RYAM Q4 2024: Warns of $35M Tariff Headwind, Mitigation Underway
- Robust Biomaterials Pipeline: Management highlighted a potential EBITDA run rate of $55 million from 2025 projects—with a long‐term view toward reaching around $70 million EBITDA by 2029—as well as strong progress on the AGE project and other biomaterials initiatives, underlining significant future growth potential.
- Effective Tariff Mitigation Strategies: Despite a potential $35 million tariff headwind on paperboard, the company is proactively converting 30,000 metric tons of U.S. exports to Canadian domestic business and leveraging foreign exchange gains of about $5–$5.5 million, which should substantially cushion any negative impact.
- Resilient Cellulose Specialty Business amid Destocking: Even with mild single-digit declines from global destocking in acetate, the company has maintained market share through pricing discipline—indicating that underlying demand remains strong and possibly setting the stage for a recovery.
- Tariff Exposure: The imposition of a 25% U.S. tariff on paperboard sales could result in an unmitigated impact of approximately $35 million over a 10‐month period, pressuring margins if mitigation measures fall short.
- Asset Sale Uncertainty: Delays and market uncertainties—exacerbated by oversupply in high-yield pulp and evolving tariff regimes—are hindering progress on the sale of paperboard and high-yield pulp assets, which could limit strategic flexibility.
- Demand Weakness from Destocking: Global destocking, particularly in the acetate segment, has led to reduced order books and single-digit declines in volume, potentially dampening future demand and revenue growth.
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Tariff Impact
Q: Impact of tariffs on paperboard EBITDA?
A: Management expects a $35 million potential hit over a 10‐month period starting March, though mitigation measures like favorable foreign exchange and customer conversion efforts are expected to partially offset the effect . -
Biomaterials Guidance
Q: Clarify shift to $55M EBITDA run rate?
A: The updated guidance includes the new AGE project, which adds roughly $25–30 million annually, improving the prior outlook by about $18 million, with full benefits becoming evident by late 2028 . -
Capital Allocation & Asset Sale
Q: How will capital plans and asset sales progress?
A: Maintenance CapEx will be heavier in the first half, while strategic investments occur later; meanwhile, asset sales for paperboard and high-yield pulp remain on hold due to market uncertainties amid tariff pressures . -
CS Volume Outlook
Q: How will CS volumes develop in 2025?
A: Volumes, particularly in acetates, are expected to decline in the single digits due to destocking, but improved pricing and a rebound in ethers demand from food and pharma sectors support moderate overall performance . -
One-Time Benefits
Q: Detail one-time HPC benefits in 2024?
A: The onetime benefits amounted to roughly $15 million, mainly from CEWS subsidies and timing adjustments related to Temiscaming’s suspension and the Jesup fire, and these benefits are not expected to recur in 2025 . -
2027 Delay
Q: Is 2027 EBITDA guidance delayed?
A: Due to delays with the bioethanol project, the anticipated EBITDA upside is now deferred, with the full impact unlikely until 2028 rather than 2027 . -
Other CS Grades
Q: How are other CS grades performing overall?
A: Filtration, nitrocellulose, and MCC are showing growth, while auto-related segments like casings remain relatively flat amid shifting product mixes . -
Canadian Conversions
Q: When will Canadian conversions offset tariffs?
A: Quick wins are expected for commercial print grades—with approximately 30,000 tons shifting in 2025—whereas packaging conversions will likely take longer, with significant moves occurring in 2026 .
Research analysts covering RAYONIER ADVANCED MATERIALS.