Rayonier Advanced Materials Inc.

Good morning, and welcome to the Ryan Third Quarter 2025 Earnings Conference Call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be open to 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. Thank you, Mr. Walsh. You may begin.

Good morning, and welcome to RIAM's third quarter 2025 earnings conference call. Joining me on today's call are Delisle Blomquist, our president and CEO, and Marcus Maltner, our CFO and senior vice president of finance. Last evening, we released our earnings report and accompanying presentation materials, which are available on our website at RIAM.com. These materials provide key insights into our financial performance and strategic direction. During today's discussion, we may make forward-looking statements subject to risks and uncertainties that could cause actual results to differ materially. These risks are outlined in our earnings release, SEC filings, and on slide two of the presentation. We will also reference certain non-GAAP financial measures to offer additional perspective on our operational performance. Reconciliations to the most comparable GAAP measures can be found on our presentations and our presentation on slides 27 to 30. We appreciate your participation in today's call and ongoing interest in RIAM. I will now turn the call over to Delisle.

Well, good morning, everyone, and thank you for joining us. Before Marcus walks through the financial results for Q3, I want to cover five topics today. First, our updated 2025 bridge and guidance. Second, recent developments in tariffs and trade. Third, our progress resolving the operational challenges we experienced earlier this year. Fourth, the work underway at Temiscaming to restore profitability and position the site for divestiture. And finally, how we're executing to the plan that increases our EBITDA to over $300 million as we exit 2027. 2025 has been a challenging year for Ryan. In response to the extraordinary headwinds, we have focused squarely on strengthening the company's cash generation, enforcing capital investment discipline, and protecting our core cellular specialties franchise. I believe that this approach is working, and that our third quarter results reflect the normalization of our core business and the continued progress across the strategic plan. Now let's move to slide four. Full-year adjusted EBITDA guidance is now $135 to $140 million, refined from our prior $150 to $160 million range. The change is primarily driven by proactive downtime of our non-core paperboard and high-yield pulp production during the holiday season to monetize inventory and protect cash given the weaker paperboard markets. We also are experiencing increased market weakness in the business but this negative was largely offset by FX tailwinds in the quarter. We also faced increased headwinds to our fluff business, primarily due to the U.S. fluff industry exports to China being displaced by the China 10% tariffs and creating increased competition into non-China markets. The cellular specialties business performed near expectations and returned to normalized EBITDA margins in Q3. Turning to slide five, please note that, importantly, there are still zero tariffs on our cellulose specialties and dissolving wood pulp products into China, zero tariffs on U.S. sales to the EU, and zero tariffs on Canadian imports into the United States. Though direct tariff impacts have stabilized, we continue to work through the 10 percent tariff on our fluff products into China. We're collaborating with customers and adjusting geographic mix as part of our mitigation strategy. We're also developing a dissolving wood pulp fluff product that would avoid this China tariff. Our technical team is working to refine this new product to reduce unit production costs. Major development in Q3 was the US ITC's preliminary affirmative injury determination and the ongoing anti-dumping and countervailing duty investigations covering Brazilian and Norwegian dissolving pulp imports. This determination allows the Department of Commerce to move forward with its investigations with preliminary duty determinations expected in early 2026. As a reminder, an estimated 190,000 tons of specialty-grade estate pulp are imported into the U.S. from Brazil each year. and about 5,000 tons of ether's pulp are imported from Europe. So this case matters. It's a significant step toward a fair level playing field for US producers of high purity specialty cellulose pulp. Overall, we now believe that trade conditions are generally trending in our favor as we move towards 2026. On slide six, The isolated operational challenges we've discussed previously are stabilizing. In Q3, operational challenges at TARDIS continued, including French national strikes that adversely affected TARDIS. These were not RIAM-specific strikes, and the RIAM team did an outstanding job keeping customers supplied. As mentioned last quarter, we were understaffed in key technical roles at TARDIS. Since June, we filled most of the open key positions via new hires, including the transfer of a couple of technical managers from Temiscamine, and expect all key positions to be filled by year-end. Jessup and Fernandina are performing to expectations. Slide 7 outlines the actions underway at Temiscamine. 