Rayonier Advanced Materials Inc.

Good morning, and welcome to the Rainier Advanced Materials First Quarter 2021 Earnings Conference Call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions with instructions to follow at that time. As a reminder, this conference is being recorded. I would now like to turn the call over to your host, Mr. Mickey Walsh, Treasurer and Vice President of Investor Relations for Rainier Advanced Materials. Thank you. Mr. Walsh, you may begin.

Thank you, Operator, and good morning, everyone. Welcome again to Rainier Advanced Materials First Quarter 2021 Earnings Conference Call and Webcast. Joining me on today's call are Paul Boynton, our President and Chief Executive Officer, and Marcus Moultner, our Chief Financial Officer and Senior Vice President of Finance. Our earnings release and presentation materials were issued last evening and are available on our website at rainieram.com. I'd like to remind you that in today's presentation, We will include forward-looking statements made pursuant to the safe harbor provisions of federal securities laws. Our earnings release as well as our filings with the SEC list some of the factors which may cause actual results to differ materially from the forward-looking statements we may make. They're also referenced on slides two and three of our presentation materials. Today's presentation will also reference certain non-GAAP financial measures as noted on slide four of our presentation. We believe non-GAAP measures provide useful information for management and investors, but non-GAAP measures should not be considered an alternative to GAAP measures. A reconciliation of these measures to their most directly comparable GAAP financial measures are included on slides 18 through 22 of our presentation. I will now turn the call over to Paul.

Thank you, Mickey, and good morning, everyone. I'm pleased to report that we generated significantly improved EBITDA in the first quarter. both compared to prior year as well as on a sequential basis. And note, we continue to see strong momentum in all of our end markets as we enter the second quarter. Starting on slide five, EBITDA improved by $64 million from prior year to $91 million, driven by a surge in lumber prices, momentum in high-purity cellulose commodity prices, and demand for cellulose specialty products. Along with the strong EBITDA, we generated $21 million of free cash flow as we captured higher prices across all key products to overcome our typical seasonal uses of working capital, as well as certain logistic constraints. Importantly, shortly after we finished the quarter in April, we announced the strategic sale of our lumber and newsprint assets. The sale allows the company to, first, capture significant value from these assets partially due to the surge in lumber prices. Second, it allows the company to pay down debt. And third, it will allow us to build upon our core high-purity cellulose businesses' biofuture. As part of that biofuture, which we see as leveraging our key assets to create new, sustainable, bio-based products, we have also formally announced yesterday an exciting strategic investment in Anamira, a startup company that will be producing and marketing carboxylated cellulose nanocrystals, or CNC, which are fundamental natural building blocks that have widespread consumer and industrial applications. Anomer's nanocrystals are patented biodegradable products to be produced at our temiscamine site from our cellulose specialties products. The emerging business will be supported by a recently signed distribution agreement with CROTA, a global leader in sustainable, high-performance ingredient formulations. So now I'd like to ask Marcus to take us through the numbers for the quarter, and then I'm going to come back on and provide additional perspective on the asset sale, as well as highlight some of our key opportunities to invest in growth for the company.

