Sylvamo Corporation · NYSE:SLVM
Sylvamo — Q4 2022 Earnings Presentation
45 slides from Sylvamo's earnings presentation, Feb 10, 2023
Slide 1: Fourth Quarter 2022 Earnings Review
1 Fourth Quarter 2022 Earnings Review February 10, 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: Significant achievements in 2022, including a 30% ROIC
Significant achievements in 2022, including a 30% ROIC 4 Commercial Excellence Operational Excellence Financial Discipline • Outperformed industry shipments • Improved safety performance • Divested Russian business across our three regions • Building our desired culture • Opportunistic Nymolla acqui
Slide 5: Strong financial results in 2022
Strong financial results in 2022 5 Net Sales Adjusted EBITDA Free Cash Flow Adjusted Operating $ Million $ Million $ Million Earnings per Share +28% +62% +72% $3,628 $721 (24%) $354 $7.84 $2,828 $269 $445 Only includes $4.57 4Q cash taxes and interest 16% 20% 2021 2022 2021 2022 2021 2022 2021 2022
Slide 6: Solid 4Q22 results
Solid 4Q22 results 6 Net Sales Adjusted EBITDA Free Cash Flow Adjusted Operating $ Million $ Million $ Million Earnings per Share $968 $927 $216 $778 $114 $109 $170 $2.51 $84 $1.97 $123 $0.95 16% 22% 18% 4Q21 3Q22 4Q22 4Q21 3Q22 4Q22 4Q21 3Q22 4Q22 4Q21 3Q22 4Q22 © 2023 Sylvamo Corporation. All righ
Slide 7: Strong Adjusted EBITDA margin in our heaviest outage quarter
Strong Adjusted EBITDA margin in our heaviest outage quarter 7 4Q22 vs. 3Q22 Adjusted EBITDA $ Million 4Q22 $30 - $35 ($5) - $0 ($35) - ($40) ($21) ($5) - $0 $180 - $190 Outlook 300 $31 ($20) ($42) 250 $216 ($21) North American $170 200 channel destocking $6 and seasonality 150 • Seasonally higher c
Slide 8: UFS Industry Fundamentals
UFS Industry Fundamentals 8 Western Europe Latin America North America Demand Growth (2%) +19% +5% (2022 vs. 2021) Imports +8% (12%) +11% (2022 vs. 2019) Capacity Change (20%) (10%) (21%) (2022 vs. 2019) Source: Pulp and Paper Products Council - Imports as of November YTD for Latin America and as of
Slide 9: Welcoming our Nymolla colleagues
Welcoming our Nymolla colleagues 9 © 2023 Sylvamo Corporation. All rights reserved.
Slide 10: Expect Nymolla to increase Free Cash Flow and shareowner value
Expect Nymolla to increase Free Cash Flow and shareowner value 10 $40 Million Pulp Mill Modernization • Completed and started up prior to the acquisition • New softwood digester, oxygen delignification plant and high-efficiency pulp washer • ~15% increase in softwood pulp line capacity will allow fo
Slide 11: 1Q23 Adjusted EBITDA Outlook with Nymolla: $200 - $215 Million
1Q23 Adjusted EBITDA Outlook with Nymolla: $200 - $215 Million 11 1Q23 vs. 4Q22 Changes $ Million Decreasing: ($15) - ($20) Price and Mix Primarily seasonal mix shift in Latin America Decreasing: ($5) - ($10) Volume Seasonally weakest demand quarter in Latin America Improving: $10 - $15 Operations a
Slide 12: Capital Deployment
Allocating cash to drive shareowner value 12 Maintain Strong Fortified balance sheet Financial Position Dividends Return Cash Capital to Shareowners Opportunistic share repurchases Deployment Maintain low-cost assets Reinvest in High-return projects Our Business Opportunistic bolt-ons © 2023 Sylvamo
Slide 13: Achieved gross debt-to-adjusted EBITDA ratio of 1.4x as of January 31, 2023
Achieved gross debt-to-adjusted EBITDA ratio of 1.4x as of January 31, 2023 13 Gross Debt $ Million $1,520 $1,397 $1,026 $996 Initial Gross Debt Dec 21 Dec 22 Jan 23 Bonds Term Loan F Term Loan B Revolver AR Securitization Net debt-to-adjusted EBITDA ratio of 1.2x as of January 31, 2023 © 2023 Sylva
Slide 14: Reinvesting in our assets and strengthening our businesses
Reinvesting in our assets and strengthening our businesses 14 2023 Capital Spending Outlook • Key Drivers of the Increase $ Million • in Capital Spending • 2023 vs. 2022 Maintenance & Regulatory $145 - $155 • Addition of Nymolla including one-time costs Brazil Forestry $30 - $35 • Delayed 2022 maint
