Rayonier Advanced Materials Inc. Q4 FY2024 Earnings Call

Good morning, and welcome to RYAM's fourth quarter 2024 earnings conference call. Joining me today are Delisle Bloomquist, our president and CEO, and Marcus Moltner, our CFO and senior vice president of finance. Last evening, we released our earnings report and accompanying presentation materials, which are available on our website at ryam.com. These materials provide key insights into our financial performance and strategic direction. Today's discussion, we may make forward-looking statements subject to risks and uncertainties that could cause actual results to differ materially. These risks are outlined in our earnings release, SEC filings, and on slide two of the presentation. We will also reference certain non-GAAP financial measures to offer an additional perspective on our operational performance. Reconciliations to the most comparable GAAP measures can be found in our presentation on slides 21 to 27. Appreciate your participation in today's call and your ongoing interest in RYAM. I will now turn the call over to Delisle.

All right. Thank you, Mickey, and good morning. I'll begin with a recap of our financial and strategic achievements in 2024 before handing it over to Marcus to walk through the details of our business segments, capital structure and liquidity. After his remarks, I'll return to discuss our ongoing initiatives and outlook for 2025. 2024 was a year of execution, resilience, and strategic progress. We made significant strides in improving profitability, strengthening our balance sheet, and positioned the company for long-term value creation. We achieved meaningful EBITDA growth, improved our free cash flow, and advanced key strategic initiatives aimed at reducing earnings volatility and increasing shareholder return. Let's review our key financial results for 2024. Revenue for 2024 came at $1.63 billion, a slight $13 million decline compared to 2023. Operating income significantly improved to $39 million, an increase of $104 million over the prior year. Adjusted EBITDA reached $222 million, marking an $83 million, or 60%, year-over-year increase, driven by strong cellulose specialty pricing and volumes, as well as cost reductions resulting from artemiskamine, high-parity cellulose indefinite suspension. EBITDA margins expanded to 13.6% from 8.5%. 2024 adjusted free cash flow stood at $128 million, an improvement of $75 million or 142% from 2023. Our net secured debt decreased by $73 million, and our net secured leverage ratio improved to 2.7 times coveted EBITDA. We are firmly on track to meet our long-term 2.5x target. High purity cellulose was the primary driver of the EBITDA growth, delivering a $93 million or 65% increase year over year. Higher cellulose specialty pricing and volumes and improved sales mix towards cellulose specialties, cost benefits from strategic capital investments, lower costs due to the Tumiskamine indefinite suspension, and Canadian Emergency Wage Subsidy or SUSE benefits supported this growth. However, we faced some offsetting impacts from the adjusted fire repair costs in the absence of a prior year payroll tax benefit. Paperboard EBITDA declined by $4 million. Finally, due to lower sales prices, higher labor costs, and the impact of custodial site costs from Tumiskamine. However, higher volumes, improved productivity, and the Sue's benefits partially offset these headwinds. A little more detail on the noted custodial site costs it's missing. The site continues to encourage site costs to support ongoing energy needs for the paperboard and high-yield pulp businesses. Beginning in the fourth quarter, these custodial site costs are now being netted with the benefit of electricity sales and will largely be allocated to the paperboard and high-yield pulp results during the period of the Tamiskamine high-purity cellulose indefinite suspension. Higher pulp EBITDA also declined by $4 million due to lower sales prices, higher labor costs, and a larger allocation of the Tamiskamine custodial side costs. That said, lower logistics and input costs, improved productivity, and the SUSE benefits help mitigate these challenges. Corporate expenses increased by $2 million, driven by higher variable compensation, discounting and financing fees, and ERP transformation costs. This was partially offset by favorable foreign exchange rate. In short, our strong operating execution and disciplined cost management helped drive significant EBITDA and free cash flow growth, despite revenue pressure in certain segments. Looking ahead to 2025, we are currently projecting EBITDA in the range of $215 to $235 million. This guidance includes our estimate of the impact of the 25% tariffs on U.S. sales of paperboard. However, this guidance is subject to any additional tariffs. While these tariffs do supply in paperboard in the absence of certain one-time net benefits of approximately $15 million that were realized in 2024 will present headwinds, we will build on last year's achievements by prioritizing value over volume in our core cellular specialty business, executing our biomaterial strategy, and realizing operational efficiencies derived from the strategic capital investments made in 2024. If we exclude the impact of these one-time benefits that were realized in 2024, we are on track to achieve our target of 10% annual EBITDA growth, even with the headwinds of the paperboard tariffs and new supply. I will provide more color on these drivers later. With that, I'll turn it over to Marcus to go through our financials.

