Rayonier Advanced Materials Inc. (RYAM) is a global leader in the production of cellulose specialties, a natural polymer used in the manufacturing of various specialty chemical products. The company has built upon nearly 100 years of experience in cellulose chemistry, providing some of the highest quality high-purity cellulose pulp products that make up the essential building blocks for its customers' products while providing exceptional service and value.
Business Overview and History
RYAM was formed in 2014 when it separated from its former parent company, Rayonier Inc., and became an independent, publicly traded company. At the time of separation, RYAM consisted of Rayonier Inc.'s wholly-owned performance fibers business, which was primarily engaged in producing cellulose specialties. In 2017, the company acquired Tembec Inc., a manufacturer of cellulose specialties, lumber, paperboard, newsprint and high-yield pulp. This acquisition expanded RYAM's manufacturing capabilities and product portfolio. However, in August 2021, RYAM sold the lumber and newsprint assets acquired in the Tembec acquisition to focus on its core cellulose-based operations.
Throughout its history, RYAM has faced various challenges. In 2019, the company experienced significant reliability issues at its Temiscaming, Quebec plant, which impacted operations. Additionally, in 2021, RYAM encountered a walk-out at its plant in Tartas, France. These operational disruptions had a negative impact on the company's financial performance during those periods.
RYAM has also navigated ongoing trade disputes, particularly the softwood lumber dispute between the United States and Canada. As part of its former lumber business, RYAM paid approximately $112 million in softwood lumber duties between 2017 and 2021. After the sale of its lumber assets in 2021, RYAM retained the rights and obligations related to these softwood lumber duties.
Today, RYAM operates four production facilities strategically located in the U.S., Canada and France. The company's operations are organized into three primary business segments: High Purity Cellulose, Paperboard, and High-Yield Pulp.
The High Purity Cellulose segment is the primary driver of RYAM's profitability, manufacturing both cellulose specialties and commodity products. Cellulose specialties are natural polymers used as raw materials to manufacture a broad range of consumer-oriented products, while commodity products include viscose and fluff pulp. The Paperboard segment produces lightweight multi-ply paperboard products, and the High-Yield Pulp segment manufactures bulky high-yield pulp for paper manufacturers.
RYAM's specialized assets also produce bioelectricity, biomaterials, including biofuels, lignin and tall oil soap, and commodity fluff, viscose and paper pulp. The company is focused on expanding its biomaterials business to capitalize on the growing demand for renewable and sustainable products.
Financial Performance and Liquidity
In fiscal year 2024, RYAM reported net sales of $1.63 billion, a slight 0.8% decline compared to the prior year. However, the company achieved a significant improvement in profitability, with operating income of $39 million, up from a loss of $65 million in 2023. Adjusted EBITDA reached $222 million, a 60% year-over-year increase, driven by strong cellulose specialty pricing and volumes as well as cost reductions.
The company's balance sheet remained strong, with total debt of $730 million and a net secured debt to covenant EBITDA ratio of 2.7x as of the end of 2024. RYAM generated $204 million in cash from operations and $128 million in adjusted free cash flow during the year, allowing it to reduce net debt by $68 million.
For the most recent quarter, RYAM reported revenue of $422 million and a net loss of $16 million. The company's annual net income for the most recent fiscal year was -$39 million. The debt-to-equity ratio stood at 1.02, with cash of $125 million and $141 million available under the ABL Credit Facility. The current ratio was 1.50, and the quick ratio was 0.98.
RYAM's financial structure includes a 5-year $175 million ABL Credit Facility maturing in 2029, with borrowings priced at Term SOFR plus 2.0% margin. The company also has a $700 million 5-year Term Loan due 2029 at a variable rate of Term SOFR plus 7.0% margin.
For 2025, RYAM provided guidance for Adjusted EBITDA in the range of $215 million to $235 million. This guidance includes the estimated impact of a 25% tariff on U.S. paperboard sales, which the company expects to largely mitigate through various cost savings and revenue optimization initiatives. Cash interest expense for 2025 is projected at $93 million, which includes a $12 million interest payment for the last quarter of 2024. On a normalized basis, annual cash interest expense will be just over $82 million. Maintenance capital is projected at $85 million, and working capital is expected to provide a modest $5 million benefit. As a result, adjusted free cash flow for 2025 is expected to be in the range of $25 million to $45 million, subject to the impact of tariffs.
Segmental Performance
High Purity Cellulose: This segment, which includes both cellulose specialties and commodity products, is RYAM's primary profit driver. In 2024, the segment's revenue declined 0.8% to $1.30 billion, but Adjusted EBITDA increased 65% to $237 million. The improved profitability was driven by higher cellulose specialty pricing and volumes, as well as cost savings from the indefinite suspension of the Temiscaming, Canada high purity cellulose facility.
