In a recent announcement, Rayonier Advanced Materials Inc. (NYSE:RYAM) (“the Company”) reported significant improvements in its second-quarter performance for 2023. The company revealed a net loss of $17 million, or $(0.26) per diluted share, for the quarter ended July 1, 2023, a substantial improvement from a net loss of $23 million, or $(0.36) per diluted share, during the same period the prior year. Additionally, the loss from continuing operations for the second quarter of 2023 was $16 million, or $(0.24) per diluted share, compared to a loss from continuing operations of $25 million, or $(0.39) per diluted share, for the prior year quarter.
The improved performance in the second quarter can be attributed to several factors, including an increase in prices and strategic measures to counteract market challenges. Rayonier Advanced Materials experienced shifting market conditions in several key end markets, which resulted in volume pressure due to destocking in certain areas of their Cellulose Specialties and Paperboard businesses. Despite these challenges, the company successfully increased prices by 13 percent and 4 percent, respectively, in these sectors compared to the previous year. This demonstrates the company’s commitment to prioritizing value over volume.
Furthermore, the company faced downward pressure on commodity prices across all its segments during the quarter, which intensified the need for strategic responses. To address this, Rayonier Advanced Materials implemented downtime at its High-Yield Pulp plant to reduce costs, minimize losses, and monetize inventories. Additionally, the company is actively reviewing strategic options for its non-fluff High Purity Cellulose commodity businesses, including viscose and paper pulp products.
De Lyle W. Bloomquist, RYAM’s President and Chief Executive Officer, stated, “Consequently, we are revising down our 2023 Adjusted EBITDA guidance, but raising our free cash flow guidance as we reduce capital expenditures and monetize additional working capital. The lower EBITDA guidance is driven primarily by a softer outlook for commodity pricing and lower sales volumes in Cellulose Specialties and Paperboard. Overall, reductions in commodity prices are impacting our 2023 EBITDA guidance by approximately $45 million, which we expect to partially offset with proactive cost reduction measures of nearly $40 million that is expected to be realized in the second half of the year.”
In a move to strengthen its financial position, Rayonier Advanced Materials raised a new $250 million secured term loan subsequent to the quarter’s end. This allowed the company to redeem the remaining $318 million of aggregate principal amount from its 2024 senior unsecured notes. Through these transactions, Rayonier Advanced Materials will further reduce gross debt by an additional $68 million.
In terms of future financial strategy, the company plans to increase the investment hurdles for strategic capital investments to service the increasing fixed charges from the higher cost of debt. These investments are expected to be primarily funded through low-cost green project capital and free cash flow. The long-term strategy of Rayonier Advanced Materials remains focused on steady margin growth from cellulose specialties products while driving new value through investments in its emerging biomaterials business.
As part of these strategic moves, the company has updated its 2023 guidance, with Adjusted EBITDA guidance now ranging from $185 million to $200 million and Adjusted Free Cash Flow guidance raised to $55 million to $70 million.
Rayonier Advanced Materials continues to adapt and evolve in response to market conditions, showcasing its resilience and commitment to delivering value to shareholders.
For more information about Rayonier Advanced Materials Inc., please visit www.rayonieram.com.
