Rayonier Advanced Materials Inc. (RYAM) 2025 Q4 法說會逐字稿

Good morning and welcome to the Rayonier fourth quarter 2025 Earnings Conference call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be open to questions with instructions to follow at that time.

As a reminder, this conference is being recorded.

I'd now like to turn the call over to your host, Nicky Walsh, treasurer and Vice President of Investor relations.

Thank you, Mr. Walsh. You may begin.

Thank you and good morning. Welcome again to Rayonier's fourth quarter 2025 earnings conference call. Joining me today are Scott Sutton, our President and CEO, and Marcus Moeltner, our CFO and Senior Vice President of finance. Last evening, we released our earnings report and accompanying presentation materials which are available on our website at ryam.com

These materials provide key insights into our financial performance and strategic direction. During today's discussion, we may make forward-looking statements subject to risks and uncertainties that could cause actual results to differ materially. These risks are outlined in our earnings release, FEC filings, and on slide two of the presentation.

We will also reference certain non-GAAP financial measures to offer perspective on our operational performance. Reconciliation to the most comparable GAAP measures can be found in our presentation on slides 21 through 24. We appreciate your participation today and your ongoing interest in Rayonier. I'll now turn the call over to Scott.

Yeah, thanks, Mickey. Good morning, everyone and thank you for joining us. Since stepping into this role, I've interfaced with many Rayonier employees and visited every site, and I'll start with three things. First, I mean, what a great team we have. I am quite lucky to have the opportunity to hold hands with the Rayonier employees and make us the absolute leader in cellulose and derivatives.

Second, we have exceptional capabilities and adaptability to produce the broadest portfolio of cellulose products. Third, we have urgent work to do to get out of the ditch. I'm going to keep my prepared remarks focused on slides four through seven and as you can see on slide number four, our free cash flow in 2025 was $88 million US dollars and we also carry plenty of high-cost debt.

That combination is not sustainable. So, priority one on slide number five is simple. Deliver positive free cash flow in 2026. Every group in the company is executing on priority one as a mission critical activity. We are not just aiming to get out of the ditch. We are aiming to exit 2026 with significant momentum with a heavy focus on execution.

That brings me to priority two assert our leadership and lift our value equation in cellulose specialties. We're making great progress 85% of the specialties business is now arranged at an average price increase of 18% over 2025 with expected volume loss of about 20% compared with 2025.

The other 15% is still in discussion and may not be decided until the back half of this year. If we are successful in those discussions, the remaining 15% will only come at an average price increase significantly higher than the 18% level.

A great characteristic of Rayonier is that everyone wants to contribute to our success, and that shows up in priority number three you should expect every business to improve EBITDA in 2026 relative to 2025 through a broad playbook of leadership initiatives, active portfolio management.

In other words, levelling up and levelling down market segment categories to maximize contribution profit and new product commercialization's across the portfolio shown on slide number six.

Slide number six shows the new product work across the company. The point is that one business does not carry the load. The point is that we have multiple levers, and we expect every business to take a step forward.

We will execute our way to the outcome shown on slide number seven. The summary is every business improves EBITDA over 2025. We bridge a near zero EBITDA first quarter as our leadership initiative kicks in and we deliver a full year EBITDA substantially better than 2025 along with solid positive free cash flow and we intend to hit 2027 running hard.

That's the plan and it's what we're executing right now. So, operator, please open the call for questions.

Thank you.

(Operator Instructions) Daniel Harriman from Sidoti. Please go ahead. Your line is open.

Hey guys, good morning.

Thank you for taking my questions and Scott, congratulations on the new role. I have two questions that I'll start with and then I'll get back into the queue, but Scott, setting aside the near-term noise in the stock move following last week's AIP announcement, I'm curious to know what you've observed internally that gives you confidence in the company's underlying earnings power and the long-term shareholder value that the company can produce.

