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Rayonier Advanced Materials Inc (NYSE:RYAM)
Q1 2021 Earnings Call
May 5, 2021, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning, and welcome to the Rayonier 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 opened 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 Rayonier Advanced Materials. Thank you. Mr. Walsh, you may begin.

Mickey Walsh -- Treasurer and Vice President of Investor Relations

Thank you, operator, and good morning, everyone. Welcome again to Rayonier 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 Moeltner, 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 RayonierAM.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. There are also referenced on Slides 2 and 3 of our presentation materials.

Today's presentation will also reference certain non-GAAP financial measures as noted on Slide 4 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.

Paul G. Boynton -- President and Chief Executive Officer

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 Side 5. 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 a 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, allows the company to pay down debt, and third, it allows us to build upon our core High Purity Cellulose Business' bio-future. As part of that bio-future, we see -- which we see as leveraging our key assets to create new sustainable bio-based products, we are also formerly -- have formally announced yesterday, an exciting strategic investment in Anomera, a start-up 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. Anomera's Nanocrystals are patented biodegradable products to be produced at our Temiscaming site from our cellulose specialties products. Emerging business will be supported by recently signed distribution agreement with Croda, 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?

Marcus J. Moeltner -- Chief Financial Officer and Senior Vice President-Finance

Thank you, Paul. Starting with High Purity Cellulose on Slide 6. First-quarter sales held flat at $250 million, 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 or 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 7. Sales in our Forest Products 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 RYAM 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. Paperboard 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 & Newsprint segment on Slide 9. Sales declined $8 million from prior year, driven by a 38% decline in Newsprint 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. Newsprint 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 Newsprint and high-yield pulp, while we manage through global logistics 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, 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 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 GILTI taxes in the US. In Canada, NOLs are available to offset the amount and RYAM 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 were 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 HPC business.

With that, I'd like to turn the call back over to Paul.

Paul G. Boynton -- President and Chief Executive Officer

Hey. Thanks, Marcus. Turning to page 11. As announced on April 12, we will be selling our Lumber mills and Newsprint facility to GreenFirst 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. 85% of the purchase price will be paid in cash with the remaining 15% being paid in shares of GreenFirst, which has upside potential. It's important to note that RYAM 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. RYAM will also retain all the rights to duties paid into the US 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, at this time, all of these assets were shut down due to lack of demand and we have stated that 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 6 times through this cycle. We plan to use the proceeds from the sale 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 bio-future of RYAM 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 traction [Phonetic] and 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 new quality leading Kallima branded three-ply paperboard and a mechanical hardwood pulp. With tailwinds supporting prices on our commodity products and strong demand for our Cellulose 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 volume 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 sulfide facilities in Florida, France, and Quebec. We've also invested in green energy projects in these facilities, including last year's new bio-electric turbine addition in Tartas. And we look and we are exploring the opportunities for similar bio-electric 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 Anomera, an entire new opportunity for growth. This investment provides a technology platform that expands our core competency of cellulose chemistry. Anomera produces the highest quality Cellulose Nanocrystals, sustainably sourced from our Temiscaming Cellulose Specialties. These Nanocrystals can be formed into a variety of building blocks, including microbeads, a biodegradable natural alternative for plastic and cosmetic texturing powders, as well as products that can enhance performance properties in cements, paints and coatings, composites, adhesives, agriculture, medical pharma, and life sciences. Anomera 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 Temiscaming, which can produce over 500,000 kilograms of Nanocellulose per year. Since 2017, we have invested a total of $8 million in Anomera through the end of this first quarter. RYAM 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 RYAM. Our reputation as the market leader in Cellulose Specialties with differentiated commodities within fluff and viscose market positions us well for the future. Our diverse assets allows us to service all the Cellulose 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.

Questions and Answers:

Operator

Thank you. At this time, we will be conducting a question-and-answer session. [Operator Instructions] Our first question is from John Babcock with Bank of America. Please proceed with your question.

John Babcock -- Bank of America -- Analyst

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 Purity Cellulose? I apologize if I missed it, but if you could just kind of go through that, that'll be helpful.

