Rayonier Advanced Materials Offers Opportunity As Pricing Improves (NYSE:RYAM)


Rayonier Advanced Materials (NYSE:RYAM) produces high-end paper products and is seeing strong pricing that will cause Q4 2022 results to be strong. This could result in strong EBITDA in 2023, following very back-end loaded EBITDA in 2022. The risks are declining volumes

Metric Value ($, M) Notes
EBITDA 171 Guidance less gas cost price spike
Interest 64 4x Q3 interest
Tax 0 Tax losses should result no meaningful tax
Capex 150 High end of guidance
Resulting Equity FCF -43M Sum of the above

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Business Line Q1 Q2 Q3 Q4 Calendar 2022
High Purity Cellulose 16 7 53 ?
Paperboard 10 10 15 ?
High yield pulp 0 -2 6 ?
Corporate costs -6 -18 -6 ?
Total 20 -3 68 86 171

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We implemented a $146 per metric ton cost surcharge effective April 1 and have maintained the surcharge as inflationary pressures continued.

More recently, we implemented a 20% increase effective August 1 on the small sales volume of cellulose specialties that usually are not under contract. Currently, we’re in negotiations with our cellulose specialty customers for 2023 pricing with the target to completely capture the fair value of those products.

Our revenues increased 25% from prior 12 months to $466 million consequently, a price increases in strong demand across all segments, reflecting a 25% increase for our cellulose specialty products, inclusive of our cost surcharge, and a 34% increase for our paperboard products.

Adjusted EBITDA for the quarter was $68 million, up 106% from the prior 12 months, as the worth and volume increases greater than offset cost inflation.

Metric Value ($, M) Notes
EBITDA 320 Assume Q4 strength (est. $86M EBITDA) broadly persists into 2023 at a run rate of $80M
Interest 73 Est. $725M of debt at 10% rate of interest
Tax 30 Relatively low tax rate given prior losses
Capex 140 Setting capex equal to depreciation (note they argue maintenance capital is ~$110M)
Resulting Equity FCF 77 Sum of the above

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