And then as you assert leadership and cellulose specialties, how should we think about a ceiling for pricing in that market? And do you think there's a point at which higher prices could invite some competitors to add capacity over time?

Yeah, okay, thanks a lot, Daniel. Great to be here. Look, I mean, I think early observations are that our best opportunity really comes from the team. I mean, look, the team here is incredible. They've been able to flip to an execution model almost overnight and really drive the free cash flow that we need. I know that the team's capable of more and you should expect to see more.

I'll just say the other surprise, and you know I mean it's really a positive surprise is there's more value here than I thought and we have significant opportunity to execute on that. We're updating our forward plans. You should expect to see more details about those forward plans on our upcoming earnings calls and you know those plans will be built mainly around, four themes and we hopefully we get a chance to talk more about those four themes today.

So, I think Daniel, that was your first question and the second one, the price increase question and how much might be too much. I actually think the best question is maybe what price increase is necessary just to keep really the remaining domestic producers of cellulose specialties in business and healthy.

Because if you think about it, before we have achieved this 18%, which by the way, leaves us far short of reinvestment economics, but before we achieve that, if you look at the last four years, you've seen specialty sites and businesses shut down in the state of Washington, they shut down in Tennessee, they've shut down in Florida.

We also permanently cease production of dissolving wood pulp in our Temiskaming, facility, so you're really left with, 22 domestic sites, and those two sites are both Rayonier. We have the capability to fully supply the whole domestic market, but we're not.

In fact, we're set up now as an as an export facility and it's, really because of so many subsidized imports coming in. So, I guess that's a long way to say that we've got a long way to go before we get to reinvestment economics and really encourage anybody else to expand or enter the market.

Really appreciate that color, Scott. Thanks again.

Sure.

(Operator Instructions) Matthew McKellar from RBC Capital Markets. Please go ahead. Your line is open.

Hi, good morning. Thanks for taking my questions. I'd like to ask, First, just, I mean, recognizing that the process seems to have played out before you joined the company, can you maybe provide some perspective around the recent filing that indicated you've rejected a potential offer and maybe with that speak to why you see, continuing to, progress as an independent company as the superior option to that offer. Thanks very much.

Yeah, I mean, hey Matthew, yeah, I'm probably not going to comment on a specific shareholder or any specific offer except what I will say is, we have plans that will deliver substantially more value. I think a good reference point for you in terms of that target is maybe my inducement agreement so that sets a place that you know I think and the team thinks that we can.

We can, get to, you're going to hear more about those plans as we're updating them in upcoming earnings calls. I know I just answered Daniel's question by saying.

You know that it'd be good to talk about some of those themes today and we have four of them, maybe I just outline them here since it's already come up twice, but those four themes are really based on the following. I mean, number one, we're going to have leadership initiatives where we go out and extract the most value we can from the landscape that's there.

Those are going to be a lot more sophisticated than what we're doing today. We're sort of using a blunt instrument to lift value today. Those will be more specific and sophisticated just like, we'll look at nitration grade cellulose into propellants, particularly for, the US military that may be some initiative we work on and you should expect to hear about playbooks set up around that.

The second theme is that we're going to get a lot more skilled at levelling up and down across all our product groups, and if you think about the product groups across cellulose, you're familiar with them. There's acetate grade, ether grade, nitration grade, and so on, but it also includes viscos grade, fluff grade, paperboard grade as well, and We're not going to keep our specialty capacity reserved and not operating while we go out and run an initiative, nor will we run it and just push material into a leadership market.

So, some of those areas we have a 30% market share. Some of those areas we have a 3% market share. But we're going to run our assets all the time and go in and out of those different market areas as necessary to maximize contribution, and you can almost think of it as a like a if you watch professional golf, you can think of it as a leaderboard, if you like F1 leaderboard, NASCAR leaderboard, you're going to see.

Which markets we're going in and out of move up and down that scale as we fully run our assets all the time without damaging where we have a leadership position. So, in other words, in those 30% market share areas.

