Sylvamo Corporation · NYSE:SLVM
Sylvamo — Q3 2023 Earnings Presentation
39 slides from Sylvamo's earnings presentation, Nov 9, 2023
Slide 1: Third Quarter 2023 Earnings
1 Third Quarter 2023 Earnings November 9, 2023 © 2023 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. Forward-looking statements forecast or state expectations concerning future events. These statements often can be identified by the fact that
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: 3Q23 Highlights
3Q23 Highlights 4 $158 • Price & Mix, Operations and Input & Transportation costs million Adjusted favorable to outlook EBITDA • Continued channel inventory destocking and weaker than expected demand $155 million Free Cash Flow • Net Debt of $796 million, 1.2x Adjusted EBITDA • Deposited $60 million
Slide 5: 3Q23 Key Financial Metrics
3Q23 Key Financial Metrics 5 Net Sales Adjusted EBITDA Free Cash Flow Adjusted Operating and Margin Earnings per Share $968 $216 $155 $919 $897 $2.51 $158 $114 $124 $1.70 $1.14 $33 22% 14% 18% 3Q22 2Q23 3Q23 3Q22 2Q23 3Q23 3Q22 2Q23 3Q23 3Q22 2Q23 3Q23 All figures are $ million, except adjusted oper
Slide 6: Adjusted EBITDA higher than the 2Q23 earnings call outlook
Adjusted EBITDA higher than the 2Q23 earnings call outlook 6 3Q23 vs. 2Q23 $ Million 3Q23 Outlook ($60) - ($65) $15 - $20 ($5) - ($10) $54 $15 - $20 $130 - $150 (August 9, 2023) $27 $158 $55 $124 ($55) $6 $1 Includes $13 million of Price & Mix unabsorbed fixed costs Paper (35) from economic downtime
Slide 7: World Graphic Paper Demand
World Graphic Paper Demand 7 UFS remains the most resilient grade. We believe in the long-term demand for education, communication and entertainment. 70,000 CFS 18% 60,000 Uncoated Thousand short tons 50,000 2022 Freesheet 40,000 UFS 53% 101 Million Newsprint 13% 30,000 Tons 20,000 UMEC Coated Frees
Slide 8: UFS estimated consumption better than demand data suggests
UFS estimated consumption better than demand data suggests 8 North America BUYING more than USING USING more than BUYING 4% 4% • Year-over-Year change % 0% -2% -6% Demand Estimated consumption -17% 2021 2022 1H23 Source: Pulp and Paper Products Council - N.A. Printing and Writing Outlook - September
Slide 9: Current industry conditions showing signs of improvement
Current industry conditions showing signs of improvement 9 • Improved European order books • Seasonal improvement in Latin America • Increasing U.S. advertising spending • Channel inventory corrections completed by year end © 2023 Sylvamo Corporation. All rights reserved.
Slide 10: 4Q23 Adjusted EBITDA Outlook
4Q23 Adjusted EBITDA Outlook: $90 - $110 Million 10 4Q23 vs. 3Q23 $ Million Decreasing: ($20) - ($25) Price and Mix Primarily prior paper price decreases in Europe and unfavorable mix in the Americas Improving: $20 - $25 Volume Seasonally stronger in Latin America and positive trends in North Americ
Slide 11: Implementing Project Horizon to pursue $110 million in cost reductions
Implementing Project Horizon to pursue $110 million in cost reductions 11 Streamline our organization and reduce costs to become a leaner, stronger company Supply Chain 15% Manufacturing 50% $110 million 2024 Year-end Run Rate Targeted Savings1 Selling & Administrative 35% ¹Before inflation of ~$50
Slide 12: Generated $190 million of Free Cash Flow
Allocating Free Cash Flow to drive shareowner value and return $125 million in cash 12 Maintained strong financial position Generated 1.2x Net Debt-to-Adjusted EBITDA $190 million of Free Cash Flow YTD through 3Q23 Returned $110 million to shareowners YTD as of Nov. 9, 2023 3Q23 YTD, the company ret
Slide 13: Creating significant shareowner value since becoming an independent company
Creating significant shareowner value since becoming an independent company 13 • Reduced debt by $530 million (35%) to < $1 billion Improving our • Achieved adjusted EBITDA to net debt of 1.2x Financial Position • Reduced risk with Russian business divestiture • Earned > $1.3 billion in Adjusted EBI
Slide 14: Strengthening our ability to create shareowner value through the cycle
Strengthening our ability to create shareowner value through the cycle 14 We remain a cash flow story: projecting > $270 million in 2023 Free Cash Flow Commercial Excellence Operational Excellence Financial Discipline • Strong supply positions and • Low-cost mills in attractive • Maintain strong fin
Slide 15: Appendix
15 Appendix © 2023 Sylvamo Corporation. All rights reserved.
Slide 16: Contacts
Contacts 16 Hans Bjorkman Vice President, Investor Relations Investor Relations +1-901-519-8030 hans.bjorkman@sylvamo.com Adam Ghassemi Senior Manager, Corporate Communications Media +1-901-519-8115 adam.ghassemi@sylvamo.com © 2023 Sylvamo Corporation. All rights reserved.
