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Date

Friday, Aug. 8, 2025 at 2:00 p.m. ET

Call participants

Chief Executive Officer — Jean-Michel Ribiéras

Chief Financial Officer — John Sims

Senior Vice President, Industrial Packaging — Don Devlin

Vice President, Investor Relations — Hans Bjorkman

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Risks

Weaker non-Brazil Latin American markets and pricing pressures, driven by tariffs and increased imports, contributed to the outlook for North American and Latin American earnings in 2025.

European demand declined 8% year over year as of February 2025, and industry capacity in Europe shrank 7% year over year as of February 2025, with management noting, "Paper prices stabilized in the second quarter but are under pressure entering the seasonally slower third quarter."

Management noted, "we realized much less than what we expected" from announced price increases in North America due to Increased imports and a competitor's inventory liquidation in early 2025 led to lower-than-anticipated pricing realization.

Takeaways

Adjusted EBITDA-- Adjusted EBITDA was $82 million with a 10% margin for Q2 2025, reflecting $70 million in planned maintenance outages during Q2 2025, and in line with company guidance.

Adjusted operating earnings-- Adjusted operating earnings were $0.37 per share in Q2 2025.

Free cash flow-- Free cash flow was negative $2 million in Q2 2025, with management noting free cash flow is "heavily weighted to the second half of the year," with almost 90% generated in the second half over the last two years, based on historical patterns.

Shareholder returns-- Nearly $40 million was distributed in Q2 2025, including $18 million in dividends, and $20 million in share repurchases.

FX impact-- $13 million adjustment to adjusted EBITDA due to foreign exchange headwinds in Q2 2025, which would have placed adjusted EBITDA at the high end of Q2 2025 guidance if excluded.

Capacity developments-- North American uncoated freesheet capacity will be reduced by another 6% with the announced closure of the Chillicothe mill by Pixelle in August 2025, following a prior 10% reduction in supply from shutdowns in the second half of last year.

Tariff and import trends-- Imports into North America increased nearly 40% in the first half of 2025, mainly rolls, with management attributing the surge to "anticipation of the tariffs being implemented."

Green energy credits-- $8 million benefit from green energy credits was recorded in Q2 2025, described as recurring.

Balance sheet strength-- Net debt to adjusted EBITDA is 1.3x (non-GAAP), with "almost $400 million available on our revolver" and no major maturities until 2027.

Guidance-- Third-quarter adjusted EBITDA is expected in the $145 million to $165 million range. Price and mix are projected to be unfavorable by $15 million to $20 million in Q3 2025 due to European pricing, while volume is projected to be favorable by $15 million to $20 million in Q3 2025 due to seasonality.

Future capital spending-- $145 million to be invested in strategic projects at the Eastover mill from 2025 through 2027, with capital spending expected to peak in 2026 before returning to prior levels in 2027.

Operational projects-- Planned Eastover projects anticipated to generate incremental adjusted EBITDA exceeding $50 million annually upon completion, with management targeting an internal rate of return greater than 30%.

Share repurchase authorization-- $42 million remains available under the current share repurchase authorization, with repurchases positioned as opportunistic due to management's belief in share undervaluation.

Leadership transition-- CEO Jean-Michel Ribiéras confirmed preparation for retirement at year-end and ongoing CEO and CFO transitions.

Summary

Sylvamo(SLVM -13.23%) emphasized disciplined capital allocation and over the past two years, the company generated almost 90% of its free cash flow in the second half, supported by the completion of a substantial portion of planned maintenance outages. The company highlighted investments in high-return projects at its Eastover mill, projecting these will contribute over $50 million of adjusted EBITDA annually with internal rates of return for these high-return projects expected to exceed 30%. Pricing headwinds, especially in Europe, remain a primary constraint for the Q3 2025 outlook, with management projecting price and mix headwinds of $15 million to $20 million in Q3 2025. Tariff-driven import surges affected both supply dynamics and the company's pricing power in North America in the first half of 2025, while muted demand and competitive imports continued to weigh on Europe and Latin America. Management indicated net debt reduction efforts have left the balance sheet resilient, establishing financial flexibility for ongoing strategic investments and potential share repurchases.

