Good morning and thank you for standing by. Welcome to Sylvamo’s Fourth Quarter 2023 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, you will have an opportunity to ask questions. [Operator Instructions] As a reminder, your conference is being recorded. I’d now like to turn the call over to Hans Bjorkman, Vice President, Investor Relations. Sir, the floor is yours.

Thanks, Greg. Good morning. And thank you for joining our fourth quarter and full year 2023 call today. Our speakers this morning are Jean-Michel Ribiéras, Chairman and Chief Executive Officer; and John Sims, Senior Vice President and Chief Financial Officer. Slides two and three contain important information, including certain legal disclaimers. For example, during this call, we will make forward-looking statements that are subject to risks and uncertainties. We will also present certain non-U.S. GAAP financial information. Reconciliations of those figures to U.S. GAAP financial measures are available in the appendix. Our website also contains copies of the earnings release, as well as today’s presentation. With that, I will turn the call over to Jean-Michel. Jean-Michel Ribiéras: Thanks, Hans. Good morning and thank you for joining our call. Let’s turn to slide four, please. In 2023, we created value for share owners. By managing what we could control, as we executed our three-pronged strategy of commercial excellence, operational excellence and financial discipline, to strengthen our competitive advantages in our core uncritical market. First, we allocated cash to improve our financial position by repaying $76 million in debt, achieving a net debt that just did a big job 1.2 times. Second, we continue to deliver on our investment thesis. We earned $607 million adjusted a bit debt, generated $294 million in free cash flow and returned $127 million in cash to share owners. Third, we invested to strengthen our low-cost assets. We invested $210 million and continue to accelerate investments in high-return capital projects. We also acquired the 500,000 ton Nymolla mill in Sweden for $167 million. This is a great asset. With a talented team, the mill is performing well and we are benefiting from the $40 million pulp mill modernization project that was completed just before the acquisition. In…

Thank you, Jean-Michel. Good morning, everyone. Thanks for joining our call. Slide seven shows our fourth quarter earnings bridge [ph]. Our $117 million of adjusted EBITDA was higher than our outlook of $90 million to $110 million. Let’s discuss the changes versus the third quarter. Price and mix decreased by $25 million, largely due to earlier paper price decreases in all regions, as well as unfavorable mix in Latin America and North America. Paper prices were stable in the fourth quarter in all regions. Volume improved by $20 million due to seasonally stronger volume in Latin America and positive trends in both Europe and North America. Operations and other costs increased by $12 million, primarily due to higher seasonal operating costs in Europe and North America, as well as unexpected reliability issue with a third party energy provider at our Saillat mill, which had a $5 million impact. This issue has been resolved and we are working to recover the full amount. These negative impacts were partially offset by lower economic downtime costs versus the third quarter. Plant maintenance outage costs increased by $25 million, with planned outages in all three regions. Input and transportation costs improved by $1 million, driven primarily by favorable chemical costs more than offsetting seasonally high energy costs. Let’s move to slide eight. Current industry conditions are showing signs of improvement. In Europe and North America, we continue to see improving order books, as well as lower import levels. In Latin America, we expect seasonally weaker demand in the first quarter. Keep in mind, in Latin America, historically, demand is sequentially stronger in each calendar quarter. We also expect improving demand for Brazilian exports to other Latin America and offshore markets. Let’s go to slide nine. We expect to deliver first quarter adjusted EBITDA of…

Thanks, Jean-Michel, and thank you, John. Okay, Greg, we are ready to take questions.

Okay. [Operator Instructions] Your first question comes from the line of George Staphos from Bank of America. Please go ahead.

Hi, everyone. Good morning. Can you hear me okay? Jean-Michel Ribiéras: Yeah. We can. Good morning, George.