Marcus? Thank you, Paul. Starting with high-purity cellulose on slide six, first quarter sales held flat at $250 million last driven by a 9% increase in sales prices, offset by an 8% decline in sales volumes. As expected, CS prices were down slightly, while higher commodity prices drove the combined increase. CS sales volumes increased a strong 6%, driven by sharper demand in acetate, tire cord, and engine filtration. Commodity volume declines were driven primarily by logistic constraints. EBITDA for the segment improved $9 million to $35 million. Pricing improvements, a more favorable mix of CS, and lower operating costs helped drive profitability gains. Looking forward to the second quarter, we expect commodity prices to increase further. While CS prices are expected to remain slightly below prior year, despite stronger demand as we fulfill our annual contracts. Total high purity cellulose volumes are expected to remain stable for the full year. However, we expect a more favorable mix toward cellulose specialties. Turning to slide seven, sales in our forest product segment improved by $65 million from the first quarter of 2020, driven by a 118% price increase offset by a 3% volume decline for lumber products mainly due to logistic constraints. EBITDA for the segment increased $62 million to $63 million, driven by the stronger sales pricing. As a reminder, EBITDA results include $7 million for duties paid in the quarter. Since the start of softwood lumber duties on shipments into the US in 2017, We now have paid a total of $98 million of duties and have also accrued interest of approximately $5 million. Based on the results of prior trade disputes, Canadian producers have historically recovered all or a vast majority of these duties upon resolution, and Ryan will retain the rights to these duties after the sale of the lumber business later this year. Looking forward, With the continued strength in the lumber market, robust repair and remodeling, and very little incremental available new supply, we expect sale prices to remain very strong in the second quarter with higher prices likely sequentially as our order book now extends into June. We are focused on ensuring reliable operations and capturing the benefits of these higher prices through the completion of the asset sale in the back half of the year. Turning to slide 8, paper board segment sales declined $2 million, driven by a 7% decline in sales volumes. EBITDA for the segment increased $1 million to $10 million, driven by lower operating costs. Looking forward, we are seeing announced price increases stick in the market to help offset rising raw material pulp costs. Turning to our pulp and newsprint segment on slide 9, Sales declined $8 million from prior year, driven by a 38% decline in New Sprint volumes, which primarily resulted from our decision to only operate one of our two manufacturing lines. High-yield pulp volumes declined 15% due to logistic delays. New Sprint and high-yield pulp prices increased 12% and 2% respectively. EBITDA for the segment held flat at a $4 million loss driven by lower sales volumes, offset by the higher prices and cost reductions. Looking ahead, we expect increased prices for both New Sprint and High Yield Pulp, while we manage through global logistic constraints, including the recent Montreal port strike. Turning to slide 10, on a consolidated basis, operating income improved $67 million from prior year to $55 million last as significant price improvements in lumber and commodity high purity cellulose contributed to the vast majority of the increase. Volume impacts were related to the lower newsprint volumes and logistic delays, while cost improvements helped offset non-cash costs in the corporate cost segment. Notably, the quarter reflects a $64 million book tax expense. There are a few key drivers of this high rate. Firstly, the company generated significant income in Canada during the quarter. Second, the company is required to recognize a double taxation for our Canadian earnings due to guilty taxes in the U.S. In Canada, NOLs are available to offset the amount, and RIAM does not expect to pay any cash taxes However, a smaller amount of taxes in the US could be payable, which will be applied against existing credit amounts. We are required to account for both of these amounts. However, we only expect to pay the smaller US portion. Second, we are unable to fully utilize our interest expense deductibility to reduce our US taxes, which increases our overall rate in this jurisdiction. While the book tax rate is high for this quarter, we expect to pay only minimal amount of tax in 2021 and still receive a substantial $50 million refund in the year. Lastly, driven by the strong results and despite seasonal working capital increases, liquidity improved $53 million to $268 million, while net debt fell to just below $1 billion. Along with the proceeds from the sale of lumber and newsprint, the company is well positioned to further reduce debt and make the strategic investments necessary to grow the core HBC business. With that, I'd like to turn the call back over to Paul.

