Earning Date, Transcript Summary & Report

Revenue and Income Increase: Revenue for 2024 was $1.63 billion, with operating income improving to $39 million, an increase of $104 million over the prior year.

Adjusted EBITDA Surge: Adjusted EBITDA reached $222 million, marking an $83 million or 60% year-over-year increase, driven by strong cellulose specialty pricing and volumes.

EBITDA Margin Expansion: EBITDA margins expanded to 13.6% from 8.5%.

Adjusted Free Cash Flow Increase: Adjusted free cash flow stood at $128 million, an improvement of $75 million or 142% from 2023.

Debt Reduction and Leverage Improvement: Net secured debt decreased by $73 million, and the net secured leverage ratio improved to 2.7 times covenant EBITDA.

EBITDA Growth Driver: High purity cellulose was a primary driver of EBITDA growth, delivering a $93 million or 65% increase year-over-year.

Commodity Exposure Reduction: The company successfully reduced exposure to non-fluff HPC commodities from 50% in 2023 to just 6% in 2024.

Cost Efficiency Investment: In 2024, the company invested $10 million in strategic capital into cost efficiency projects, projected to generate $10 million in EBITDA in 2025.

Biomaterials Business Expansion: The company is committed to advancing its biomaterials business, with expected EBITDA of $8 million to $10 million in 2025 from key initiatives.

Price Increase Strategy: The company anticipates mid-single-digit percentage price increases in cellulose specialties, driven by a value-over-volume strategy.

Revenue Decline Analysis: Revenue for 2024 declined by $13 million compared to 2023, indicating a slight downturn in overall sales performance.

Paperboard EBITDA Decline: Despite improved operating income, the company faced challenges with paperboard EBITDA declining by $4 million due to lower sales prices and higher labor costs.

Pulp Sales Decline: High yield pulp sales also saw a decline of $9 million, primarily due to a 9% drop in external sales prices, reflecting oversupply in China and lower demand.

EBITDA Guidance Challenges: The absence of certain one-time net benefits of approximately $15 million that were realized in 2024 will present headwinds for 2025 EBITDA guidance.

Rising Corporate Expenses: Corporate expenses increased by $2 million, driven by higher variable compensation and other costs, which could impact overall profitability.

Tariff Impact on EBITDA: The company anticipates a significant impact from a 25% tariff on US paperboard sales, which could lead to an annualized EBITDA impact of $42 million and $35 million in 2025.

Projected Cash Flow Constraints: Adjusted free cash flow for 2025 is projected to be in the range of $25 million to $45 million, indicating potential cash flow constraints compared to previous years.

Rising Maintenance Expenditures: The company expects maintenance capital expenditures to rise to $85 million in 2025, reflecting planned maintenance outages across all facilities, which could strain financial resources.