Slide 17: Free Cash Flow Reconciliation
Free Cash Flow Reconciliation 17 2023 $ Million 3Q22 2Q23 3Q23 Outlook Cash from Continuing Operations $146 $77 $197 > $485 Cash Invested in Capital Projects ($32) ($44) ($42) < ($215) Free Cash Flow $114 $33 $155 > $270 Free cash flow is a non-GAAP measure and the most directly comparable GAAP meas
Slide 18: Free Cash Flow – Quarter-over-Quarter
Free Cash Flow – Quarter-over-Quarter 18 $ Million 2Q23 3Q23 Variance Adjusted EBITDA $124 $158 $34 Cash Taxes ($55) ($18) $37 Cash Interest ($13) ($17) ($4) Cash Special Items - ($3) ($3) Other Changes in Working Capital $21 $77¹ $56 Cash from Continuing Operations $77 $197 $120 Capital Spending ($
Slide 19: Free Cash Flow – Year-over-Year
Free Cash Flow – Year-over-Year 19 $ Million 3Q22 3Q23 Variance Adjusted EBITDA $216 $158 ($58) Cash Taxes ($37) ($18) $19 Cash Interest ($18) ($17) $1 Cash Special Items ($10) ($3) $7 Other Changes in Working Capital ($5) $77¹ $82 Cash from Continuing Operations $146 $197 $51 Capital Spending ($32)
Slide 20: Free Cash Flow Reconciliation – Since Spinoff
Free Cash Flow Reconciliation – Since Spinoff 20 3Q23 Since $ Million 4Q21 2022 YTD Spinoff Cash from Continuing Operations $131 $418 $337 $886 Cash Invested in Capital Projects ($22) ($149) ($147) ($318) Free Cash Flow $109 $269 $190 $568 © 2023 Sylvamo Corporation. All rights reserved.
Slide 21: Adjusted EBITDA and Margin Reconciliation
Adjusted EBITDA and Margin Reconciliation 21 $ Million 3Q22 2Q23 3Q23 4Q23 2023 Net Income (Loss) $57 $49 $58 Outlook Outlook Less: Discontinued operations, net of tax (52) - - Net Income from Continuing Operations $109 $49 $58 $18 - $32 $222 - $236 Depreciation, Amortization, Cost of Timber Harvest
Slide 22: Adjusted EBITDA Reconciliation – Since Spinoff
Adjusted EBITDA Reconciliation – Since Spinoff 22 3Q23 Since $ Million 4Q21 2022 YTD Spinoff Net Income from Continuing Operations $29 $336 $204 $569 Depreciation, Amortization, Cost of Timber Harvested 31 125 105 261 Interest (Income) Expense, Net 18 69 28 115 Income Tax Provision 28 131 98 257 Adj
Slide 23: Adjusted EBITDA and Margin Reconciliation
Adjusted EBITDA and Margin Reconciliation 23 $ Million 3Q22 2Q23 3Q23 Adjusted EBITDA Europe 24 (3) (5) Latin America 74 67 74 North America 118 60 89 Total Business Segment Adjusted EBITDA $216 $124 $158 Net Sales (excluding Inter-segment Sales eliminations) Europe 130 210 184 Latin America 270 250
Slide 24: Adjusted Operating Earnings per Share Reconciliation
Adjusted Operating Earnings per Share Reconciliation 24 $ Million 3Q22 2Q23 3Q23 4Q23 Net Income (Loss) $57 $49 $58 Outlook Less: Discontinued operations, net of tax (52) - - Net Income from Continuing Operations $109 $49 $58 $18 - $32 Special Items Expense (Income) 3 - 14 6 Adjusted Operating Earni
Slide 25: 3Q23 vs. 3Q22 Adjusted EBITDA
3Q23 vs. 3Q22 Adjusted EBITDA 25 $ Million $216 ($55) ($39) $7 $158 $67 Price & Mix Paper Pulp (25) (30) ($45) $7 Includes $38 million of unabsorbed fixed costs from economic downtime 22% 18% 3Q22 Price & Mix Volume Operations Maintenance Input and Nymolla 3Q23 and Costs Outages Transportation Earni
Slide 26: Europe Adjusted EBITDA
Europe Adjusted EBITDA 26 3Q23 vs. 2Q23 ($3) ($24) ($5) $6 (1%) $19 (3%) $0 ($3) 2Q23 Price & Mix Volume Operations Maintenance Input and 3Q23 and Costs Outages Transportation $ Million Costs 3Q23 vs. 3Q22 $24 ($27) 18% ($1) ($5) ($14) $7 $7 (3%) ($1) 3Q22 Price & Mix Volume Operations Maintenance I
Slide 27: Latin America Adjusted EBITDA
Latin America Adjusted EBITDA 27 3Q23 vs. 2Q23 $15 $74 $67 ($17) $3 $5 $1 27% 30% 2Q23 Price & Mix Volume Operations Maintenance Input and 3Q23 and Costs Outages Transportation $ Million Costs 3Q23 vs. 3Q22 $74 ($15) $7 $9 9% $74 19% ($5) $4 27% 30% 3Q22 Price & Mix Volume Operations Maintenance Inp