Slide 15: Created substantial shareowner value since the spinoff
Created substantial shareowner value since the spinoff 15 • Fortified financial position Maintain Strong • >35% debt reduction Financial Position • <$1 billion gross debt • $21 million cash dividends Return Cash • $90 million share repurchases to Shareowners • $0.25 quarterly dividend as of 1Q23 • N
Slide 16: Well-positioned to create additional shareowner value in 2023
Well-positioned to create additional shareowner value in 2023 16 2023 Outlook Commentary on Key Assumptions $ Million 2023 vs. 2022 • Includes Adjusted EBITDA for Nymolla • Slightly favorable price & mix vs. input costs Adjusted EBITDA • Relatively stable volume • Stable operations and costs $760 -
Slide 17: Executing on our Investment Thesis
Executing on our Investment Thesis 17 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 18: Appendix
18 Appendix © 2023 Sylvamo Corporation. All rights reserved.
Slide 19: Contacts
Contacts 19 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 20: Free Cash Flow Reconciliation
Free Cash Flow Reconciliation 20 2023 $ Million 4Q21 3Q22 4Q22 2021 2022 Outlook Cash from Continuing Operations $131 $146 $142 $423 $418 $510 - $565 Cash Invested in Capital Projects ($22) ($32) ($58) ($69) ($149) ($210) - ($235) Free Cash Flow $109 $114 $84 $354 $269 $300 - $330 Free cash flow is
Slide 21: Adjusted EBITDA and Margin Reconciliation
Adjusted EBITDA and Margin Reconciliation 21 $ Million 4Q21 3Q22 4Q22 2021 2022 1Q23 FY 2023 Net Income (Loss) $62 $57 $94 $331 $118 Outlook Outlook Less: Discontinued operations, net of tax 33 (52) 6 104 (218) Net Income From Continuing Operations $29 $109 $88 $227 $336 $97 - $107 $368 - $420 Depre
Slide 22: Adjusted EBITDA and Margin Reconciliation
Adjusted EBITDA and Margin Reconciliation 22 $ Million 4Q21 3Q22 4Q22 2021 2022 Adjusted EBITDA $123 $216 $170 $445 $721 Europe (18) 24 16 (9) 70 Latin America 80 74 72 254 281 North America 61 118 82 200 370 Total Business Segment Adjusted EBITDA $123 $216 $170 $445 $721 Net Sales (excluding Inter-
Slide 23: Adjusted Operating Earnings per Share Reconciliation
Adjusted Operating Earnings per Share Reconciliation 23 $ Million 4Q21 3Q22 4Q22 2021 2022 1Q23 Net Income (Loss) $62 $57 $94 $331 $118 Outlook Less: Discontinued operations, net of tax 33 (52) 6 104 (218) Net Income From Continuing Operations $29 $109 $88 $227 $336 $97 - $107 Special Items Expense
Slide 24: 2022 Return on Invested Capital Reconciliation
2022 Return on Invested Capital Reconciliation 24 $ Million 2021 2022 Net Income From Continuing Operations $336 Special Items Expense (Income) 12 Interest (Income) Expense, Net 69 Adjusted Operating Earnings Before Interest $417 Total Equity $182 $678 Add: Long-Term Debt 1,357 1,003 Add: Notes paya
Slide 25: 2022 Financial Highlights
2022 Financial Highlights 25 2022 1Q 2Q 3Q 4Q FY 2022 Net Sales (Million) $821 $912 $968 $927 $3,628 Adjusted EBITDA (Million) $146 $189 $216 $170 $721 Adjusted EBITDA Margin 18% 21% 22% 18% 20% Adjusted Operating EPS $1.34 $2.02 $2.51 $1.97 $7.84 Free Cash Flow (Million) $32 $39 $114 $84 $269 © 202
Slide 26: 4Q22 Adjusted EBITDA by Region
4Q22 Adjusted EBITDA by Region 26 4Q22 Adjusted EBITDA Company Highlights Region $ Million Margin 4Q22 vs. 3Q22 • Continued price increase realizations Europe $16 13% • North American volume affected by channel destocking Latin • Good mill operations America $72 25% • Seasonally higher costs in Euro
Slide 27: 4Q22 vs. 4Q21 Adjusted EBITDA
4Q22 vs. 4Q21 Adjusted EBITDA 27 $ Million 400 $198 ($10) 350 ($71) 300 $5 ($75) 250 $170 200 $123 150 100 50 16% 18% 0 4Q21 Price & Mix Volume Operations Maintenance Input and 4Q22 and Costs Outages Transportation Costs © 2023 Sylvamo Corporation. All rights reserved.
