Rayonier Advanced Materials Inc. (NYSE:RYAM) Q4 2017 Earnings Conference Call Transcript

Feb 20, 2018 • 10:00 am ET

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Rayonier Advanced Materials Inc. (NYSE:RYAM) Q4 2017 Earnings Conference Call Transcript

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Presentation
Executive
Paul Boynton

leader of cellulose-based technologies.

As shown on Slide 4, this combination creates a broader and more diverse product offering, which will allow us to better serve our customers globally, while immediately rebalancing our portfolio across acetate, ethers, specialties, viscose and fluff products. Combined, we'll have an attractive portfolio of products that is capable of serving a variety of end markets. Additionally, Tembec's pulp and paper and forest products businesses will increase both our product and geographic diversity and provide greater scale to drive growth.

Beyond the improved scale and balance across our portfolio, we also see a substantial opportunity to grow the combined companies' EBITDA through the 4 pillars of strategic framework. Specifically, we are targeting approximately $155 million of incremental EBITDA growth, focused in 4 areas. The first is a combination of cost reductions in our core business and of substantial synergies as we integrate Tembec. Second is market optimization, as we leverage our broader product offering and asset base. Third is new product development, as we leverage two world-class R&D facilities.

And lastly, investments in our business through high returning capital projects, stock repurchases and attractive external growth opportunities as part of a disciplined and balanced capital allocation strategy. I will outline these growth initiatives in more detail a bit later in the call.

Looking at the combined business on Slide 5. We exited 2017 with annualized pro forma revenues and adjusted EBITDA of $2.1 billion and $369 million, respectively. Going forward, we will be reporting our business in 3 segments, which are high-purity cellulose, forest products and pulp and paper. High-purity cellulose will comprise the majority of the company's EBITDA, which represented approximately 70% of the company's full year 2017 pro forma EBITDA.

Turning to Slide 6. You'll see that by adding Tembec's global manufacturing footprint, we not only enhance our competitiveness through increase geographic and currency diversification, but we also reduce our manufacturing risk, given our prior dependence on manufacturing facilities in the southeastern United States. The acquisition will also expand our pipeline of innovative products through our R&D facilities in both the U.S. and France.

Overall, the combination of Rayonier Advanced Materials and Tembec creates a company with greater scale, a better balanced portfolio and significant opportunities for growth. I would now like to briefly review each of our business segments before turning the call over to Frank.

As outlined on Slide 7, our largest segment is high-purity cellulose, which has four facilities with six manufacturing lines located in the US, Canada and France. Five of these six lines are capable of producing the highest grade cellulose, known as cellulose specialties. Rayonier Advanced Materials has been the market innovator and leader in this industry for 90 years. With the addition of Tembec's leading position in ethers, we are now number one or number two manufacturer in every cellulose specialties end market which we serve, including acetates, ethers, MCC, tire cord, filtration, casings and nitrocellulose.

Additionally, this segment provides commodity viscose for the textiles market and