Slide 28: North America Adjusted EBITDA
North America Adjusted EBITDA 28 3Q23 vs. 2Q23 $31 $6 $89 $60 ($14) $5 $1 13% 19% 2Q23 Price & Mix Volume Operations Maintenance Input and 3Q23 and Costs Outages Transportation $ Million Costs 3Q23 vs. 3Q22 $118 ($13) ($33) $51 9% $89 19% ($35) $1 20% 19% 3Q22 Price & Mix Volume Operations Maintenan
Slide 29: 3Q23 Price & Mix vs. Input Costs
3Q23 Price & Mix vs. Input Costs 29 Change of Price & Mix 3Q23 vs. 2Q23 Input Costs vs. Input Costs Change By Region $ Million $ Million 3Q23 vs. 2Q23 3Q23 vs. 3Q22 Europe Latin America North America $67 $15 1 ($55) ($55) 2 1 $6 $27 $6 3 1 11 2 4 3 1 Price & Mix Input Costs Price & Mix Input Costs (
Slide 30: Quarterly Business Segment Operating Results
Quarterly Business Segment Operating Results 30 Sales D&A Adjusted EBITDA $ Million 3Q22 2Q23 3Q23 3Q23 3Q22 2Q23 3Q23 Europe $130 $210 $184 $7 $24 ($3) ($5) Latin America $270 $250 $246 $18 $74 $67 $74 North America $589 $474 $476 $11 $118 $60 $89 Segment Total $989 $934 $906 $36 $216 $124 $158 Sum
Slide 31: Sales Volume
Sales Volume 31 Latin North 000 Short Tons Europe Sylvamo America America Uncoated Papers 136 251 328 715 3Q23 Market Pulp 46 32 25 103 Total 818 Sales volume includes revenue recognition © 2023 Sylvamo Corporation. All rights reserved.
Slide 32: Economic Downtime
Economic Downtime 32 000 Short Tons 1Q23 2Q23 3Q23 YTD Europe 27 39 44 110 Latin America - - - - Paper North America 29 84 80 193 Total 56 123 124 303 Europe - 19 46 65 Latin America - - - - Pulp North America - 8 15 23 Total - 27 61 88 © 2023 Sylvamo Corporation. All rights reserved.
Slide 33: Capacity by Grade
Capacity by Grade 33 000 Short Tons Uncoated Papers Market Pulp Total Saillat 265 130 395 Nymolla 500 - 500 Europe 765 130 895 Luis Antonio 385 130 515 Mogi Guacu 460 35 495 Tres Lagoas 260 - 260 Latin America 1,105 165 1,270 Eastover 700 115 815 Ticonderoga 275 - 275 North America 975 115 1,090 Syl
Slide 34: Outlook for Total Maintenance Outage Costs
Outlook for Total Maintenance Outage Costs 34 4Q23 2023 $ Million 1Q23 2Q23 3Q23 Outlook Outlook Europe - $20 $1 $7 $28 Latin America - $5 - $3 $8 North America - $33 $2 $18 $53 Total - $58 $3 $28 $89 Total maintenance outage costs (shown for Sylvamo mills only) include direct maintenance outage exp
Slide 35: 1.5x Gross Debt-to-Adjusted EBITDA as of September 30, 2023
1.5x Gross Debt-to-Adjusted EBITDA as of September 30, 2023 35 Gross Debt $ Million $1,520 $1,397 $1,026 $990 Initial Gross Debt Dec 21 Dec 22 Sep 23 at Spinoff Bonds Term Loan F Term Loan B Term Loan A Revolver AR Securitization 1.2x Net Debt-to-Adjusted EBITDA as of September 30, 2023 Net debt exc
Slide 36: No significant debt maturities until 2027
No significant debt maturities until 2027 36 Debt Maturity Profile $ Million as of September 2023 $412 $229 $158 $90 $41 $51 $10 2023 2024 2025 2026 2027 2028 2029 Term Loan F AR Securitization Revolver Term Loan A Bonds © 2023 Sylvamo Corporation. All rights reserved.
Slide 37: Selected Guidance
Selected Guidance 37 2021 2022 2023 $ Million Actual Actual Outlook Total Maintenance Outage Costs $81 $73 $89 Maintenance, Regulatory & Reforestation $70 $143 < $180 Capital Spending High-return Projects - $6 < $35 Total $70 $149 < $215 Depreciation & Amortization $126 $125 $142 Interest Expense $1
Slide 38: Executing on our Investment Thesis
Executing on our Investment Thesis 38 The World’s Paper Company A Simple, Focused Plan We are the world’s paper company, the: We focus on uncoated freesheet and will create long-term • Employer of Choice value through: • Supplier of Choice • Talented teams • Investment of Choice • Iconic brands We b
Slide 39: Building a better future for people, the planet and our company
39 Building a better future for people, the planet and our company © 2023 Sylvamo Corporation. All rights reserved.