Thank you, Dalai. Now, annual 2024 sales for the HPC segment declined by $11 million to $1.3 billion, as summarized on slide 5. Despite a 5% net increase in overall HPC pricing, driven by a higher mix of cellular specialties products, total sales volumes fell by 5%. This was due to a 10% rise in CS sales, upset by a 19% decline in commodity sales. The increase in CS volumes was supported by several factors, including a competitor plant closure in late 2023, accelerated sales volumes from the Tamiskaming HPC indefinite suspension, a gradual recovery in ETHR's demand, and the absence of a prior year one-time benefit from a change in customer contract terms. EBITDA rose by $93 million to $237 million, reflective of the improved CS sales mix, cost improvements due to the indefinite suspension of the existing HBC plan, and the benefits of strategic capital investment. EBITDA margins improved from 11% to 18.2%. Turning to slide 6, paperboard sales grew by $9 million, reaching $228 million, driven by higher volumes as customer destocking eased. EBITDA declined by $4 million to $48 million, mainly due to lower pricing influenced by higher European imports and cost increases related to higher labour and to miscoming custodial site costs. These impacts were partially offset by improved productivity. EBITDA margins for the segment declined to 21.1% as compared to 2023. High-yield pulp sales, as set out on slide 7, declined by $9 million to $127 million, primarily due to a 9% drop in external sales prices, reflecting oversupply in China and lower demand. Cost improvements as a result of higher productivity and lower cost inputs were partially offset by increased labour and Tumiskaming custodial site costs. Segment EBITDA declined by $4 million to a $5 million loss compared to a $1 million loss in the prior year. Transitioning to slide 8, consolidated operating income improved significantly to $39 million, reversing the prior year's $65 million loss. Higher CS pricing was partially offset by lower prices in HPC commodities, high-yield pulp, and paperboard. In addition, the favorable sales mix from increased CS volumes more than offset the impact of lower HPC commodity volumes. Cost improvements were mainly driven by the Tamiskaming HPC indefinite suspension activities and previous strategic capital investments. SG&A and other costs increased due to higher variable compensation, but were more than offset by the impact of favourable foreign exchange rates and SUSE benefits. Highlights on the company's capital structure and liquidity profile are set out on slide nine. Net debt fell to $653 million, a $68 million reduction from 2023. Net secured debt, as reflected in our financial covenant ratio associated with the term loan, was $625 million, reducing net secured leverage to 2.7 times covenant EBITDA. Liquidity remains strong at $276 million, reflecting $125 million in cash, $141 million under the undrawn ABL facility, and $10 million from the French factoring facility. Turning to capital allocation, total 2024 capital expenditures reached $108 million, with $33 million allocated to high-return strategic projects focused on enhancing plant efficiency, the France bioethanol plant, and completing ERP upgrades to support enhanced segment reporting in 2025. Net of financing, strategic capital amounted to $15 million. Overall, the completed refinancing in Q4 of 2024 strengthens the company's capital structure and enhances Ryan's financial flexibility to execute the company's long-term business strategy. With that, I'd like to turn the call back over to DeLauw. All right. Thank you, Marcus. Let's now turn our attention