Management stated that almost 85% of annual maintenance outage expenses had already been incurred as of Q2 2025, significantly reducing anticipated cost headwinds going forward.

Europe segment performance remains challenged by "sluggish" demand and lower pulp prices, with a specific focus on operational cost improvements and strategic mix enhancements for stabilization.

"We have reduced our debt by about half, including more than $150 million last year," supporting financial security and flexibility for investments and buybacks.

Volume in North America was impacted by the Riverdale mill producing only 80% of planned capacity over the last three quarters, with management cautioning this shortfall is expected to persist into Q3 2025.

The company outlined clear plans to modernize its woodyard in partnership with Price Companies, aiming to avoid $75 million in capital expenditures over the next five years and further strengthen supply chain efficiency.

Management attributed lower than anticipated North American price realization to "sell their inventory at very low prices" by a competitor following an announced mill closure, compounding pricing pressures from increased imports.

Market conditions in Latin America remain weak outside Brazil, with long-term demand trends in Latin America expected to remain "flat or slightly down."

No major debt maturities are scheduled until 2027, positioning the company for continued investment and resilience in volatile market environments.

Industry glossary

Uncoated freesheet: A type of printing and writing paper lacking a surface coating, valued for its printability and used in office, publishing, and specialty applications.

Cut-size: Paper cut to standard sheet dimensions, commonly used for printing and copying purposes.

Sheeter: Industrial equipment used to convert paper rolls into sheets of specified dimensions.

OLA: Refers to "other Latin America," distinguished in the transcript from Brazil within management commentary.

Full Conference Call Transcript

Jean-Michel Ribiéras: Our teams are committed to the success of our customers and are partnering with them to be the supplier of choice every day. Our operational performance improved during the second quarter, and the challenges we faced in the first quarter are largely behind us. We completed the largest planned maintenance outage quarter we have had in over five years. Lastly, we returned nearly $40 million in cash to shareholders. We distributed $18 million via the second quarter dividend, and we repurchased $20 million in shares in the quarter. Let's move to the next slide. Slide five shows our second quarter key financial metrics. We earned adjusted EBITDA of $82 million with a margin of 10%, in line with our expectations.

This reflects having almost $70 million of planned maintenance outages in the quarter, which is the largest in recent history. We now have almost 85% of our planned maintenance outage for the year behind us. We generated adjusted operating earnings of $0.37 per share. Free cash flow was negative $2 million. The variance to the second quarter last year is due to lower adjusted EBITDA and slightly higher capital spending. Keep in mind that our free cash flow is heavily weighted to the second half of the year. In the last two years, we generated almost 90% of our free cash flow in the second half.

Now I will turn it over to Don to review our performance in more detail. Thank you, Jean-Michel, and good morning, everyone.

Don Devlin: Slide six contains our second quarter earnings bridge versus the first quarter. The $82 million of adjusted EBITDA was in line with our outlook of $75 to $95 million. Excluding the $13 million in FX headwinds in the quarter, we would have been at the high end of our outlook. Price and mix were favorable by $12 million, driven by better mix in North America and Latin America, with lower export sales from both regions. Volume decreased by $9 million, mostly in North America. About half was due to less volume from IP's Riverdale mill than planned.

Over the last three quarters, they have only produced about 80% of their 27,000-ton per month plan, and we expected that to continue into the third quarter. The other half was partially due to our own operational challenges we experienced in the second quarter. Operations and other costs were favorable by $23 million, driven by $18 million in improved operational performance in North America and Europe. We continue to make progress in resolving the operational issues experienced in the first and second quarters. Other costs were also favorable by $18 million, primarily due to green energy credits in Europe and lower overhead costs. This more than offset the unfavorable impact of $13 million from FX.

Planned maintenance outage costs increased by $39 million, largely as expected, as we conducted complex outages in five of our mills. Input and transportation costs were favorable by $5 million, primarily due to energy in North America. Let's move to slide seven.

