Good morning, and thank you for joining us. Welcome to Sylvamo's Third Quarter 2021 Earnings Review Conference Call. I will now hand the call over to Hans Bjorkman, Vice President of Investor Relations. Please proceed.

Thanks, Angie. Good morning, and thank you for joining our 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 2 and 3 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, including the impact of COVID-19. 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 third quarter 2021 earnings press release as well as today's presentation. I will now turn the call over to Jean-Michel.

Thanks, Hans. Good morning, everyone, and thank you for joining us today. I'm on Slide 4. Our vision is to be the world's paper company, the employer, supplier, and investment of choice. We are a new corporation with roots that go back more than 120 years. We are committed to transforming renewable resources into paper that people depend on for education, communication, and entertainment. Moving to Slide 5. As we discussed on Investor Day, while we have a strong North American business, we generate more than 70% of our profit in Europe and Latin America. Over the last 12 months, we generated sales of $3.3 billion and $535 million in adjusted EBITDA. As of the end of the third quarter, our gross debt adjusted EBITDA ratio was 2.8. On a net debt basis, we ended the quarter with a ratio of 2.6x adjusted EBITDA. Slide 6 shows how we built momentum for the October 1 launch. Third quarter net sales increased 8% to $908 million. We delivered adjusted EBITDA of $177 million and an adjusted EBITDA margin of 19.5%, above the high end of our target range of 15% to 18%. Adjusted operating earnings were $2.27 per share. We remain focused on generating cash and strengthening our balance sheet. Let's turn to Slide 7 to review our third quarter results in greater detail. As we continue to realize the benefit of prior price increases, price and mix outpaced increasing input costs. Global demand for uncoated free sheet continued to gain momentum as schools and offices reopened. Our volumes remain strong, and we continue to run full in all three regions. We tend to avoid conducting planned maintenance outages during the harvest months of the year, so the third quarter was a low maintenance outage quarter. However, if we had normalized maintenance outage expenses, our third quarter adjusted EBITDA margin would still have been a strong 17.6%. Our customer value proposition has strengthened as our channel partners and customers value a supplier committed to the uncoated free sheet segment. Strong commercial and operational performances during the spin-off period drove our above-target financial results. Now John Sims will provide more detail about our third quarter performance.