Hey, thanks, Marcus. Turning to page 11, as announced on April 12th, we will be selling our lumber mills and newsprint facility to Green First Forest Products, for a purchase price of approximately $214 million, plus an additional $6 million related to a chip offset agreement. The purchase price will fluctuate based on the level of inventory delivered at closing, which we are currently assuming to be about $74 million. Eighty-five percent of the purchase price will be paid in cash, with the remaining 15 percent being paid in shares of green first, which has upside potential. It's important to note that RIAM will also retain all earnings of these businesses up until closing, which is not expected to incur until sometime in the second half of the year and is expected to provide a substantial amount of incremental value. RIAM will also retain all the rights to duties paid into the U.S. Department of Commerce up until closing, which we estimate will be around $110 million. In total, we've captured significant value for our shareholders in this transaction. As our investors know, the lumber business is very cyclical and the newsprint business is in secular decline. Just a year ago this time, all of these assets were shut down due to lack of demand. And we have stated that, you know, with an appropriate valuation, we would consider further portfolio optimization and divest the company of these businesses. Over the past three years, EBITDA has averaged $34 million for these businesses. Based on our $214 million purchase price, we are capturing an enterprise multiple of over six times through this cycle. We plan to use the proceeds from the sales of the lumber and newsprint businesses to both repay debt and invest in key strategic opportunities in our high-purity cellulose business, which over time has had higher margins that investors tend to reward with a higher enterprise multiple. As such, looking forward, on slide 12, the biofuture of Ryan will center around opportunities to leverage bio-based solutions out of our four manufacturing locations in Quebec, Georgia, Florida, and France, along with our world-class R&D centers. We are a leading manufacturer of cellulose specialties across all grades from acetate plastics used in craftsmen's screwdriver handles to cellulose ethers used in many food and pharmaceutical additives. We are also a producer of differentiated commodity products such as fluff, viscose, and lyocell, a more environmentally friendly textile. Additionally, we also continue to produce a unique, quality-leading Kalima-branded three-ply paperboard and a mechanical hardwood pulp. With tailwind supporting prices on our commodity products and strong demand for our cellular specialties, we are well-positioned to capture value with the upswing of the market. Turning to slide 13, we also have the ability to invest in our businesses to capture even greater value and help smooth out the peaks and values of commodity markets. These investments into our bio future will add to our product diversity and our financial growth. At the core of our manufacturing processes are our cellulose pulp products, but we know that much more can be done with these assets. We've already invested in producing lignosulfonates at each of our three softwood sulfite facilities in Florida, France, and Quebec. We've also invested in green energy projects in these facilities, including last year's new bioelectric turbine addition in Tartas. And we were exploring the opportunities for similar bioelectric investments in our Georgia facility. Other area of explorations are in our second-generation bioethanol as well as biomaterials such as natural prebiotics, which we believe can further diversify revenue streams coming from our assets and drive more value for our shareholders. Looking at page 14, as I noted at the beginning of the call, an additional investment into our bio future is the investment in Anamira, an entire new opportunity for growth. This investment provides a technology platform that expands our core competency of cellulose chemistry. Anamera produces the highest quality cellulose nanocrystals, sustainably sourced from our temiscamine cellulose specialties. These nanocrystals can be formed into a variety of building blocks, including microbeads, a biodegradable natural alternative for plastic cosmetic texturing powders, as well as products that can enhance performance properties in cement's paints and coatings, composites, adhesives, agricultural, medical, pharma, and life sciences. Anamara is headquartered in Montreal with a team of nearly 20 scientists and 17 patents, and is currently in the process of developing a specialty manufacturing facility on our property in Tamiskimene, which can produce over 500,000 kilograms of nanocellulose per year. Since 2017, we have invested a total of $8 million in Anamera through the end of this first quarter. RIAM is the largest shareholder with 44% voting interest, and we expect to make additional investments over the next five years. We are excited about the future of RIAM. Our reputation as the market leader in cellular specialties with differentiated commodities within fluff and viscous markets positions us well for the future. Our diverse assets allow us to service all the cellular specialties market segments, while our leading R&D platform and bio-future investment opportunities will further broaden our presence. We have proven that we can control cost and manage cash to drive stronger liquidity and a more flexible balance sheet. Now, if the market conditions are in our favor, we are well on our way to capitalize and grow our business. So with that, operator, let me open up the call for questions.

Thank you. At this time, we will be conducting a question and answer session. If you'd like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. Our first question is from John Babcock with Bank of America. Please proceed with your question.

Hey, good morning, and thanks for taking my questions. First, I just was wondering if you might be able to quantify the impact of the volumes lost associated with the freight challenges in high-parity cellulose. Apologies if I missed it, but if you could just kind of go through that, that would be helpful.

Yeah, hey, good morning, John. This is Paul. Look, we said that volumes were off a bit, and we didn't quantify that out there in a But we have had, and across the business, and I don't think we're unique in any way, a lot of logistical challenges, and a good part of that is related to logistics. We had the Port of Savannah actually defer a lot of product for us and everybody else who moves out of the second largest port there on the eastern seaboard. A lot of fog for a few days in February created a lot of backlog, so that was certainly an impact to our business. We also had, you know, issues with trucking and the availability of truck drivers. So we've had that hit not only our HPC business, but also our lumber and our high yield businesses as well. So kind of across the board, we think the challenges will ease up, but we still see in the second quarter delays as well. So it may take us to the third quarter, back half of this year to kind of get all that leveled out. And again, I don't think we're unique in that way across the industry or even outside our industry.

John, you most likely noticed that there was back-to-work legislation in Canada for the Montreal port, which is a good development, which speaks to Paul's comments where we should see some of that ease up.

John, as a benchmark on the volumes, we've guided the HPC volumes will be stable for the year with really an increase and a benefit in the mix towards cellulose specialties.

That's helpful. And so, based on that commentary, I mean, it sounds like, you know, you should get some of those volumes back in the second quarter. Is that kind of fair? You know, obviously, it sounds like, you know, trade challenge will continue to be a challenge, but, you know, it sounds like you're not losing these volumes necessarily.