Jean-Michel Ribiéras: Looking at industry conditions for February 2025 versus 2024. In Europe, demand remains sluggish and is down 8% year over year. Industry capacity was reduced by 7% after two uncoated freesheet machines closed late last year. Paper prices stabilized in the second quarter but are under pressure entering the seasonally slower third quarter. Pulp prices in Europe significantly decreased in the first half of this year, contributing to uncoated freesheet pricing pressure. In Latin America, demand is down 2% year over year, with demand down 6% in other Latin American countries. However, Brazil is up 6% due to strong publishing demand. Industry capacity across the region remained stable.

In North America, reported apparent demand is stable year over year, driven by higher imports, which were up nearly 40%. Much of this increase in imports was in converting and printing rolls. We believe that real demand will be down 3% to 4% this year. Industry supply was reduced by 10% after a few machines, including IP's Georgetown mill, closed in the second half of last year. In addition, Pixelle announced they will close their Chillicothe, Ohio mill in August. This will further reduce uncoated freesheet capacity in North America by approximately 6%.

Don Devlin: Let's go to slide eight. We continue to monitor the U.S. tariff situation and the potential challenges and opportunities that may unfold. In the first half of the year, we saw some shifts in uncoated freesheet trade flows. This is one of the main reasons why imports into the U.S. were up almost 40% through the first half. We are also keeping an eye on several cross-regional themes, for example, currency fluctuations, with the U.S. dollar devaluation against many currencies. Regarding our major capital spending plans for the year, the business cases for these projects included the possibility of higher tariff costs, which are not expected to be material at this point.

We are staying close to our customers to understand their needs and opportunities to help them be successful. And we are focused on what we can control, improving productivity, reliability, and leveraging our cost initiatives. Let's move to slide nine.

Jean-Michel Ribiéras: Looking ahead, we expect to deliver third-quarter adjusted EBITDA of $145 million to $165 million. We project price and mix to be unfavorable by $15 to $20 million. This is primarily due to paper and pulp prices in Europe. We expect volume to be favorable by $15 to $20 million. This is primarily due to stronger seasonality in both Latin America and North America. Operations and other costs are projected to be favorable up to $5 million due to improved operational performance. We expect input and transportation costs to be stable. Planned maintenance outages will improve by $66 million as we have no outages planned in the quarter. We expect a significantly better adjusted EBITDA performance in the second half.

This is due to much lower planned maintenance outage expenses, improving volumes, and better operations. Now I will turn it over to John to talk about our capital allocation plans. Thank you, Don, and good morning, everyone.

John Sims: I'll pick up on Slide 10. Our long-term capital allocation strategy drives shareholder value. We are focused on maintaining a strong financial position, reinvesting in our business, and returning cash to shareholders. This allows us to stay focused on our customers, helping them win through commercial excellence efforts. It enables reinvesting in our business, enhancing our reliability, productivity, and improving our service through operational excellence initiatives. And our healthy financial position preserves the flexibility to return cash to shareholders. We will continue to evaluate opportunities to repurchase shares at attractive prices with the $42 million available on our current share repurchase authorization. Let's move to slide 11.

This slide shows how the deleveraging of our balance sheet has enhanced our financial position. We have reduced our debt by about half, including more than $150 million last year, which we did in anticipation of the potential uncertainties in 2025. Our net debt to adjusted EBITDA now stands at 1.3 times. We have no major maturities due until 2027. Plus, we have almost $400 million available on our revolver. A strong balance sheet and available cash on hand provide us with the ability to focus on our customers, run our business, and invest in our future throughout the cycle. Let's go to slide 12.

Jean-Michel Ribiéras: Our team continued to develop our high-return project pipelines with returns greater than 20%. We are investing in high-return projects to generate earnings and cash flow. We want to take this opportunity to highlight our 2026 and 2027 capital spending outlook. The purple shaded bars on this chart show a high-return investment. The light purple is for our Easter investment, and the dark purple is for all other high-return projects. As disclosed on our fourth quarter 2024 earnings call back in February, we are investing $145 million in strategic projects at our flagship mill in Eastover, South Carolina. These investments will be spent from 2025 through 2027, with the majority of spending taking place next year.

