Sylvamo Corp (SLVM)·Q4 2024 Earnings Summary

Executive Summary

• Q4 2024 delivered in line with management’s outlook: Adjusted EBITDA of $157M (16.2% margin), diluted EPS of $1.94, and net sales of $970M; strong cash generation with free cash flow of $100M .
• Sequential decline versus Q3 driven by higher planned maintenance (+$17M), unfavorable price/mix (−$18M), and higher input/transport costs (+$9M), partially offset by seasonal volume improvement (+$6M) .
• Management announced high-return Eastover projects (~$145M over three years, >30% IRR) expected to add >$50M annual adjusted EBITDA and avoid ~$75M in near-term woodyard capex via a 20-year outsourcing partnership .
• Q1 2025 guidance: Adjusted EBITDA $85–$105M with expected sequential headwinds in price/mix (−$10–15M), volume (−$20–25M), input costs (+$5–10M), and maintenance (+$15M); earnings expected to improve through 2025 as price increases realize and outages normalize .
• S&P Global consensus estimates were unavailable at the time of this report; comparisons to Wall Street estimates could not be presented (values would be retrieved from S&P Global).

What Went Well and What Went Wrong

What Went Well

• Cash generation remained strong: Q4 free cash flow of $100M, with cash from operations of $164M; full-year free cash flow $248M and ROIC 23% .
• Project Horizon exceeded targets, delivering $144M run-rate savings before inflation, streamlining manufacturing, supply chain, and overhead across regions .
• Strategic reinvestment announced at Eastover: ~$145M projects to optimize a paper machine and add a state-of-the-art sheeter, expected to improve mix, reduce costs, and add ~60,000 short tons of capacity by late 2026 (>30% IRR, >$50M annual EBITDA uplift) .

What Went Wrong

• Sequential margin compression: Adjusted EBITDA fell to $157M (16.2% margin) from $193M (20.0%), mainly due to planned maintenance outages (+$17M), unfavorable price/mix (−$18M), and higher transportation/energy costs (+$9M) .
• North America Q4 earnings declined to $56M (from $98M) on higher planned maintenance, unfavorable price/mix, lower volumes, and higher operating/input costs; November was notably weak in commercial printing and envelopes .
• Price pressure in Europe and Brazilian export markets weighed on price/mix, while Q1 outlook anticipates further sequential decreases before North America and Brazil price increases are realized in Q2 .

Financial Results

Consolidated Financials vs Prior Periods and Prior Year

Note: Wall Street consensus estimates from S&P Global were unavailable at time of publication; estimate comparisons could not be presented.

Segment Breakdown

Key Performance Indicators

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “We earned $632 million in adjusted EBITDA… generated $248 million of free cash flow, and returned $130 million in cash to share owners… achieving a net debt to adjusted EBITDA of 0.9x.”
• “Project Horizon… exceeded our $110 million year-end run rate saving goals by $34 million.”
• “We plan to invest approximately $145 million… Once completed… IRR greater than 30% and increase adjusted EBITDA by more than $50 million annually.”
• “We expect quarterly earnings to improve throughout the year… seasonally stronger volume… realize the price increases… less maintenance outage expenses in the second half.”
• “In North America, we had a weak November… commercial printing and envelope market… copy paper stronger than expected.”

Q&A Highlights

• Pricing realization timing: North America and Brazil price increases are being implemented; minimal Q1 realization with more impact in Q2 .
• North America demand: Q4 weakness in commercial printing/envelopes; management expects industry demand down ~3% in 2025 but not systemic; copy paper held up .
• Tariffs: Potential US/Canada/Mexico tariff scenarios seen as limited direct impact absent retaliation; steel/aluminum could modestly affect equipment costs .
• Capex cadence: 2025 capex $220–$240M; heavier weighting in H1 due to outages; Eastover project spend occurs through the year .
• Europe cost curve and operating rates: Cost curve elevated since Ukraine war; ~20–25% of capacity at/below cash costs; operating rates mid-80% after closures .
• Free cash flow: No explicit quarterly guidance; Q1 seasonally pressured by outages, incentive comp, customer rebates .

Estimates Context

• S&P Global consensus for Q4 2024 EPS, revenue, and EBITDA could not be retrieved due to API limits; comparisons to Wall Street expectations are unavailable at this time (values would be retrieved from S&P Global).
• Management’s Q4 delivery was “in line with our outlook of $150–$165 million” Adjusted EBITDA, suggesting internal expectations were met; update consensus comparisons when S&P data becomes available .

Key Takeaways for Investors

• Near-term earnings headwinds from concentrated H1 maintenance and seasonal LatAm softness; sequential improvement expected through 2025 as price increases realize and outages normalize .
• Structural cost progress: Project Horizon savings and streamlining support durable margins despite input cost volatility; watch for continued supply chain and SKU optimization benefits .
• Capital projects are compelling: Eastover investments (>30% IRR; >$50M annual EBITDA uplift) and woodyard outsourcing (avoids ~$75M capex) are clear medium-term EBITDA and cash flow catalysts .
• Regional setup constructive: Capacity reductions (~10% NA, ~7% Europe) support operating rates and pricing stability; monitor European cost curve and pulp dynamics .
• North America mix and demand: Commercial printing and envelope weakness impacted Q4; copy paper resilient; pricing actions should aid H2 trajectory .
• Balance sheet and returns: Net debt/EBITDA 0.9x and continued dividend/share repurchases provide flexibility to sustain shareholder returns through the cycle .
• Trading implication: Near-term volatility around Q1 delivery and maintenance cadence; opportunity to position for H2 recovery as price increases flow through and Eastover projects progress .