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Rayonier Advanced Materials Announces Second Quarter 2020 Results

General News

Rayonier Advanced Materials Inc. (the “Company”) reported a loss from continuing operations for the quarter ended June 27, 2020 of $13 million or $0.20 per diluted share, compared to a loss of $19 million or $0.46 per diluted share for the same prior year quarter.

Year-to-date net loss from continuing operations for the six months ended June 27, 2020 was $38 million, or $0.60 per diluted common share, compared to a net loss of $47 million, or $1.10 per diluted common share for the same prior year period. The decrease in the diluted loss per share was due primarily to the conversion of the Company’s preferred stock into approximately 13 million shares of common stock in August of 2019.

“Second quarter results were below expectations primarily driven by the impacts of COVID-19,” said Paul Boynton, President and Chief Executive Officer. “High Purity Cellulose was impacted from reduced demand for textile, automotive and construction related products and ocean carrier delays, while newsprint demand was adversely affected, severely impacting price realizations and volumes. Despite the market challenges, we continued to focus on operating reliably to meet the needs of our customers, minimizing our costs and improving our cash flow. In addition, we amended our bank debt covenants and increased liquidity, providing us with incremental financial flexibility to manage through the pandemic.”

Second Quarter 2020 Operating Results

High Purity Cellulose

Operating results for the three and six month periods ended June 27, 2020 were comparable and down $2 million, to the respective prior year periods. Higher commodity product sales volumes and lower costs, primarily driven by lower wood and chemical prices, were offset by a decrease of 16 percent and 17 percent in cellulose specialties sales volumes for the three and six month periods, respectively. Additionally, improved reliability provided benefits to the current six-month period. Cellulose specialties sales volumes were below original expectations primarily due to COVID-19 related demand weakness in automotive, industrial and construction end-markets in addition to delays in ocean shipments. Commodity product sales prices decreased 22 percent and 26 percent for the three and six month periods, respectively, driven by COVID-19 and China trade dispute related demand impacts on the larger commodity pulp and textile markets.

Compared to the first quarter of 2020, operating income improved by $12 million primarily from higher commodity product sales prices and volumes, and overall lower costs.

Forest Products

The operating loss for the three and six months ended June 27, 2020 improved $13 million and $16 million, respectively when compared to the same prior year periods, primarily due to the 10 percent and 8 percent increases in lumber prices, respectively, and lower costs driven by the curtailments of production. Gains were partially offset by lower sales volumes as a result of market downtime taken due to lower demand resulting from the COVID-19 pandemic. The Company incurred $12 million of duties in both the six months ended June 27, 2020 and June 29, 2019.

Compared to the first quarter of 2020, the operating loss increased by $3 million. The decline was driven by a 5 percent lower lumber sales volumes and a 4 percent decline in lumber prices primarily as a result of reduced demand early in the quarter due to the COVID-19 pandemic, partially offset by lower costs.


Operating income improved $6 million and $13 million for the three and six months ended June 27, 2020, respectively, when compared to the same prior year periods primarily due to lower raw material pulp prices.

Compared to the first quarter of 2020, operating income improved $1 million primarily due to lower transportation costs.

Pulp & Newsprint

Operating income for the three and six months ended June 27, 2020 declined $11 million and $19 million, respectively, when compared to the same prior year periods. The decline was primarily driven by decreases in high-yield pulp and newsprint sales prices during both the three and six months periods ended June 27, 2020 compared to the same prior year periods. In addition, newsprint sales volumes decreased by 43 percent and 21 percent during the three and six month periods ended June 27, 2020, respectively, due to weak demand and market related downtime resulting from the COVID-19 pandemic.

The operating loss was similar to the first quarter of 2020, with lower newsprint sales volumes offset by higher pulp sales prices.


The operating loss for the three months ended June 27, 2020 was unfavorable by $7 million primarily due to higher non-cash amortization of technology costs and stock-based compensation expenses and an unfavorable change in the foreign exchange rates when compared to the same prior year quarter. The operating loss for the six months ended June 27, 2020, improved $7 million when compared to the same prior year period primarily due to overall reduced spending and a favorable change in the foreign exchange rates.

Compared to the first quarter of 2020, the operating loss was $14 million higher during the second quarter ended June 27, 2020. This was primarily driven by an unfavorable change in foreign exchange rates and the remeasurement of certain liabilities in Canada.

Non-Operating Expenses

Interest expense for the three and six months ended June 27, 2020, increased $1 million and $3 million, respectively, when compared to the same prior year periods, principally driven by increased interest margin related to the September 2019 amendment to the credit facilities, partially offset by lower debt levels.

Income Taxes

The second quarter 2020 and 2019 effective tax rate from continuing operations was a benefit of 59 percent and 34 percent, respectively. The 2020 effective tax rate benefit differs from the federal statutory rate of 21 percent primarily due to the release of certain valuation allowances related to nondeductible interest expense, benefits from the CARES Act, return to accrual adjustments, and tax credits, partially offset by nondeductible interest expense in the U.S., taxable income generated from the 2020 credit agreement amendment, increases to uncertain tax position reserves, nondeductible executive compensation, and lower tax deductions on vested stock compensation.