No, we don't see the volumes going out of the year at all. I think we remain kind of, again, consistent with our comments last quarter that year-over-year volume should be stable. And we actually see at this point CS volumes potentially stronger than we had originally anticipated and up slightly from last year. Okay.

And then actually on that last point there, could you just talk about the demand trends you're seeing in commodity viscose and also cellular specialties with a focus on state meters?

Yeah, I think I got your question, John. Yes, for what we're seeing out there in demand on the CS as well as commodity side.

Yep, that's right.

Look, and Marcus made the comments on it. We're seeing good, strong demand in a lot of our markets for the CS. Acetate, probably a lot of that going into acetate plastics. Automotive-related products that we sell, right? Engine filtration media, tire cord. We're also seeing it in nitrocellulose, which goes into a lot of construction products and paints and coatings. So some good fundamental demand. We've had a lot of conversation with our customers around this. We think some of it certainly is just a catch-up on a bit on inventories. They got thin, but we actually see some real fundamental demand pull through on that. So hence our thoughts for the year that CS volumes will be up year over year. And then with Viscose and Fluffbulb, look, we're continuing to see very strong demand for those products. We've been commenting on the market pricing increases out there. And you'll probably note, John, our prices have lagged, and probably most people's will have lagged, the overall market, certainly fluff pulp. You know, the market price is up Q1 10% over Q4 for MBSK. And already in April, I think you see out there MBSK has pushed up about 19%, 20% relative to those Q1 prices. So we're probably a quarter behind that. So you're going to see some good, strong push up in our second quarter in fluff pulp prices. And similar viscose prices, which are a bit ahead of that already. I think we noted, you see in the last chart in our deck there, viscose prices up 34% in Q1 relative to Q4. This is just market index prices. Again, we're seeing April already up about 20% relative to those Q1 prices, and we're probably about a six to eight week to lag on that for us. So again, you're going to see a strong second quarter on our commodities for both fluff pulp and viscose. So the majority of our product is the fluff pulp.

Okay, that's great. And then next question I just had, and I think this is probably a relatively common question these days, but Overall, how are you thinking about the impact of inflation across your business through the remainder of the year?

Yeah, John. Marcus here. You know, we're seeing signs of inflation in a couple spots. Certainly some of the sulfur-based chemicals, energy inputs such as diesel fuel. So we're starting to see signs of that, and certainly that then migrates into the logistics supply chain as well. It's probably not as strong as some might have thought at the beginning of the year, but we are definitely seeing signs of it coming across our business units.

Gotcha. And so labor inflation, I mean, should we just assume that's off the standard kind of 2% to 3%?

Yeah, labor is certainly more tied to the labor agreements that we have in place.

So, Marcus, you know, it's a bit of a lag on those commodities, right, when it comes to inflation for our business. But, Will, you should see it coming through. We probably anticipated pretty muted inflation for the year originally, and maybe we're up kind of mid-single digits, you think, overall?

Yeah, that would be a good number, yeah.

Okay. All right. That's reasonable. And then just last question before I turn it over. You know, I was just wondering if you could – talk about any potential impact from some of the tax proposals that are making its way through Congress.

Yeah, we're keeping a sharp eye on that, John. You know, it's somewhat fluid still. There's moving parts. There's certainly the GILTI taxes that have been referenced that could present some additional tax leakage. But again, we feel good about our NOL position up in Canada and in the U.S., we still have some credits to mitigate any near-term impacts. But we're staying close to it. Okay, great. Thanks for the help. Thanks, Sean.

Thank you. Our next question is from Paul Quinn with RBC. Please proceed with your question.

Yeah, thanks very much. Good morning, guys. Listen, you guys referenced the strong pulp markets that we're currently seeing. Just wondering how this sets you up for – for your negotiations around the high purity business, and when do those negotiations start?

Paul, thanks for the question. Look, you know, we've said actually the last couple years that those weak commodity HPC markets are not typically helpful as a backdrop to our discussions in cellulose specialties. So, to your question, real gain in strength of those commodity markets is actually, I think, a helpful backdrop. Right now, we know that some of our competitors are far more advantaged to sell the commodities in this market than they are on selling cellular specialties. All that, I think, just fuels some tightness across the market, again, which we think would be a helpful backdrop that we haven't had for a couple of years. Those discussions usually kick off in earnest in the next couple months and, as you know, kind of kick into the fall time frame.

Okay, and then just on the sale of the lumber business as well, Denise Grimmel, you've got a 15% equity position in Green First. What are the restrictions around that, and what's your intention with that position?