2025 has been a difficult year for the paperboard and high-yield pulp business. We now expect an EBITDA loss of about $14 million compared with historical profitability of roughly $30 million. The decrease in 2025 guidance is due primarily to lower paperboard prices and volumes due to new U.S. capacity, and our plan to idle the paperboard line and one of the two high-yield pulp lines for three weeks in the fourth quarter to improve working capital and cash flow. Our plan to return the temiscaming site to historical profitability is focused on four key initiatives. First, reducing temiscaming costs by approximately $10 million. This initiative has been fully implemented through utility contract improvements and benefits derived from high return strategic capital investments. Second, improving the paperboard's line OEE by approximately $10 million in 2026 as a result of fewer economic shutdowns, great optimization, and enhanced maintenance reliability. Further upside of $5 million is expected to be realized in 2027 as supply and demand normalizes, resulting in no economic production shutdowns. Third, Advancing the commercialization of new product development to generate an estimated $10 million in 2026 EBITDA and another $5 million in 2027. The new freezer board grade has been qualified and launched in Q3, and orders are being secured. The roll softwood high-yield pulp qualification trials are advancing well with potential customers, and the oil and grease resistant board trials will begin this quarter. Additionally, we are developing another new product, a high-yield pulp wrapper product that is in testing, which we will believe will deliver 2026 cost savings and potential for new market entry. And fourth, we're in active negotiations with U.S. customers affected by the 15% tariff on EU board imports and participating in an AFRI-led study evaluating strategic options for all the assets on the site, including the currently suspended HPC line. We recently responded to an opportunistic inquiry about temiscamine, so there is current interest in the business. As we restore positive profits and cash flow to temiscamine in 2026, and once the USMCA free trade review is completed in July of 2026, We believe we can divest the site at a fair value. Turning to slide eight. Starting from our normalized EBITDA baseline, we've updated our plan to double our EBITDA from our current guidance over the next two years. I will walk through each step and provide an update on how we're progressing. On the pricing front, we believe that we're tracking ahead of plan. We are targeting a significant price reset to reflect the inherent value of our cellular specialty products, which we believe requires recapturing lost value from prior years' inflation. Our cost, the $30 million reduction program for 2026, is almost fully implemented. And as upside, we are now working on a $20 million of EBITDA benefit for 2027 that would be derived from strategic capital projects. From a specialty commodity sales mix standpoint, we are increasingly confident that we will realize the $30 million in EBITDA growth for margin improvement. I will expand on why in a moment. Finally, our biomaterials projects are progressing, and I'll cover this progress in more detail in a couple of slides. In short, our strategy remains firmly intact. and we have a clear line of sight to achieving our 2027 run rate target. Slide 9 expands on the pricing and market fundamentals for our core business. We are highly confident that Ryan is in a strong position to realize a significant price reset for his cellular specialty products. We believe that the market is conducive to capturing product value because industry capacity utilization is over 90%, with no expected major capacity additions before 2029. RIAM holds most of the excess cellulose specialty capacity. And then industry is highly concentrated with RIAM and two other producers accounting for roughly 80% of the global cellulose specialty capacity. This is important because we're making a strong push on 2026 cellulose specialty pricing. i.e., pursuing a meaningful reset beyond prior year increases to reflect the value of our high-purity products, which requires us to recapture lost value from inflation that has increased nearly 35% faster than our average cellulose specialty pricing since 2014. We also continue to capture the opportunities to enrich our sales mix towards specialty cellulose, We are on track to re-qualify Temiscaming CS volumes to generate $5 million of EBITDA in 2026, with two customers already qualified and a third expected by year-end. We also remain highly confident we will generate $20 million in EBITDA over the next two years via specialty margin enhancement versus commodity sales. This objective will be driven by organic growth across cellular specialty markets supported by RIAM's outsized share of available excess capacity and potential upside to the plan from increased cellulose specialty volumes following Georgia Pacific's Memphis facility closure, which produced an estimated 10,000 to 20,000 metric tons of cotton, linen, or pulp grades that go into cellulose specialty applications. Finally, we continue to expect to realize $15 million of additional EBITDA when ether demand in the EU returns to historical levels. which would also be upside to our plan. On cost, $24 million in strategic investments made this year will generate $20 million in cost reductions at our HPC plants in 2026. We also are taking action to reduce corporate costs by $10.5 million, including eliminating lightly used medical benefits, increasing