Slide 28: Europe Adjusted EBITDA
Europe Adjusted EBITDA 28 4Q22 vs. 3Q22 $6 ($2) 35 ($13) $24 30 25 $0 $1 $16 20 15 10 18% 13% 5 0 3Q22 Price & Mix Volume Operations Maintenance Input and 4Q22 and Costs Outages Transportation $ Million Costs 4Q22 vs. 4Q21 $22 ($13) 40 $40 $3 ($18) 30 $16 9% 20 19% ($18) 13% 10 0 (17%) -10 -20 4Q21
Slide 29: Latin America Adjusted EBITDA
Latin America Adjusted EBITDA 29 4Q22 vs. 3Q22 120 $12 $5 ($10) ($4) 100 $74 ($6) $72 80 60 40 27% 25% 20 0 3Q22 Price & Mix Volume Operations Maintenance Input and 4Q22 and Costs Outages Transportation Costs $ Million 4Q22 vs. 4Q21 $58 ($3) 160 ($29) 140 ($10) 9% 120 ($24) $80 100 19% $72 80 60 40
Slide 30: North America Adjusted EBITDA
North America Adjusted EBITDA 30 4Q22 vs. 3Q22 $13 ($23) 160 $118 ($20) 140 120 ($17) $11 $82 100 80 60 40 20% 16% 20 0 3Q22 Price & Mix Volume Operations Maintenance Input and 4Q22 and Costs Outages Transportation $ Million Costs 4Q22 vs. 4Q21 $100 ($10) 180 ($24) 160 ($7) ($38) 140 9% $82 120 19%
Slide 31: Quarterly Business Segment Operating Results
Quarterly Business Segment Operating Results 31 Sales D&A Adjusted EBITDA $ Million 4Q21 3Q22 4Q22 4Q22 4Q21 3Q22 4Q22 Europe $103 $130 $119 $4 ($18) $24 $16 Latin America $229 $270 $289 $15 $80 $74 $72 North America $463 $589 $527 $13 $61 $118 $82 Segment Total $795 $989 $935 $32 $123 $216 $170 Sum
Slide 32: Annual Business Segment Operating Results
Annual Business Segment Operating Results 32 Sales Adjusted EBITDA $ Million 2021 2022 2021 2022 Europe $366 $501 ($9) $70 Latin America $786 $1,023 $254 $281 North America $1,718 $2,173 $200 $370 Segment Total $2,870 $3,697 $445 $721 Sum of Business Segment net sales will not tie with consolidated
Slide 33: 4Q22 Sales Volume
4Q22 Sales Volume 33 Latin North 000 Short Tons Europe Sylvamo America America Uncoated Papers 51 281 352 684 Market Pulp 34 37 23 94 Total 778 Sales volume includes revenue recognition © 2023 Sylvamo Corporation. All rights reserved.