Overall, capital spending is increasing in 2026 but then dropping back down to prior levels in 2027. This outlook should provide you with a good sense of our capital spending for the next few years. And we will continue to update you as we refine our plan. Let's go to slide 13. We feel the importance of the strategic investments that our Easter renewal warrants a quick refresh of our exciting plans. We have three high-return projects that will reduce costs while improving efficiency and mix of the most competitive uncoated freesheet mill in North America. First, we are investing to optimize one of our two paper machines.

The enhancements will allow us to reduce costs while improving our product mix across both paper machines. This investment should result in an incremental 60,000 tons of uncoated freesheet capacity. Second, we are replacing existing cut-size sheet with a brand new state-of-the-art sheeter. This will lower our sheeting cost up to 15%, reduce waste by maximizing paper machine trim, while providing incremental cut-size capacity. This sheeter will allow us to provide improved reliability and flexibility to better service our customers. Detailed engineering work continues, and many of the orders for the parts and equipment have already been placed. All plans are on track.

Once completed, these combined investments should create incremental adjusted EBITDA of more than $50 million per year, resulting in additional cash flows and an internal rate of return of greater than 30%. Lastly, we are partnering with the Price Companies, an industry leader in woodyard operations, to modernize our woodyard and improve our efficiency. This will result in more efficient, reliable, and cost-effective wood processing operations and allow us to avoid about $75 million in capital over the next five years. This woodyard modernization project is progressing as planned and remains on schedule to begin the start-up in early 2026 and will be completed by 2026. Let's go to slide 14.

Our strategy is to be simply on uncoated freesheet paper because we believe uncoated freesheet will be needed for a long, long time. Uncoated freesheet remains the largest and most resilient segment in the graphic paper space, and we view the uncoated freesheet industry landscape as an opportunity. We are investing to strengthen our competitive advantages, to generate earnings and cash flow. We view these investments as high return and low risk. As we are staying in our core product line of uncoated freesheet and reinforcing our position as the supplier of choice for our customers. We will leverage our strength, through our talented teams, iconic brands, strategic channel partnerships, and low-cost mills that drive high returns on invested capital.

I'll now turn it back over to Jean-Michel. Thanks, John.

Jean-Michel Ribiéras: I conclude my remarks on slide 15. We will create shareholder value by partnering with customers so we remain the supplier of choice, maintaining a strong financial position to provide flexibility, and reinvesting in our business through a great pipeline of high-return capital projects. Enabling us to grow our earnings and cash flow. Sylvamo Corporation is creating shareholder value with strong cash generation and disciplined capital allocation, including share repurchases at prices well below our intrinsic value. And we are progressing well. We are executing CEO and CFO transitions with John and Don as we prepare for my retirement at the end of the year. We are confident in our future and motivated by the opportunities that lie ahead.

With that, I'll turn the call back to Hans. Thank you, Jean-Michel, John, and Don.

Hans Bjorkman: Okay, Regina. We are ready to take questions.

Operator: If you would like to ask a question, simply press star then 1 a second time. We do ask that you limit yourself to one question and one follow-up question. Our first question will come from the line of George Staphos with Bank of America. Please go ahead.

George Staphos: Hi, everyone. Good morning. Thanks for all the details. I guess, the question I had for you is, can you talk a little bit about what the outlook is for South America in the third quarter? To the extent that you can talk about EBITDA and how things are trending, that would be helpful. And the second question would be, I remember from last quarter, I seem to remember that you were expecting North and South America on a combined basis to be up in EBITDA versus 2024? Is that still the outlook? And what are the puts and takes there? Thanks, guys.

John Sims: Hey, George. Thanks. So for the outlook for the third quarter in LatAm, we are expecting that you will see continued improvement. First of all, we have seasonally increasing shipments, and we have seen that typically, and we expect that again to occur this year, and you will see that in the third quarter. Second, of course, we do not have any outages. We had two significant major outages in the second quarter down in Latin America, so that is behind us. Our shipments were slightly lower than what we expected in the second quarter because we were slow to come out in both of those outages that caused us about 10,000 tons, but that, of course, is behind us.

We will be moving forward with that. The second question you had was around the combined earnings. And in general, you know, we do not give a full-year outlook, as you know, and these current market conditions, with the tariffs, provide a lot of uncertainty. But right now, we believe that the combined earnings of both North America and Latin America could be slightly less than what they were last year. And this is mostly due to a kind of a change in position because of some of the weakness that we have seen in other Latin American markets and pricing.

