Rayonier Advanced Materials Inc. reported a net loss of $102 million for the year ended December 31, 2023, compared to a net loss of $15 million for the prior year. Loss from continuing operations for the year ended December 31, 2023 was $102 million, compared to a loss from continuing operations of $27 million for the prior year.
Net sales for 2023 were $1,643 million, down $74 million from the prior year.
Operating loss for the quarter and year ended December 31, 2023 was flat and decreased $1 million, respectively, compared to the same prior year periods. Quarter and year-over-year improvements included lower variable compensation and other benefit costs that were largely offset by unfavorable foreign exchange rates in the current year as compared to favorable rates in the prior year. Additionally, higher costs were recognized related to ERP transformation project expenditures, discounting and financing fees incurred to facilitate working capital enhancements and advisory and professional expenses related to the Company’s senior notes refinancing. Also contributing to the year-over-year improvement were one-time severance costs incurred in the prior year. Compared to the third quarter of 2023, the operating loss was flat.
The effective tax rate on the loss from continuing operations for the quarter and year ended December 31, 2023 was a benefit of 26% and 24%, respectively. The 2023 effective tax rates differed from the federal statutory rate of 21% primarily due to different statutory tax rates in foreign jurisdictions, U.S. tax credits, return-to-accrual adjustments related to previously filed tax returns and changes in the valuation allowance on disallowed interest deductions.
The effective tax rate on the income from continuing operations for the quarter ended December 31, 2022 was a benefit of 130%. The effective tax rate on the loss from continuing operations for the year ended December 31, 2022 was an expense of 4%. The most significant items creating a difference between the 2022 effective tax rates and the statutory rate of 21% were changes in the valuation allowance on disallowed interest deductions, nondeductible executive compensation, U.S. tax credits, tax return-to-accrual adjustments on filed returns and interest received from tax overpayments.
2024 Outlook
In October 2023, the Company announced that it engaged a financial advisor to explore the potential sale of its Paperboard and High-Yield Pulp assets located at its Temiscaming site. The process is ongoing for this strategic review, which is consistent with the Company’s commitment to align its portfolio with its long-term growth strategy and provide flexibility to pay down debt, reduce leverage and minimize earnings volatility.
Excluding any assets sales, the Company expects to generate between $180 and $200 million of Adjusted EBITDA in 2024.
“Our EBITDA results for 2023 fell short of expectations reflecting soft demand for cellulose ethers products driven by weak construction activity, lower than expected demand in Paperboard and weak pricing in High-Yield Pulp and commodity pulp products. In response to weaker markets, we implemented cost-cutting measures and strategically scheduled market-driven downtime across all segments. Our primary focus shifted to generating free cash flow, driven predominantly by improvements in working capital and adhering to our lending commitments,” said De Lyle Bloomquist, RYAM’s President and CEO. “As a result, we concluded the year with $139 million in Adjusted EBITDA and $53 million of free cash flow and remained in compliance with our original debt covenants with a net secured debt ratio of 4.2 times Adjusted EBITDA.
“With an improving outlook aided by a competitor’s closure, coupled with our sales priority of value over volume, we anticipate better results for 2024. Higher pricing for our key cellulose specialties products, along with lower unit production costs for our High Purity Cellulose business, driven by improved productivity and lower key input and logistics costs, are expected to generate higher earnings for this segment. Furthermore, our new bioethanol facility is expected to commence operations in the Q1 2024. Paperboard and High-Yield Pulp are also expected to deliver improved results due to lower costs and higher production due to normalized demand. In total, we project an Adjusted EBITDA of $180 to $200 million and free cash flow of $20 to $40 million in 2024,” concluded Mr. Bloomquist.
Rayonier Advanced Materials Inc. is a global leader of cellulose-based technologies, including high purity cellulose specialties, a natural polymer commonly used in the production of filters, food, pharmaceuticals and other industrial applications. The Company also manufactures products for paper and packaging markets.