Thank you, Jean-Michel, and good morning, everyone. It certainly is exciting to be part of Sylvamo's first earnings call. On a daily basis, we all hear and read about increasing input costs and supply chain bottlenecks, and Sylvamo was not immune to those challenges. Our input costs have increased by $26 million in the third quarter. However, our price and mix improvement outpaced increased input costs by $4 million. Year-to-date, our improvement in price and mix was $23 million more than input cost inflation. An important takeaway from this slide is the advantage we have in our global footprint. As you can see on a per ton basis, increasing costs impacted our regions differently. I want to point out that $3 million of the increase in fiber cost that you see in Latin America is related to the pulp we purchase for our non-integrated Três Lagoas mill. Seventy percent of this increase is naturally hedged by our pulp sales in Latin America. So if you take that into account, you'll see that our Latin America cost on a per ton basis would be similar to Europe. So most of the cost impact that we're seeing globally is in our North America business. Moving to Slide 9. Global uncoated free sheet demand continues to recover from the impact of the COVID pandemic, and we continue to run full and improve our mix as our commercial teams maximize opportunities across geographies, segments, and channels. Let's talk a little bit about global demand. Third quarter year-to-date global uncoated free sheet demand was up 5.3%. Industry demand in Latin America was up 11%. And in Eastern Europe, demand was up nearly 8%. In Western Europe and North America, demand was up 3.5%. So the recovery of copy paper demand continues to lag other uncoated free sheet segments because a significant number of office workers still have not returned to the office in North America and Europe, and schools still remain closed in Latin America. I point this out because there's still more recovery to be had as people return back to the offices and schools begin to open. This should be supportive of global operating rates and particularly operating rates in the regions we operate in. Currently, global copy paper demand was only up 2.6% in the third quarter. Year-to-date, our uncoated free sheet shipments were up 14% versus last year, and our third quarter shipments were up 11% versus 2020. So we're continuing to outperform industry growth rates due to our strong commercial team, brand, and our focus on commercial excellence. Let's go to Slide 10. We generated $177 million in adjusted EBITDA in the third quarter, up from $124 million in the second quarter. We achieved $30 million in price and mix improvements and $12 million in volume. Operations improved by $10 million, reflecting a foreign exchange benefit in Brazil and good operations as we prepared for the spin-off. As Jean-Michel mentioned, we conducted fewer planned maintenance outages and spent $27 million less than in the third quarter. This benefit, though, was largely offset by $26 million in increased costs in fiber, energy, chemicals, and distribution. We feel good about the performance of our regional and staff teams during the third quarter as they worked extremely hard to meet customer needs, manage global supply chain challenges, and prepared to execute the spin-off. Let's turn to Slide 11. We regard commercial excellence and operational excellence as key differentiators of Sylvamo. We're gaining new business and improving our mix with key customers who are eager to expand their positions with a supplier committed to uncoated free sheet. We have best-in-class commercial teams working tirelessly to deliver value to our customers and land new business that improves our mix and increases our positions with key channel partners and customers that are winning in their segments. And for example, in the third quarter, our North America team landed an incremental 12,000 tons of Accent Opaque business from several new customers. Accent Opaque is one of our premium commercial printing grades. We also expanded our channels to market in Latin America. We recently added Chamex copy paper, our branded copy paper, into 46 new Brazilian retail outlets that previously did not sell copy paper in their outlets. In addition, we are leveraging product development that expands beyond traditional end-use applications. For example, in Brazil, we're expanding our position in medicine insert applications. Our best-in-class operations team demonstrated their commitment to operational excellence in the third quarter. They successfully completed an extremely challenging operating system cutover during a very difficult supply chain environment. Let's take a second and look at our regional results on Slide 12. Each of our regions performed well in the quarter. Strong earnings and margins reflected the realization of prior price increases, improving volume in Europe, and continued strong volume in Latin America and North America. Europe and North America had no planned maintenance outages and Latin America executed two outages well. As we discussed earlier, input cost increases were significant. Although supply chains have been disrupted, some customers have shifted incremental business to us. And in fact, we have customers that would like to shift more of their business to us if we could accommodate them. The appendix in the back provides more detail on our regional performance. So let's turn to Slide 13 to discuss our outlook for the fourth quarter. We expect to deliver an EBITDA of $140 million to $150 million in the fourth quarter. That's adjusted EBITDA. Price and mix is expected to improve by $30 million to $35 million as we continue to realize price increases that have been communicated to our customers in all regions. We expect seasonally strong volume in Latin America contributing to overall volume improvements of $10 million to $15 million. Operating costs are expected to increase by $15 million, and that's reflecting seasonally high energy use in Europe and North America as we transition into the colder timeframe. We expect input costs and distribution to increase $35 million to $40 million. Most of this is driven by energy, wood, and chemicals. And I'll speak a little bit about that. In the energy area, particularly in the gas prices, particularly in Europe is where we're seeing most of the increase. Gas prices in Europe were up almost 300% versus last year. And wood, we're seeing increases in North America, primarily weather-related. This has driven our inventories low because of low harvesting. We do expect that we will replenish our inventories and our wood costs will return back to normal sometime around March next year. Maintenance outage expenses will increase by $24 million as we conduct two extended planned maintenance outages at our Saillat and Eastover mills. Our adjusted EBITDA outlook does not include one-time costs for transition service agreements. Slide 27 in the appendix contains fourth quarter estimates for corporate items. Let's turn to Slide 14 to discuss free cash flow. As Jean-Michel discussed, we are focused on generating free cash flow to drive shareholder value. We generated strong free cash flow in the third quarter, and we expect strong free cash flow in 2022. Please recognize that our 2021 free cash flow is not representative of the free cash flow we will generate in the future, primarily because it doesn't reflect the $130 million to $150 million of annual capital spending for maintenance, regulatory, and reforestation, which is going to be above the $90 million that's forecasted for this year. It also does not include our projected interest expense. Even with our interest expense and normalized capital spending, we expect our 2022 cash flow to be more than sufficient enough to allow us to reduce debt, fund $145 million of maintenance, regulatory, and reforestation capital plus the $15 million of engineering that we'll spend for the Svetogorsk recovery boiler and position the company to begin to return cash to shareholders. I will conclude my comments on Slide 15 with a review of our current debt structure. On Investor Day, we showed that we launched Sylvamo with just over $1.5 billion in gross debt. We ended the third quarter at 2.8x gross debt to adjusted EBITDA, which is equivalent to 2.6x on a net debt basis. On October 29, we repaid $30 million of the outstanding balance of our revolving credit facility, bringing the outstanding balance down to $70 million. And as you can see, we have a favorable debt maturity profile. Over the next four years, on average, less than $50 million of debt will amortize each year. So with that, I'm going to turn it back over to you, Jean-Michel.