Paul G. Boynton -- President and Chief Executive Officer

Yeah. Hey, good morning, John. This Paul. Look, we said that volumes were off a bit and if we didn't quantify that out there and -- but we have had -- and across the business and I think -- 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 no issues with trucking and 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 even third-quarter, back half of this year to kind of get all that leveled up. And again, I don't think we're unique in that way across the industry or even outside our industry.

John Babcock -- Bank of America -- Analyst

Okay [Speech Overlap] Okay, go ahead.

Marcus J. Moeltner -- Chief Financial Officer and Senior Vice President-Finance

Hey, John. You've 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.

Paul G. Boynton -- President and Chief Executive Officer

And, John, as a benchmark on the volumes, we've guided the HPC volumes will be stable for the year with really -- increase in the benefit and the mix toward Cellulose Specialties.

John Babcock -- Bank of America -- Analyst

Well, that's helpful. And so, based on that commentary, I mean it sounds like you should get some of those volumes back in the second quarter. Is that kind of fair? Obviously, it sounds like you know freight tons [Phonetic] times will continue to be a challenge, but it sounds like you're not losing these volumes necessarily?

Paul G. Boynton -- President and Chief Executive Officer

No, we don't see the volumes going out of the year at all. I think we still -- we remain kind of, again, consistent with our comments last quarter that year-over-year volumes 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.

John Babcock -- Bank of America -- Analyst

Okay. And then, actually on that last point there, could you just talk about the demand trends you're seeing in commodity viscose? And volume price sales in Cellulose Specialties with a focus on acetate makers? [Phonetic]

Paul G. Boynton -- President and Chief Executive Officer

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?

John Babcock -- Bank of America -- Analyst

Yup, that's right. Yeah.

Paul G. Boynton -- President and Chief Executive Officer

Look at -- 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 in acetate plastics, automotive-related products that we sell like the 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 the inventories. They got thin. But we actually see some real fundamental demand pull-through on that. So, hence, our thought's for the year that CS volumes will be up year-over-year. And then, viscose and fluff pulp, look we're continuing to see very strong demand for those products. We've been commenting on the market pricing increases out there -- and that's -- you'll probably know, John, that our prices have lagged and probably most people's will have lagged in the overall market, certainly, fluff pulp. The market price is up Q1 10% over Q4 for NBSK, and already in April, [Technical Issues] see out there NBSK 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 similarly, viscose prices, which are a bit ahead of that already. I think we noted, you'll see in the last chart in our deck there, viscose prices up 34% in Q1 relative to Q4. This is just market index prices. And again, we're seeing April already up about 20% relative to those Q1 prices. And where [Phonetic] probably about a six-week 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. And the majority of our product is the fluff pulp.

John Babcock -- Bank of America -- Analyst

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?

Marcus J. Moeltner -- Chief Financial Officer and Senior Vice President-Finance

Yeah, John. It's Marcus here. We are seeing signs of inflation in a couple of 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 is as strong as some might have thought at the beginning of the year, but we are definitely seeing signs of it coming through across our business units.

John Babcock -- Bank of America -- Analyst

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

Marcus J. Moeltner -- Chief Financial Officer and Senior Vice President-Finance

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

Paul G. Boynton -- President and Chief Executive Officer

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

Marcus J. Moeltner -- Chief Financial Officer and Senior Vice President-Finance

Yeah, that'd be a good number.

Paul G. Boynton -- President and Chief Executive Officer

Okay.

John Babcock -- Bank of America -- Analyst

All right. That just -- well then, just last question before I turn it over. 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?

Marcus J. Moeltner -- Chief Financial Officer and Senior Vice President-Finance

Yeah. We're keeping a sharp eye on that, John. It's somewhat fluid still. There is moving parts, there is 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 US. We still have some credits to mitigate any near-term impacts. But we're staying close to it.

John Babcock -- Bank of America -- Analyst

Okay, great. Thanks for the help.

Paul G. Boynton -- President and Chief Executive Officer

Thanks, John.

Operator

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

Paul Quinn -- RBC Capital Markets -- Analyst

Hey. 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 renegotiations around the High Purity business? And when do those negotiations start?