to slide 10, where I'll provide an overview of our key initiatives for 2025. We will be implementing new segment reporting beginning in Q1 of 2025, which will better reflect our evolving business and strategic direction. The new segments will include cellulose specialties, cellulose commodities, biomaterials, paperboard, and high-yield pulp. We believe that these These reporting segments will provide investors with a clearer picture of the resilient earnings power of our cellular specialty business, the progress in the execution of our biomaterial strategy, and the steps we are taking to reduce exposure to non-fluff commodity markets. Next we remain committed to debt reduction. We will continue to prioritize debt reduction to strengthen our financial flexibility. However, our debt reduction in 2025 will likely be limited to the scheduled amortization of $20 million permitted under our credit agreements, as discussed with potential buyers of our paperboard and high-yield pulp businesses have stalled due to the market uncertainties introduced by the U.S. tariffs. Optimizing assets and operational efficiency is a huge opportunity for IAM. We have successfully reduced our exposure to non-fluff HPC commodities from 15% in 2023 to just 6% in 2024, and we believe that this commodity exposure will continue to decline as Ether's demand recovers to historical levels, and we successfully re-qualify the Tamiskamine cellulose specialty production at our other HPC facilities. Such qualifications remain on track. In 2024, we invested $10 million of strategic capital into cost-efficiency projects that, when added to an additional $5 million investment to be made in 2025, is projected to generate $10 million in EBITDA in 2025. Significant opportunities remain, and we will continue to invest in such high-return strategic capital projects to reduce unit production costs via increased labor productivity, improved reliability, and input efficiencies. Finally, growing our biomaterials business remains a key initiative. We continue to believe that demand for sustainable solutions is accelerating, and that we are well-positioned to capture highly profitable growth in this space. The biomaterial projects we plan to advance in 2025 include the Altamaha Green Energy, or AGE, project, which was awarded a purchase power agreement by Georgia Power in 2024. We are currently working on permitting, negotiating the EPC contract, and arranging the project's financing. We expect a final investment decision to be made on this project in late 2025. The various Bionova initiatives, such as bioethanol, crutal oil, and prebiotics, we have secured funding for these near-term projects. These investments leverage co-product economics, driving strong investment returns and profitability. Final investment decisions are also expected to be made on these projects in 2025. I want to emphasize that we remain committed to advancing the bioethanol project at our Fernandina Beach site. We believe that the City of Fernandina Beach erred in rejecting our site plan application for this project, and we are pursuing all available remedies. In anticipation of a favorable outcome, we are continuing to advance engineering plans and explore potential commercial agreements. Turning to slide 11, we are committed to realizing high investment returns on our discretionary strategic capital investments. In 2025, we are evaluating $39 million of strategic capital investments toward biomaterials and CS cost efficiency projects that will meet our mandatory investment criteria of a ROE greater than 30% and a payback period of less than two years. As noted, in biomaterials, we are advancing the Bionova initiatives as well as the AGE project. With substantial external financing, RIAM's net 2025 strategic capital investment for biomaterials project is just $1 million. Total investment for these projects is expected to be around $140 million, of which 50% will be funded by RIAM equity. These investments in biomaterials are expected to generate $55 million in EBITDA once full production is achieved. In cellular specialties, we're evaluating investments of $19 million and $14 million in 2025 and 2026 respectively in automation, plant efficiencies, and other cost reduction projects. We believe these initiatives will generate $31 million in annualized EBITDA, which will build on the success of the $15 million recently invested in similar projects that is expected to deliver $10 million in cost reduction this year. We're also completing the final phase of our ERP system upgrade with a $4 million investment to enhance segment reporting and operational oversight, supporting our new segment reporting structure launch in Q1 2025. Turning to slide 12, we outline our 2025 EBITDA and free cash flow guidance. Expect EBITDA to be in the range of $215 to $235 million, driven by the continued strength of our core cellular specialty business. Sequentially and year-over-year, we expect EBITDA to decline moderately in the first half of 2025, with a stronger back half of the year, reflecting the impact of extended planned maintenance outages at all three HPC facilities in the first half of 2025. Though this guidance includes an estimated impact of the recent 25% U.S. tariffs on paperboard, this guidance remains subject to the impact of any additional tariffs. Cash interest expense for 2025 is projected at $93 million, which reflects the timing of our debt refinancing. Thus 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, reflecting the noted planned maintenance outages across all three HPC facilities, compared to only one in 2024, as well as incremental capital repairs related to the Jessup fire. Working capital is expected to provide a modest $5 million benefit as we continue optimizing our cash conversion cycle. we realize a total of nearly 100 million dollars of working capital reduction over the two-year period of 2023 and 2024 that's the opportunities to monetize working capital are getting more challenging