generate high returns 2018-2020 2018-2020 Strategic CapEx, net EBITDA $45 $25 million million Forest Products High Purity Cellulose Benefit from Quebec Tariff L program to return 40% of capital spen
Slide 126: Portfolio Evaluation
Portfolio Evaluation Evaluating strategic alternatives for certain commodity assets Portfolio became more diverse with Tembec acquisition Some assets are integrated with the core High Purity Cellulose business Formal asset review Evaluating highest value owner for certain commodity assets (R
Slide 127: Disciplined Capital Allocation
Disciplined Capital Allocation Cash Flow From Operations Maintain Assets $100-110 million of annual capex Adjusted Free Cash Flow Reduce Leverage Target 2.5x Net Leverage Value Driven Approach focused on Risk Adjusted Returns on Invested Capital Investment in the Return of Capital External Strategic
Slide 128: 2018 Capital Resources & Allocation
2018 Capital Resources & Allocation Disciplined Allocation of Debt Repayments of $46 million Adjusted Free Cash Flow Strategic Capital of $37 million – $9 million for LignoTech Florida 28% 19% – $17 million toward Investment pillar – $11 million toward Cost Transformation pillar Dividends of $
Slide 129: Stable and Balanced Capital Structure
Stable and Balanced Capital Structure As of December 31, 2018 Outstanding Leverage Interest Rate Maturity Cash $109 Term Loan A-1 $160 LIBOR +2.00% November 2022 Term Loan A-2 $439 LIBOR +1.75%* November 2024 Other Secured Debt $98 Average ~6% 2019-2028 Total Secured Debt $697 1.9x Senior Notes $496
Slide 130: Strategic Pillars of Growth
Strategic Pillars of Growth $61 million* generated in 2018; On track to deliver $155* million from 2018-2020 Cost Transformation New Products Reduced costs by $53 million 2 commercialized products — $25 million from legacy plan brought to market — $28 million from synergies — Optisilk – lower co
Slide 131: Strategic Pillars Tracking
Strategic Pillars Tracking $155 million EBITDA* opportunity by end of 2020 $61 million captured in year 1 of 3 year plan $45 million targeted in 2019 $200 $100 $15 $15 $25 GOAL million million million million $150 $1 million $100 $6 million Captured $1 million Captured ---- Captured $10 million $50
Slide 132: Closing Comments
Closing Comments Paul Boynton Chairman, President & Chief Executive Officer
Slide 133: Strategy to Drive Growth & Shareholder Value
Strategy to Drive Growth & Shareholder Value Launch new “Go-to-Market” strategy designed to: Go-to-Market • Improved Cellulose Specialties price and margin Strategy • Realign assets to market needs and sales mix Achieve long-term • Drive long-term High Purity EBITDA growth EBITDA growth in High Puri
Slide 134: Questions?
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Slide 135: Appendix
RAYONIER Advanced Materials. Appendix
Slide 136: Presenters
Presenters Paul Boynton Chairman, President & CEO Mr. Boynton is Chairman, President and CEO of the Company, a position he has held since June 2014. Previously he held a number of positions of increasing responsibility with Rayonier Inc., including Senior Vice President, Performance Fibers from 2002
Slide 137: Presenters
Presenters Bill Manzer SVP, High Purity Cellulose Mr. Manzer joined Rayonier Inc. as Vice President, Manufacturing Operations in January 2011, a position he held until June 2014. Following our 2014 spinoff, Mr. Manzer was appointed to his current position for the Company. Prior to joining Rayonier I
Slide 138: Presenters
Presenters Chris Black SVP, Forest Production & Paper Mr. Black joined Rayonier Advanced Materials in 2017 as Senior Vice President, Forest Products, Paper and Board Business, following the acquisition of Tembec. Prior to the acquisition, Mr. Black was Executive Vice President, Forest Products, Pulp
Slide 139: Presenters
Presenters Frank Ruperto CFO & SVP of Finance and Strategy Mr. Ruperto joined Rayonier Inc. in March 2014 as Senior Vice President, Corporate Development and Strategic Planning, a position he held until June 2014. Following our 2014 spinoff, he was appointed to the same position at the Company and w
Slide 140: Definitions of Non-GAAP Measures
Definitions of Non-GAAP Measures EBITDA is defined as earnings before interest, taxes, depreciation and amortization. EBITDA is a non-GAAP measure used by our Chief Operating Decision Maker, existing stockholders and potential stockholders to measure how the Company is performing relative to the ass
Slide 141: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures ($ Millions) Forest High Purity Corporate Twelve Months Ended: Products Pulp Paper Cellulose & Other Total December 31, 2018 Net Income $ 22 $ 96 $ 40 $ 118 $ (148) $ 128 Depreciation and amortization 7 4 18 119 — 148 Interest expense, net — — — — 60 60 Income tax
Slide 142: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures ($ Millions) December 31, December 31, 2018 2017 Adjusted Net Debt Reconciliation Current maturities of long-term debt $ 15 $ 9 Long-term debt & capital lease obligation 1,173 1,232 Total debt $ 1,188 $ 1,241 Original issue discount, premiums and debt issuance cos
Slide 143: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures ($ Millions) December 31, December 31, 2018 2017 Adjusted Free Cash Flows: Cash provided by operating activities 247 130 Capital expenditures (95) (65) Adjusted Free Cash Flows $ 152 $ 65 143
Slide 144: Reconciliation of Reported to Adjusted Earnings
Reconciliation of Reported to Adjusted Earnings ($ Millions, except per share amounts) Three Months Ended Twelve Months Ended December 31, September 29, December 31, December 31, December 31, 2018 2018 2017 2018 2017 Per Per Per Per Per Adjusted Operating and Net Diluted Diluted Diluted Diluted Dilu
Rayonier Advanced Materials — Investor Day (March 2019) on 6ix