FREE

Performance Looks to Improve as Headwinds Abate

We recently hosted CEO De Lyle Bloomquist for a fireside chat. We discussed RYAM’s current business portfolio performance in 2023 and the outlook for 2024, the opportunities in biomaterials, and the progress being made in streamlining the company’s business portfolio away from commodity and low differentiation product families and businesses. This report contains a transcript of the conversation from March 7, 2024, which can be accessed on demand in our full report. Debt reduction remains top priority. Ever since being spun off as a publicly traded entity in 2014, RYAM had to deal with an untenably high level of debt, which constrained its strategic options in recent years. While 2023 EBITDA fell short of management’s initial guidance, strong free cash generation allowed the company to reduce net debt to ~$700 million and management remains committed to meeting its target of 2.5x net debt to EBITDA by 2027. Turning the tide. Last year was difficult for RYAM, as its main cellulosics markets experienced simultaneous impacts of channel destocking and price declines in several key segments of the portfolio, the extent of which was unanticipated. However, the company believes these trends largely played out by the end of 2023, with a modest carryover into 1Q24, as a number of those markets are showing signs of stabilizing demand and improving prices. At the same time, management’s 2024 guidance does not include a number of positive catalysts that can potentially help offset unexpected unfavorable developments that may arise during the year. Improved competitive environment. The closure of the GP pulp plant in Florida should provide RYAM with an opportunity to gain significant new business in other cellulosic specialties in 2024, replacing commodity HPC volume that generates negative EBITDA with products that generate EBITDA margins in the mid-20% range. Biomaterials ready to step up. The Tartas France second-generation bioethanol plant is on schedule to start up later this month, with its entire production being sold out on a five-year take-or-pay contract. RYAM is also in the process of commercializing production of tall oil and animal prebiotics that, combined with a second bioethanol plant in Florida, could generate incremental annual EBITDA of $40-45 million. Potential asset sale. RYAM is exploring the sale of its commodity cellulosic business, as well as the Paperboard and High Yield Pulp divisions. Announcements may come as early as 2Q24, with expected closing in 3Q24. Proceeds are likely to be used to further reduce debt.