Sylvamo Delivers Strong Results, Fortifies Financial Position and Increases Quarterly Dividend

Sylvamo (NYSE: SLVM), the world’s paper company, is releasing third quarter 2022 earnings.

Message from the Chairman and Chief Executive Officer

• “We generated strong earnings and free cash flow in the third quarter. In October, we also achieved several milestones, including selling our Russian operations, reaching our gross debt target ahead of schedule and exiting our transition services agreement. I’m also pleased our board of directors approved increasing our quarterly dividend to 25 cents per share,” said Jean-Michel Ribiéras. “We continue to implement our three-pronged strategy of commercial excellence, operational excellence and financial discipline, which enabled us to remain the supplier of choice and strengthen our balance sheet.”

Third Quarter Highlights

• Net income from continuing operations of $109 million ($2.44 per diluted share) compared with $84 million ($1.89 per diluted share) in the second quarter of 2022
• Adjusted operating earnings¹ (non-GAAP) of $112 million ($2.51 per diluted share) compared with $90 million ($2.02 per diluted share) in the second quarter of 2022
• Adjusted EBITDA² (non-GAAP) of $216 million (22.3% margin) compared with $189 million (20.7% margin) in the second quarter of 2022
• Free cash flow³ (non-GAAP) of $114 million compared with $39 million in the second quarter of 2022
• Announced an agreement to acquire an uncoated freesheet mill in Nymolla, Sweden, for an attractive price of 150 million euros (approximately $150 million)

Third Quarter Commercial and Operational Highlights

• Price and mix improved by $60 million versus the prior quarter, outpacing energy and input cost inflation
• Operations and costs increased $3 million this quarter, while total planned maintenance outage expenses improved by $14 million
• Input costs grew by $46 million versus the prior quarter, reflecting energy and input cost inflation
• Adjusted EBITDA margins for Europe, Latin America and North America were 18%, 27% and 20%, respectively

Milestones Subsequent to the Third Quarter

• Completed the sale of our Russian operations for $420 million, receiving approximately $390 million in cash proceeds after foreign currency exchange rates and transaction fees
• Strengthened our financial position by reducing gross debt to less than $1 billion, equal to a gross debt-to-adjusted EBITDA ratio of less than 1.5x for the last 12 months ending Sept. 30, 2022
• Sylvamo’s board of directors declared a quarterly dividend of $0.25 per share for the period of Jan. 1, 2023, to March 31, 2023. The dividend is payable Jan. 25, 2023, to holders of record at the close of business Jan. 4, 2023.

Fourth Quarter Outlook

• Adjusted EBITDA is expected to be $180 million to $190 million
• Compared to the third quarter of 2022:
  • Price and mix are expected to improve by $30 million to $35 million, reflecting continued realization of prior increases in all regions
  • Volume is expected to be flat to decreasing by up to $5 million, with seasonally weaker volume in Europe and North America
  • Operations and costs are expected to increase by $35 million to $40 million; seasonally higher in Europe and North America, plus foreign exchange impacts and other costs
  • Input and transportation costs are projected to be flat to increasing up to $5 million, primarily due to higher energy and input cost inflation
  • Total maintenance outage expenses are projected to increase by $21 million

Management Summary

Sylvamo celebrated its first year as an independent, publicly traded company Oct. 1. After a successful third quarter, the world’s paper company achieved important milestones making it financially and strategically stronger than one year ago.

Milestones include repaying all of Term Loan B, achieving less than $1 billion in gross debt and exiting the spinoff transition services agreement. Our board of directors also declared a quarterly dividend of $0.1125 per share, which we paid in October.

We completed the sale of our Russian operations Oct. 6 for $420 million after reaching an agreement with Pulp Invest Limited Liability Company. After transaction and bank fees, as well as foreign currency impacts, we received approximately $390 million in cash proceeds.

The sale of our Russian operations allowed us to repay debt, avoid a $220 million boiler capital project at the Svetogorsk mill, reduce our exposure to the more cyclical market pulp segment by 30% and reduce geopolitical risk and uncertainty.

On Sept. 15, we announced an agreement to acquire an uncoated freesheet mill in Nymolla, Sweden, for an attractive price of approximately $150 million. The strategic bolt-on acquisition has the capacity to produce approximately 500,000 short tons of uncoated freesheet, generates 85% of its energy needs from carbon-neutral, renewable biomass residuals and includes iconic brands like Multicopy. The transaction is expected to be immediately accretive to our earnings per share and free cash flow while offering the potential to generate more than $20 million in synergies.

The Nymolla mill will strengthen Sylvamo’s uncoated freesheet product mix with cutsize, business forms, digital papers and offset, enabling us to serve European and global customers more effectively. We expect the transaction to close in the first quarter of 2023, subject to customary closing conditions, including receiving the required regulatory approvals.