additionally we will likely be required to pay the full 14 million dollars of deferred energy payments in france from 2023 as a result we expect adjusted free cash flow for 2025 to be in the range of 25 to 45 million dollars subject to the same caveats mentioned early regarding tariffs. As in prior years, we will continue allocating these funds toward debt reduction and high-return strategic capital investments so that we can maximize long-term equity value creation. On slide 13, I will provide a deeper look into our 2025 market outlook across each of our business segments. In cellular specialties, we expect mid-digit, mid-single digit percentage price increases driven by our value over volume strategy sales volumes are projected to decline slightly reflecting the 2024 bridge volume up from the indefinite to miscommunication. Acid heat demand continues to be afflicted by supply chain to stocking while ether's demand is expected to improve and the demand for the other specialty grades remain strong. We anticipate moderate inflation in raw materials and logistics costs. For the year, we project EBITDA between $255 and $265 million subject to any future tariffs. In cellulose commodities, we also anticipate mid-single-digit percentage price increases. Fluff demand remains strong, while our non-fluff exposure continues to to decline. Moderate inflation in raw materials and logistics cost is expected. EBITDA is projected to range from $3 to $8 million, subject to potential tariffs. In biomaterials, we are advancing the key initiatives as noted. We expect biomaterials EBITDA of $8 to $10 million in 2025. In paperboard, a 25% U.S. tariff will be applied on our U.S. sales of paperboard effective March 4th. As I will discuss on the next page, we are confident that we can mitigate much of the impact of these tariffs to the enterprise EBITDA. Paperboard prices are expected to decline in 2025 due to the startup of new capacity, while sales volumes are expected to increase. Higher purchase bulk costs and the increased burden of Tamiskamene custodial side costs will also put pressure on margins. For 2025, we expect paperboard EBITDA of $15 million, subject to any additional tariffs. In high-yield pulp, we anticipate lower prices, though sales volumes are expected to rise as we return to normal operating levels following the Q4 2024 market-related production downtime. EBITDA is projected at a negative $15 million, reflecting ongoing pricing pressure and a $10 million impact of Tamiskaming custodial site costs. Corporate costs are expected to decline, driven by the completion of our ERP project. We anticipate corporate EBITDA of negative $50 million, subject to currency changes. I outlined the potential impacts of tariffs and our mitigation strategies on slide 14. Given the evolving trade environment, we are actively assessing the potential financial and operational effects across our business segments, and we'll adjust our mitigation strategies as needed. In cellular specialties, the primary tariff risk relates to potential retaliatory measures from China on our acetate products. While no specific retaliatory tariffs against our products have been announced, similar past actions suggest a potential exposure of up to 5% on approximately $160 million in However, given the industry is largely sold out, our approach to mitigating this risk includes customers absorbing the tariff and protecting the U.S. domestic market. In cellulose commodities, the exposure is primarily related to fluff pulp, with the potential for Chinese retaliatory tariffs of up to 5% on approximately $110 million in revenue, though no specific retaliatory tariff has been announced. Mitigation efforts will focus on passing through the tariffs to customers where possible, protecting U.S. market share, and pursuing market share in geographies outside of the impacted regions. As already mentioned, a 25% U.S. tariff will be applied on our U.S. paperboard sales of approximately $175 million in annualized sales. Worst case scenario is an annualized EBITDA impact at $42 million per year and $35 million in 2035. We will, of course, attempt to pass on as much of this impact to customers as we can. Our key mitigation action, though, will be to replace our 105,000 metric tons of paperboard U.S. exports with Canadian domestic sales. We believe that this can be done since the trade balance between the U.S. and Canada for paperboard is significant and balanced. 400,000 metric tons is imported by either country from the other. We believe that most of the 400,000 metric tons of U.S. paperboard imports into Canada will be available for domestic suppliers given the strong Canadian sediment in the upcoming retaliatory tariffs, a 25% retaliatory tariff on U.S.-sourced SBS and FBB paperboard effective March 25, 2025. We are also in frequent discussions with Canadian federal and Quebec provincial policymakers regarding short-term government support, including the funding of the up-to-one-year qualification process to convert these Canadian SPS customers to our paperboard product. Through a myriad of mitigation actions, including the noted short-term government support, the favorable change in foreign exchange, a hold on discretionary spending, and a quick Canadian customer conversions of at least 30,000 metric tons in 2025. We believe we can mitigate much of the EBITDA impact of these tariffs. We will continue to monitor trade developments closely and we'll take necessary actions to address risk as more details become available. Turning to slide 15, we anticipate margins in the 13 to 14 percent range in 2025, supported by our continued shift toward higher value specialty products and the realization of cost efficiencies at our manufacturing facilities from strategic investments. Net-secured leverage is projected to be 2.7 times covenant EBITDA at year end, and we remain confident in our ability to reach two and a half times target well ahead of 2027. With that, operator, please open the call to questions.

