Rayonier Advanced Materials Announces First Quarter 2022 Results

Rayonier Advanced Materials Inc. (the “Company”) reported a net loss of $25 million or $(0.39) per diluted share for the quarter ended March 26, 2022, compared to net loss of $27 million or $(0.43) per diluted share for the same prior year quarter. The net loss from continuing operations for the quarter ended March 26, 2022 was $24 million or $(0.38) per diluted share, compared to net loss from continuing operations of $16 million or $(0.26) per diluted share for the same prior year quarter. The increase in the diluted loss per share was driven primarily by higher key input costs. Loss from discontinued operations for the quarter ended March 26, 2022 was $1 million or $(0.01) per diluted share, compared to a loss from discontinued operations of $11 million or $(0.17) per diluted share for the same prior year quarter. The Company sold its lumber and newsprint assets in the third quarter of 2021, and as a result, reclassified prior year amounts to conform to the presentation for discontinued operations. Unless otherwise stated, information in this press release relates to continuing operations.

• Reaffirms 2022 guidance of driving EBITDA growth, with expected previously announced slow start in first quarter, and a focus on capturing higher prices from strong demand, managing inflationary costs and improving reliability
• Cost surcharge on cellulose specialties and higher prices for other commodity products expected to offset incremental inflation
• Reliability and productivity expected to improve with the completion of extensive planned maintenance outages at Jesup and Fernandina facilities in April, representing four of the Company’s six High Purity Cellulose operating lines
• Net loss from continuing operations for the first quarter of $24 million, $8 million unfavorable to the comparable period in 2021
• Adjusted EBITDA from continuing operations was $20 million, unfavorable $12 million from the comparable quarter in 2021, driven by higher key input costs due to inflation and lower sales volumes due to supply chain constraints and lower production, partially offset by higher sales prices across all segments

“During the first quarter, we continued to advance our efforts to improve reliability and manage inflationary pressure in order to position ourselves for greater profitability. We recently completed the extensive planned maintenance outages in Jesup and Fernandina. We decided to accelerate Tartas’ planned maintenance outage into the second quarter from the fourth quarter. With Temiscaming’s outage also in the second quarter, we will proactively position the assets to operate with greater reliability and productivity to better service our customers” said Vito J. Consiglio, President and Chief Executive Officer. “In this dynamic environment, our team has continued to work diligently to absorb and mitigate the impacts of inflation and supply chain challenges. As previously stated, we have maintained an active and ongoing dialogue with our customers, and effective April 1, we implemented a cost surcharge to help offset the inflation of our key input costs. With these actions in place, we remain on track to deliver improved EBITDA in the second quarter and for the full year 2022.”

First Quarter 2022 Operating Results from Continuing Operations

The Company operates in the following business segments: High Purity Cellulose, Paperboard, High-Yield Pulp and Corporate.

High Purity Cellulose

Net sales increased $31 million or 12 percent to $281 million from the prior year period. Sales prices increased 17 percent for the three-month period, compared to the prior year, driven by commodity prices and a 10 percent increase for cellulose specialties. Total volumes declined 4 percent during the current three month-period compared to the prior year period, driven by supply-chain constraints and lower production as well as a more favorable mix of cellulose specialties. Net sales for the period also included $27 million of other sales, primarily from biobased energy and lignin. Operating results for the three-month period ended March 26, 2022, declined $14 million to an $8 million loss, when compared to the prior year. Costs increased compared to the prior year periods driven by inflation on key inputs, including chemicals, wood fiber and energy costs, and higher supply-chain expenses. Partially offsetting higher energy costs in the current period is a $5 million favorable impact related to sales of approximately half of the Company’s excess emission allowances associated with the operations in Tartas, France.

Compared to the fourth quarter of 2021, operating income declined by $9 million driven by higher key input costs partially offset by higher cellulose specialties sales volumes. However, total sales volumes declined by 13 percent driven by supply chain constraints and lower production driven by 12 percent fewer days available in the first fiscal quarter compared to the fourth fiscal quarter.

Paperboard

Net sales for the quarter increased $6 million or 12 percent to $54 million compared to the period year period. Compared to the prior year, sales prices increased 19 percent during the period, driven by strong demand while sales volumes decreased 5 percent. Operating results for the three-month period ended March 26, 2022, remained stable at $6 million when compared to the same period in the prior year, as higher sales prices were offset by higher raw material pulp input costs and lower sales volumes.

Compared to the fourth quarter of 2021, operating income improved by $3 million driven by a 9 percent increase in sales prices.

High-Yield Pulp

Net sales for the quarter declined $6 million or 21 percent to $22 million compared to the prior year period. Operating income for the three-month period ended March 26, 2022, improved by $1 million when compared to the same period in the prior year. Higher sales prices were partially offset by lower sales volumes, driven by supply-chain constraints and lower productivity, as well as higher input costs.

Operating results improved by $1 million when compared to the fourth quarter of 2021.

Corporate

The operating loss for the three-month period ended March 26, 2022, increased by $3 million to $14 million, when compared to the same prior year period, driven by an increase in variable compensation.

Compared to the fourth quarter of 2021, the operating loss improved by $3 million, to $14 million, driven primarily by lower environmental expenses.

Non-Operating Expenses

Interest expense for the three-month period ended March 26, 2022, increased $1 million to $16 million when compared to the same prior year period. Interest expense during the three months ended March 26, 2022, decreased $1 million when compared to the fourth quarter of 2021.