Paul G. Boynton -- President and Chief Executive Officer

Hey, Paul. Thanks for the question. Look, we've said actually the last couple of years that those weak commodity HPC markets are not typically helpful as a backdrop to our discussions on Cellulose Specialties. So, to your question, real gain in the 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 Cellulose Specialties. But all that, I think just fueled some tightness across the market, and again, which we think would be a helpful backdrop -- drop that we haven't had for a couple of years. Those discussions usually kick off in earnest in the next couple of months. And as you know, kind of kick into the fall timeframe.

Paul Quinn -- RBC Capital Markets -- Analyst

Okay. And then, just on the sale of the Lumber business as well as the Newsprint mill [Phonetic]. You've got a 15% equity position and in GreenFirst, what are the strict restrictions around that and what's your intention with that position?

Marcus J. Moeltner -- Chief Financial Officer and Senior Vice President-Finance

Yeah. It's Marcus Paul, the -- so the rollover, you're correct -- think of 32 US current exchange rates, that would be about a $40 million rollover into GreenFirst as equity. Again, we feel we are well-positioned to participate in upside in the Lumber market with that vehicle. And the nice thing is, our fuse [Phonetic] on the hold is measured in six months. So again, after that time period, we would be free to monetize it at our option.

Paul Quinn -- RBC Capital Markets -- Analyst

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

Paul G. Boynton -- President and Chief Executive Officer

Look, we're going to watch it just like you Paul. We -- as Marcus said, I think there is 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 write the Lumber market add 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 think and excited for GreenFirst products. It's a great way for them to start off. As we noted, that 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 write some of the upside in GreenFirst and we'll just have to make the call at the time.

Paul Quinn -- RBC Capital Markets -- Analyst

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

Paul G. Boynton -- President and Chief Executive Officer

No. Look, we've kind of -- we feel like we've executed what we wanted to execute when we entered of this transaction. We made that very clear that we were really into and focused on the HPC assets of Tembec. We said that over time we would evaluate opportunities to do that with the markets, right? I think we got some feedback of why not now and why not then? And again, I think it's all around of 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 are connected, the paperboard and the high yield pulp in Temiscaming. And so, we anticipate being longer-term owners of all these assets. So, I think we're in a good shape right now, Paul. Now, we 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 about -- more about the bio-future and expanding our portfolio going forward into sustainable bio-based products.

Paul Quinn -- RBC Capital Markets -- Analyst

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

Paul G. Boynton -- President and Chief Executive Officer

Thanks, Paul.

Operator

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

Roger Spitz -- Bank of America -- Analyst

Thanks very much. Of the $182 million in the loss 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?

Marcus J. Moeltner -- Chief Financial Officer and Senior Vice President-Finance

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.

Roger Spitz -- Bank of America -- Analyst

Got it. And can you disclose, I guess, at some point you will -- it will be anyway. What Newsprint's Q1 '20 in Q1 '21 sales on EBITDA is so we can get our LTMs right on the pro forma?

Marcus J. Moeltner -- Chief Financial Officer and Senior Vice President-Finance

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 the three-year period.

Roger Spitz -- Bank of America -- Analyst

Okay. And then, do you have -- do you expect to pay any cash as payable on the sale of the Lumber, Newsprint business?

Marcus J. Moeltner -- Chief Financial Officer and Senior Vice President-Finance

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

Roger Spitz -- Bank of America -- Analyst

Cash taxes [Speech Overlap] will there be all [Speech Overlap]

Marcus J. Moeltner -- Chief Financial Officer and Senior Vice President-Finance

Cash -- cash. Very little tax leakage. We estimated, call it in the range of under $10 million, and we are fortunate to have our NOLs in Canada to help offset any leakage in Canada. And then, in the US, we have some credit. So, very little is what we're expecting.

Roger Spitz -- Bank of America -- Analyst

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

Marcus J. Moeltner -- Chief Financial Officer and Senior Vice President-Finance

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 HPC assets. So previously, we said $85 million to $90 million on a net basis. You saw in the first quarter, we were $20 million, including some strategic capital. I would certainly see -- I was looking in the range of $100 million to maintain custodial capex.

Roger Spitz -- Bank of America -- Analyst

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

Marcus J. Moeltner -- Chief Financial Officer and Senior Vice President-Finance

Yeah, the -- Roger, we still envision the CARES Act refund, which is $33 million, and then, we'll couple that with $17 million to come in at around $50 million 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.

