Good morning and thank you for joining us. Welcome to Sylvamo’s Fourth Quarter 2023 Earnings Call. All lines are muted to eliminate background noise. After the speaker concludes, you will have a chance to ask questions. Please note that this conference is being recorded. I will now hand the call over to Hans Bjorkman, Vice President of Investor Relations. 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.

Thanks, Hans. Good morning and thank you for joining our call. Let’s turn to slide four, please. In 2023, we created value for shareholders. 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 EBITDA, generated $294 million in free cash flow and returned $127 million in cash to shareholders. 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 a tough market, the mill generated about $50 million in cash before any allocated overhead. Slide five highlights our 2023 full year key financial metrics. Our adjusted EBITDA was $607 million, which was a 16% margin. Our $294 million of free cash flow was more than $7 per share. In 2023, our free cash flow was heavily weighted to the second half of the year. We generated almost 90% of free cash in the second half. You may recall that in 2022, we generated about 75% of our free cash in the second half of the year. Our adjusted operating earnings were $6.51 per share. Regarding our 2023 financial result, it was solid considering unfavorable industry conditions that were more difficult than expected. As we enter 2024, we are confident in our ability to continue to create value for our customers and shareholders. Slide six shows our fourth quarter key financial metrics. Adjusted EBITDA was $117 million, with a margin of 12%. We generated $104 million in free cash flow as we continue to optimize our working capital. Our adjusted operating earnings were $1.16 per share. These strong performances during challenging industry conditions demonstrate our agility and ability to adapt. I am proud of how our teams collaborated to meet our customer needs and maximize cash. Now, John will review our fourth quarter performance in more detail. John?

Thank you, Jean-Michel. Good morning, everyone. Thanks for joining our call. Slide seven shows our fourth quarter earnings bridge. 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 an 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 $105 million to $125 million. We project price and mix to decrease slightly, about $5 million to $10 million. In the fourth quarter, we communicated pulp and paper price increases to our European and Latin American customers effective in January. We do, however, expect some price and mix erosion in North America, and as is usual in the first quarter, we expect an unfavorable seasonal mix impact in Latin America. We expect volume to decrease by $10 million to $15 million, reflecting seasonally weaker industry demand in Latin America. Operations and other costs are projected to improve by $20 million to $25 million, primarily reflecting lower economic downtime. We expect input and transportation costs to increase by $5 million to $10 million due to increased transportation costs, mostly in North America, and higher fiber costs in Latin America. Planned maintenance outages are projected to decrease by $3 million. Moving forward, we will continue to provide quarterly earnings guidance on selected annual financial metrics as shown on slide 17 in the appendix. On the advice of our high-conviction, long-term shareholders, we will no longer provide full year guidance for earnings or free cash flow. They have encouraged us to discontinue annual guidance and to continue our focus on growing long-term shareholder value. Let’s go to slide 10. We continue to reinvest, strengthen our low-cost assets, and we will fund high-return projects to increase our earnings and cash flow. Our 2024 capital spending outlook includes $125 million to $130 million in maintenance and regulatory spending, as well as $30 million to $35 million for high-return projects. Our Brazilian forestlands are a significant competitive advantage. These eucalyptus plantations provide a material cost advantage relative to most other global competitors. In 2023, we invested $34 million, and this year we will invest $35 million on our forestlands to increase our self-sufficiency and reduce our wood costs. We are also investing $20 million this year, $12 million in 2025 for a three-year third-party wood supply agreement to ensure adequate wood supply in 2024 through 2026. Let’s look at slide 11 for additional detail on our Brazilian forestlands. We source a majority of our wood in Brazil from our own and managed wood and supplement that with open market purchases. Most of our wood needs come from our forestland, from strategic long-term partnerships. Our owned and managed wood has the capacity to provide 80% to 90% of our total wood needs from forestlands close to our mill. However, several years of reduced planting, combined with natural causes, largely droughts and fires, forced us to harvest trees early. These factors increase the amount of market wood required to meet our needs. We are currently purchasing about 25% of our wood from the open market, and this wood costs two to three times our owned wood. The increase in reforestation capital and a three-year wood supply agreement will enable us to return to about 85% owned and managed wood by 2027. Let’s move to slide 12. In addition to providing global competitive advantages, our Brazilian forestlands have significantly increased in value. In the fourth quarter, we commissioned a third party to appraise our forestland. In December, they valued it at about $1 billion at the current exchange rate. The updated valuation reflects an increase of about $600 million from our 2021 appraisal done by the same firm. Increasing demand for land and wood in Brazil has driven this increase in valuation. Our forestlands are not only a source of global competitive advantage but also an enduring repository of shareholder value. Jean-Michel, I will now turn it back over to you.

Thanks, John. I am on slide 13. We are a cash flow story. We have generated substantial cash over the past two years, and importantly, we returned $90 million in cash to shareholders in 2022 and $127 million in 2023. Last year, we also deposited $60 million in escrow, which allowed us to return more than the $90 million limit in our credit agreement. Returning cash to shareholders remains a key component of our capital allocation strategy. In 2024, we expect to return at least 40% of free cash flow to shareholders. Slide 14, please. We are confident in our ability to continue to create long-term shareholder value by executing our strategy and delivering on our investment thesis. We believe in the promise of paper for education, communication, and entertainment, and we intend to increase our competitive advantages in the markets we serve. We are a low-cost global producer with a strong supply position, iconic brands, and talented teams. We leverage our strengths to drive high returns on invested capital and generate free cash flow. We use that cash to increase shareholder value by maintaining a strong financial position, returning cash to shareholders, and reinvesting in our business. We are confident in our future and motivated by the opportunities that lie ahead. With that, I will turn the call back to Hans.