Thank you. At this time, we'll be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question comes from the line of Daniel Harriman with Hedoti and Company. Please proceed with your

Hey guys, good morning. Thank you so much for taking my questions and congrats on a really wonderful year of execution. Just a couple of quick ones from me today. The first, when we look at capital allocation, both on a strategic and a maintenance level for 2025, can we expect that to kind of follow the same cadence as 2024 in terms of quarterly spend? And then I hate to bring this up, but just wanted to ask about the sale of the paperboard and high yield pulp assets to Miskaming, and wondering if maybe you're seeing a better market, more conducive market thus far into 2025, and if investors are hung up on the oversupply of high-yield pulp from China and the upcoming paperboard capacity ads in that market. Thank you so much.

Hey, good morning, Daniel. This is Delisle. So on your capital allocation question, which is specifically around, I think, calendarization of the spend throughout the year, I would say that with respect to the maintenance CapEx, it'll be a little heavier in the first half than it will be the second half because, again, our outages at the three facilities will happen in March and April of this year. So you'll see a heavier weighting in the first half of the year. With respect to the strategic capital, it's probably a little bit the opposite because we're still going through the evaluation of various projects and so forth. The spend on that tends to happen in the second half, the later part of the year, after justifications have been validated and projects have been approved. And then, obviously, the execution implementation actually doesn't happen until after all that happens. So at the end of the day, given the size of the maintenance CapEx relative to the strategic CapEx, you probably see on a combined consolidated level a little heavier in the first half and a little lighter in the second half. And then with respect to the potential sale of the paper board in high-yield pulp, again, obviously, we're very interested in making this happen sometime in the near future. And I think you hit on a couple of points about why this has been dragging out the excess capacity of high-yield pulp in China, and it's weighing down on prices for high-yield pulp, not just in China, but around the world. The issues with respect to the new capacity on paperboard coming online later this year and the impact it will have on prices, it certainly has weighed on interest. But I would say that, you know, the uncertainty that's surrounding the tariff news that have been going out, I think the uncertainty with respect to the flip-flops we're seeing between it is not helping. And until all that settles out, until things become much more certain, and we can put together a long-term coherent strategy to deal with that, I think we're going to be in a situation where most potential suitors will sit on the sidelines until all that settles out.

Okay. Thanks, Delilah. I appreciate it.

Thank you. Our next question comes from the line of Matthew McKellar with RBC Capital Market. Please proceed with your question.

Good morning. Thanks for taking my questions. First, I'd like to ask about the outlook for CS volumes this year. Is there any more color you can provide, particularly around the destocking trend and asset dates you noted, maybe around what kind of destocking you're seeing now and how you expect the impacts of destocking to affect demand through the year? And then just around what's driving continued improvement in ethers, both in terms of the end uses and then the impacts of restocking versus improvements in underlying demand you might be expecting. Thanks.