The third theme of that plan will be around, new products, new cousins of the products we have, new tweaks on those products to deliver maybe what others can't and then finally the fourth theme, we'll have a very active idea pipeline across the whole company that always offsets inflation. So those are the main themes of the plan that you should expect to hear more about. I mean, Marcus, anything to add, or yeah, Matt.

What another fifth that I'd add that is very complimentary to the items that Scott covered is, that improved performance based on execution on those themes will position Rayonier for a refi to really address the capital structure and drive down our interest expense and fixed charges, so very complementary in nature and fits well.

Great, thanks for all the commentary, very thorough sorry.

Did we answer your question, Matthew?

Yeah, that was helpful and thorough, thank you very much. Maybe next for me and then I'll jump back in the queue could you just touch on demand conditions and I guess market conditions, you're seeing a couple of CS products, maybe first in ethers, one of your competitors, I think recently called out it was seeing increased competition from Chinese CLP producers in European markets.

Are you seeing something similar? And if so, can you speak to how significant this phenomenon is and how it's affecting the market and then second, you mentioned nitrous cellulose in your previous remarks. Could you just give us a sense of what conditions in that market are like with some of the geopolitical events we're seeing? Thanks very much.

Yeah, sure, I mean, look, ether grade cellulose, it is challenged a bit. It's particularly challenged in Europe, but it's mainly because of, the ethers coming out of China. In other words, our customers' products are under attack and therefore their demand for ether grade cellulose is less.

But I will say, even with that, we've still been able to achieve that near 20% price increase across ethers in Europe, which, I think is quite different than what others have said again, it's just a demonstration that these products can command more value even when there is a demand pressure and even when others, may have said that pricing is actually going down.

I mean that's a testament to our team, I think you are the other part of that, the nitration grade cellulose, yeah, there, there's lots of new inquiries around that I would say there is lots of demand coming from domestic producers of propellants as well. I would say that's an area where we've been able to achieve more than that 18% price increase that we quoted in the prepared remarks.

Thanks very much. I'll get back in the queue.

(Operator Instructions) Dmitry Silversteyn from Water Tower Research. Please go ahead. Your line is open.

Good morning, gentlemen, and Scott, welcome to Rhyme.

Quick question, there, there's been some, discussion about, not discussion, but you announced that you're not going to be participating in the energy project in Georgia. There's been some issues with TARDIS plants as far as skipping production and getting the raw material sufficient to produce the bioethanol business there. Can you talk a little bit about your strategy for biomaterials broadly and then maybe more specifically how these decisions are impacting the Biaova joint venture?

Yeah, sure, hey, Dimitri, good to meet you look, I would say just broadly across biomaterials. I mean it, it's an important business for us today. It's an important part of our growth story in the future, but I would just say that it's really one contributor to our growth. If you think back to the slide that we had put in the earnings deck, you see new products or new cousins across every business, and that's what you should expect to see, going forward, we're going to be talking much more about.

An integrated model across cellulose specialties, commodity commodities and biomaterials that sort of gets run under the same value creation model and all of those items will contribute to our growth but here if you go back to the leveling up, leveling down, in other words like the NASCAR leaderboard that I just talked about before by running TARDIS. Much more and much stronger, not only are we able to get the value we want in specialties by being able to hold out and not push volume into that leadership market.

Of course we're able to access, other product groups like Fluff, but at the same time that provides an increased feedstock that goes into the biomaterials business and in particular it goes into BioNova there and we. Sell more ethanol and we sell more lino sulfonates as well, so we're actively working on a plan to run TARDIS harder. We have basically a crisis management team and we're having success in doing that.

Understood. Thank you. And then the second question to follow-up on your remarks about pricing getting so low that even an 18% price increase still doesn't put you at reinvestment economics. There's been a, anti-dumping case that you filed against Brazilian and North European importers.