How are you? Thanks for the details. I will ask my two questions and get back in queue. First of all, I know you are not giving guidance past the first quarter, but how repeatable are the trends and what you are doing in operations and other costs? They seem to have been a source, even with some offsets that you talked to, seem to be a source of positive variance in the fourth quarter for you, it’s certainly a positive bridge item in the first quarter. How much longer can that go and how much is the cost reduction program driving that? That’s question number one. Question number two, to my recollection is the first time in a while that you have talked about the timberland values in Brazil. Given our experience over the years covering the Latin American producers, that connection to timberland is a source of competitive advantage, a source of process improvement. Are you suggesting that, over time, this would be something you could disconnect from the portfolio or do you see this as a reason why you should be able to maintain your position grow -- grow profitably, and either way not being sort of under -- it’s being underappreciated within the market. How should we think about what you are trying to say on timberlands here? Thank you. Jean-Michel Ribiéras: George, I will start by your second question and John will take the first one. So we thought our timberland is key to our competitiveness and it’s really a key advantage. The reason why we updated appraisal is we think it was undervalued and that’s the only reason. We continue to invest in it and I think this is a base, exactly as you mentioned, of long-term competitiveness, which we count on. Our fiber is key in our paper advantage. John, on cost…

George, I will take your second question in terms of the ops variance and how much runway we have there going forward. So what we talked about, I think, it’s important to note is that, our order books have improved across all our regions as we sit here today. In fact, we are running full in both Europe and LatAm and with a lot significantly less economic downtime in North America and that has driven a lot of the operational improvement because we are taking less order downtime and we are absorbing more of the fixed costs that we had in the first half of last year. Second thing is we are continuing to start to get the benefits of some of this high return cost reduction capital that we started to invest in. It’s been really fun, but we really didn’t start ramping that up until next year. And I think, third, we talked about what we call Project Horizon. That’s our cost reduction program. It was both operational supply chain and S&A and we started seeing some benefit of that a little bit and first -- we expect to see a little bit in the first quarter, but really that’s going to really start ramping up through the balance of the year.

Hey, John. Forgive me, just point clarification. You said on the reduction in unabsorbed costs, if I heard you correctly, you are going to see more of that this year or more -- I just want to make sure I heard the cadence on that correctly because the phone cut out.

Yes. So if you look at even in the fourth quarter and you will see in the appendix, we took about 90,000 tons less lack of order downtime in the fourth quarter.

Got it.

And what I said was in the first quarter, that is somewhat what’s driving the operations outlook that we gave, because we are running more full right now in the first quarter than we were even…

Okay. Thank you. I have got that. I will be back.

[Operator Instructions] Next we will go to the line of Harman Dhatt from RBC. Please go ahead.

Hi. Good morning. Thanks for taking my question. This is Harman filling in for Matt McKellar. I guess one quick question I had was just around and apologies if this was mentioned in the first question, I had some technical difficulties. But with the high return projects that the company is looking at in 20, are you able to share any incremental details on what sort of things you are pursuing and how that could shake out in terms of increased margins or even potentially supporting more cost reductions as you have outlined with Project Horizon?

Yes, Harman, and thanks for joining the call. Also pass our congratulations over to Matt, understand his wife is having a baby. That’s exciting. I will give you an example of what we have. So -- and this also talks about really the agility. I think we have as the company because we are singularly focused on uncoated freesheet. But there was a large mill that was shut down in South Carolina in Charleston and it was a large consumer of wood chips. And one of the significant cost reduction projects we will be investing in this year is increasing our capacity to handle chips in our mill at Eastover so that we can take advantage of the increased supply now that’s come about because of that mill’s closure. And so those are some of the type of projects we have done. In fact, just recently, we completed a chemical recovery project in Eastover that has -- also we have already started seeing results of pretty significant returns in terms of cost reduction that we started experiencing here even in January. Typically, these projects that we have, we have targeted almost $30 million of high return projects. These returns are well over 20% returns, even much higher than that.

Awesome. No. That’s great. That’s helpful color. And I suppose just -- I guess, more broadly, with the Red Sea crisis, would you be seeing additional European products show up in North America, given the increased cost of reaching Asian markets from Europe? I guess, our last check with RISI sort of said that North American outbound shipping costs have been somewhat flat but inbound are up. So we were just hoping to get some more perspective on there.

Yeah. Harman, it’s hard to tell what the implication is going to be in terms of the Red Sea crisis. What we are seeing right now in Europe is decrease in imports. And some of the transit times coming from Asia, it’s almost increased about four weeks we understand for imports from Asia to get into the Europe. So it could have an impact that actually decreased imports in Europe, which then means that more domestic supply has to be stay onshore to service that need. But I would say, right now, it’s hard to tell what the impact of the Red Sea is going to be. It certainly is increasing freight costs. So all exporters are seeing increased freight costs, as well as lead times. Jean-Michel Ribiéras: And concerning what you were asking about Europe export overseas, we export very little from Europe to overseas. Our production in Europe mostly remain in Europe and we have a very few going to Middle East, Africa. So it’s really not impacting us so far significantly.

