Rayonier Advanced Materials Inc. (NYSE:RYAM) Q1 2016 Earnings Conference Call Transcript
May 03, 2016 • 10:00 am ET
Greetings, and welcome to the Rayonier Advanced Materials First-Quarter 2016 Earnings Conference Call. At this time, all participants are in a listen-only mode.(Operator Instructions)As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mickey Walsh. Thank you, you may begin.
Thank you, and good morning. This is Mickey Walsh, Treasurer and VP of IR. Welcome to Rayonier Advanced Materials 2016 first-quarter earnings call and webcast.Joining me on today's call, are Paul Boynton, our Chairman, President and CEO; and Frank Ruperto, our CFO. (Forward-Looking Cautionary Statements) At this time, I would like to turn the call over to Paul for his opening remarks.
Thanks, Mickey. And good morning, everyone. I will start today's call with highlights of the quarter before turning it over to Frank to review our financial details.We had a solid first quarter and we made a lot of progress on our two key strategic initiatives. First, reducing cost, which is part of our broader transformation initiative, and second, driving innovation. These initiatives will enhance our long-term competitive position.Specific to our transformation initiative, we are rapidly advancing towards our three-year $75 million to $90 million goal.
For 2016 we're on track to achieve $25 million of newly-identified transformation cost improvements. When coupled with the carryover from savings generated by our actions taken in 2015, we are targeting cost improvements of $40 million to be realized in 2016.Additionally, lower raw material input and transportation costs provided a moderate tailwind to our quarter. As a result, we are raising our pro forma EBITDA guidance by $10 million to $185 million to $200 million for 2016. With that, let me turn it over to Frank to review our financials and more details on our transformation initiatives.
Thank you, Paul. Let's look at slide 3 to review our financial highlights for the first quarter.Sales totaled $218 million for first quarter 2016, 2% below first quarter 2015. The decrease was largely driven by lower prices on cellulose specialties, offset by increases in commodity sales volume. For the year, cellulose specialty prices are expected to be 6% to 7% below 2015 levels.Operating income was $32 million for the first quarter of 2016, compared to $24 million for the first quarter of 2015.
Our variance analysis for operating income relative to the first quarter of 2015, and the relevant price and volume statistics are provided on slides 4 and 5 of the financial presentation material. As you can see, first-quarter 2016 operating income was negatively impacted by $12 million due to lower prices.As expected, cellulose specialty prices were down approximately $112 per ton, or 7% from the prior year. Aggregate prices for commodity products were down slightly from the prior year. Volume and sales mix increased operating income by $3 million compared to the first quarter of 2015.
As you can see on slide 5, cellulose specialty sales volume declined 1,000 tons to 106,000 tons, while commodity volumes increased 17,000 tons. The increase in commodity tons is due to improved