Thanks, John. I'll wrap up our comments on Slide 16. Even with the continued uncertainty of the COVID-19 pandemic and supply chain disruptions, we are well positioned for continued success. Our commercial and operational excellence will continue to drive strong business results and our financial discipline will create value for shareholders. The cash flow generation John outlined will position us to improve shareholder value by reducing debt and beginning discussion with our Board about returning cash to shareholders. I couldn't be more proud of how our employees have performed throughout 2021. We appreciate their commitment to working safely during the pandemic and taking care of our customers. We are passionate about our employees, customers, and our shareholders. Sylvamo is off to a great start. We really like our position in paper and have a great deal of momentum to close out the year on a high note. With that, I will turn the call back to Hans.

Thanks, Jean-Michel, and thank you, John. Okay, Angie, with that, we're ready to take questions.

Your first question comes from the line of George Staphos with Bank of America.

This is actually John Babcock on the line for George. I guess just first question. Can you talk about how demand trends have held up so far in four Q across your different markets? It sounds like overall it was pretty strong in three Q. And then also if you could talk about what impact you're seeing from the supply chain, particularly in North America, that would be helpful.

John, thank you for joining our call. First of all, I will answer the question around demand. Demand continues to be really strong globally. As I mentioned, we are full everywhere and the trend continues to be very good. And we even have some regions like Latin America which are kind of getting out of the pandemic. So you have back to school which are starting, return to office which should start soon and have even started in some regions of Brazil. So we expect to have continued strong demand in the fourth quarter. Concerning supply chain, we've been, like everybody, impacted with what's going on. In the U.S., I would say, for us, it's mostly truck. We are looking at mode shift to more rail and looking at different options and have good partners, but truck is where we've put a lot of attention. In Latin America, I would say it's mostly from Brazil vessels for exports. It's difficult to get export. And if you miss one, getting a new one is really very difficult. So making sure we comply with the planning, timing of vessels is essential. In Europe, we had some issues in the third quarter, a little bit in rail in Russia, but it's been taken care. It's managed by the government. And they actually did a good job to put it back to a smoother relation. And we have some truck in some specific regions of Europe like the U.K.

Got you. And then moving on, I guess, like my next question before I turn it over. On maintenance, it seems like that's going to be up a decent bit in four Q. I thought you mentioned some projects at Saillat, correct me if I'm wrong there. And then also, how should we think directionally about maintenance in 2022?

John, this is John Sims. If you think, for the fourth quarter, we have two major outages, extended outages, both at Saillat and the Eastover mill. So those are, the Saillat mill is actually a 21-day outage. It's a 10-year outage that we have to do every 10 years. And Eastover was a cold outage. So that will drive up the cost of those outages. We do provide guidance in the appendix back there in terms of what 2022. We estimate that to be $62 million for the outage expense, so slightly less than what we did this year.

Your next question comes from the line of Ross Haberman with RLH Investment.

Could you talk about the capital expenditures you're going to use on your European plants? I think I saw something from your original deck that you needed to upgrade. I think it's your Russian operation. Could you address that for '22?

Yes, Ross, we did discuss that also in our Form 10 and Investor Day. So we have two recovery boilers that are reaching their end of life at our Svetogorsk mill in Russia. And we've been looking at options either to rebuild those two boilers or to replace them. We haven't made a final determination on that. We'll be bringing that to our Board of Directors. But we put in our projections, if you will, and we talked about at Investor Day the higher capital option, which is to rebuild the recovery boiler, which we estimate is somewhere around $220 million. This is a lower capital but less operationally impacting option because if you rebuild it, you have to shut the mill down and so you lose the production of that. But when you install a new one, you don't lose that. You don't have that impact. So next year, we have $15 million in our capital spend that's around the engineering of the recovery boiler. And then we're projecting that we'll have in 2023 approximately $75 million related to the Svetogorsk boiler. And in 2024, we'll have $100 million. And then we install it and complete it with $30 million in 2025.

So if you do go the new route, how much cash flow will that take off operating cash flow in '22 and '23 if you go with the new boiler route?

So if we go the new boiler route, we will not impact the production at our Svetogorsk mill. So from an operating cash flow, we'll be able to continue to run that mill and that won't be impacted.

We have a follow-up question from George Staphos with Bank of America.

I did want to ask, actually, can you just remind us what price hikes you have in the market? And then also, how much is left to be realized from the hikes that you've announced?