Yeah, it's Marcus. Paul, so the rollover, you're correct. Think of 32 U.S. current exchange rates, that'd be about a $40 million rollover into... green first as equity. Again, we feel we're well positioned to participate in upside in the lumber market with that vehicle. And the nice thing is our fuse on the hold is measured in six months. So again, after that time period, we would be free to monetize it at our auction.

And as you're sitting now and looking at the lumber markets, I mean, obviously, their record high is well above past peaks. But is that something that you anticipate taking advantage of once the six-month holding period is up? Or is that something, do you think this lumber market's got some legs?

Look, we're going to watch it just like you, Paul. As Marcus said, I think there's some upside to that 15% that rolled over. And we'll gauge that and we'll monetize. We sold the assets with the plan not to be in that business in the long term. So that will be our plan. But we'll certainly make a play on the short-term opportunity to ride the lumber market out as long as it stays strong. Everything we see out there, it's going to be strong for a while. So we're really excited. We're actually excited for green first products. It's a great way for them to start off. As we noted, that transaction will come to completion in the back half of this year, so we're going to have a good opportunity to capture a lot of the value that's created in 2021. And then, again, we'll be able to ride some of the upside in green first, and we'll just have to make the call at the time.

Okay, fair enough. And then maybe just any other portfolio changes that you're anticipating with the businesses that you're currently in?

No, look, we feel like we've executed what we wanted to execute. When we entered this transaction, we made that very clear that we were really into and focused on the HPC assets of Tembeck. We said that over time we'd evaluate opportunities to do that when the market's right. I think we got some feedback of why not now and why not then. And, again, I think it's all around doing it when the market's at strength and we see the market at strength. We like the additional businesses in there, and as you know, they're connected, the paper board and the high-yield pulp and temiscamine. And so we anticipate being longer-term owners of all these assets. So I think we're in good shape right now, Paul. Now we've just got to really leverage what we have, invest back in them, let's get the most out of them that we can, and that's why we're talking a lot more about the bio future and expanding our portfolio going forward into sustainable biobased products.

Great. That's all I had. Thanks very much, guys. Thanks, Paul.

Thank you. Our next question is from Roger Spitz with Bank of America. Please proceed with your question.

Thanks very much. Of the $182 million U.S. basis cash sale proceeds, how much do you expect to use to repay debt, and do you have a view of which debt you would go after with that?

Yeah, good morning, Roger. It's Marcus. As you know, within the senior note facility that we negotiated recently, we have a option for $150 million pay down within that credit facility. So certainly, we built in that flexibility. We would see that as a natural place to allocate a pay down. But again, we'll evaluate as we get to a closing what the best option is based on where the markets are. But certainly we have that flexibility for us.

Got it. And can you disclose, I guess at some point you will be anyway, what Newsprint's Q120 and Q121 sales and EBITDA is so we can get our LTMs right on the pro forma?

Roger, we put a schedule In the back of the investor deck, page 22, that sets out both the lumber and the newsprint EBITDA figures for those three-year periods. Yep.

And do you expect to pay any cashes payable on the sale of the lumber newsprint business?

Sorry, do we expect to pay? I didn't get that.

Cash taxes.

Will there be any cash taxes? Very little tax leakage. We estimated, you know, call it in the range of under $10 million. And we're fortunate to have our NOLs in Canada to help offset any leakage in Canada. And then in the U.S., we have some credits. So very little leakage is what we're expecting.

Okay, and then a couple last ones on cash flow. Last call, you expected 2021 CapEx of 85 to 90. Obviously, that probably depends on the timing of the sale, but any update on that and what a 2022 CapEx might look like?

Well, you heard Paul's comments, right? With us refocusing the portfolio, we would then be focused on the right level of custodial capital to maintain the reliability of our HBC assets. So, you know, previously we said 85 to 90 million on a net basis. You saw in the first quarter we were 20, including some strategic capital. I would certainly see us looking in the range of 100 million to maintain custodial CapEx.

Last for me, and ignoring the $10 million tax leakage on the sale or less than $10 million, last call you expected 2021 cash tax inflow of $55 million. And you made some earlier comments on cash taxes in the prepared remarks. But I'm wondering, should we still think of that being $35 million excluding the sale tax leakage?

Yeah, the... Roger, we still envision the CARES Act refund, which is 33, and then we'll couple that with 17 to come in at around 50 now. We've reclassified a portion just based on some further audit work that's ongoing, but we still feel good about the 50 million in the back end of this year.