Roger Spitz -- Bank of America -- Analyst

Thank you very much.

Marcus J. Moeltner -- Chief Financial Officer and Senior Vice President-Finance

Thanks, Roger.

Operator

Thank you. Our final question is from Paretosh Misra with Berenberg. Please proceed with your question.

Paretosh Misra -- Berenberg -- Analyst

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 wanted to focus on the volumes because your -- in your CS business you have multiple customers, different contracts. So I guess this -- the volumes that is coming up for renewal or price reset next year is -- or this volume changes?

Just any sense you could give us as to how much volume might be up for a reset as we enter 2022?

Paul G. Boynton -- President and Chief Executive Officer

Paretosh, 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, [Technical Issues] some of the [Technical Issues] 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. It -- so yeah, I think that it's a pretty, I think, typical rollover type of year. We've got a lot of contracts in place for multiple years. And they 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.

Paretosh Misra -- Berenberg -- Analyst

Got it. That's actually very useful. And then, switching to TemSilk opportunity. I guess, any update in that lyocell 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 will be priced at a premium to viscose. Are -- what kind of discussions are you having on that?

Paul G. Boynton -- President and Chief Executive Officer

Look, that market like most textiles was pretty significantly impacted by COVID-1 and we saw that. We saw a lot of the lyocell assets in Asia slow down or shut down. I think they even dipped down to probably a 50%-55% capacity there for a while there, Paretosh. 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-ton to 500,000-ton type of growth opportunity out there. Obviously, we've got our sights on that, some of our competitors that have our [Phonetic] 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'd say probably most products. It takes a more specialized fiber to feed into the lyocell market than it does into the general viscose pulp market.

So, as we look at what capacity we have available and this is 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 TemSilk business and then the balance would be remaining into the general viscose market. But also keep in mind that we have a softwood set of products. And I know, there's been some notes out there that there is more capacity coming into dissolving wood pulp in the viscose market. They're are all from the Southern Hemisphere, almost all of that is hardwood. We've got a nice softwood product. And if 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 TemSilk or just general viscose, with our softwood product, we're in a good spot to serve the market at a premium.

Paretosh Misra -- Berenberg -- Analyst

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

Paul G. Boynton -- President and Chief Executive Officer

So, we don't have the capacity at this time to do 300,000 tons 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 TemSilk is being made in our Temiscaming facility. And we have said that we could see up to and including the majority of our production in Temiscaming at some point being made to produce a TemSilk type product. So, that's kind of how we're framing it right now, Paretosh. If that helps you? And now, that facility's -- has the potential capacity or the boilerplate capacity of let's just call it 140,000 tons to 150,000 tons in that range. And we could see the majority of that growing into the market for TemSilk and lyocell.

Paretosh Misra -- Berenberg -- Analyst

Thanks, Paul. That's very clear now. And maybe I'll ask a quick one for Marcus. The corporate cost, which was I believe $30 million in Q1. How should we think about that as we go into the second half and when this transaction closes?

Marcus J. Moeltner -- Chief Financial Officer and Senior Vice President-Finance

Yeah, Paretosh, the -- where we do have some not seasonality but lumpiness to the corporate cost on the side there, but think of -- think of $11 million to $12 million a quarter on the corporate side. We would challenge ourselves to 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 of -- on that run rate.

Paretosh Misra -- Berenberg -- Analyst

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

Paul G. Boynton -- President and Chief Executive Officer

Thank you.

Operator

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.

Paul G. Boynton -- President and Chief Executive Officer

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 Rayonier Advanced Materials. So again, thank you for your time, and have a good day.

Operator

[Closing Operator Remarks]

Duration: 41 minutes

Call participants:

Mickey Walsh -- Treasurer and Vice President of Investor Relations

Paul G. Boynton -- President and Chief Executive Officer

Marcus J. Moeltner -- Chief Financial Officer and Senior Vice President-Finance

John Babcock -- Bank of America -- Analyst

Paul Quinn -- RBC Capital Markets -- Analyst

Roger Spitz -- Bank of America -- Analyst

Paretosh Misra -- Berenberg -- Analyst

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