Good morning. Thank you for standing by. Welcome to Sylvamo's Fourth Quarter 2024 Earnings Call. [Operator Instructions] As a reminder, your conference is being recorded. I would now like to turn the call over to Hans Bjorkman, Vice President, Investor Relations. Sir, the floor is yours.

Thanks, Audra. Good morning, and thank you for joining our fourth quarter and full year 2024 earnings call. Our speakers this morning are Jean-Michel Ribiéras, Chairman and Chief Executive Officer; and John Sims, Senior Vice President and Chief Financial Officer. Slides 2 and 3 contain important information, including certain legal disclaimers. For example, during this call, we will make forward-looking statements that are subject to risks and uncertainties. We will also present certain non-U.S. GAAP financial information. Reconciliations of those figures to U.S. GAAP financial measures are available in the appendix. Our website also contains copies of the earnings release as well as today's presentation. With that, I'd like to turn the call over to Jean-Michel. Jean-Michel Ribiéras: Thanks, Hans. Good morning, and thank you for joining our call. I'll start on Slide 4. In 2024, we generated 23% return on invested capital as we executed our strategy and strengthened our competitive advantages in our core uncoated freesheet market. We improved our financial position by repaying $154 million in debt, achieving a net debt-to-adjusted EBITDA of 0.9x. We earned $632 million in adjusted EBITDA, generated $248 million in free cash flow, and returned $130 million in cash to shareowners. We reinvested $221 million across our manufacturing network and our Brazil forestland to strengthen our low-cost position. We are committed to being the investment of choice and believe we can generate significant shareholder returns in the future by executing our strategy. Slide 5 highlights our 2024 full year key financial metrics. Our adjusted EBITDA was $632 million with a 17% margin. Our $248 million of free cash flow was more than $6 per share. Our adjusted operating earnings were $7.42 per share, which is 14% higher than 2023. We now have 3 full years under our belt since becoming an independent…

Thank you, Jean-Michel, and good morning, everyone. Slide 8 contains our fourth quarter earnings bridge versus the third quarter. The $157 million of adjusted EBITDA was in line with our outlook of $150 million to $165 million. Price and mix was unfavorable by $18 million. 40% of this was driven by lower pulp and paper pricing in Europe, and about 30% was due to worse mix in North America. Volume increased by $6 million, driven by the seasonality of Latin America. Operations and other costs were stable due to favorable FX and less economic downtime in North America, which more than offset the planned 10-year turbine generator maintenance event at our Eastover mill that we highlighted on our last earnings call. We also had some onetime events, some planned like an insurance settlement and others like a LIFO adjustment. Planned maintenance outages costs increased by $17 million as we executed a major planned outage at the Eastover mill in the quarter. Input and transportation costs increased by $9 million, driven by transportation and seasonally higher energy prices. Moving to Slide 9. A core pillar of our strategy is to be a low-cost producer. Project Horizon, our cost reduction program to streamline manufacturing, supply chain and overhead costs, is helping us to stay low cost. As Jean-Michel mentioned earlier, before inflation, we exceeded our $110 million year-end run rate savings goal by $34 million. We beat our manufacturing savings targets by delivering results on over 180 initiatives across all 3 regions. These projects targeted chemical, energy, and fixed cost reductions as well as improving fiber efficiency and productivity. We surpassed our supply chain savings targets by reducing approximately 20% of our distribution centers in North America, optimizing sheeting and rewinding outsourcing processes as well as other initiatives across our networks. We…

Yes. Thank you, Jean-Michel. So this is exciting. I'm on Slide 16. The first of these high-return projects at our flagship Eastover mill will be to optimize 1 of our 2 paper machines, modernizing it to the same world-class level as the other paper machine at Eastover. We plan to make investments starting at the headbox continuing all the way down the paper machine through the forming, press and dryer section, including modifications to the winder at the end of the machine. These enhancements will allow us to reduce cost while improving our product mix across both paper machines. This debottlenecking should result in up to an incremental 60,000 tons of uncoated freesheet. The project has an investment of approximately $100 million over the next 3 years with an expected start-up in the fourth quarter of 2026. Let's turn to Slide 17. The second high-return project will be to replace an existing sheeter with a state-the-art cutsize sheeter. This new and more efficient sheeter will lower our sheeting costs up to 15%, reduce waste by maximizing paper machine trim while providing incremental cutsize volume capability. This sheeter will allow us to reduce outsourced sheeting while providing better reliability and additional flexibility to better service our customers. This $45 million project is expected to start up in the fourth quarter of 2026. Let's turn to Slide 18. And the third high-return project at Eastover will be to improve our woodyard efficiency through innovative modernization. We are entering into a 20-year partnership with an external provider, The Price Companies, who is an industry leader in woodyard operations. They design, finance, and operate the most efficient woodyards in the world. They will invest the capital to upgrade our woodyard and they will also operate and maintain the woodyard at the Eastover mill. This…

