Rayonier Advanced Materials Inc.

Welcome again to RIAM's second quarter 2024 earnings conference call and webcast. Joining me on today's call are Delisle Blomquist, our president and chief executive officer, and Marcus Bultner, 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, RIAM.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 are also referenced on slide two of our presentation materials. Today's presentation will also reference certain non-GAAP financial measures, as noted on slide three of our presentation. We believe non-GAAP financial 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 20 through 25 of our presentation materials. And now I'll turn the call over to Delisle.

Thank you, Mickey, and good morning. I'll start with a financial overview for the second quarter of 2024. After that, I'll outline recent company actions before handing over to Marcus, who will provide more details on the business segments, capital structure, and liquidity. Following Marcus's remarks, I'll return to discuss our ongoing initiatives and updated guidance for 2024. This will include updates on the progress towards suspending operations at our Temiscamingh HBC plant and brief comments on the sales process of our paperboard and high yield pulp businesses. We will then open the floor for questions. Let's turn our attention to slide four, where we'll discuss our strong second quarter performance. Adjusted EBITDA reached $68 million, a $41 million or 152% increase from the same quarter last year. In the high-purity cellulose segment, EBITDA improved by $38 million or 136%, driven by higher sales volumes for cellulose specialties, decreased costs for key inputs and logistics, and improved productivity. Additionally, this quarter's results included a $5 million benefit from a Canadian wage subsidy received during the COVID pandemic, but was recognized during this quarter due to the completion of the government audit of the benefit. The paperboard segment experienced a $5 million or 50% increase in EBITDA, driven by higher sales volumes, lower costs for purchased pulp, and a $2 million benefit from the Canadian wage subsidy. These gains were partially offset by lower sales prices. In the high-yield pulp segment, EBITDA rose by $1 million, primarily due to reduced logistics and chemical costs, along with a $2 million benefit from the Canadian wage subsidy. However, these improvements were largely offset by lower sales prices and volumes. Corporate expenses increased by $3 million, driven by higher costs related to the ERP projects variable compensation, and discounting and financing fees to support our working capital initiatives. These were partially offset by our favorable foreign exchange impact. In summary, the overall performance was driven by strong results in our core cellular specialty segment as we continued to pivot our mix to more specialty production and sales and focused cost reduction across the enterprise, which more than compensated for softness in some of our commodity businesses. Last quarter, we announced a significant transaction to monetize our lumber duty refund rights for $39 million. I'm happy to report that we finalized that transaction in June and have received $39 million as expected. This was reflected in our strong year-to-date pre-cash flow generation of $69 million. The process to indefinitely suspend operations at our Temiscaming HBC plant remains on track. Under current market conditions, the suspension is yielding positive EBITDA benefits and enhanced our consolidated free cash flows. Considering these updates and our strong performance in the first half of the year, I am pleased to increase our full-year EBITDA guidance to $205 to $215 million and to raise our full-year adjusted free cash flow guidance to $100 to $110 million. With that, I'll hand it over to Marcus to walk us through the financials for the quarter.

Marcus. Thank you, Delisle. Beginning with our HPC segment on slide five, quarterly sales increased by $32 million, or 11% to $332 million. Overall, HPC pricing increased 5%, reflective of a higher mix of CS products, whereas total sales volumes increased by 5%. resulting from a 25% increase in CS sales, partially offset by a 13% decrease in commodity sales. EBITDA margins in the HPC segment reached 20%, demonstrating the success of our initiatives to enhance product mix and prioritize specialties. The rise in CS sales volumes was supported by the closure of a competitor's plant in late 2023, the continued muted recovery in ether sales, and bridge volumes from the indefinite suspension of the Tomiskaming HPC plant. Other sales for the corridor were $23 million, which included $13 million of green energy sales. EBITDA for the HPC segment rose by $38 million to $66 million, primarily due to an enriched mix of CS sales previously noted and the benefit of decreased costs for key inputs and logistics, along with the impact of improved productivity. This quarter's results also included $5 million for the SEWS benefit. Turning to slide six, sales in the paperboard segment increased by $12 million, driven by higher sales volumes. EBITDA for the segment improved by $5 million, reaching $15 million, primarily as a result of increased sales volumes and the benefit of decreased purchase pulp costs. In addition, the segment included 2 million for sous. Turning to the high-yield pulp segment on slide 7, sales declined by 11 million in comparison to the prior year, reflecting a 25% drop in sales volumes and a 9% decline in sales prices due to overall reduced demand and the impact of market supply dynamics in China. Segment EBITDA improved $1 million to $2 million as compared to the prior year quarter. The quarter's results also included a $2 million benefit for SEWS. Transitioning to slide 8, consolidated operating income for the quarter amounted to $28 million, reflective of a $35 million improvement versus the second quarter of last year. This positive change was primarily driven by improved product mix favoring HPC CS grades, which more than compensated for lower sales prices. The increased sales volumes in CS and paper board were partially offset by reduced sales for commodity HPC products and high-yield pulp. Other cost benefits, including the impact of favorable foreign exchange rates and a $10 million SUSE benefit contributed to improved results. These positive gains were partially offset by higher costs to support the company's ERP project, increased variable compensation, as well as discounting and financing fees incurred to support working capital initiatives. Now let's turn to slide 9. Gross debt ended the quarter at $795 million, a reduction of $44 million from the same period in 2023. Net secured debt, as reflected in our financial covenant ratio associated with the term loan, ended the quarter at $659 million. Net secured leverage reduced further and closed the quarter at 3.4 times, well within the covenant test. Liquidity remains strong at $260 million, reflecting $114 million of cash, $135 million available under our ABL facility and 11 million from our French factoring facility. Year-to-date capex totaled 58 million, with 28 million allocated towards strategic capital to support the startup of the Tartas bioethanol project and the implementation of our upgraded ERP system. Net of financing, strategic capital reached 17 million. Currently, all planned major maintenance outages for 2024 have now been completed. And additionally, as Delisle mentioned, we successfully completed the sale of our duty refund rates for 39 million. Overall, our liquidity remains strong, positioning us well to achieve our targeted $70 million debt reduction this year. We are actively pursuing the refinancing of our senior notes before going current in January of 2025 and expect the company's improving business performance and enhanced credit metrics will enable the company to complete the refinancing by year end. With that, I'd like to turn the call back over to Dilal.