RYAM Sales Drop 19%

Rayonier Advanced Materials (RYAM 0.78%), a leading manufacturer of high-purity cellulose and related plant-based products, reported Q2 FY2025 earnings on August 5, 2025. The earnings release revealed a pronounced setback: GAAP earnings per share were $(5.48) in Q2 2025, a significant miss compared to the consensus GAAP estimate of $(0.23). GAAP revenue also came in well below expectations at $340 million versus the forecast of $385.5 million. Management cited extraordinary, largely non-recurring obstacles in Q2 2025, including tariff-related slowdowns, operational disruptions, and a substantial non-cash tax charge. Overall, the quarter marked a step down from previous periods, as reflected in the Q2 2025 GAAP results, and a heavy GAAP net loss weighed down by the write-off.

Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.

Business Overview and Strategic Priorities

Rayonier Advanced Materials is a global leader in producing cellulose specialties and cellulose-based technologies, best known for its high-purity cellulose. This material carries critical roles in products like pharmaceuticals, LCD screens, food additives, and specialty fabrics. Its unique technical processes and focus on tailored specifications enable it to serve high-value, end-user markets that demand strict consistency, purity, and flexibility.

Current priorities center on five key areas: expanding its high-purity cellulose and specialty product portfolio, embedding sustainability into every level of operations, investing in biomaterials and renewable chemicals, driving production efficiency, and maintaining a strong global market position. Success for the company hinges on the ability to innovate within specialty chemicals, optimize cost structures, expand into sustainable product lines like second-generation bioethanol, and swiftly adapt to shifting global market and regulatory trends.

Q2 2025: Financial and Operational Results

Q2 2025 was marked by a sharp drop in both GAAP profitability and top-line results. The company reported a GAAP net loss of $363 million in Q2 2025, largely due to a $337 million non-cash charge. This charge stemmed from the write-off of Canadian deferred tax assets due to ongoing losses in the paperboard and high-yield pulp businesses, recognized as a non-cash tax expense under U.S. GAAP in Q2 2025. Adjusted EBITDA sank to $28 million from $68 million in the same period last year. Adjusted free cash flow (non-GAAP) turned deeply negative at $(52) million for the first half of 2025, reflecting operational setbacks, additional capital spending, and lower profits.

Across the core business lines, Cellulose Specialties saw net sales fall 14% in Q2 2025, driven by a 15% decrease in volumes. The underlying issue was a temporary pause in orders from customers, primarily in China, due to uncertainty around tariffs. While average sales prices for these products rose by 3%—reaching $1,807 per metric ton in Q2 2025—lower activity offset those gains. Management confirmed that all cellulose plants operated at normal rates by the end of the quarter, All cellulose plants are currently operating at expected rates. However, operating income for the segment dropped steeply to $29 million from $50 million as margins compressed (GAAP).

In the Biomaterials business—focused on new-generation plant-based chemicals and materials—net sales were $6 million in Q2 2025. Operating income remained flat at $1 million. The company continued to advance its bioethanol plant in France, which now operates at commercial levels, and achieved certification for a prebiotic additive. Full-year 2025 segment EBITDA is projected at $8 to $10 million, according to the company's outlook.

The Cellulose Commodities segment, which supplies traditional pulp to global markets, also saw declines in Q2 2025. GAAP net sales for Cellulose Commodities dropped to $59 million in Q2 2025, a 31% reduction from a year ago. This mainly reflected a 33% decline in volume as RYAM navigated the direct impact of tariffs on exports to China and a labor strike at its Tartas facility in France. A bright spot for the segment was a reduction in operating loss—from $(21) million in Q2 2024 to $(9) million in Q2 2025—driven by lower non-fluff commodity losses, lower indefinite suspension charges, and lower key input costs.

Paperboard, used in packaging and specialty applications, posted GAAP net sales of $47 million, down 22% in Q2 2025. Operating results for the segment declined by $12 million, or 100 percent, compared to the same quarter last year. This was due to the impact of Temiscaming net custodial site costs and increased competitive activity from higher EU imports and the start-up of new U.S. capacity. The company paused efforts to divest this segment, citing difficult market conditions and trade-related uncertainty.