management span of control, reducing clerical roles via automation, and terminating non-employee technician and professional contracts. We are also working on an upside to this cost improvements initiative. We are actively working on projects at the HPC plants to generate another $20 million in EBITDA for 2027 and believe that we can take out another $4 to $6 million in corporate costs via AI and automation over the next two to three years. On slide 10, I highlight the progress we are making on our biomaterial projects. The Altamaha Green Energy, or AGE, project is a $500 million 70 megawatt renewable power project to be based at our Jessup facility. RIAM will own 49% of this project. Recent progress includes reaching agreement on the EPC contract in September, and receiving our air permit in October. The joint venture is now focused on reviewing project financing options, after which the project will move to its FID. Ryan will invest $46 million of equity to realize an annual proportional EBITDA of $50-plus million. Assuming a utility valuation multiple, This project is expected to generate a 12x ROI on RIAM's equity. The $64 million Bionova Fernandina Beach second-generation bioethanol project is expected to generate $15 million of annual proportional EBITDA for RIAM in return for $6 million of RIAM cash equity, generating a 19x ROI ROI on RIME equity assuming a comparable multiple. Funding is secured, the air permit has been approved, and engagement with the City of Fernandina Beach has begun with respect to a potential settlement on the land use application. The U.S. Bionova CTO project will produce about 13,000 tons per year of CTO from feedstock primarily sourced from our Jessup and Fernandina plants. Engineering for the project is complete. That incorporates a high-quality used CTO plant that we acquired for $350,000 in September. Commercial discussions are advancing, and we expect to file the air permit application by the end of November. This project is expected to generate $6 million of annual proportional EBITDA per year on a total capex of $9 million, much of which ryan will contribute less than two million dollars of equity using a comparable market valuation multiple this project is expected to generate a 16 x roi on ryan's equity the european bionova cto tolling project is small but requires no ryan equity we'll supply feedstock from our tardis plant to a third-party toller which will generate approximately $1 million of annual proportional EBITDA. And finally, the prebiotics project at Jessup is one of the more exciting projects in the Bionova portfolio. As a result of exceptional efficacy results that show that our product delivers significantly higher weight gain and feed conversion performance in poultry than competing alternative feed additives, We are redesigning the plant to a smaller modular footprint that can scale up with demand growth due to lower initial dosing requirements. We've also signed a commercial sales MOU with a feed additives manufacturer for U.S. poultry and swine feed applications. While the redesign may extend this project's timeline, this is a positive adjustment. The trial data confirmed our product's superior performance And as a result, we believe meaningfully expands the commercial opportunities ahead. Across all these initiatives, RIAM demonstrated its ability to recycle capital into high return projects due to low capital intensity, attractive project capital, and repeatable outside investment returns. Slide 11 explains why we can do this. The crux of these opportunities is RIAM's extensive and unique asset base. The noted biomaterial projects will be located at existing RIAM cellulose fiber plants, where the infrastructure, utilities, raw material sources, and site management are already in place. Thus, RIAM's asset base anchors our ability to scale new biomaterial projects efficiently. We also believe that replicating this asset base would be prohibitively expensive, thus it is unique to RIAM. As a case in point, the replacement value of Jessup alone is estimated to be over $4 billion. So we believe that RIAM is uniquely positioned to pursue such opportunities as very attractive ROIs on equity invested. The technical and market viability of most of our projects are already proven. Prebiotics isn't the only opportunity that would be new. We are therefore taking the necessary steps, including animal feed trials and resizing the plant to mitigate the market and capital risks for this project. The project that I summarized on the previous slide will generate high returns and very profitable growth through 2028-2029. For the 2030s decade, we are investigating promising opportunities today and biomaterials and bioenergy to provide profitable growth. For example, we are currently conducting due diligence with Grand Bio for a pilot-scale ethanol-to-jet plant at our Jessup facility. If this due diligence concludes that such a project would be successful, we will then proceed to construction, which would be fully funded by a DOE grant. We've also signed an MOU with Verso Energy to evaluate ESAF production at Jessup and Tardis that will align with the EU decarbonization mandate starting in 2030. Just yesterday, we were informed that Verso Energy's project at our Tardis plant was selected by the EU Commission for its Innovation Fund and will receive a $37 million grant towards the construction and commissioning of the Tardis ESAF project

