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RAYONIER ADVANCED MATERIALS INC. (RYAM)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 net sales were $422 million, flat year-over-year and up ~5% sequentially; Adjusted EBITDA was $51 million (flat vs Q3), aided by $10 million energy credits and lower Temiscaming costs but offset by tariffs and Jesup fire repairs .
  • Full-year 2024 Adjusted EBITDA rose 60% to $222 million and Adjusted FCF to $128 million; management issued 2025 guidance of $215–$235 million Adjusted EBITDA and $25–$45 million Adjusted FCF, incorporating a 25% U.S. paperboard tariff and custodial costs at Temiscaming .
  • Strategic highlights: mid single-digit 2025 price increase for cellulose specialties without losing share, segment reorganization (introducing Biomaterials), €67 million green capital secured, and $700 million debt refinancing completed in October 2024 .
  • Key headwinds: acetate destocking (especially in China), new paperboard capacity and tariffs, and ongoing high-yield pulp price pressure tied to China oversupply; management outlined mitigation (Canadian conversions, pass-throughs, FX tailwinds) .
  • Stock-relevant catalysts: tariff mitigation execution (Canadian conversions), cellulose specialties pricing uplift, biomaterials EBITDA ramp, and delivery against 2025 efficiency targets ($10 million) .

What Went Well and What Went Wrong

What Went Well

  • Strong cellulose specialties pricing/mix drove Q4 operating and EBITDA resilience; mid single-digit 2025 price increase negotiated without share loss (“value over volume”) .
  • Balance sheet strengthened: $700 million term loan refinancing and ABL facility; net secured leverage at 2.7x by year-end 2024 .
  • Biomaterials momentum: €67 million green capital, France bioethanol and lignosulfonate plants expected to contribute 2025 EBITDA; clear hurdle rates (≥30% ROE, <2-year payback) .

What Went Wrong

  • Paperboard and high-yield pulp margins pressured by new supply, higher purchased pulp costs, and tariff/custodial site costs; High-Yield Pulp EBITDA expected ~-$14 million in 2025 .
  • Acetate destocking persisted longer than expected, weighing on cellulose specialties volumes despite price actions .
  • Jesup fire created $9–$10 million EBITDA headwind in 2024 and incremental repair capex ($15 million over two years) .

Financial Results

MetricQ4 2023Q2 2024Q3 2024Q4 2024
Revenue ($USD Millions)$422 $419 $401 $422
Diluted EPS – Continuing ($USD)$(0.94) $0.12 $(0.49) $(0.25)
Diluted EPS – Net ($USD)$(0.94) $0.17 $(0.49) $(0.25)
Gross Margin ($USD Millions)$27 $48 $44 $37
EBITDA ($USD Millions)$(25) $61 $19 $38
Adjusted EBITDA ($USD Millions)$37 $68 $51 $51

Segment net sales

Segment Net Sales ($USD Millions)Q4 2023Q2 2024Q3 2024Q4 2024
High Purity Cellulose$347 $332 $325 $338
Paperboard$55 $60 $55 $60
High-Yield Pulp$25 $33 $28 $32
Eliminations$(5) $(6) $(7) $(8)
Total$422 $419 $401 $422

Key operating KPIs

KPIQ4 2023Q2 2024Q3 2024Q4 2024
Avg Price – HPC ($/mt)$1,248 $1,371 $1,369 $1,317
Avg Price – Paperboard ($/mt)$1,441 $1,384 $1,400 $1,394
Avg Price – HYP ($/mt)$504 $574 $559 $523
Sales Vol – HPC (‘000 mt)259 225 218 244
Sales Vol – Paperboard (‘000 mt)38 44 39 43
Sales Vol – HYP (‘000 mt)40 45 38 49

Notes: Wall Street consensus estimates for Q4 2024 and prior two quarters were unavailable via S&P Global (tool error); therefore, estimate comparisons are not provided.

Drivers and mix:

  • HPC mix shift toward specialties lifted pricing/mix; Q4 YoY HPC net sales -$9 million with flat prices but higher specialties mix; commodity volumes down 21% YoY .
  • Paperboard Q4 YoY net sales +$5 million on volumes (+13%) despite price pressure (-3%); sequential operating income -$3 million on Temiscaming custodial costs .
  • HYP Q4 YoY net sales +$7 million (prices +4%, volumes +23%); segment loss increased on labor and custodial costs .

Non-GAAP adjustments:

  • Q4 included $10 million debt refinancing charges and $3 million Temiscaming suspension charges; Q3 had $25 million asset impairment and $7 million suspension charges; Q4 2023 included $62 million impairment .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted EBITDA (Consolidated)FY 2024$205–$215MM $205–$215MM Maintained
Adjusted Free Cash FlowFY 2024$100–$110MM $115–$125MM Raised
Adjusted EBITDA (Consolidated)FY 2025N/A$215–$235MM New
Adjusted Free Cash FlowFY 2025N/A$25–$45MM New
Depreciation & AmortizationFY 2025N/A$140MM New
Net Interest ExpenseFY 2025N/A$90MM New
Income Tax (Benefit)FY 2025N/A$(2)MM New
EBITDA – Cellulose SpecialtiesFY 2025N/A$255–$265MM New
EBITDA – Cellulose CommoditiesFY 2025N/A$3–$8MM New
EBITDA – BiomaterialsFY 2025N/A$8–$10MM New
EBITDA – PaperboardFY 2025N/A~$15MM (incl. tariff impacts) New
EBITDA – High-Yield PulpFY 2025N/A~$(14)MM New
Corporate Costs (EBITDA)FY 2025N/A~$(50)MM New
Net Custodial Site Costs (Temiscaming)FY 2025N/A$20–$22MM New
Tariff AssumptionsFY 2025N/A25% U.S. tariff on paperboard (Mar 4), 25% Canadian retaliatory tariff on U.S-sourced (Mar 25) New