Cash Flows & Liquidity

For the three and six months ended June 27, 2020, the Company’s operations provided cash flows of $24 million and $11 million, respectively. Year-to-date working capital used $27 million, primarily due to an increase in the income tax receivable as a result of the CARES Act. Operating cash flows improved $37 million from the first quarter 2020.

For the three and six months ended June 27, 2020, the Company invested $10 million and $23 million respectively, in capital expenditures, which included approximately $5 million of strategic capital year-to-date.

The Company ended the second quarter of 2020 with $166 million of liquidity globally, including $49 million of cash, $98 million revolver availability in the U.S. and $19 million of availability on a factoring facility in France. Liquidity for the quarter improved $21 million, driven by a $10 million increase in revolver availability resulting from an amendment to the credit agreement and a $6 million improvement in cash driven by $16 million of Free Cash Flow in the quarter.

The Company remains well within compliance with its second quarter covenants, including a Gross Secured Leverage Ratio of 4.8 times EBITDA compared to a covenant of less than 6.2 times and an Interest Coverage Ratio of 2.0 times compared to a covenant 1.6 times.

Market Assessment

A full year outlook for each of the Company’s segments is difficult to provide due to the uncertainty of the magnitude and timing of economic recovery due to the COVID-19 pandemic and the risk of supply chain disruptions beyond the control of the Company. As such, the Company has determined to suspend its guidance. The market assessment represents the Company’s best current estimate of each business in this environment.

High Purity Cellulose

During the second quarter, as a direct result of the COVID-19 pandemic, the Company experienced a reduction in overall demand for its cellulose specialties products, driven by weakness in the automotive, industrial and construction end-markets, while demand for acetate tow, food and pharmaceutical end-markets remained relatively stable. The Company believes its diversified end-markets, and its customers’ focus on security of supply, provide greater earnings stability during times of uncertainty but do not eliminate the risk associated with the demand impact of COVID-19 on its end markets. The outlook for sales of cellulose specialties is highly dependent on the recovery of economic growth as the world emerges from the pandemic. For its commodity products, the pricing momentum of absorbent materials, primarily fluff pulp, experienced in the second quarter has dissipated and modest decreases have recently been experienced. 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 textiles and clothing.

Certain costs, specifically wood, energy 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. Logistics delays, especially as it relates to ocean transportation, could result in the variability of revenue recognition. Operations at all four high purity cellulose mills are running at or near normal levels. The Company will continue to optimize its commodity profile to maximize profitability and, if necessary, will curtail production to minimize impacts of reduced demand.

Forest Products

Early in the second quarter, stemming from the COVID-19 pandemic, lumber demand and prices declined rapidly causing producers to curtail approximately 30 percent (at peak) of North American lumber production capacity. Later in the quarter, the demand for lumber improved significantly while North American production rates have been slower to restart, resulting in a supply and demand imbalance. As a result, lumber sales prices have surged. Repair and remodel activity is the main catalyst for this market resurgence with strong demand for stud lumber, resulting in a rare premium for stud products above random length lumber. U.S. housing starts in June 2020 were approximately 1.2 million units, seasonally adjusted, which is an improvement from lows in April of 0.9 million units, but still 25 percent below the pre-COVID-19 February 2020 seasonally adjusted levels. As a result of the improved pricing, the Company is currently operating its lumber assets near full capacity.

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 reduced from 20 percent to 8 percent later in 2020 or early 2021. Since 2017, the Company has paid approximately $72 million in duties.


COVID-19 has had a muted impact on Paperboard sales and profitability has benefited from lower input costs offset by some sales mix decline. Paperboard for packaging and lottery markets have been generally resilient, while commercial printing has shown weakness. The Company expects stable sales volumes and to operate the paperboard assets at normal levels going forward.

Pulp & Newsprint

After significant improvements in high yield pulp demand and pricing at the beginning of the year, the weakness in the broader paper pulp market caused by the COVID-19 pandemic is now negatively impacting pricing of high yield pulp products. Overall input costs have remained stable and the Company expects to produce at normal levels for the near future. However, a further deterioration of markets could require modest downtime to control inventory levels.

Demand for newsprint products has declined approximately 23 percent since the beginning of the year resulting in reduced sales prices and volumes, while input costs have remained stable. In response, North American producers have announced production downtime, resulting in reduced newsprint production capacity of approximately 33 percent. The Company intends to manage its production based on demand to maximize profitability and optimize cash flows until the market stabilizes.


“Despite the challenges from COVID-19, we believe that our core High Purity Cellulose segment represents a solid foundation to grow our business as we emerge from the unprecedented challenges and uncertainties in the global economy. With the earnings potential of our assets well above current levels, we continue to focus on operating safely, reducing costs and improving cash flow and liquidity. We believe that our business is resilient and the actions we have taken to increase financial flexibility in the near term will allow us to realize our potential in the post-pandemic world.” concluded Mr. Boynton.

For the full second 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 Contact – (904) 357-9134

Source: Rayonier Advanced Materials, Inc.