Thanks, Jean-Michel, and thank you, John. Okay, Audra, we're ready to take questions.

[Operator Instructions] And we'll take our first question from George Staphos at Bank of America.

My 2 questions, and congratulations on the progress over the last few years. My 2 questions. First of all, can you talk a little bit about what impact of pricing that might be in the process of being implemented is in your guidance for the first quarter, if anything at all? Or is all of that pricing more or less locked and loaded from prior efforts? And then if I go to Slide 8, I believe, and we look at volume, you touched a little bit on it, but volume was a little bit weaker than what you've been looking for in the fourth quarter. Can you give us a bit more detail on what was going on there?

Yes, George, and thank you. To your first question, actually, the -- so we have 2 price increases that we've announced to our customers as we mentioned, 1 in Brazil. Remember, Brazil so that's about 50% of our volume down in LatAm and 1 in North America. And we're in the process of implementing that in the first quarter. Because we are implementing, I can't give you a lot of details but I can say that the realization because of the timing of those, it's going to be more in the second quarter and very little in the first quarter in our outlook. The second question in terms of volume, volume was lower than what we expected really across all the regions, mostly in North America. And so that's really the difference between our outlook and the actual results.

I guess, John, why was it a little bit weaker in North America than the other regions, if you had a view? I'm sorry, keep going.

I'm sorry. George, we were a little bit lower in the commercial printing and envelope market. I think the cutsize, the copy paper business was absolutely stronger than what we expected, but it was more so in the commercial printing area.

Okay, that makes sense. Jean-Michel Ribiéras: We had -- in North America, to be -- George, it's Jean-Michel. Thanks for joining. In North America, we had a weak November. I think we didn't anticipate it well enough all the holidays and the impact it had, so we had as planned October and December months but November was below.

We'll take our next question from Matthew McKellar at RBC Capital Markets.

I'd like to start by asking about tariffs. If the U.S. were to apply sustained 25% tariffs on goods from Canada and Mexico and they, in turn, applied retaliatory tariffs on the U.S., how do you think your business would be affected? And what would be your response in that scenario? Jean-Michel Ribiéras: So thanks for joining the call, first of all. This is still very difficult to assess, to be very honest. I think the 25% on aluminum and steel will have some impact that we've anticipated potentially on some of the equipment we buy because the steel, aluminum might get more expensive in the U.S. in general, but that's not material for us. I would not be too worried about that. The rest with Canada and Mexico, if it was to happen, it's more a question of what is the retaliation we're going to get. I don't think it's going to impact us really at all if there is no retaliation. But as of now, if those tariffs were to put in place, we don't know what Canada or Mexico will do. And that's a question mark I don't have the answer.

Okay. Maybe shifting to Latin America. I think you mentioned seeing some positive trends in demand in Brazil. I'd also like to ask about your expectations for demand to the textbook orders this year. And maybe putting it all together, what that implies for how your volumes and mix kind of evolve through 2025? And maybe put differently, do you expect the seasonality you typically see in LatAm to be exaggerated this year with a bigger ramp through the year than usual, driven by a more significant shift in mix, maybe especially given the prices in Brazil are going up that you called out prices in the export channel as being under some pressure?

Yes, Matthew, I think one of the questions you asked is just around the textbooks and the school business. So if I heard that correctly, yes, we're seeing improved order book demand for that down in Brazil. You got to remember, in Brazil, last year, demand was down, so that does impact us from a negative mix perspective as we ship less into Brazil. This year, we're seeing it up to -- flat to slightly up, and we expect as we said that at Brazil and also LatAm, markets will sequentially increase throughout the year. So that's going to be positive from a volume perspective but also very positive from a mix perspective. And that will start to really materialize itself more as the year goes on, second and third quarter.