okay well good morning matthew um talk about um uh the stocking of acetate um in in china and actually i would say it's probably global um this is really i think you're taking our our own direct customers a little bit by surprise themselves um we look at the supply chain um from our product all the way up into the actual cigarette sticks. There seems to be an overstocking throughout the supply chain. With respect to ourselves, the order book for 25 was reduced by the large consumers of the acetate product that we make. And as a consequence, although we were able to maintain share, our volumes did come down, but we were able to raise price. Again, continuing to push the value over volume there. In terms of percentages, in terms of a decline in demand, I would say it's in the single digits, roughly. certainly, let's say, mid-single-digit impact relative to last year. And the expectation of how long this is going to last, I mean, it's lasted longer than we thought it would. We thought this would be well behind us going into 25. But, you know, right now we really don't have any clear sight of when this is going to end. So we'll just keep our ear to the rails, so to speak, and though we'll inform investors as we get new information with respect to ethers ethers demand we're seeing improvement in 24 some of that improvement was due to restocking but also an increase in demand from a few end uses principally food and pharma construction continues to be a little week. But again, we expect that demand will continue to increase in ethers in those two segments that we saw improvements in 2024. And there may be some upside on construction activity, particularly around, you know, if the wars in Gaza and Ukraine end, construction activity may pick up and that obviously will then drive construction-related ethers demand.

That's great. Thanks very much for that colour. And then just on other CS grades, appreciate that demand there remains fairly robust. Just looking underneath the surface level, any, I guess, specific end uses that you call out as being stronger or weaker here, maybe either around kind of what's happening with defence spending with respect to nitrocellulose or autos with respect to tire cord and filtration applications?

Yeah, I would say that filtration has been a strong growth market force for the business. Also, nitro, obviously, you know, the sad commentary about the various geopolitical activities going on in the world is actually driving munitions, and that's been supportive for us. Autos, I would say, if you look at the build rate for autos, it's weak, but given the mixed change to electric vehicles and the impact of the heavier cars that cars have on tires, we're actually seeing an uplift in the premium tires that go into EV. casings is a relatively flat um we're not seeing a growth there mcc which again is primarily tied to food and pharma we're seeing improvements in um so at the end of the day three markets are up mcc nitro filtration casings entire quarter are relatively flat right now that's great thanks

very much for that color and then last question for me just around tariffs and your paperboard business. Assuming this 25% tariff level is sustained, how quickly would you expect to capture more business within Canada versus a business you might expect to lose out on in the U.S.? You've called out one-year qualification periods as a consideration here. Is that pretty universal across the business you'd expect to target, or how would you just think about that

kind of relative relationship between that's a great that's that's a great question and you know um but what and getting down to uh specifics would probably be um uh probably a little premature on our part right now but um if i look at a paperboard um you know the really two big segments that we would be looking at um converting in canada would be commercial writing uh commercial print and then packaging we think packaging is going to have the the much longer qualification period and so that'll be the one where we'll need to take a little bit of government support and so forth to make it to to make those conversions but where we think we can get quick wins is on the commercial commercial print side and the qualifications are much much shorter um in in that space so with the you know with the retaliatory tariffs expected to go into go in effect um at the end of march um given the strong uh canadian sentiment to buy canada products um we believe that we'll be able to um convert fairly quickly um upwards of 30 000 tons of production away from U.S. exports to Canadian domestic business in 2025. Obviously, we will continue during that period going through the qualification on the packaging grades, and we would expect to start seeing those conversions in 2026. so that that's that's our that's our strategy that's that's our our our action plan right now

we're with respect to that great thanks very much i'll turn it back thank you ladies and

gentlemen as a reminder if you'd like to ask a question please press star one on your telephone keypad our next question comes from the line of dimitri silverstein with water tower research

please proceed with your question good morning gentlemen and congratulations on a strong end to the year and a very good 2024. A couple of questions, if I may. One, you talked about one-time benefits that helped with the profitability, I believe, of your high purity cellulose business in 2024. Can you just go through and remind us what those one-time benefits were so we know how to adjust our 2025 expectations? Yeah, Dimitri. Oh, by the way,

Good morning. With respect to 2024, let's say there was probably roughly $15 million of one-time benefits in 2024 that we would not see continuing in 2025. One of them is SUSE, you know, those Canadian employment wage subsidy benefits that we were able to recognize in 2024. That totaled about $10 million. There was a benefit that came from the Temiscomean indefinite suspension, you know, that pull forward of demand by our customers to have inventory on the floor while they went through a qualification process. That would probably be another $17 million of benefit last year. So those two together is $27 million. And then offsetting that would be the fire at Jessup. And so when you take that out, which was roughly a $9 million hit, that gets you down to roughly that $15 million impact for last year.