Included in interest income and other, for the three-month period ended March 26, 2022, is a $9 million unrealized gain based on the market valuation at quarter end of the shares of GreenFirst Forest Products, Inc. (“GreenFirst”) received in connection with the sale of lumber and newsprint assets.

Income Taxes

The effective tax rate on the loss from continuing operations for the three-month period ended March 26, 2022, was an expense of 6 percent compared to an expense of 1 percent on the loss from continuing operations in the same period of the prior year. The 2022 effective tax rate differs from the statutory rate of 21 percent primarily due to disallowed interest deductions in the U.S. and nondeductible executive compensation, partially offset by US tax credits and tax return to accrual adjustments. The 2021 effective tax rate expense differs from the federal statutory rate of 21 percent primarily due to disallowed interest deductions in the U.S., lower tax deductions on vested stock compensation, and tax return to accrual adjustments.

Discontinued Operations

As a result of the sale of lumber and newsprint assets, the Company is presenting prior year results for the Forest Products and Newsprint segments as discontinued operations.

The sale was completed on August 28, 2021. The cash received at closing was preliminary and subject to final purchase price and other sale-related adjustments. During the first quarter of 2022, the Company trued-up certain sale-related items with GreenFirst for a total net cash outflow of $3 million, as previously disclosed. Pursuant to the terms of the asset purchase agreement, GreenFirst and the Company continue efforts to finalize the closing inventory valuation adjustment.

Cash Flows & Liquidity

For the three-month period ended March 26, 2022, the Company used $23 million in its operating activities from continuing operations. The operating cash outflows include the impact of working capital, which decreased $19 million during the period primarily driven by the extensive planned maintenance outage in the Jesup facility.

For the three-month period ended March 26, 2022, the Company used $45 million in its investing activities for continuing operations. The investing cash outflows related to capital expenditures, net of proceeds from sale of assets, including approximately $9 million of strategic capital spending focused on enhancing reliability and productivity.

For the three-month period ended March 26, 2022, the Company used $4 million in its financing activities for continuing operations for payments of long-term debt offset by borrowing related to the Tartas bioethanol projects.

The Company ended the quarter with $302 million of liquidity globally, including $179 million of cash, borrowing capacity of $100 million under the ABL Credit Facility and $23 million of availability on the factoring facility in France. Additionally, the Company recently announced the sale its shares of GreenFirst for approximately $43 million and expects to receive $21 million from tax refunds in 2022.

With its next significant maturity in early 2024, the Company continues to monitor the capital markets and is prepared to opportunistically refinance its Senior Notes due June 1, 2024, at the appropriate time taking into account market conditions and all other relevant factors. The Company is confident that by executing on its strategy to improve its credit profile in the back half of 2022 it can obtain a refinancing at acceptable terms based on market conditions. The Company may also use a portion of its cash balances to opportunistically repay debt or assist in a holistic refinancing of its capital structure.

Market Assessment

The market assessment represents the Company’s best current estimate of each business segment in this environment.

High Purity Cellulose

Demand for cellulose specialties remains strong. Sales prices for cellulose specialties increased double digit percent in the first three months of 2022 and are expected to increase further as the Company realizes the cost surcharge implemented in the second quarter of 2022, designed to offset extraordinary inflation pressures for key inputs. Commodity sales prices in the second quarter of 2022 are also expected to increase from the first quarter as supply for fluff products remains constrained. The Company recently completed extensive planned maintenance outages at its Jesup and Fernandina facilities, which represent four of the six operating lines in the segment. Temiscaming’s planned maintenance outage is scheduled during the second quarter and the Company also made the strategic decision to accelerate Tartas’ planned maintenance outage into the second quarter. These actions are expected to yield greater reliability and productivity to better service customers and generate improved financial results; however, total sales volumes for the full year remain dependent on managing ongoing supply-chain constraints and production reliability. Overall, adjusted EBITDA for the segment is expected to grow for the second quarter compared to first quarter and for the full year compared to 2021.

Paperboard

Paperboard prices continue to increase driven by strong demand in both commercial printing and packaging segments. Price increases are expected to outpace raw material cost increases in the second quarter, while sales volumes are also expected to increase. As a result, Adjusted EBITDA is anticipated to improve in the coming quarter.

High-Yield Pulp

High-yield pulp markets remain positive with realized prices expected to increase in the second quarter. Sales volumes are also expected to increase due to timing of sales and improved production. However, costs are also expected to increase driven by chemical and transportation costs. Overall, Adjusted EBITDA is anticipated to improve in the coming quarter.

A Sustainable Future

For over 95 years, the Company has invested in renewable product offerings. As governments and consumers demand sustainable products, the Company’s biorefinery model provides a platform to grow existing and new products to address needs of the changing economy. The Company remains enthusiastic about growing its biobased product offering. In the first quarter, non-pulp sales in the High Purity Segment were $27 million primarily from sales of bioelectricity and lignin. The Company is investing in expanding its biomaterial product offering and expects to grow these sales and increase overall margins over time.

Conclusion

“The Company remains on track to generate improved financial results for 2022. We have taken decisive action to improve our operating results and capture value from our unique assets and high-quality product offerings. We remain committed to serving our customers and developing incremental biobased solutions to capture value from increasing demand for our sustainable products,” concluded Mr. Consiglio.

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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 paper and packaging markets. With manufacturing operations in the U.S., Canada and France, Rayonier Advanced Materials employs just over 2,500 people and generates approximately $1.4 billion of revenues. More information is available at www.rayonieram.com.

Contact:

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

Source: Rayonier Advanced Materials, Inc.