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Rayonier Advanced Materials Provides Market and Operations Update & 1Q Results

General News

Rayonier Advanced Materials, Inc. (the “Company”) provided the following updates on its markets and operations:

“In response to the COVID-19 pandemic, we’ve taken decisive actions to ensure the safety of our employees and to protect our business by minimizing operational disruptions and mitigating the financial impact through prudent cost and capex reductions,” said Paul Boynton, Chairman, President and Chief Executive Officer. “All of our businesses and operations have been deemed essential due to the important role these products play in the food, pharmaceutical, and industrial products supply chains. We are focused on maintaining stable operations and providing security of supply to our customers during these unprecedented times.”

First Quarter 2020 Operating Results

The Company reported a loss from continuing operations for the three months ended March 28, 2020 of $25 million, or $0.39 per diluted common share, compared to a loss of $28 million, or $0.64 per diluted common share for the same prior year period. The decrease in the diluted loss per share was due to the conversion of the Company’s preferred stock into approximately 13 million shares of common stock in August of 2019.

High Purity Cellulose

For the three-month period ended March 28, 2020, operating results declined $2 million compared to the same prior year period. The decline was driven by 18 percent lower cellulose specialties sales volumes, in line with forecasts, and 30 percent lower commodity products sales prices as viscose pricing continued at 2019 year-end low levels. The cellulose specialties sales volumes were significantly stronger in the 2019 quarter due to favorable sales timing in that quarter, as certain shipments made in the fourth quarter of 2018 were not recognized as sales until the first quarter 2019. This sales timing accounted for approximately one-third of the decrease in sales volumes. This was partially offset by slightly higher cellulose specialties sales prices, higher commodity products sales volumes, and lower costs. Costs improvements were driven by lower wood prices, as the prior year prices were negatively impacted by wet weather, lower commodity chemical costs and improved productivity, primarily at the Temiscaming mill which was negatively impacted by an unplanned outage in the previous year.

Compared to the fourth quarter of 2019, operating income declined $1 million as lower cellulose specialties and commodity sales volumes were mostly offset by lower costs.

Forest Products

The operating loss for the three-months ended March 28, 2020 improved $4 million when compared to the same prior year period primarily due to the 5 percent increase in lumber prices partially offset by increased duties for lumber as a result of the increased prices and increase in volumes shipped to the U.S.The Company incurred $6 million and $5 million of duties in the quarter ended March 28, 2020 and March 30, 2019, respectively. The Company reduced or ceased production at its sawmills at the end of the first quarter of 2020 due to the decreased market demand resulting from the COVID-19 outbreak.

Compared to the fourth quarter of 2019, the operating loss improved by $3 million. The improvement was driven by a 6 percent increase in lumber sales prices which was partially offset by a 4 percent decline in lumber sales volumes due to the rail blockades in Canada and the initial impact of the COVID-19 pandemic and increased wood costs.


Operating income improved $7 million for the three months ended March 28, 2020 when compared to the same prior year period primarily due to lower raw material pulp prices.

Compared to the fourth quarter of 2019, operating income improved $2 million primarily due to lower raw material pulp prices.

Pulp & Newsprint

Operating income for the three months ended March 28, 2020 declined $8 million when compared to the same prior year period. The decline was primarily driven by 20 percent and 30 percent decreases in high-yield pulp and newsprint sales prices, respectively, partially offset by 42 percent and 5 percent increases in high-yield pulp and newsprint sales volumes, respectively, and improved freight costs.

Compared to the fourth quarter of 2019, the operating loss was $4 million worse. The decline was driven by lower newsprint sales prices and lower newsprint and high-yield pulp sales volumes partially offset by increased high-yield pulp sales prices.


The operating loss for the three months ended March 28, 2020 improved $14 million when compared to the prior year quarter primarily due to favorable foreign exchange rate changes, lower incentive compensation and overall lower costs.

Compared to the fourth quarter of 2019, the operating loss improved by $21 million. The improvement was primarily driven by lower environmental costs and favorable foreign exchange rate changes. The fourth quarter of 2019 included a $17 million environmental charge.

Cash Flows & Liquidity

For the three months ended March 28, 2020, the Company’s operations used cash flows of $13 million. Year-to-date working capital used $42 million, primarily due to higher accounts receivable and seasonal inventory builds.

For the three months ended March 28, 2020, the Company invested $13 million in capital expenditures, which included approximately $2 million of strategic capital.

For the three months ended March 28, 2020, the Company incurred net borrowings of $6 million to fund its operations and ended the quarter with adjusted net debt of $1.0 billion which includes $43 million of cash.

The Company ended the period with $145 million of liquidity globally, including $43 million of cash, revolver availability in the U.S. of $90 million and $13 million of availability on a factoring facility in France.

The Company remains well within compliance with it first quarter covenants, including a Net Secured Leverage Ratio of 4.1 times EBITDA compared to a covenant of less than 5.4 times and an Interest Coverage Ratio of 2.2 times compared to a covenant 1.75 times.