John, so we have price increases actually in all regions. And we've had some price increases that we announced since the investor meeting. So we have price increases that we'll be going through in Russia, Europe, and Latin America and export markets and in North America. So you saw that we project that we have $30 million to $35 million in terms of price and mix in the fourth quarter. And how you can think about that, there will be further implementation and realization of those price increases in the first quarter because essentially that $30 million to $35 million probably represents about half a month of implementation of those price increases.

Okay. And then can you also just remind us how mix tends to shift across the regions? So is it more of a positive impact or a negative impact across different regions?

Yes. From a mix perspective, we're always looking for opportunities to improve the mix. And then particularly in the demand environment that we have today, there is a lot of opportunities to do that. And so when you think about mix, we have the flexibility or the ability to improve our mix from a product perspective. We also have it from a customer perspective domestically in each of our regions and also export-wise. And that means taking the opportunity to be able to export to the markets that we generate the most profits in. And so when you think about mix, we're trying to pull those levers in all our markets.

Okay. Is there a seasonal impact, though, to mix, at least from what I remember, maybe I'm completely wrong here, but that's really what I was getting at.

You're correct, John. There is a small regional impact. But because we have the three regions, it's a little bit different. But usually the first quarter is, especially in Latin America and in Russia, the lowest one because of the holidays and the vacations. And then you have the third quarter which is average. So we do have some seasoning, but because we have the third region, they kind of balance each other.

Okay. And then just a last question. Just on cash flow, are there any notable items we should be mindful of in the fourth quarter here, whether it's working capital or otherwise?

No. We did share with you that what we got the TSA expense that will show up in the fourth quarter, which we hadn't had previously, of course, because of the spin and also we have some one-time items.

Your next question comes from the line of Brian Lalli.

It's Brian Lalli from PGIM. If I could maybe just follow on, on John's question there, not to get too far ahead of ourselves with 2022 guidance, etc. But if you were to sum up all of the price actions you've taken relative to the inflation that you're dealing with, is there an amount for 2021 that you'd say you're still not fully caught up on yet? And obviously, all things being equal, which isn't fair, you'd say 2022 has additional tailwinds from the pricing you've already enacted. I'm just curious kind of what that number might be as we move into next year.

Yes. I think if you looked at a full-year basis because we still have some of these price increases that we're implementing in the fourth quarter and we've had some significant cost increases. And some of these, I think that may not go forward, right? So we think that the gas prices in Europe as more gas has been coming in from Russia and hopefully the wind will blow stronger in Europe that we may definitely see some of the gas prices back off. And like I mentioned earlier, the wood cost in North America, we expect that it's elevated now because of weather, but that will come off. But in general, I think that when you look at our price increases relative to cost increases, we're just staying ahead of it by the time we exit the year. However, when you look at the first quarter, because of prices that we have already announced to our customers and feel very strong, confident that these will be implemented, we're going to see the benefit of that in the first quarter. It's in the first quarter that we'll start to really show that we're outpacing the cost inflation.

Is there a number that we should be thinking about on that, John? I'm just curious, again, to your point, the run rate as we exit the year maybe isn't as high as you think you'll get to, again, with the prices that you've announced and feel confident in with your customers. Just so we size it up correctly in our model is what I'm getting here.

I'm not going to give you the numbers right now for projections for 2022. We don't give forward-looking in terms of price details. So I think...

Okay. No. That's fine. Again, I wanted to ask the question, not a big deal. And then I guess my second one would just be, again, the Brazil tax liability, I'm just curious if there's any update on that? I know there's some limitations around restricted payments and stuff until you get that figured out. So I figured I'd just see if there was an update on that front as you talk about shareholder returns.

Yes. Brian, it's a good question. In terms of the, yes, there's still a bill pending in the Brazilian legislation about a potential tax amnesty program, but that still hasn't worked its way through yet. And just to remind everybody on the call that it's really International Paper's decision. They control the decision of whether they want to pursue that amnesty or not, but it still hasn't worked through. So it doesn't appear that it kind of comes through in November. There's a lot going on in terms of the Brazilian government right now. It may come out in December or maybe some time next year if we don't get any further update.

At this time, there are no further questions. I would now like to turn the floor back to Mr. Bjorkman for any additional or closing remarks.

Thank you for joining us today. We do greatly appreciate your interest in Sylvamo, and we look forward to the continued conversations in the months and quarters to come. Have a great rest of your day and a great week.

Thank you for participating in today's conference call, you may now disconnect your lines at this time.