I think that's been positively decided, but it hasn't been adjudicated yet. So can you talk about sort of where you think or when you think the remedies are going to come in to allow you to restore pricing in North America?

Yeah, I will. And I mean, by the way, I mean, we're going down a path of restoring prices with or without, the anti-dumping and the countervailing duties case. It's just that success in those cases. Would certainly help us close the remaining 15% of business likely sooner than we otherwise would, and success in those dumping cases would also make our 2027 improvement and next steps in value. Likely better as well but the situation around those and I'll just start with the countervailing duties case.

So, there's likely and there will be, we believe a preliminary determination of those duty rates later this month. So, just as a reminder. You know that applies to exports out of Brazil from the subsidized state sponsored producer that has sort of taken over the North American market. So those we believe will come in March.

The anti-dumping duties are applicable to both Brazil and Norway and we believe that there'll be a preliminary determination of those rates in May and by the way, those things are stackable. In other words, the countervailing duties and the anti-dumping duties can stack on top of one another, as could other things around tariffs as well if they were enacted, so that's the status of the duties.

Understood.

Thank you very much. I'll get back into the queue.

(Operator Instructions) Daniel Harriman from Sidoti. Please go ahead. Your line is open.

Hey guys, thanks again. Just a quick follow-up. Scott, we've talked a good amount on specialties and biomaterials, but I'm curious to know with the new product initiatives and cost actions underway within the paper board and high yield pulp businesses, how do you see them fitting into the company portfolio longer-term and specifically, do you still see them as potential divestiture candidates or is there a role for them longer-term in the Rayonier portfolio?

Yeah, no, thanks for the question. I would just say across all of Rayonier's portfolio, we're not selling any business and we're not closing any assets. All of them right now are certainly sources of improvement for us, and we expect to improve them all, both the paper board business and the high yield.

Salt business, look, they're certainly challenged, and you know they're still absorbing new capacity, particularly in paper board, but we have new products there that we're being successful at commercializing, so the source of improvement in '26, '25 for paperboard will be those new products.

There's one is associated with an oil and grease board, and the other one is a foldable freezer board, all of which can carry, a unique set of printing and coatings on them. So that will be the source of improvement. We expect to do more volume in paperboard as that other capacity is getting absorbed.

High yield pulp, yes, there's a lingering oversupply issue there as well, but we also have, a significant new product that is under customer testing, and we've sold some trial quantities there already, and we'll expect to see price, start to move back up as that oversupply issue gets addressed.

Okay, thanks again, Scott. I really appreciate it. Yes, sure.

(Operator Instructions) Matthew McKellar from RBC Capital Markets. Please go ahead. Your line is open.

Thanks again for taking my questions. Scott, you made an interesting comment there about a more integrated model across CS commodities, and even biomaterials. Can you maybe expand on that a bit?

And, I think the current segmentation has helped make clear their products in very different margins within your business because that segmentation may be masked to some degree that commodity pricing is, very outside your control. Maybe you need higher CS margins still to justify, continued investments.

And I guess would you even make a make an argument that maybe the commodity side has become structurally more challenging and with that, again that would suggest CS margins need to go higher likes.

Yeah, sure, I mean, look, our forward model is going to be one value creation model in this area and you look at the scale and scope of our assets, we, we've got to be successful on every product that can come out of those assets, whether it's the seven or eight.

Market segments that we previously classified as specialties or whether it's the three or four segments that we've previously classified as commodities or whether it's the four or five other segments that you know we've called biomaterials so we're going to be setting those assets and we're going to be setting our market participation strategy.

In whatever configuration gives us the most contribution at the time, so sometimes we're going to be running more fluff and more viscos. That's just like today. I can tell you for 2026 our highest volume product by far is cellulose fluff, and you know that's because we're going through this leadership initiative. And we're able to not rush that leadership initiative, not push, production out into a market where we're trying to increase the value of it.