“Improved operational reliability and reduced costs in High Purity Cellulose along with stronger lumber prices and lower input costs in paperboard helped drive improved year-over-year EBITDA,” said Boynton. “Unfortunately, the positive momentum gained in the first quarter was disrupted by the outbreak of COVID-19. The Company maintains good liquidity to manage the business and is proactively engaged in discussions with our banks to manage impacts from the pandemic.”

Market Assessment

A full year outlook for each of the Company’s segments is difficult to predict based on the current economic conditions caused by the COVID-19 pandemic and the lack of visibility around the timing and trajectory of the economic recovery. The Company is providing its best assessment of each business in this environment.

High Purity Cellulose

In the face of the COVID-19 pandemic, the Company has experienced modest impact to overall demand for its cellulose specialties products. Strength in food and pharmaceutical end-markets is mostly offsetting weakness in the automotive and certain industrial segments. To date, while acetate tow demand has also remained stable and in-line with Company expectations, customers are beginning to experience weakness in acetate industrial and textile applications. The Company believes the stability of this demand is driven by its diversified end-markets and customers’ focus on security of supply. Volumes and prices for cellulose specialties products currently remain in line with earlier forecasts with contracted and agreed upon volumes expected to be down 7 to 8 percent, or 11 to 12 percent after giving effect to the anticipated impact of sales timing; contracted cellulose specialties prices are expected to increase, approximately 2 percent, year-over-year based on contracted prices before giving effect to any currency changes. However, the Company remains cautious regarding demand expectations for the balance of 2020 as the full impact of COVID-19 on its demand remains undetermined. For its commodity HPC products, the Company has realized significant pricing momentum in absorbent materials (fluff pulp) markets with strong demand globally and expects these prices to maintain or improve for the balance of the year. However, viscose pulp markets remain extremely weak as the U.S. tariffs on Chinese textiles combined with the global “stay at home” directives have significantly reduced demand for clothing and related goods; the Company expects prices to remain weak and possibly decline through year end, depending on the timing of improvement in the textile market.

In regard to costs, wood and commodity chemical prices have declined from prior year levels. However, future input prices and availability of chemicals are difficult to predict due to the current unprecedented economic conditions. The Company is seeing increasing pressure on certain chemical and transportation costs. Operations at all four high purity cellulose mills are expected to run at normal levels into the future, although the timing of annual planned maintenance outages is being modified for the safety of employees and contractors. If viscose prices continue to decline, to the extent possible, the Company plans to shift future production away from viscose pulp to fluff and paper grade pulps to maximize profitability.

Forest Products

By late March, lumber sales prices had fallen 35 percent below the prior six-week levels due to buyer reaction to the potential impact of COVID-19. Trade analysts estimate nearly 25 percent of North American lumber capacity had been removed in this same time period, supporting a lift in prices of 15 percent by mid-April. U.S. housing starts declined in March and are expected to decline again in April primarily due to restrictions placed by local governments on construction activities. Remodeling activity, however, remains robust as demand for stud lumber products from lumber retailers continues above expectations. For the near future, the Company intends to manage its total production, balancing market demand for lumber with availability of wood chips for its pulp and paper operations to maximize profitability and optimize cash flows. Currently, the Company is operating nearly all its lumber assets, some at reduced levels.

As announced in January by the U.S. Department of Commerce, the Company expects duties on softwood lumber imported into the U.S. to be significantly reduced later in 2020. Since the duties started in 2017, the Company has paid approximately $65 million.


COVID-19 has had limited impact on Paperboard sales and profitability has benefited from lower input costs. While there are areas of consumer-based end markets that have shown weakness, packaging markets have been generally resilient and have offset volume in these markets, albeit with some mix value trade-off. The Company expects to operate the paperboard assets at normal levels going forward.

Pulp & Newsprint

Overall, the Company is experiencing positive pricing momentum for its high yield pulp products with weakness in Europe due to temporary business closures being more than offset by increased demand in China as the region recovers from the COVID-19 outbreak. As a result, positive pricing pressure exists and little impact has been seen from the pandemic. Overall input costs have remained stable and the Company expects to produce at normal levels for the near future.

Demand for newsprint products has declined significantly, an estimated 12 percent from prior year and accelerating into April. Overall, sales prices and volumes have declined, while input costs have remained stable. The Company intends to manage its production based on demand to maximize profitability and optimize cash flows until demand stabilizes or as supply exits the market.

For the full first quarter results, click here.

About Rayonier Advanced Materials

Rayonier Advanced Materials is a global leader of cellulose-based technologies, including high purity cellulose specialties, a natural polymer commonly found in filters, food, pharmaceuticals and other industrial applications. The Company also manufactures products for lumber, paper and packaging markets. With manufacturing operations in the U.S., Canada and France, Rayonier Advanced Materials employs approximately 4,000 people and generates approximately $1.8 billion of revenues. More information is available at


Ryan Houck – Media Relations – (904) 357-9134

Source: Rayonier Advanced Materials, Inc.