Okay, that's helpful. That's what I thought it was. I just wanted to make sure I wasn't missing anything. And then switching quickly to the tariff impact, and obviously paperboard is the one that's in the crosshairs immediately here starting in April. So your guidance, I'm presuming, is based on three-quarters of tariff impact because the first quarter looks like it, you know, you sort of dodged the bullet in the first quarter impact. So is this basically a nine-month kind of worst-case scenario guidance that you're giving us of $35 million?

Yeah, no, we're actually assuming a 10-month hit, because it was effective as of March 4th. So, and if you look at an unmitigated exposure, it's roughly a $35 million potential impact. Now, as I said, we expect to pass on as much of that tariffs as we can to our U.S. customers. But that being said, we will retain our share in the U.S. while we work through the qualification processing in Canada with our customers, potential customers in Canada. So there's a lot of puts and takes here. One of the immediate benefits that we got was foreign exchange. foreign exchange work work in our favor and that alone will provide its benefits of five five and a half million dollars all by itself so and then you you look at the conversions and some of the things we're doing on putting holds on some discretionary spend at the enterprise level we believe that will largely binigate that $35 million potential exposure due to these tariffs in 25.

Okay, that's encouraging. And then I just want to make sure I understand this correctly. You know, biomaterials, guys, you talked about reaching a $55 million EBITDA run rate when these projects come in. I think last time you were mentioning something in the neighborhood of $40 million in EBITDA when these projects come up. So are you adding more projects in your line of sight to get to the $55 million, or do you expect what you've told us before to be more profitable on a run rate basis when you get the production fully up?

Yeah, and that's a great question because it is a little confusing. The $55 million is related to projects that we're going to spend strategic capital starting in 2025. through 2028 but one of the things it doesn't include and it doesn't include the the bioethanol plant that we've already invested in in France so just for easy math let's assume that you had another ten million dollars EBITDA to the to the 55 to get to the potential that we get to at the end of 28 so you've got this increase of roughly 18 million plus that versus what we've what we've mentioned in the past and really that the difference is is the AGE project so the AGE project is advancing pretty quickly since we received the purchase power agreement from Georgia power law last year we'll be making a final investment decision on that later this year. But the potential EBITDA impact of that is 25 to $30 million per year. And so by the time that we get that plan up and running in 2028, which is, it would come on in the later half of 2028, because it takes about three years to build. So you get some of the benefit in 28, and then you get a full year impact in 29. So when you get to $29,000, you're possibly looking at a $70 million EBITDA number for biomaterials.

Okay. So if I'm to think about this over the next couple of years, kind of going back to your original 2027 guidance, that $40 million EBITDA expectation is still valid.

Well, there's been delays, principally around the bioethanol plant in Fernandina Beach. as we go through the public participation process on the permitting. So, achieving $42 million at the end of 2020 or for the year of 2027 is probably not likely. We'll probably see that in 2028. I mean, yeah, 2028 because of that delay.

Okay. Got it. Thank you very much. That's all the questions I have.

Thank you. Ladies and gentlemen, that concludes our question and answer session. I'll turn the floor back to Mr. Blomquist for any final comments.

Well, once again, thank you for taking the time today to listen to our earnings call and for your continued interest in RIEM. 2024 year was a great year for us, and I'm incredibly proud of all the hard work and effort and progress we made in 2024. As we move forward, we will continue our focus on executing our strategy around enhancing our profitability, advancing our high-return investments, and continuing to maintain our financial discipline to drive the long-term value of the business. So we appreciate your support, and we will continue to strengthen our business and position ourselves for sustained growth going forward. So we're committed to transparency and open communication, but please don't hesitate to reach out to us if you have any further questions. Thank you again, and we look forward to talking to you in the future.