Thank you very much. Thanks, Roger.

Thank you. Our final question is from Paritas Mishra with Barenburg. Please proceed with your question.

Thank you. Good morning, everyone. So starting off, maybe a follow-up on the earlier question on CS pricing for next year. I just Maybe I wanted to focus on the volumes because in your CS business, you have multiple customers, different contracts. So I guess the volumes that is coming up for renewal or price reset next year, those volumes change. Is there any sense you could give us as to how much volume might be up for a reset as we enter 2022?

Paritosh, I don't think we have that out there, and I don't know that that's something we want to put out there right now. Obviously... We have some of our business that comes up for renewal. I don't think this coming period of 2022 is anything more substantial than what we've seen over the last few years, so I think it's in line. So, yeah, I think it's a pretty, I think, typical rollover type of year. We've got a lot of contracts in place for multiple years, and we do have a bit of volume up for discussion coming forward, but I think it's all in the range of what we've seen in the last handful of years.

Got it. That's actually very useful. And then switching to ChemSilk opportunity, I guess any update in that live cell market in recent months that's worth sharing? And longer term when this becomes a bigger opportunity, how should we think about the pricing? Is that something that we priced at a premium to Viscose? Or what kind of discussions are you having on that?

Yeah, look, that market, like most textiles, was pretty significantly impacted by COVID-19. And we saw that. We saw a lot of the Lysol assets in Asia slow down or shut down. I think they even dipped down to probably a 50%, 55% capacity there for a while, paradoxically. A lot of that looks like it's coming back on nicely. It's probably behind the viscose market a bit. But moving forward, our customers in that area are still very optimistic about the five-year growth plan, and most of them are still all combined. When we put it together, we're still looking at a 300,000 to 500,000 ton type of growth opportunity out there. Obviously, we've got our sights on that. Some of our competitors have our sights on it. We've got a really nice softwood product that feeds into that market, so we're optimistic about that business going forward. And with that, we think our product will be priced at a premium, and I say probably most products. It takes a more specialized fiber to feed into the Lyocell market than it does into the general viscose pulp markets. So, as we look at what capacity we have available, and let's just say broadly for the viscose market, and keep in mind, as I already said, we got a good amount available for the fluff pulp market. We would take a look at driving that TempCell business, and then the balance would be remaining into the general viscose market. But also keep in mind that, you know, we have a softwood set of products. And I know there's been some notes out there that there's more capacity coming into dissolving wood pulp in the viscose market. They're all from the southern hemisphere. Almost all of that is hardwood. We've got a nice softwood product. And as that hardwood demand moves into the market, supply moves into the market, the demand for a softwood product is going to continue to be increasing. And we think at a premium over that hardwood. So we think either way, whether it's TempCell or just general viscose, with our softwood product, we're in a good spot to serve the market at approval.

And did you currently have capacity to make this much volume, like 300,000 to 500,000 tons? How does it compare with your current viscose capacity?

So we don't have the capacity at this time to do 300,000 to 500,000 tons. We're saying that's what the overall market demand looks like over the next five years. What we've talked about, this product, Temselc, is being made in our Tamiskameen facility. And we have said that we could see up to and including the majority of our production in Tamiskameen at some point being made to produce a Temselc-type product. So that's kind of how we're framing it right now. Paritasha, if that helps you, and that facility is you know, has the potential capacity or the boilerplate capacity of, let's just call it, you know, 140,000, 150,000 tons in that range. And we could see, you know, the majority of that growing into the market for Tencel and Lyocell.

Thanks, Paul. That's very clear now. And maybe a last quick one for Marcus. The corporate cost, which was, I believe, $13 million in Q1, How should we think about that as we go into the second half and when this transaction closes?

Yeah, Paritosh, we do have some, not seasonality, but lumpiness to the corporate cost of the side there. But think of $11 to $12 million a quarter on the corporate side. We would challenge ourselves to... you know, optimize our corporate costs due to the transaction. But it's not going to be a step change. It's going to be an optimization on that run rate.

Got it. That makes sense. Thanks, guys. That's all I had.

Thank you.

Thank you. Ladies and gentlemen, we have reached the end of the question and answer session. I will now turn the call over to Paul Boynton for closing remarks.

Now, hey, thanks, everybody, for your time today. With the current market tailwinds and significant opportunities we see to reinvest in our business, we're excited about the bio future of Rainier Advanced Materials. So, again, thank you for your time, and have a good day.

This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation, and have a great day.