after a final investment decision was made.

Turning to slide 12, I'd like to close with three points. First, our near-term issues are mostly behind us. The terrorist situation has stabilized and the extraordinary operational challenges, except maybe those challenges tied to political turmoil, are resolved. Second, the underlying fundamentals of our strategy remain intact, and our EBITDA enhancing initiatives are advancing. The core business is performing to expectations with a significant 2026 pricing reset being pursued. The $30 million in structural cost targets will be delivered for 2026, and we're now working on a further 20 to $25 million plant and corporate cost reductions for 2027. Our confidence continues to build that organic growth across cellular specialty markets will further expand EBITDA margins by $30 million over the next two years. The demiscaming turnaround efforts are effectively underway, and our biomaterials portfolio continues to progress. Third, Ryan valuation remains compelling. We believe that an up to five times upside to the stock price for our shareholders would be implied by the comparable double-digit valuation of our competition in a recent transaction on our targeted 2027 $300-plus million run rate EBITDA. 2025 has been a challenging year, but we are getting through it with our strategy intact. Our core is solid and performing, and our growth initiatives are advancing. We remain confident in the path ahead and focused on execution on this plan for our shareholders. With that, I'll hand the call over to Marcus to take us through the Q3 financial highlights.

Thank you, Delisle. Let's now turn to slide 13, which summarizes our third quarter 2025 financial highlights. In the third quarter, revenue was $353 million, down $48 million year over year. Operating income was $9 million. an improvement of $26 million compared to the prior year. Adjusted EBITDA was $42 million, a $9 million decrease from Q3 2024. And adjusted free cash flow year-to-date was negative $83 million, driven by working capital timing that is expected to improve in the fourth quarter. The primary drivers of the EBITDA change this quarter can be summarized with the following highlights. In paperboard, Earnings decreased by approximately 10 million, reflecting lower sales volumes and pricing from tariff uncertainty, competitive EU imports, and new U.S. capacity, along with higher fixed costs from market-related downtime and the allocation of Tamiskaming net custodial site expenses. In high-yield pulp, earnings declined by approximately 10 million due to continued oversupply in China, and higher fixed costs resulting from market downtime. And in cellulose commodities, earnings increased by $7 million, driven by stronger fluff pricing, improved mix, and the absence of prior year impairment and suspension charges. Given these weaker than expected results in our non-core business, we have now refined our full year 2025 adjusted EBITDA guidance to a range of 135 to $140 million, implying $25 to $30 million of adjusted free cash flow for the fourth quarter. Let's now review our segment results, beginning with cellular specialties on slide 14. Quarterly net sales for CS were $204 million, down $28 million, or 12% from the prior year. The decline was driven by a 17% decrease in sales volumes partially offset by a 7% increase in average sales prices from negotiated price actions and improved mix. Operating income was $49 million, compared to $46 million in the third quarter of 2024. The improvement was driven by higher average selling prices, lower fixed costs related to the تمiscaming cellulose indefinite suspension, and a $7 million energy cost benefit from the sale of excess emissions allowances, partially offset by lower volumes, higher operating costs, and the impacts of national labor strikes in France. Adjusted EBITDA was 66 million compared to 65 million last year, with margins increasing to 32% from 28%. Turning to slide 15, quarterly net sales for biomaterials were 8 million, flat compared to the prior year. Higher turpentine volumes were offset by lower bioethanol sales volumes caused by temporary feedstock constraints and labor disruptions at Tartas. Operating income was $1 million compared to $3 million in the third quarter of 2024, reflecting higher shared and ancillary service costs. Adjusted EBITDA was $1 million compared to $4 million in the prior year, with margins of 13% versus 50% in Q3 of 2024. Turning to slide 16, quarterly net sales for cellulose commodities were $85 million, down $1 million, or 1% from the prior year quarter. A 2% decrease in volumes, mainly due to the prioritization of production towards cellulose specialties and the absence of tomiscuming sales volumes following the indefinite suspension, was largely offset by additional viscose sales as part of inventory and cash management efforts and an 8% increase in average selling price driven by higher fluff pricing and mix improvement. Operating loss was $13 million compared with $55 million last year. The improvement reflects the absence of a $25 million non-cash impairment charge and $7 million of indefinite suspension costs recorded in the prior year combined with higher selling prices lower fixed costs following the indefinite suspension of temiscaming cellulose operations, and improved cost performance. Adjusted EBITDA was negative $3 million compared to negative $10 million in the prior year quarter. Let's now move to slide 17, which covers our paperboard segment. Quarterly net sales were $39 million, down $16 million, or 29% compared to the prior year. Average sales prices decreased 10%, and sales volumes were down 21%, driven by mixed shifting customer dynamics associated with tariff uncertainty and increased competitive activity due to EU imports and the startup of new US capacity. Operating loss was $4 million compared to operating income of $7 million in the prior year quarter. The change was driven by lower sales, higher fixed costs for market downtime, and the allocation of temiscaming net custodial site costs partially offset by lower purchase pulp costs. Adjusted EBITDA was $1 million compared to $11 million in Q3 of 2024 with margins of 3% compared to 20% in the prior year. Turning to slide 18, quarterly net sales for high yield pulp were $24 million down $4 million or 14% compared to the prior year quarter. Average sales prices declined 10% and volumes decreased 8%, reflecting weaker demand, oversupply in China, and shipment delays to customers in India. Operating loss was $10 million compared to break-even results in the prior year. The decline reflects lower sales, higher fixed costs from market downtime, and the allocation of net custodial site costs. Adjusted EBITDA was negative $9 million compared to positive $1 million, in Q3 of 2024, with margins of negative 38% compared to 4% last year. Slide 19 provides an overview of our balance sheet and liquidity. We ended the quarter with $140 million of total liquidity, including $77 million of cash and a net secured leverage ratio of 4.1 times within the five times covenant threshold. During the quarter, we experienced working capital outflows across receivables, payables, customer rebates, and inventory, which pressured free cash flow. These outflows also reflect temporary inventory management actions by a large settler low specialties customer that affected order timing. We expect working capital levels to normalize as we progress through the fourth quarter and as sales volumes increase. We remain focused on driving working capital efficiency and improving cash flow generation. For the full year, we expect adjusted EBITDA in the range of $135 to $140 million and positive free cash flow in the fourth quarter as these timing effects ease. In addition, we have $40 million of committed green debt available to support the execution of our biomaterials portfolio as the projects move forward. The company will also look to proactively pursue a refi in 2026 to lower interest expense by leveraging Ryan's expected stronger operating performance and potentially lower debt as a result of the targeted divestment of Temiscamingue. With that operator, please open the call for questions.

