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Why Rayonier Advanced Materials Stock Is Cratering Today

By Matthew DiLallo - May 9, 2019 at 1:37PM

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The maker of cellulose-based materials delivered disappointing results.

What happened

Shares of Rayonier Advanced Materials (RYAM -2.16%) tumbled more than 33% at 12:45 p.m. EDT on Thursday. Driving down the stock of the cellulose-based materials company was its disappointing first-quarter report.

So what

Rayonier Advanced Materials reported an unexpected loss of $22 million, or $0.52 per share, during the first quarter. That missed analysts' expectations by a wide margin given the consensus that the company would report a $0.13-per-share profit.

The company faced a variety of issues during the quarter, including unplanned downtime due to boiler issues at its Temiscaming plant and higher hardwood costs at its Jesup plant due to extreme periods of prolonged rainfall in the U.S. Southeast. Those factors caused its high-purity cellulose business to report a loss during the quarter. On top of that, the company experienced weaker demand in the lumber, pulp, and paperboard markets, which impacted its forest products, pulp, and paper segments.

A person looking at an down arrow going through a floor.

Image source: Getty Images.

The company said that it's actively addressing the issues impacting its high-purity cellulose business and anticipates that its financial results will improve throughout the year. Because of that, Rayonier Advanced Materials sees its margins returning to normal levels in the mid-teens during the second half of the year, depending on commodity prices. However, the company warned investors that its guidance is no longer reliable. Further, the company said that weakness in lumber prices and paperboard and newsprint sales would likely continue.

Now what

Rayonier Advanced Materials believes that the headwinds facing its high-purity cellulose business will go away during the second half of the year, which should boost its profitability. In addition to that, the company is continuing to market some of its nonstrategic commodity assets, which it expects to complete by the end of the second quarter. Those could prove to be catalysts that might help boost the stock price later this year. However, shares will likely remain under pressure until the company demonstrates that it can turn things around.

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