So, it's serving us very well in doing that. You also heard me speak about [TARDIS] for the biomaterials, the co-product, or the black liquor that comes off the production of the other serves as the feed for that so we can balance all that together instead of sort of isolating those and showing isolated results. It doesn't really matter what we produce. We're just going to be showing a better and better result each time.

Yeah, and Matt, as our breadth and production capability, as Scott mentioned, we can make a myriad of products. We've got a sulfite and craft process. We've got hardwood and softwood capabilities. We're just going to look to optimize that contribution margin across our footprint while driving down absolute fixed costs, right? We must drive down fixed costs and be more profitable across the footprint.

Great. Thanks very much for that perspective. Last question for me. It was interesting to see your paperboard volumes and prices increase sequentially in Q4 would you attribute that mostly to the introduction of the freezer board product you mentioned previously?

Is there anything else we should understand about your results of that business? And then I guess with the recently announced closure of a competitors, SBS Mill in Quebec, do you see opportunities to potentially win some attractive business there that could further support results.

Thanks.

Yeah, I think that and maybe Mark is a comment more. I mean, there's some mixed issue there. We were successful with the freezer board, new product introduction as well because you're speaking about the third quarter of last year compared to the fourth quarter.

Yeah, and I'll add to that, Matt. There's an element of mix as it relates to quality as well. Better productivity and better quality at the plant results in less calls, so that's going to drive your mix as well. So, we've seen the plant performance better and improved.

Hey, Matt, ask your second question again.

Yeah, sure. So, I guess with the closure of a competitor's SBS mill in Quebec, do you see some opportunities to win business that could further, support results in that segment. Thanks.

Yeah, okay, thanks. Yeah, I think there's opportunities, but at the same time that's going on, we are having to absorb the new capacity up in the northeast US as well, so it's sort of, maybe helping offset the negative from that.

Okay, fair enough. Thanks very much. I'll turn back.

All right.

And we have no further questions, I would like to turn the call back to Scott Sutton for closing remarks.

Yeah, okay, yeah, thanks. I mean there, there's just a couple things I'd like to add here at the end, maybe things that didn't really come up and you know we did comment that we still have, 15% of the expected cellulose specialties business to place and I just wanted to relay that I think we have options for that. I mean, clearly the first option is to get that in the specialties area. It's mainly a shortage in the acetate area and it's mainly a shortage in the US and.

All I would say there is it's going to take some time to be successful, but I would hate to really be the last man standing there, like maybe the US tow producers are going to be. It's sort of like there's a game of musical chairs.

And someone is going to be left standing with without a chair and you know we're going to see where that goes and that's why I made my earlier comments that remaining 15% is only going to come at a higher price increase than the 18% that, we've already achieved. The other option that we have there if we're not successful.

At getting that that remaining 15% is we'll run our, NASCAR leaderboard strategy and, we're already practicing at that sum will level up and level down as necessary and, we'll go do some more fluff business where we only have a 3% or 4% global market share and we can enter that market.

Basically, without damaging the pricing profile of it, so I think that's something that didn't come up, but it's important because how we manage that is important to our EBITDA profile going forward through the rest of, 2026.

Okay, so look, I mean, with that, I guess I'll just end where we began and you know I'll just say, look, what I mean, what a great team we have. We have a lot of value here, but we have really urgent work to do, and our priorities are really clear. Deliver positive free cash flow in 2026. We're going to assert our leadership and lift value and cellulose specialties and we're going to improve EBITDA across every business look; we're executing on that now.

We intend to exit 2026 with significant momentum and hit 2027 running really hard. You should also expect us to continue to update these plans where we hinted on the four themes that they will contain and Marcus added 1/5 very important value creation theme. To that as well and you know that's what we'll be talking about in our upcoming earnings calls.

So anyway, I mean with that I'll just say, thanks a lot for your questions and thanks a lot for your interest in Rayonier.

And this concludes today's conference call.

Thank you for your participation. You may now disconnect.