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing star keys.

One moment please while we poll for questions. Thank you. Our first question comes from the line of Daniel Harriman with Sidoti. Please proceed with your question.

Thank you so much. Hey, guys. Good morning. Thank you for taking my questions. I just wanted to hit on two in the beginning, one for Delisle and one for Marcus. Delisle, just going back to the paper board and high yield pulp assets, can you just talk again, I know you went through it all, but what specific operational and financial milestones Do you think you need to achieve in 2026 to make those assets viable for a sale? And then Marcus, you know, you touched on this at the end of your comments, but with leverage at 4.1 times, can you just talk a little bit about how you're thinking about refinancing and repricing opportunities considering that the debt is callable in 26? And then what level of EBITDA would give you comfort that you can regain full balance sheet flexibility? Really appreciate it, guys. Thank you.

Good morning, Daniel. This is Delisle.

I'll see if I can address your question on the paperboard and how you'll pulp business. The way I would look at it is that before I can sell it, there's two gating items that we have to get past. One is the USMCA renewal that is under negotiations right now between the three governments. Let's say that that gets done by the deadline, which should be around July of 2026. I don't think there'll be any interest on anybody's part in terms of buying those assets until we get to that point. The other gating item is that I believe that the business needs to get back to positive EBITDA and positive cash flow. And I outlined... four different things that we're pursuing to make that happen. I would say two of them are high probability or locked. One is the cost reduction, which is largely locked and given the activity we've already done. The other is the OEE or the paperboard plan, which has been demonstrating significant improvement over the past couple of months and we expect to continue to do so as we go into 2026. The last element I would say is really big is really the new product development and the uptake of those new products into the market. So to get to a positive EBITDA, I need all three of those elements. And so really the last critical element that needs to fall in place is the successful commercialization of those new products, which we should start seeing in the first quarter and second quarter of 26. So once I get to a positive EBITDA, positive cash flow, and we get past the negotiations on the USMCA, I think at that point we've got an asset now that's attractive and we'll be able to dispose of it.