Earnings Call Themes & Trends

TopicQ2 2024 (Prior-2)Q3 2024 (Prior-1)Q4 2024 (Current)Trend
Tariffs / TradeNo tariff impact; European imports pressuring U.S. paperboard Preparing for new competitive supply in 2025 25% U.S. paperboard tariff; mitigation via Canadian conversions (≥30k mt), pass-throughs, FX tailwind ~$5–$5.5MM Headwind intensifying; active mitigation
Acetate DestockingExpected to bleed into 2025 Still present; mix favoring specialties Destocking persists longer than expected in China; volumes down but prices up mid-single-digit in 2025 Persisting
Ethers DemandUptick; restocking and demand recovery Continued improvement Improving in food & pharma; construction weak but potential upside Improving
Biomaterials StrategyTartas bioethanol ramp; Fernandina and prebiotics advancing €67MM green capital; target ~$42MM biomaterials EBITDA by 2027 Segment formalized; 2025 EBITDA $8–$10MM; Fernandina site plan denied (pursuing remedies); AGE project progressing Accelerating; near-term legal hurdle
Debt RefinancingTarget to refi by YE $700MM term loan raised; ABL extended Higher 2025 interest ($90MM); leverage path to ≤2.5x over time Completed; cost baked into guide
High-Yield Pulp (China)Prices pressured; pivot to India/Europe Low prices expected; EBITDA losses ahead 2025 EBITDA ~$(14)MM; custodial costs burden Continued pressure

Management Commentary

  • “2024 marked a transformative chapter… we emphasized value over volume in our core cellulose specialties markets… increasing our Adjusted EBITDA by 60 percent to $222 million and generating $128 million of Adjusted Free Cash Flow” .
  • “We have negotiated a mid single-digit price increase for our cellulose specialties business for 2025 without losing market share” .
  • “If we exclude the impact of… one-time benefits in 2024, we are on track to achieve our target of 10% annual EBITDA growth even with the headwinds of the paperboard tariffs and new supply” .
  • “We believe we can mitigate much of the EBITDA impact of these tariffs… convert at least 30,000 metric tons in 2025 to Canadian domestic sales” .
  • “We intend to proceed only with those [biomaterials] projects that meet… a minimum 30% ROE and less than two-year payback” .

Q&A Highlights

  • Capex cadence: maintenance weighted to H1 2025 (due to outages); strategic projects likely H2-weighted after validation .
  • Asset sale (Temiscaming paperboard/HYP): buyer interest slowed by market uncertainty (tariffs, Chinese oversupply, new capacity); process continues but timeline extended .
  • Acetate outlook: mid single-digit demand decline; destocking lasting longer; price increases maintained (“value over volume”) .
  • Tariff impact sizing: assuming 10-month U.S. paperboard tariff in 2025; unmitigated EBITDA hit ~$35MM, mitigated by pass-throughs, Canadian conversions, FX .
  • Biomaterials run-rate: portfolio now expected to reach ~$55MM EBITDA at full production for new projects (ex-France plant); AGE could lift biomaterials to ~$70MM by 2029; Fernandina shift to 2028 from 2027 .

Estimates Context

  • We attempted to retrieve Wall Street consensus (EPS, revenue, EBITDA) for Q4 2024 and prior two quarters via S&P Global; data were unavailable due to system limits. As a result, comparisons to consensus are not provided in the tables above. Consensus estimates unavailable via S&P Global (tool error).

Key Takeaways for Investors

  • Cellulose specialties pricing power persists; 2025 mid single-digit increase without share loss supports margin durability even amid acetate destocking .
  • 2025 guide embeds conservative headwinds (tariffs, Temiscaming custodial costs, extended maintenance), offering potential upside if mitigation and efficiencies deliver (>=$10MM targeted) .
  • Tariff mitigation plan (Canadian conversions, pass-throughs, FX) is a near-term execution catalyst; watch qualification pace in Canadian packaging vs. faster commercial print .
  • Biomaterials optionality underpinned by €67MM green capital and clear hurdle rates; near-term EBITDA ($8–$10MM) grows with AGE and Fernandina progress (legal remedies underway) .
  • Balance sheet flexibility improved post-refinancing; 2025 interest expense elevated ($90MM) but leverage at 2.7x with path to ≤2.5x supports equity optionality if EBITDA tracks .
  • Paperboard/HYP asset sale remains strategic but timing uncertain; valuation discussions hampered by tariff/new capacity dynamics—monitor regulatory developments and buyer engagement .
  • Watch Jesup capex and insurance recovery; 2024 EBITDA impact ~$9–$10MM with ~$15MM incremental capex over two years, deductible $15MM .