[Operator Instructions] We'll go next to Daniel Harriman at Sidoti.

Just a quick one here today for me. Can you help us a little bit with the cadence of your capital spending in 2025 within that range of $220 million to $240 million? Should we expect more or less that CapEx to kind of follow the cadence that it did in 2024?

Yes. Daniel, are you talking about -- thanks for joining, Daniel. Are you talking about in terms of the timing of the spend? Is that what you mean by...

Yes. Just how should we think about it being spread out throughout the year on a quarterly basis?

Yes. And I think the way to think about that is more heavily weighted to the first half because you can see 80% of our outages are in there. Now with the spending for -- the spending that we'll do on the Eastover project that we talked about, that will occur throughout the year, not really tied to the outages as we prepare for that implementation in 2026. Jean-Michel Ribiéras: Yes. The outage this year particularly it's probably one of the most extreme we've had in terms of timing of outages first half versus second half of the year, which is part of our earnings growth where we have a hockey stick. We have 80% of our outage spending in the first half of the year versus 20% only in the second half. So that's a big component to take into consideration.

Daniel, when you do look at like the monthly spend, the projections that we have and as we forecast, it's really not much different than what we had last year in terms of the monthly spend on capital.

We'll move next to George Staphos with Bank of America.

My next 2, can you talk a little bit about how the cost curve is shifting in Europe? Certainly, pulp prices stabilized or it looks like that in a few markets, but it was a declining situation in second half. What did that mean for the cost curve and ultimately, pricing and your market shares in the region? The related question, what do you think the industry operating rate is in Europe right now?

Yes, George, I think when we take a look at the cost curve, it has certainly moved up really since the Russian invasion into Ukraine. And that's really driven -- what that has driven is increased energy costs, gas costs as well as wood. The wood cost we've seen go up across the region. If you look at your day pricing, that's what we looked at Europe, uncoated freesheet pricing is stabilizing because about 20% or so, maybe even more, 1/4 of the cost curve is -- right now, the pricing is below the cash cost. So right now, we got about 20%, 25% of the capacity that even with the pulp prices where they are today, which is bottoming, we have cost that's above the current pricing in Europe. In terms of the operating rate, it has improved because of the outages or because of the closures that occurred.

Closures.

Yes. And so it's in the mid-80s right now.

Including the 10%, I think you said, reduction from closures?

That's right, including that, yes.

Okay. And John, just a point of clarification, I'll turn it over. So your view is the cost curve actually is up over the last quarter, 2 quarters in Europe? Or it's more or less stable and certainly up over the last several years because of Ukraine and the like?

It's the latter. I mean with the decreasing pulp prices, you can say that maybe quarter -- sequentially, quarter is slightly down. But overall, the cost curve is increased, if you will, gotten higher cost because of the [ environment ].

And we'll take a follow-up from Matthew McKellar at RBC.

Just following up on an earlier response. I think you mentioned you saw lower commercial printing and envelope volumes in North America in the quarter than maybe you were anticipating. Just wanted to, I guess, get a little bit more color on that. Are you seeing any kind of rebound in volumes maybe start Q1? Or whether maybe you're expecting to see some more permanent kind of demand destruction maybe on the back of higher postal rates or were there any other factors?

No, I think we don't see that as a systemic issue. We see that coming back. And our projections are for North America, the demand will be down about 3%, the historical trend that we have been seeing or -- well, we haven't been seeing really because of the inventory corrections and all, but that we've generally been seeing over the -- for the industry. So nothing different than normal.

Okay, okay. And if I could just sneak one more in on the Eastover woodyard operations. Of course, your partner will be laying out some capital and you're going to be avoiding spending your own capital. You also mentioned more efficient, reliable and cost-effective operations. I guess with this agreement, how should we think about the impact to operating costs at Eastover both in '26 versus maybe '25? And then how things progress over the longer term, just specific to what you've announced with the woodyard here. Jean-Michel Ribiéras: I think just the woodyard is not a huge impact on cost. It's avoidance of capital spending, the first thing. And then the yield and all of that will continue to put our wood, which is very competitive, even more competitive once transformed at the mill. So it's a small impact but not -- we'll take every penny. We count everything in this industry. It's a small impact in the cost side, better reliability, flexibility and avoidance of capital. That's the way I would look at it.