Slide 34: 2022 Sales Volume
2022 Sales Volume 34 Latin North 000 Short Tons Europe Sylvamo America America Uncoated Papers 249 1,071 1,544 2,864 Market Pulp 144 125 104 373 Total 3,237 Sales volume includes revenue recognition © 2023 Sylvamo Corporation. All rights reserved.
Slide 35: Global uncoated freesheet demand continued to recover
Global uncoated freesheet demand continued to recover 35 UFS Industry Demand 2021 2022 Western Europe 6% (2%) Latin America 14% 19% North America 4% 5% Sylvamo Regions 6% 5% Global 3% Flat Source: Pulp and Paper Products Council © 2023 Sylvamo Corporation. All rights reserved.
Slide 36: Nymolla mill strengthens our European and global positions
Nymolla mill strengthens our European and global positions 36 UFS Geographic Mix by Capacity including Nymolla, Sweden Europe 27% Latin 2.8 Million America Short Tons 39% North America 34% Nymolla mill transaction completed on January 2, 2023; Figures exclude the 655,000 tons of Georgetown and River
Slide 37: Capacity by Grade
Capacity by Grade 37 000 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 38: 4Q22 Price & Mix vs. Input Costs
4Q22 Price & Mix vs. Input Costs 38 Change of Price & Mix 4Q22 vs. 3Q22 Input Costs vs. Input Costs Change By Region $ Million $ Million 4Q22 vs. 3Q22 4Q22 vs. 4Q21 Europe Latin America North America $11 2 $198 8 $1 5 $75 2 3 (2) (2) $31 (2) (8) $6 Price & Mix Input Costs Price & Mix Input Costs ($6
Slide 39: 2022 Delivered Cost of Goods Sold
2022 Delivered Cost of Goods Sold 39 Distribution 18% Fiber 21% Depreciation 4% Woo d Labor Chemicals 13% 14% Energy Fixed 10% 14% Packaging 5% © 2023 Sylvamo Corporation. All rights reserved.
Slide 40: Non-Discretionary Capital Spending by Region - 2023 Outlook
Non-Discretionary Capital Spending by Region - 2023 Outlook 40 2023 $ Million Outlook Europe $25 - $30 Latin America $105 - $110 North America $40 - $45 Corporate ~$5 Total $175 - $190 Non-discretionary capital spending includes Maintenance, Regulatory and Brazil Forestry © 2023 Sylvamo Corporation.
Slide 41: Total Maintenance Outage Costs - 2022
Total Maintenance Outage Costs - 2022 41 $ Million 1Q22 2Q22 3Q22 4Q22 2022 Europe - - - - - Latin America - - $7 $11 $18 North America $8 $24 $3 $20 $55 Total $8 $24 $10 $31 $73 Total maintenance outage costs (shown for Sylvamo mills only) include direct maintenance outage costs plus unabsorbed fix
Slide 42: Total Maintenance Outage Costs - 2023 Outlook
Total Maintenance Outage Costs - 2023 Outlook 42 2023 $ Million 1Q23 2Q23 3Q23 4Q23 Outlook Europe $1 $21 - $7 $29 Latin America - - $7 $3 $10 North America $1 $32 $2 $18 $53 Total $2 $53 $9 $28 $92 Total maintenance outage costs (shown for Sylvamo mills only) include direct maintenance outage costs
Slide 43: No significant debt maturities until 2027
No significant debt maturities until 2027 43 Debt Maturity Profile $ Million as of January 2023 $450 $397 $71 $26 $26 $45 $26 $26 2023 2024 2025 2026 2027 2028 2029 Term Loans AR Securitization Bonds © 2023 Sylvamo Corporation. All rights reserved.
Slide 44: Selected Guidance
Selected Guidance 44 2021 2022 2023 $ Million Actual Actual Outlook Total Maintenance Outage Costs $81 $73 $92 Maintenance, Regulatory & Reforestation $70 $143 $175 - $190 High-return Projects - $6 $30 - $35 Capital Spending Nymolla Synergies - - $5 - $10 Total $70 $149 $210 - $235 Depreciation & Am
Slide 45: Building a better future for people, the planet and our company
45 Building a better future for people, the planet and our company © 2023 Sylvamo Corporation. All rights reserved.