Got it. No. That’s helpful, and yeah, thanks again. I will jump back.

Next we will go back to the line of George Staphos from Bank of America. Please go ahead.

Yeah. Thank you very much. Just on that point that was raised just before. All right, I know you aren’t really quantifying it, but is the impact from Asia, if there is a positive on reduced imports into Europe more on converted products or more on cut size and graphic papers overall, that in turn is leading to better demand for you and/or your customers? Jean-Michel Ribiéras: Mostly, I would say, George, it’s cut size. That’s what’s easier to export. So mostly you see from Asia are the cut size and the role in the offset business because of the various sizes that you have to have, it’s much more difficult for any exporter that matter not to say Asia to export. But the role that the commercial playing.

Okay. And John and Jean-Michel, my next question and I will come back and queue again. Related point, so to the extent that we have seen pulp prices continue to rise in Europe, recognizing Asia, we are starting to see them fade a bit. Has that cost curve, or let me say it differently, has the cost curve shifted sufficiently where that’s also beginning to have an impact on supply within Europe, i.e., the curve shifted some of your non-integrated peers, are having some difficulty producing or really that’s not really having much of an effect at this juncture from what you can see? Jean-Michel Ribiéras: I think, George, it’s a good question. I think it’s impacting. From the trough, the pulp prices in Europe have gone up €160 from last year trough to today. So it is for sure impacting the non-integrated players in Europe and that’s maybe one of the reasons why we are seeing operating rates back up high in Europe and having a very strong demand. It might impact it. We also know the inventory correction in Europe is behind us and industry inventory are quite low actually right now in paper. So multiple factors, but pulp price has an impact.

Yeah. Jean-Michel, ultimately, look, I realize it’s our job, not yours, but to the extent that you have a view on this, is there kind of a view in terms of how much now is kind of in the red in terms of industry production relative to the cost curve, and if you don’t have a view, that’s fine. I just thought I’d ask if you had and you can share it? Jean-Michel Ribiéras: I don’t, but I would -- I don’t have the number precisely. So all I can make is...

No worries Jean-Michel Ribiéras: Maybe guess -- a very high level guess and it might be about 10%.

Okay. Thank you very much. I will turn it over.

[Operator Instructions] And we will go back to the line of George Staphos. Please go ahead.

Hi, guys. To the extent that there’s been some pricing reductions in North America as memory serves, at least in terms of published indices, how much of that, if you can quantify, recognizing you are not tied to RISI in your contracts per se, but how much of that is baked into your guidance, if anything at all for the first quarter and to the extent that you could size it broadly, how much would be something we need to make sure we model for over the rest of the year, recognizing you are not guiding on 2Q through 4Q? Jean-Michel Ribiéras: So, George, I cannot give you an exact price, but I can give you a trend. We saw the same RISI report you did. As you mentioned it, we do not report to -- our pricing to RISI. I would say on a trend, RISI might have the direction correct, but we have seen in the past that, in absolute value, we see it differently. So in our outlook, mostly from third quarter, actually, we expect slight erosion in North America, not a huge one, a slight one. And at the same times we expect -- because of two price increases we have announced to our customers in Europe and in Brazil and LatAm, we expect price increase on the other regions.

Okay. And then back to Europe and I will turn it over. The performance for the quarter was somewhat below our expectations now. That’s neither here nor there. That’s our forecast versus your actual. But was performance in Europe as you had expected in terms of that loss and what if we -- again, you are not guiding for the full year, but should we expect that ultimately Europe should be breakeven or better for this year and what are the bigger bridge items to get you there if, in fact, that’s your assumption? Thank you. Jean-Michel Ribiéras: Yeah. So 2023, as you know, in Europe was difficult. It was a trough in terms of demand. The prices of pulp, which affect a lot our Saillat mill went down. We had an annual outage in Saillat, which costed us $20 million. We had an annual outage in the fourth quarter in Nymolla. We had an issue with the turbine we mentioned in the Saillat mill, which is over now, which costed us $5 million and it was really the trough of the cycle in terms of prices. So we clearly see 2024 rebounding significantly and hope to very soon be talking about positive earnings for Europe. So we are quite positive about Europe. It’s more cyclical than any other businesses. So sometimes it’s a bit frustrating, but on average, we really believe Europe would be good, Nymolla is performing very well, Saillat is performing well, order book, as I mentioned, is good and we have seen price increasing. So Europe is rebounding significantly. It’s tailwind for 2024.