[Operator Instructions] And we'll go back to George Staphos at Bank of America.

I wanted to piggyback off of Matt's question. So what does your partner get from you in exchange for operating the woodyard, if you can talk about the terms there? Second question, penciling it out, free cash flow for the first quarter looks to be, on our math, kind of neutral to maybe up $20 million. I don't know if you called it out actually in the deck or the release. If you did, I apologize for missing it. But if you could sort of give us some thoughts there, and then I'll turn it over and come back into queue.

Yes. I think the -- to your first question, George, we're not going to really disclose the terms of the agreement other than what we said, it's a 20-year agreement, we are paying down to service the woodyard. And the way Jean-Michel talked about it, we're going to get some efficiencies on yield, but that's going to pay the service fees that we're charging them. So the big benefit there is really the capital avoidance because they will be investing -- installing the equipment and maintaining the equipment in the woodyard, which will significantly modernize it. So that's how that's going to work.

And on free cash flow?

All right. I'm sorry, you're going to have to repeat your question again.

John, I was penciling it out and I don't know if you've actually mentioned in the deck or the release. If you did, I missed it. I'm kind of coming out with sort of flat to up $20 million on free cash flow for the first quarter. Could you give us some thoughts on that?

Yes. I'm sorry, I didn't remember that question. But yes, we don't -- George, we don't give any guidance on free cash flow. Jean-Michel Ribiéras: Just one thing I would say is like '24, I would expect a '25 with a seasonal stronger cash flow in the second half than first half. And remember, in the first half, especially in the first quarter, we've got these outages in Europe, which impacts the cash. We've got the annual incentive compensation and customer rebates. So we've got quite a onetime seasonal cost in Q1 versus the rest of the quarters. So it's -- I won't give exact number but it might be more pressure than you have in your numbers.

Yes. The first quarter is always are more challenging in terms of cash flow. Jean-Michel Ribiéras: No worries for the year. It's just this timing.

Understood. Maybe I'll throw my last 2 in here, if it's okay. Tax rate ticks up a little bit, 28% to 29%. What's in that? And could you give us -- my last question, what was the effect of the one-timers in the quarter that I know you'll be offsetting with Horizon in the first quarter? But what was kind of that benefit that you got in the fourth quarter? Good luck in the first quarter.

Yes. And thanks, George. And the question on the taxes, we had a benefit last year. We bought some credits that we were able to use, and so that lowered our tax. So we're not going to have that repeat right now. We're going to be continuing to look at that, but that's not in our outlook. And the other thing is lower earnings in Europe as -- and so that increases our tax -- the overall tax rate because we have less earnings in Europe.

Okay. And one-timers from 4Q?

One-timers, yes. So specifically, we had a $5 million insurance payment that we got in the fourth quarter. LIFO was about $7 million.

I'll now turn the call back over to Hans Bjorkman for closing comments.

All right. Thank you. Before we close up, I'm going to let Jean-Michel kind of wrap up the call today. Jean-Michel Ribiéras: Yes. So thank you, everybody, for joining. Exciting times, and we're right in our strategy about reinvesting in our high-return projects. One thing for '25 is I don't intend to give you numbers on the annual earnings guidance, but with all the uncertainty of the macro and the geopolitical, I'll be prudent. But on a high-level color, if you look at '25 versus '24, both in North America and Latin America, we plan a slightly better '25 than '24 on adjusted EBITDA. For Europe, with a $35 million incremental maintenance outage, we plan to be [ worse ] than '24. So I'm putting that with some thoughts, of course, because as you mentioned, all tariffs and macro is very difficult to forecast. And it's not an exact number but it gives you a trend, which I hope helps you. As we mentioned, we expect our quarterly earnings to improve throughout the year due to 3 main factors: seasonally strong volume, realization of the price increase in North America and Brazil and less maintenance outages in the second half of this year. So with that, I thank you for joining the call, and have a good day.

Once again, we would like to thank you for participating in Sylvamo's Fourth Quarter 2024 Earnings Call. Thank you. You may now disconnect.