High-Yield Pulp, a smaller segment supplying pulp for paper and packaging, reported a significant downturn in Q2 2025. The segment moved from $1 million in operating income in Q2 2024 to a GAAP operating loss of $(7) million in Q2 2025. Weak demand in China and logistical hurdles accessing the Indian market, combined with higher operating and site costs, contributed to these losses. Management responded by reducing production capacity, opting for temporary shutdowns in coming periods to conserve cash.

Company-wide, total debt rose modestly to $746 million, with a net secured leverage ratio of 3.8× in Q2 2025, up from 2.9× in Q1 2025. Liquidity, which combines cash and access to borrowing facilities, ended at $202 million in Q2 2025, down from $272 million in Q1 2025. GAAP operational cash flow for the first half of FY2025 was $10 million. Higher capital spending pushed adjusted free cash flow (non-GAAP) to $(52) million for the first six months of 2025.

Strategic Moves and Headwinds: Products and Markets

Rayonier Advanced Materials' core specialty cellulose products remain the engine of value. These materials, derived from wood and engineered to tight tolerances, are essential in producing LCD displays, specialty fibers, and pharmaceutical products. The company’s focus has been sustaining pricing power amid global trade turbulence, and shifting volumes to higher-value, less tariff-exposed products wherever possible.

The Biomaterials segment, including bioethanol and plant-based additives, continues to be a growth focus. The bioethanol facility in France has been operational since Q1 2024, and management is also developing new prebiotic products for commercial feed markets. These moves align with global trends toward renewable resources and are supported by European green investment funds. However, some projects, such as a planned bioethanol facility expansion in Florida, have faced regulatory delays, as the City of Fernandina Beach recently denied the site plan application for this project and the company is pursuing legal remedies. Despite these hurdles, advancements in sustainable fuel and specialty chemical development mark ongoing investment in the segment and remain part of the company’s long-term growth strategy.

In response to tariffs imposed by China on U.S.-sourced cellulose commodities, management quickly pivoted production toward alternative product grades and targeted new export markets. Key actions included seeking customers in India, Africa, and the Middle East and reducing reliance on the Chinese market for fluff pulp, which faced the steepest tariffs. The strategy also involved emphasizing products like viscose pulp, which may be exempt from current trade restrictions. These market shifts are labor-intensive but are already providing new opportunities as management sees resumed volume in non-tariff markets.

Paperboard and high-yield pulp face persistent overcapacity and pricing pressure, especially as European competition increases and North American markets absorb more low-cost imports. Paperboard prices declined 3% in Q2 2025. The company has responded with cost containment and selective shutdowns to reduce inventory and limit negative cash flow. Both units are being evaluated for possible divestiture if market conditions improve, but no transactions are expected in the near term.

The major non-cash tax asset write-off in Q2 2025, totaling $337 million, reflected a reassessment of future profitability in the Canadian paperboard and pulp units. Management stated that this accounting change, which resulted in a non-cash deferred tax asset write-off under U.S. GAAP in Q2 2025, does not affect the company's legal ability to apply these assets in the future, but signals ongoing risk and pressure in those legacy businesses.

Looking Ahead: Guidance and Key Watchpoints

After the turmoil of the quarter, management cut its full-year 2025 adjusted EBITDA (non-GAAP) outlook to a range of $150 million to $160 million, down from its most recent target of $175 million to $185 million. Adjusted free cash flow (non-GAAP) guidance for FY2025 has been reduced to a range of $(10) million to $(25) million, down noticeably from positive projections earlier in the year. Segment-level projections point to the continued dominance of Cellulose Specialties, with expected EBITDA of $232 million to $235 million for FY2025, and steady, though modest, growth in Biomaterials. High-yield pulp is expected to remain negative on an EBITDA basis for the full year 2025.

Management indicated that trade headwinds and operational disruptions, including the effects of strikes and plant outages, have largely abated and facilities are running normally. However, tariff risk continues to affect volumes and customer behavior, especially in cellulose commodities and some specialty markets. No changes were made to the company’s long-term goal of reaching over $300 million in EBITDA by the end of 2027, though the current guidance reductions highlight the uncertainty in that trajectory.

Investors and market watchers should keep a close eye on three factors in upcoming quarters: the persistence or resolution of global tariffs and trade disputes, the recovery pace in specialty cellulose order volumes (especially to China), and execution of new product launches and facility expansions in Biomaterials.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.