Good morning, Dan. Thanks for your question. Yeah, as you mentioned, the term debt becomes callable in May of next year. and there's a 2% takeout premium, right, which falls to 1% in November. I think the key here is, you know, as we've gone through the materials, navigating these transitional headwinds and then demonstrating that this business should return to historical levels of EBITDA, right? We actually did last year at $50 million quarters. And when we demonstrate that kind of cadence, we'll anniversary some weaker quarters that we had this year, and get our LTM back up over the $200 million level. That certainly is going to give us a better leverage profile to be out in the marketplace, and then continue to tell our story on the backdrop of all the positive items Delisle mentioned in his review, and look to do the break-even on a refi. We certainly see a line of sight where we can take a measurable amount of interest out of this business at that time.

Thanks so much, guys. I appreciate it. Does that answer your question, Daniel? Yes, it does. Thank you. All right. Thank you.

Our next question comes from the line of Nick Tour with Black Root Capital. Please proceed with your question.

Hi, Delisle. I just wanted to hone into a point that you have on slide nine, which says that As we kick off 2026 cellular specialties pricing discussions, we are targeting a significant reset beyond prior year increases, reflecting the value of our products and recapturing lost value for prior years inflation. Could you give me a little bit of color on how much value has been lost from prior years inflation as you head into these negotiations next month? or this month. And, you know, what does, what is baked currently into your guidance? And what is the impact of, you know, 1% increase in pricing over your cost inflation?

Okay. Well, good morning, Nick. I know it's early over there in the West.

Yes.

Certainly appreciate you getting up early. I certainly appreciate you getting up early to participate on the call. Questions you ask, I'll see if I can try to answer it, each of the different components, starting off with just kind of a rule of thumb on a 1% increase in pricing. It generally generates a $8 to $9 million increase in EBITDA when we talk about increasing our CS pricing by 1%. Okay. So you take that, and as I stated in the presentation, since 2014, the inflation has increased 35% more than the average pricing for our CS products. So if you take 8% or 9% for every 1% increase in pricing, the value lost, is somewhere in the tune of $300 million. I think that's the right math. But anyway, you can certainly do the math quickly. In the plan that we've laid out with respect to getting to $300 million from our pro forma 25 number, we assumed essentially a 1% increase higher rate of increase on pricing than inflation. So I think we show on the slide an $89 million increase over two years in pricing, offsetting the $80 million in inflation. Largely, the reason for that assumption is because that's what our analysts out there are saying, that we can get a 4% to 6% increase in our pricing Pricing, given the tight market conditions, given the highly concentrated industry we're in, and so forth. So we just assume that the midpoint on that to drive that number. What I'll tell you is that we internally believe we need to increase that at a much faster rate than just 1% above inflation to get back to a level that will allow us to reinvest back into our plants, and make our facilities viable for the long term. Because quite frankly, since 2014, pricing where it has been has not been sustainable. And you've seen that in the industry, in that we've seen a competition and capacity get shut down and rationalized, with GP fully being the last one. Well, not the last one. Actually, our temiscaming operations being the last line being shut down. But GP Foley, Cosmo out of Washington State, and just recently the CLP plant in Memphis, Tennessee, which is not in cellular specialty, but certainly in the same applications. All right. So pricing must go up. It must go up. So, you know, I know that the next question would be, well, how much more do you think is going to go up than just the 1% above inflation? It's going to be multiples of that number. It has to be multiples of that number so that we can get the capital we need to reinvest back in the plants and make these facilities the gold standard that they need to be. So I can't tell you exactly the number that we're after, but all I can tell you is that we're not looking at a 5% increase. We're not looking at a 10% increase. We're looking at much higher numbers.

So there is roughly $300 million of cash flow that needs to be recaptured, whether that happens, a big portion of it probably happens next year and then remaining in the years after that. But that's an extremely significant number considering your market cap is around $400 million. So that's very exciting. Now that the capacity has been taken out of the industry to the extent that it has and capacity utilization levels are as high as they are, now there is space in the industry for there to be more rational pricing and recapture what has been lost through inflation over the last nine or 10 years. Is that a fair assumption?

I couldn't have summarized it better, Nick.

That's exactly right.