After achieving our debt target, we updated our investment thesis. Importantly, Sylvamo remains a cash flow story. We will leverage our strengths to drive high returns on invested capital and generate free cash flow. We will use that cash to increase shareowner value: maintain a strong financial position, return cash to shareowners and reinvest in our business.

These accomplishments reflect Sylvamo’s strategy of commercial excellence, operational excellence and financial discipline. Our 6,000 team members contribute to this success by working safely, caring for one another and taking care of our customers. We are grateful for each colleague’s contributions to help Sylvamo be the employer, supplier and investment of choice.

1 Adjusted Operating Earnings (non-GAAP) are net income (loss) (GAAP) excluding discontinued operations, net of tax and net special items. Management uses this measure to focus on ongoing operations and believes it is useful to investors because it enables them to perform meaningful comparisons of past and present combined operating results. The Company believes that using this information, along with net income (loss), provides for a more complete analysis of the results of operations by quarter. Net income (loss) is the most directly comparable GAAP measure. For more information regarding net special items, see the information under the heading Effects of Net Special Items and the Condensed Consolidated and Combined Statement of Operations and related notes included later in this release.

2 Adjusted EBITDA (non-GAAP) is net income (loss) (GAAP) excluding discontinued operations, net of tax plus the sum of income taxes, net interest (income) expense, depreciation, amortization and cost of timber harvested, transition service agreement expense, stock-based compensation, and, when applicable for the periods reported, net special items. Management uses this measure in managing the operating performance of our business and believes that Adjusted EBITDA and Adjusted EBITDA Margin provide investors and analysts meaningful insights into our operating performance and Adjusted EBITDA is a relevant metric for the third-party debt. The Company believes that using this information, along with net income (loss), provides for a more complete analysis of the results of its operations. Net income (loss) is the most directly comparable GAAP measure. For more information regarding net special items, see the information under the heading Effects of Net Special Items and the Condensed Consolidated and Combined Statement of Operations and related notes included later in this release.

3 Free Cash Flow is a non-GAAP measure and the most directly comparable GAAP measure is cash provided by operating activities from continuing operations. Management utilizes this measure in connection with managing our business and believes that Free Cash Flow is useful to investors as a liquidity measure because it measures the amount of cash generated that is available, after reinvesting in the business, to maintain a strong balance sheet and service debt, and return cash to shareowners in the future. It should not be inferred that the entire Free Cash Flow amount is available for discretionary expenditures. Free Cash Flow also enables investors to perform meaningful comparisons between past and present periods.

Select Financial Measures
(In millions)	Third Quarter 2022		Second Quarter 2022		Third Quarter 2021
Net Sales		$968			$912				$731
Net Income from Continuing Operations		109			84				59
Net Income (Loss)		57			(59)				92
Business Segment Operating Profit		175			142				95
Adjusted Operating Earnings		112			90				67
Adjusted EBITDA		216			189				131
Cash Provided By Operating Activities From Continuing Operations		146			76				137
Free Cash Flow		114			39				117

Segment Information

Sylvamo uses business segment operating profit to measure the earnings performance of its businesses and is calculated as set forth in footnote (e) under the “Sales and Earnings by Business Segment” table (page 10). Third quarter 2022 net sales by business segment and operating profit by business segment compared with the second quarter of 2022 and the third quarter of 2021 are as follows:

Business Segment Results
(In millions)	Third Quarter 2022		Second Quarter 2022		Third Quarter 2021
Net Sales by Business Segment
Europe		$130				$135				$85
Latin America		270				249				200
North America		589				549				447
Inter-segment Sales		(21)				(21)				(1)
Net Sales		$968				$912				$731
Operating Profit by Business Segment
Europe		$19				$17				$(1)
Latin America		58				59				44
North America		98				66				52
Business Segment Operating Profit		$175				$142				$95

Operating profits in the third quarter of 2022:

Europe – $19 million compared with $17 million in the second quarter of 2022. Earnings were higher as higher average sales prices more than offset lower volumes, higher operating costs and higher input costs.

Latin America – $58 million compared with $59 million in the second quarter of 2022. Earnings were slightly lower as higher average sales prices and higher volumes were offset by higher operating costs, higher maintenance outages and higher input costs.

North America – $98 million compared with $66 million in the second quarter of 2022. Earnings were higher as higher average sales prices, higher volumes, lower operating costs and lower maintenance outages more than offset higher input costs.

For the complete press release, click here.

About Sylvamo

Sylvamo Corporation (NYSE: SLVM) is the world’s paper company with mills in Europe, Latin America and North America. Our vision is to be the employer, supplier and investment of choice. We transform renewable resources into papers that people depend on for education, communication and entertainment. Headquartered in Memphis, Tennessee, we employ more than 7,500 colleagues. Net sales for 2021 were $3.5 billion. For more information, please visit Sylvamo.com.

Contact:

Hans Bjorkman – Investor Contact – hans.bjorkman@sylvamo.com – (901) 419-3525

Source: Sylvamo Corporation