And that is really driven by the impact of the tariff and increased imports into those markets and also weaker demand. So in particular, in some of our Latin American markets as we talked about, other than Brazil, Brazil is up 6%. Demand is strong there. And the other Latin American market demand generally is down 6%. And that is mostly driven by really Mexico. Now we do not ship into Mexico because of the tariffs that they implemented against Brazil there. But it does have a knock-on impact on the other regions.

George Staphos: Thanks, John. I'll turn it over. Appreciate that.

Operator: Our next question will come from the line of Daniel Harriman with Sidoti. Please go ahead.

Daniel Harriman: Thank you. Hey, good morning, guys. Thank you for taking my questions. First, I just wanted to start with Europe and then the last quarter, you spent quite a bit of time talking about some changes that were made there. Obviously, the region continues to suffer from soft demand and lower pulp prices. And I am just wondering if you could update us on what needs to happen either commercially or operationally to kind of stabilize performance there heading into 2026.

John Sims: Yeah, Daniel. Europe is a difficult market condition. This is also driven a lot by the tariff impacts. Particularly the impact it has had on market pulp due to weak demand in China, as you know, market pulp. Prices were going up in the first quarter, but then significantly decreased in the second quarter. And pulp pricing is a driver of uncoated freesheet prices in Europe because of the level of non-integrated capacity that is there. So we are seeing weakness in both pulp and pricing there. Certainly, we need the market conditions to improve, you know, with pulp going up would be part of stabilization for the pricing there.

But what we are really focused on, we talked about it, is the factors that we can control, and that is improving our competitive cost position. So we are focused on mix improvement as well as fixed cost reduction in our new mill, reducing wood cost, and improving our operations there. Those are the things that we are focused on. We believe we have the right leader driving that. We have talented teams that are focused on that. And that is what the team is working on.

Daniel Harriman: Okay. Thanks so much, John.

Operator: Our next question comes from the line of Matthew McKellar with RBC Capital Markets.

Matthew McKellar: Good morning. Thanks for taking my questions. You mentioned shifting trade flows at uncoated freesheet to the first half of the year. Can you maybe just give us a sense of what the latest is that you are seeing on that front and how trends, excuse me, through the past couple of months and into August have looked in particular? What are you seeing by market? Thanks.

John Sims: Yeah, Matthew. So relative to the first half of this year, we have seen a significant increase in trade in rolls mainly coming into North America. And we believe it is in advance of the tariff uncertainties, and so it has had an impact in creating more supply available in North America, primarily rolls.

Matthew McKellar: Okay. And are you seeing any, I guess, changes in trends in Europe at this point?

Jean-Michel Ribiéras: We have seen here some pressure also from importers trying to get into the European market. Where we see it is some which are anticipated to have new access to the U.S. or difficult access with tariffs, trying to go to OLA. John was mentioning to you prices in OLA were under pressure, and partially it is because of some countries trying to import at very low prices to OLA. And we did not have that before. So OLA is other Latin America to be sure. What I mean by OLA. So we have seen it, as we said, in North America, especially in the first half, and we are seeing it a lot in OLA and the Middle East.

So some of the traditional people who were used to sell to the U.S. will try to find other avenues, and this is where we call with the flow impact.

Matthew McKellar: Okay. Thanks very much for that detail. Next one, you just zoomed me out a bit here. What is your outlook for how uncoated freesheet demand in Latin America evolves over the next couple of years? Thanks.

John Sims: Yeah. We think that Latin America will continue to be maybe flat or slightly down. You know, I think what we are seeing today if you look at it, Brazil is up 6%. So that is in Brazil demand year to date is up 6%. It is other Latin American markets that are down. That is really, as I said earlier, being driven by Mexico, and you know, that is being driven mostly, we think, because of the tariff uncertainty that is occurring, you know, that is just driving through the economy in Mexico. We also see it in a couple of the other countries in Brazil.

But in general, we believe the long-term trend will be flat to slightly down in the whole Latin American market.