Thank you.

Yeah. George, just to add on to that...

Go ahead, John

We say that it was a trough, but it was a significant. You think about in terms of demand decline that we had in Europe, it was even worse than COVID. When you look at how much volume and shipments were down and also pulp prices, Saillat is, one-third of its capacity is pulp. So it is to certain extent more exposed to the cyclical pulp prices than our other mills. But as Jean-Michel said and we said earlier, we are currently running full right now in Europe and so that’s a very positive. We also have prices going up both in paper and pulp. So the reason -- thing that’s helped us with pulp prices going up already almost $160 per ton versus trough would indicate that Europe would be better.

Thank you, John.

Next we will go back to the line of Harman Dhatt from RBC. Please go ahead.

Hi. Thanks. I just had a couple quick follow-ups on the cost reduction plan and apologies if it was mentioned earlier, had some technical difficulties at the start of the Q&A. But just had a quick clarifier, that $15 million reduction in overhead expenses, is that factored into your $110 million target or is this on top of it? And I suppose secondly, will there be an update to the prior inflation assumption, I believe it was around $50 million with Q3 results?

Yeah, Harman. The $50 million that we reported for the fourth quarter is additive or was not included in the $110 million target that we talked about, when we reported the third quarter. And the inflation number that we provided, you are correct, was $50 million and that won’t be updated. That’s still a good number.

Got it. Yeah. That’s all from my end. Thank you.

And next we will go back to the line of George Staphos. Please go ahead.

Hi, guys. Last one for me. Now you are not the only company in South America that’s talked about having to go farther from its own mills for wood and do a bit more third-party wood and although the company, in particular, I am thinking of is more packaging grade production. But is there a broader issue that’s been affecting the producers, has it been just the droughts or has there been something else that’s gone on, either in terms of maybe over harvesting or underinvesting that, not just for Sylvamo, you have seen elsewhere, just some quick thoughts there and I will turn it over. Jean-Michel Ribiéras: I think you -- some of our competitors talked about the same thing we did on some plantations about six years to seven years ago, where those plantations have suffered under the seven-year cycle of drought, natural causes, which have impacted and that has impacted all Brazilian forestry plantations. So we are not the only one. This is not the case anymore. But it’s been two years. And we also, specifically, more significantly from our past companies, reduced some of our investments in the forestry during those years, which we are -- it’s a six-year, seven-year cycle. So we are seeing the impact of that now, which is why we have had to go more outside market than we usually do and we wanted to solidify the need of wood, because there is a strong demand of wood in Brazil right now. So the demand is clearly strong. So the demand plus the natural causes which have reduced the productivity of plantation is an impact we are feeling and our strategic investment in the very valuable forestlands we have will make up for that.

I mean, we are starting to see a little bit of an uptick in South America overall in box shipments, obviously, that’s a bit more soft wood. But to the extent that we see a bit of a rebound there, does that put your wood position and maybe make it a bit more precarious and mean that next quarter or quarter down the road you are talking about further inflation that you are contending with or are you, as much as you can, relatively well set for the rest of the year? Jean-Michel Ribiéras: With the investment we have made we feel like we are well set.

Okay. Thank you, Jean-Michel. Good luck in the quarter. Thank you, John. Jean-Michel Ribiéras: Thank you.

And at this time, there are no further questions. I’d now like to turn the call back to Hans Bjorkman for any closing comments.

Thanks, Greg. Before we wrap up the call, Jean-Michel, any closing comments? Jean-Michel Ribiéras: Yeah. Just thank you, first of all, for joining the call. We are a cash flow story. In 2023, we generated $294 million in free cash flow and returned $127 million to shareholders. We allocate capital to increase shareholder value, we use cash to maintain a strong balance sheet, return cash to shareholders and we invest to strengthen our business, and we are confident in our ability to generate strong earnings and free cash flow through the cycle. We are confident for 2024.

Thank you, Jean-Michel, and thanks everyone for joining us today. We appreciate your interest in Sylvamo and we look forward to continued conversations in the coming weeks and months ahead. Thank you so much.

Once again we would like to thank you for participating in Sylvamo’s fourth quarter 2023 earnings call. You may now disconnect.