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

Your first question comes from George Staphos from Bank of America. Please go ahead.

Hi, everyone. Good morning. Can you hear me okay?

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 profitably, and either way not being sort of underappreciated within the market? How should we think about what you are trying to say on timberlands here? Thank you.

George, I will start by your second question and John will take the first one. So we think our timberland is key to our competitiveness, and it’s really a key advantage. The reason why we updated the appraisal is that we think it was undervalued, and that’s the only reason. We continue to invest in it, and I think this is the 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 Latin America, with 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 in the first quarter, but really that’s going to really start ramping up through the balance of the year.

Hey, John. I just need a quick clarification. You mentioned the reduction in unabsorbed costs, and if I heard you correctly, we can expect to see more of that this year. I want to ensure I understood the timing on that correctly since 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.

Next, we will hear from 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 2024, 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, thank you for being on the call, and please extend our congratulations to Matt on the arrival of his new baby, which is very exciting. I want to highlight an example of our company's agility. Our focus on uncoated freesheet has allowed us to adapt quickly. Recently, a large mill in Charleston, South Carolina, was shut down, which was a significant consumer of wood chips. One of our major cost reduction initiatives this year involves enhancing our capacity to process wood chips at our Eastover mill, so we can benefit from the increased supply resulting from that mill's closure. This is just one type of project we are working on. Additionally, we recently finished a chemical recovery project in Eastover, which has already begun to deliver substantial cost reductions starting this January. We are targeting nearly $30 million in high-return projects, expecting returns well above 20%, and potentially much higher.

That's great. That's helpful information. More broadly, with the Red Sea crisis, do you anticipate additional European products entering the North American market due to the rising costs of shipping to Asian markets from Europe? Our latest check with RISI indicated that North American outbound shipping costs have remained relatively stable, while inbound costs have increased. We were hoping to gain more insight on this.

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 a decrease in imports. And some of the transit times coming from Asia have almost increased about four weeks we understand for imports from Asia to get into Europe. So it could have an impact that actually decreases imports in Europe, which then means that more domestic supply has to 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.

And concerning what you were asking about Europe export overseas, we export very little from Europe to overseas. Our production in Europe mostly remains in Europe, and we have very few shipments going to the Middle East and Africa. So it’s really not impacting us significantly so far.

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?

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 rolls 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 is 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?

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’s 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 go 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 is 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?

I don’t have the precise number, so I can only make a very high-level guess, and it might be around 10%.

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

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?

So, George, I cannot provide an exact price, but I can share a trend. We noticed the same RISI report you did. As you mentioned, we do not report our pricing to RISI. I would say RISI might be headed in the right direction, but in terms of absolute value, we see things differently. In our outlook, mainly for the third quarter, we expect a slight decline in North America, not significant, just slight. At the same time, due to two price increases we've announced to our customers in Europe, Brazil, and Latin America, we anticipate price increases in the other regions.

The performance for the quarter in Europe was somewhat below our expectations. This is a comparison between our forecast and the actual results. Were the losses in Europe aligned with your expectations? While you're not providing guidance for the entire year, should we anticipate that Europe will ultimately be breakeven or better this year? What are the key factors that could help achieve that assumption? Thank you.

Yeah. So 2023, as you know, in Europe was difficult. It was a trough in terms of demand. The prices of pulp, which affected a lot our Saillat mill, went down. We had an annual outage in Saillat, which cost 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 cost 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 prices 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 indicated that it was a low point, but it was significant. When considering the demand decline we experienced in Europe, it was even worse than during COVID. The reduction in volume and shipments, along with pulp prices, has impacted Saillat, as one-third of its capacity is pulp. This makes it more sensitive to the fluctuations in pulp prices compared to our other mills. However, as Jean-Michel mentioned earlier, we are currently operating at full capacity in Europe, which is a very positive sign. Additionally, prices for both paper and pulp are increasing. Pulp prices have risen nearly $160 per ton from the low point, suggesting that the situation in Europe is improving.

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, I had some technical difficulties at the start of the Q&A. But I 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 has talked about having to go farther from its own mills for wood and do a bit more third-party wood. 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 overharvesting or underinvesting that, not just for Sylvamo, you have seen elsewhere, just some quick thoughts there, and I will turn it over.

I believe some of our competitors mentioned similar issues regarding certain plantations about six to seven years ago, which have been affected by the seven-year cycle of drought and natural causes, impacting all Brazilian forestry plantations. We are not alone in this situation. However, this is no longer the case. It's been two years since then. We have also notably decreased our investments in forestry during those years, which follows that six or seven-year cycle. We are currently experiencing the effects of those decisions, which is why we have had to source more wood from outside the market than we normally would. We recognize the strong demand for wood in Brazil right now, and the combination of this demand and the natural factors that have lowered our plantation productivity is an impact we are experiencing. Our strategic investments in our valuable forestlands will help mitigate 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 softwood. 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?

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.

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?

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.