Sylvamo (NYSE: SLVM), the world’s paper company, is releasing first quarter 2024 earnings.

Financial Highlights - First Quarter vs. Fourth Quarter

• Net income of $43 million ($1.02 per diluted share) vs. $49 million ($1.16 per diluted share)
• Adjusted operating earnings¹ of $45 million ($1.07 per diluted share) vs. $49 million ($1.16 per diluted share)
• Adjusted EBITDA² of $118 million (13% margin) vs. $117 million (12% margin)
• Cash provided by operating activities of $27 million vs. $167 million
• Free cash flow³ of $(33) million vs. $104 million

Commercial and Operational Highlights – First Quarter vs. Fourth Quarter

• Price and mix were stable
• Volume decreased by $12 million due to expected seasonally weaker industry demand in Latin America
• Operations and other costs improved by $19 million due primarily to lower economic downtime
• Planned maintenance outage expenses decreased by $3 million
• Input and transportation costs increased by $9 million, driven primarily by transportation costs in North America

Second Quarter Outlook

• Adjusted EBITDA of $145 million to $160 million
• Compared to the first quarter:
  • Price and mix are expected to increase by $15 million to $20 million, primarily reflecting prior price increases across all regions and a better mix in Latin America
  • Volume is projected to increase by $5 million to $10 million, with seasonally stronger demand in Latin America and continued momentum in Europe and North America
  • Operations and other costs are expected to improve by $5 million to $10 million due primarily to lower costs in Europe and North America
  • Input and transportation costs are projected to be stable to improving up to $5 million due to better transportation and energy costs in North America partially offset by unfavorable fiber costs in Latin America
  • Total planned maintenance outage expenses are expected to increase by $3 million

Management Summary from Chairman and Chief Executive Officer Jean-Michel Ribiéras

As uncoated freesheet conditions improved in the first quarter, we experienced strengthening order books, resulting in less economic downtime. Price and mix were better than expected while input costs stabilized. That momentum is expected to continue in 2024, and we are well positioned to capitalize on the opportunities that lie ahead.

We are making good progress with Project Horizon, our structural cost reduction program to streamline overhead, manufacturing and supply chain costs. Before inflation, we are on target to meet run rate savings of $110 million by the end of 2024.

This year, we repurchased $20 million of shares, including $15 million in April, and have $130 million remaining on our $150 million share repurchase authorization from September 2023. Our board of directors declared a second quarter dividend of $0.30 per share, which we paid April 29.

Since the spinoff, we have repurchased $170 million in shares or 8% of our initial shares outstanding. This use of cash resulted in a 35% return on investment based on a $65.00 share price.

We continue to allocate capital to generate long-term shareowner value. Since our inception, we have reduced gross debt significantly and will maintain a strong financial position to operate and invest throughout industry cycles. We remain committed to reinvesting in our business. We have identified a pipeline of more than $200 million of high-return capital projects, which will allow us to grow our earnings and cash flows as we invest in these projects in the future. We also plan to continue returning substantial amounts of cash to shareowners through dividends and share repurchases at attractive prices.

Segment Information

Sylvamo uses business segment operating profit to measure the earnings performance of its businesses and is calculated as set forth in footnote (f) under the "Sales and Earnings by Business Segment" table (page 7). First quarter 2024 net sales by business segment and operating profit by business segment compared with the fourth quarter of 2023 and the first quarter of 2023 are as follows:

Operating profits in the first quarter of 2024:

Europe - $(4) million compared with $(23) million in the fourth quarter of 2023. Earnings were higher due to higher price and mix, slightly higher volumes, lower planned maintenance outages, lower operating costs and lower economic downtime.

Latin America - $14 million compared with $48 million in the fourth quarter of 2023. Earnings were lower due to lower volumes, lower price and mix, higher operating and input costs and higher planned maintenance outages.

North America - $62 million compared with $52 million in the fourth quarter of 2023. Earnings were higher as higher volumes, lower economic downtime and lower planned maintenance outages more than offset lower price and mix and lower operating and input costs.

Effective Tax Rate

The reported effective tax rate for the first quarter of 2024 was 28%, compared to 27% for the fourth quarter of 2023. The higher rate for the first quarter was due to the mix of earnings in our regions.

Excluding net special items, the effective tax rate for the first quarter of 2024 was 28%, compared with 27% for the fourth quarter of 2023.

The effective tax rate excluding net special items is a non-GAAP financial measure and is calculated by adjusting the income tax provision and rate to exclude the tax effect at the applicable statutory rate of net special items. Management believes that this presentation provides useful information to investors by providing a more meaningful comparison of the income tax rate between past and present periods.

Effects of Net Special Items

Net special items in the first quarter of 2024 amounted to a net after-tax charge of $2 million ($0.05 per diluted share), compared with a net after-tax charge of $0 million ($0.00 per diluted share) in the fourth quarter of 2023.

Earnings Webcast

The company will host an audio webcast at 10 a.m. EST / 9 a.m. CDT. All interested parties are invited to listen at investors.sylvamo.com.

Parties who wish to participate should call +1-877-336-4440 (U.S.) or +1-409-207-6984 (international) and use access code 763504. Participants should call in no later than 9:45 a.m. EST / 8:45 a.m. CDT.

Replays are available at investors.sylvamo.com for one year and by phone for 90 days, beginning at approximately 2 p.m. EST / 1 p.m. CDT the day of the call. To listen to the replay by phone, call +1-866-207-1041 (U.S.) or +1-402-970-0847 (international) and use access code 2604061.

About Sylvamo

Sylvamo Corporation (NYSE: SLVM) is the world's paper company with mills in Europe, Latin America and North America. Our vision is to be the employer, supplier and investment of choice. We transform renewable resources into papers that people depend on for education, communication and entertainment. Headquartered in Memphis, Tennessee, we employ more than 6,500 colleagues. Net sales for 2023 were $3.7 billion. For more information, please visit Sylvamo.com.

Forward-Looking Statements

This news release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including the information under the headings "Second Quarter Outlook" and "Management Summary from Chairman and Chief Executive Officer Jean-Michel Ribiéras." Any or all forward-looking statements may turn out to be incorrect, and our actual actions and results could differ materially from what they express or imply, because they involve known and unknown risks, uncertainties and other factors, many of which are beyond our control. These risks, uncertainties, and other factors include those disclosed in the heading "Risk Factors" in our Annual Report on Form 10-K for the year ended Dec. 31, 2023, filed with the U.S. Securities and Exchange Commission (SEC) and in our subsequent filings with the SEC, available on our website, Sylvamo.com. These forward-looking statements reflect our current expectations, and we undertake no obligation to publicly update any forward-looking statements, whether because of new information, future events or otherwise.

The non-GAAP financial measures presented in this release have limitations as analytical tools and should not be considered in isolation or as a substitute for an analysis of our results calculated in accordance with GAAP. In addition, because not all companies use identical calculations, the Company’s presentation of non-GAAP measures in this release may not be comparable to similarly titled measures disclosed by other companies, including companies in the same industry as Sylvamo.

Management believes certain non-U.S. GAAP financial measures, when used in conjunction with information presented in accordance with U.S. GAAP, can facilitate a better understanding of the impact of various factors and trends on the Company’s financial condition and results of operations. Management also uses these non-U.S. GAAP financial measures in making financial, operating and planning decisions and in evaluating the Company’s performance.

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