Rayonier Advanced Materials Sees $308M Core EBITDA Run Rate by 2027 as Tariff Pressures Ease

Management Perspective

During the earnings call, CEO De Lyle W. Bloomquist acknowledged that Rayonier Advanced Materials Inc. (RYAM) encountered significant nonrecurring challenges in 2025. This led to a downward revision of the full-year EBITDA guidance to $150 million to $160 million, compared to the initial forecast of $215 million to $235 million. He emphasized that these headwinds are largely behind the company, citing the normalization of cellulose specialty orders as evidence. According to Bloomquist, 2025 is considered the "trough year," with Q2 being the lowest quarter, and he expects growth and profitability to accelerate from there.

Bloomquist outlined several factors contributing to the EBITDA headwinds, including approximately $59 million in challenges. These included $21 million from tariff-related uncertainty, $8 million from foreign exchange revaluations, $18 million from operational disruptions, and $12 million in noncash environmental charges. He also noted that the paperboard and high-yield pulp segments experienced "higher-than-expected softness."

The CEO announced a strategic plan to nearly double EBITDA over the next two years, projecting a normalized core EBITDA run rate of around $308 million by the end of 2027 and $338 million by 2028 with the completion of the AGE project. Key drivers for this growth include market share gains in cellulose specialties, cost reduction initiatives, and high-return biomaterial projects. Bloomquist expressed confidence in the company's strategy and its potential to deliver value to both the business and shareholders.

He also mentioned that the disruptive Chinese tariffs have been resolved, noting that exports of cellulose specialty and dissolving wood pulp to China are now tariff-free, while paperboard imports into the U.S. remain tariff-free under the USMCA agreement.

Financial Results

In the second quarter of 2025, RYAM reported revenue of $340 million, a decrease of $79 million year-over-year. The operating loss was $1 million, down by $29 million compared to the previous year. Adjusted free cash flow year-to-date was negative $52 million, while adjusted EBITDA was $28 million, reflecting a $40 million decline compared to the same period last year.

Looking at specific segments:

• Cellulose Specialties: Net sales were $208 million, a decrease of $33 million year-over-year. Operating income fell by $21 million to $29 million, with adjusted EBITDA margins dropping to 22% from 28%.

• Biomaterials: Net sales were $6 million, with operating income remaining flat at $1 million. Adjusted EBITDA margins declined to 17% from 25%.

• Cellulose Commodities: Net sales were $59 million, with operating results improving by $12 million, reducing the operating loss to $9 million.

• Paperboard: Net sales were $47 million, with operating income declining by $12 million year-over-year. Adjusted EBITDA for the segment was $5 million, with margins falling to 11% from 25%.

• High-yield Pulp: Net sales were $29 million, with an operating loss increasing by $8 million to $7 million.

Outlook and Strategic Initiatives

Management revised the full-year 2025 adjusted EBITDA guidance to $150 million to $160 million, implying that the second half of the year should generate approximately $105 million to $115 million in EBITDA. Adjusted free cash flow guidance for the full year is estimated at a negative $10 million to $25 million, with positive free cash flow of about $35 million expected in the second half.

Bloomquist described 2025 as a "trough year" and projected growth in subsequent quarters and years through cost reductions, margin expansion, and strategic investments.

Q&A Highlights

Several analysts raised questions during the call, focusing on commercialization timelines, cost reduction initiatives, and capital allocation. Bloomquist addressed concerns about the commercialization of dissolving wood pulp fluff in China, stating that trials are underway and that commercialization is expected to begin in 2026. He also outlined the timing of cost reduction initiatives, indicating that most of the $24 million in capital will be spent in 2025, with $30 million in value realized in 2026.

Regarding biomaterials growth, Bloomquist expressed strong confidence in the company's ability to ramp up projects, emphasizing that commercial agreements are a key precondition for investment decisions.

Sentiment and Risk Analysis

Analysts maintained a neutral to slightly cautious tone, particularly regarding the realization of projected benefits and new product commercialization. However, management remained confident, frequently emphasizing that 2025 headwinds are "largely behind us" and using phrases such as "we remain highly confident" and "exceptional equity returns."

Compared to the previous quarter, the tone shifted from defensive to assertive confidence. While Q1 was described as "disappointing," Q2 saw a more optimistic outlook, with the CEO projecting a doubling of EBITDA over the next two years.

Risks and Concerns

Despite the optimism, management cited ongoing macroeconomic and internal headwinds, including tariff-related uncertainty, foreign exchange losses, operational disruptions, and noncash environmental charges. Challenges in the paperboard and high-yield pulp segments were highlighted as continuing risks.

Bloomquist emphasized that while most headwinds are "one-time in nature," the indirect effects of tariffs and market softness are not expected to recover in the current period. Analysts raised concerns about execution timing for cost reductions, new product commercialization, and capital allocation priorities.

Final Takeaway

Overall, management conveyed that 2025 is expected to be a low point for RYAM due to extraordinary but largely resolved headwinds. With tariff disruptions easing and new cost reduction and biomaterials initiatives underway, the company projects substantial EBITDA growth and improved free cash flow in the coming years. Leadership remains confident in restoring and expanding profitability, highlighting a robust pipeline of high-return projects and an improved competitive position as key drivers for future shareholder value.