Okay, great. And then just second question. I think I see the stock is trading a few percentage points later, which is sometimes the market gives you a gift. But it seems like your reduction in EBITDA from last quarter to this quarter is was because of your decision to shut down your operations for a little bit to generate cash from your working capital. Can you just give me, I think you mentioned in one of your slides that the 10 million loss was from that decision. but that generated or is expected to generate additional working capital and improve the cash flows overall for the company. What's the magnitude of that working capital release?

Roughly about $14 million.

Okay. So you basically sort of made the decision you're going to get the EBITDA down by 10, but get $14 million more of cash.

Yeah, yeah. Now $10 million of EBITDA loss or non-recurring impact result of the, we call it market or economic shutdowns of the Temiscaming facility, that's over the whole year. Right. So the $14 million benefit is really over the whole year.

Yeah, and Nick, to the last comment, so that's the portion related to downtime. If you look at our guidance, In Q4, we're expecting close to 30 million of working capital release, as you saw on the bridge.

Yeah, a good chunk of that is paid for, but there's also a big chunk of it coming out of CS.

Got it. And then just the last question, just honing in on your AGE project, which seems incredible. It seems like you've basically passed most of the hurdles for your FID. She's just working on the financing. You've got an investment grade counterparty there. And I think the EBITDA now is $50 million applicable to you, which is worth $500 million of value. Again, your market cap is in the $400 million. Is there anything that is preventing or is there any major things that you're concerned about that you know, could potentially derail that project or is now just the timing of funding or, you know, getting the funding finalized?

It's just getting the funding finalized, Nick. And just to correct you, it's not $500 million of call it market cap. I think it's $650 million of market cap because you need to, this is essentially a utility.

Right.

Your contract, fixed pricing, no volatility, coming from a Georgia power, which is a statewide utility. So you take a 13x multiple in times of by the $50-plus million, it's a $650 million potential impact to our ROI. So we understand and we recognize that it's a super... project for this business. The hurdle on this, really, it's not so much the project financing. It's really finding the $46 million of equity that we, Ryan, have got to put in the business. And we're looking at options of how we're going to find that money to fund this. That's really the issue.

Okay. Okay, sounds good. Well, I mean, as you know, I own almost 2 million shares of the stock, and I feel like I'm So there's very exciting plans for the company, and it looks like you guys are making very rapid progress on the biomaterials initiatives. But the really exciting news coming out of this quarter, which we didn't know last quarter, was the magnitude of price increases that are possible going into next year. So good luck with those negotiations, and thanks for the time.

All right. Well, thank you.

Our next question comes from the line of Amit Prasad with RBC.

Please proceed with your question.

Hey, it's Amit on for Matt. Thanks for taking my questions. Just starting off with temiscamine, you noted a $5 million benefit in 2026 for qualifying volumes on other lines. What would that be on a run rate basis, and when do you expect those incremental volumes to show up? And I guess, how much of that historical Tumiskameen business do you expect to ultimately have retained through transferring production to other facilities by the end of 2026?

Hey, good morning. So you're asking on the amount of volumes that we're able to convert from our old HPC line in Tumiskameen over to our facilities in Jessup, Fernandina, and Tardis. And what we're talking about with respect to the $5 million that we're looking to see in terms of increased EBITDA for 26 is conversions that have occurred this year. All right. We've already seen a significant amount of conversions since we suspended the operations back in July of 2024. So what we're saying is that there – and as we said at the time of the suspension – there was a number of products that would take multiple years in terms of qualifications. So we're just now getting through the conversion with three customers this year. And when those conversions are completed this year, that should add another $5 million of EBITDA for a business going forward. That being said, there will be more opportunities in 2026. Probably after that, that's probably about the extent we're going to be able to get to as some of the business like MCC and some other grades that we were producing in Temiscaming have gone to the competition. We're getting to the end of the road with respect to what we're going to be able to realize from the full conversion of those specialty cellulose business that we had up at the Temiscaming facility. I hope that answers your question.

Yeah, that's perfect. Thank you. I guess one other quick one for me is we saw paperboard realizations move significantly lower quarter on quarter. How much of that was just pricing related, being down on a like for like basis versus just mix and potentially some FX?

That's a really, really technical question and probably beyond my ability to answer it specifically. But we certainly would be happy to try to answer that question to you one on one. Amit, after we've done a little bit of investigation, is it okay just to punt that for a couple of hours?

Yeah, absolutely. No problem at all. That's all I had. Thanks for taking my questions. Thank you.