RYAM's High Purity Cellulose segment manufactures and markets high purity cellulose, which is sold as either cellulose specialties or commodity products. Cellulose specialties are primarily used in dissolving chemical applications that require a highly purified form of cellulose, such as in the production of liquid crystal displays, impact-resistant plastics, thickeners for food products, pharmaceuticals, cosmetics, and more. The company's ability to consistently manufacture high-quality cellulose specialties products results from its proprietary production processes, intellectual property, and nearly 100 years of technical expertise and knowledge in cellulosic chemistry.
In addition to cellulose specialties, a significant portion of RYAM's High Purity Cellulose production capacity is dedicated to manufacturing high-purity commodity products for absorbent materials, typically referred to as fluff, and viscose applications. Fluff is used as an absorbent medium in products like disposable diapers, feminine hygiene products, and wipes, while commodity viscose is a raw material required for the manufacture of viscose staple fibers used in woven and non-woven textile applications.
Operating income for the High Purity Cellulose segment improved significantly in 2024 to $76 million, compared to $42 million in 2023, primarily due to the prior year's $62 million non-cash impairment charge, lower costs from the Temiscaming suspension, and recognition of CEWS benefit claims. The segment's key input costs, including wood, chemicals, and energy, represent approximately 50% of per MT cost of sales.
Paperboard: Revenue in this segment increased 4.1% to $228 million in 2024, but Adjusted EBITDA declined 8.3% to $48 million. The decrease was primarily due to lower pricing, higher labor costs and the impact of custodial site costs related to the Temiscaming facility suspension. Operating income for the Paperboard segment decreased to $31 million in 2024 from $37 million in 2023. Key input costs, including wood, chemicals, and energy, represent approximately 75% of per MT cost of sales for the Paperboard segment.
High-Yield Pulp: Segment revenue declined 6.6% to $127 million in 2024, and Adjusted EBITDA decreased from $1 million loss to a $5 million loss. The decrease was driven by lower sales prices, reflecting oversupply in China, as well as higher labor costs and the impact of Temiscaming custodial site costs. Operating loss for the High-Yield Pulp segment increased to $8 million in 2024 from $3 million in 2023. Key input costs, including wood, chemicals, and energy, represent approximately 40% of per MT cost of sales for the High-Yield Pulp segment.
Biomaterials: RYAM is investing in new green energy and renewable products, such as 2G bioethanol, lignin-based products, and biomass-generated electricity, to diversify its revenue streams and reduce its environmental footprint. The company expects its biomaterials business to contribute $8 million to $10 million in Adjusted EBITDA in 2025.
Geographic Performance
In 2024, 66% of RYAM's revenue was from customers outside the United States. The company's key international markets included China (22% of total revenue), Europe (17%), and Japan (7%).
Research and Development
RYAM maintains an active R&D program focused on improving product quality, manufacturing efficiency, and environmental controls. R&D spend was $5 million, $6 million, and $7 million in 2024, 2023, and 2022, respectively.
Sustainability and Certifications
RYAM's sustainability profile is a core part of its business model. All production facilities are certified under the Forest Stewardship Council and Programme for the Endorsement of Forest Certification Chain of Custody standards. The Fernandina Beach and Tartas facilities are also ISCC PLUS and ISCC EU certified, respectively.
Risks and Challenges
RYAM faces several key risks and challenges, including:
1. Cyclical and competitive nature of its markets: The company's businesses, particularly high-yield pulp and commodity cellulose products, are highly cyclical and competitive, which can result in fluctuations in pricing and volume.
2. Exposure to global trade tensions: RYAM has significant international operations and sales, making it vulnerable to trade barriers, tariffs and other protectionist measures, as evidenced by the 25% U.S. tariff on Canadian paperboard exports.
3. Raw material and energy cost volatility: The company's key input costs, such as wood fiber, chemicals and energy, are subject to significant price fluctuations, which can impact profitability.
4. Environmental regulations: RYAM's manufacturing operations are subject to stringent environmental laws and regulations, which could result in increased compliance costs and capital expenditures.
5. Pension and post-retirement benefit obligations: The company has sizable defined benefit pension and other post-retirement plans, which are sensitive to changes in actuarial assumptions and could require substantial future cash contributions.
Despite these challenges, RYAM's diversified business model, focus on high-value cellulose specialties, and strategic investments in biomaterials provide a solid foundation for long-term growth and value creation.
Conclusion
Rayonier Advanced Materials is a global leader in the production of cellulose-based technologies, with a diversified portfolio of high purity cellulose, paperboard and high-yield pulp products. The company has demonstrated its ability to navigate challenging market conditions, improve profitability, and strengthen its balance sheet. While RYAM faces various risks, its strategic initiatives, including the expansion of its biomaterials business, position it well for future growth and value creation for shareholders.