Matthew McKellar: Thanks very much. And if I could just sneak one last one in here. I recognize that Eastover spending will be ramping into 2026. But how do you think about the opportunity to lean into share repurchases with where the share price is at? Particularly with the balance sheet in good shape in '25 likely to be stronger from a free cash perspective. Thanks.

John Sims: Yeah. I think it is clear. We have a pretty strong balance sheet, so we have a lot of capacity to take advantage of opportunities to buy back our shares when they are significantly undervalued. We have a little bit of $40 million still authorized from the board of directors. And so we think we have plenty of capacity to take advantage of repurchasing our shares.

Matthew McKellar: Thanks very much. I'll turn it back.

Operator: Again, to ask a question, simply press star followed by the number one on your telephone keypad. And our next question is a follow-up from the line of George Staphos with Bank of America. Please go ahead.

George Staphos: Thanks. Hi, everyone. Could you talk about the green energy credits that you received in 2Q? What was the amount? Are they nonrecurring? And then, you know, to the extent that you can comment, the fact that you are seeing so much in the way of imports into North America, is that affecting any of your tactics and, for that matter, the behavior of, you know, producers in the region, you know, vis-a-vis their margin efforts? And then, I guess, relatedly, you are seeing imports, I believe, into Europe as well from what I heard from Jean-Michel. You know, I recognize it is slow, but is it changing behavior at all? And how are you contending with that? Thank you.

Don Devlin: George, this is Don. To your first question relative to the green credit in Q2, they were $8 million. And this is recurrent? It is something that recurs throughout the year.

George Staphos: Okay. Got it. Thank you for that. And your second question, behavior and what is going on? Thank you.

John Sims: Well, you know, with the import situation in the U.S., just to deal with that, a lot of that in the first quarter was due to anticipation of the tariffs being implemented. Given where we stand today with the tariffs, we are expecting imports to decrease into the U.S. because of the high level of tariffs that are being applied, particularly on those countries where those imports will be coming into. So in general, we believe in North America, that with the closure of the Chillicothe mill and the reduction in imports, the rates are going to improve, probably be in the mid-nineties in the second half of the year. In terms of our tactics, no.

I mean, I think that our strategy continues to be, as we said, to be focused on uncoated freesheet. We want to be the supplier of choice for our customers. We are continuously working to improve our cost positions, our competitive advantages, the values of that brand, and what we provide to the customers. This is why it is so important for us. We believe to debottleneck the Eastover mill so that we can produce more uncoated freesheet. And, you know, the timing is going to look, we believe, pretty good on that given where we think that the operating rates, where we think the import situation is going to be, near term and also longer term.

George Staphos: Yep. I mean, John, I appreciate that. Have you seen looking at 2Q and to date 3Q recognizing you cannot comment on a forward basis, did the fact that you had more supply perhaps from imports change any of the competitive activity on pricing? Was it a little bit more intense on pricing than you would expect? I think from your waterfall, it is a little bit worse than you would expect it. So if you can talk a little bit about that across the regions.

John Sims: Yeah. For me, I think the candid answer is, you know, we put a price increase announcement to our customers in the first part of this year, and we realized much less than what we expected. And that was due, we attributed to the increase in the imports and also the fact that with the announced closure of the Chillicothe, there was an effort by them to sell their inventory at very low prices, which impacted our ability to get the price increase that we would have expected. And so, yes, that did impact us in the short term.

George Staphos: Okay. Thank you, John. I'll turn it over.

Operator: I'll now turn the call back over to Hans Bjorkman for any closing comments.

Hans Bjorkman: Alright. Thank you. I'm going to let Jean-Michel do a quick wrap-up. So thank you, first of all, for joining our call.

Jean-Michel Ribiéras: We understand we are facing some difficult industry conditions. But we have faced them before. So we have a very strong position financially, and we think we can continue to perform very strongly through the cycles. We are committed to our long-term strategy of reinvesting in our business, to increase our competitive advantages and returning cash to shareholders. We are in the process of executing a seamless CEO and CFO transition plan with John and Don as we prepare for my retirement. Our long-term strategy investment themes remain intact. So we are really confident in our ability to generate strong earnings and cash flow through the cycle. Thank you for joining again.