As a reminder, if you would like to ask a question, press star 1 on your telephone keypad. Our next question comes from a line of Dimitri Silverstein with Water Tower Research. Please proceed with your question.

Good morning, gentlemen. Thank you for taking my questions. I have a couple of them. First of all, you talked about working on a new fluff product that would avoid the tariffs, the 10% import tariffs from China or into China. Can you talk about what the changes are that would allow the new product to bypass these tariffs? And when do you think this product will be available for commercial sales?

Dimitri, welcome and thank you for being on the call. Great question with respect to our new product development around fluff. We've developed it. We have a product that we believe that would qualify as a dissolving wood pulp product from a tariff perspective into China that would go into the fluff business. or into the fluff market. That's really the key, is that it has to be a dissolving wood pulp product to be able to get into China without any tariffs. And we're really the only, I believe, the only fluff producer who can do that, because we're a specialty cellulose producer that can make dissolving wood pulp, whereas all the other fluff producers in the world cannot. It's a real comparative advantage to be able to do that. We can do that today. The issue that we're dealing with is that the cost of that conversion from fluff to a dissolving wood pulp product is the cost per ton is higher than the cost we would bear by paying the 10% fluff duty right now. We've We continue to work on seeing if there's a means to lower the unit cost of production to make that dissolving wood pulp fluff. And in the meantime, we'll continue to do what we're doing, which is extend and expand our geographical diversity away from China to keep our fluff volumes high and keep the operation at capacity. But the truth of the matter is we have a product. We just have to figure out a way to make it cheaper.

Understood. That's a very good level of granularity there. I appreciate it, Lyle. My next question is you talked about the $30 million in cost reduction projects that you announced last quarter being pretty much fully implemented by now, and we're just sort of waiting for the ramp up and get to that run rate. You also mentioned that there's an additional $20 million in EBITDA improvement projects for, you know, through 2027. Is it too early to ask you to provide sort of some major buckets of where that cost setting is going to come from?

Well, it'd be the same major buckets that we've had for 2025 and 2024, which is, you know, around improving reliability, improving material usage on our variable inputs, through automation, through, I call it, preventative and even predictive maintenance practices and measuring devices so that we can capture or catch maintenance requirements before any kind of catastrophic failure. Those are the things we've been focusing on in the past. That's what we'll be focusing on in the future. And as I said in the past, a couple of analysts called, We have a good backlog of projects that we're going through that we'll invest in. And as capital gets available, we'll execute. That will give us the returns that we've been seeing for the last couple of years on these type of investments. Those are generally the buckets, though, Dimitri, that we'll be investing, similar to the investments we did last year or this year.

Okay, so basically kind of like a Japanese Kazan approach where you just do better every time you go through this and get a little bit more out of it.

That's exactly right. Exactly right.

Yeah.

Okay.

Okay, great. And then my last question, you mentioned in your high-yield pulp business that there was a shipment delays of a business going to India and that accounted for some of your volume losses in that business in the quarter. What was the nature of those delays, and have they been resolved? Is there going to be a catch-up in the fourth quarter, or is this sort of missed until next year?

It's just a timing issue. We'll capture it in the fourth quarter. And really what it comes down to is the lane between Montreal, Canada, and the ports in India, the capacity of those ocean lanes are pretty slim, pretty narrow. And as a consequence, you know, if you miss a ship, then you've got to wait a month, right, for the next ship to show up to take it to India. So that's really the issue that we're dealing with. Gotcha.

Okay. I appreciate the time. This is all the questions I have. Thank you.

Thank you. Mr. Bloomquist, we have no further questions at this time. I'd like to turn the floor back over to you for closing comments.

Okay. Well, thank you. In closing, just to reiterate, the temporary headwinds that define 2025 we believe are now largely behind us and that our core business is now performing as expected. As we talked about in the Q&A, pricing negotiations are underway and we continue to value and put priority on the value we provide to our customers. so that we can be able to get the money that needed to reinvest back into our assets. Our operations are stable, and our teams are executing with discipline. We have a clear strategy and a strong portfolio of high return projects that position the company for margin expansion and stronger cash generation, and we are very disciplined in our capital deployments. These actions should reinforce your confidence in our path to sustain the growth and the long-term value creation of the project or of the company. Our focus now is very simple. Execute with precision and continue to demonstrate the strength and potential of the company. And thank you for joining us this morning.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.