What happened
Rayonier Advanced Materials (RYAM 0.26%) lost more money than expected in the most recent quarter and said it is looking at options for some of its more commoditized units. The market sees no quick turnaround, sending shares of the specialty materials manufacturer down more than 20%.
So what
Rayonier specializes in using renewable forestry resources to create natural polymers, with its products found in electronics, eyeglasses, textiles, and pharmaceuticals. The company holds great promise as a green-tech alternative to petrochemical sources for specialty chemicals.
But the second quarter was difficult. Rayonier lost $0.24 per share on sales of $385 million, falling short of analyst expectations for a $0.12 per share loss on revenue of $417 million.
"Results for the second quarter reflected shifting market conditions across several key end markets," CEO De Lyle W. Bloomquist said. "We are experiencing downward pressure on commodity prices across all our segments, which intensified during the quarter.
Rayonier was able to boost prices by 13% in its cellulose specialties unit and by 4% in its paperboard business. It also said it was reviewing options for its non-fluff high-purity cellulose commodity business.
Now what
Rayonier expects to generate adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of between $185 million and $200 million for the year. That's down from the $200 million to $215 million projected in May. The lower guidance is driven primarily by a software outlook for commodity pricing and lower sales volumes. However, the company hopes to offset some of that lost profitability via about $40 million in cost reduction measures.
Overall, for investors focused on a green future, Rayonier is an intriguing company, but one with a lot of uncertainty and no quick way to rocket higher. For those interested in buying in, limiting this stock to a small part of a well-diversified portfolio is best.
