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Rayonier (RYAM) Misses Earnings, Revenue Estimates in Q1

Zacks

Rayonier Advanced Materials Inc. RYAM slipped to a loss of $22 million or 52 cents per share in first-quarter 2019 from a profit of $24 million or 38 cents per share a year ago. Analysts polled by Zacks were expecting earnings of 14 cents per share on an average for the quarter.

The bottom line in the reported quarter was hurt by reduced commodity sales prices, significantly higher hardwood costs at the Jesup plant and operational issues at the company’s High Purity Cellulose segment. The company also faced challenges from softer lumber, pulp and paperboard markets.

Revenues fell around 7% year over year to $483 million in the reported quarter. It also missed the Zacks Consensus Estimate of $521.8 million.

Rayonier Advanced Materials Inc. Price, Consensus and EPS Surprise

Rayonier Advanced Materials Inc. Price, Consensus and EPS Surprise

Rayonier Advanced Materials Inc. price-consensus-eps-surprise-chart | Rayonier Advanced Materials Inc. Quote


Segment Highlights

Revenues from the High Purity Cellulose unit edged up 1% year over year to $286 million. The unit posted operating loss of $3 million compared with operating income of $21 million a year ago. The decline is due to lower cellulose specialties sales prices as well as higher costs.

The Forest Products unit raked in sales of $75 million, down 24% year over year. The unit recorded operating loss of $5 million compared with operating income of $10 million a year ago, hurt by lower lumber sales prices and reduced volumes.

Revenues from the Pulp segment were $70 million in the quarter, down 18% year over year. The segment logged operating income of $10 million, down 57% year over year. The decline was due to lower high-yield pulp sales prices and reduced sales volumes.

Revenues from the Paper unit fell around 8% year over year to $70 million. The unit recorded operating loss of $1 million compared with operating income of $3 million a year ago. The results were affected by higher costs due to production issues at the Kapuskasing plant, reduced newsprint sales volumes due to the production issues and logistics issues in Canada.

Financials

The company ended the quarter with cash and cash equivalents of $68 million, down around 24% year over year. Long-term debt and capital lease obligations were $1,208 million, down around 1% year over year.

Cash used for operating activities was $27 million in the quarter. Capital expenditures were $31 million.

Outlook

For High Purity Cellulose, the company expects EBITDA margins to return to the high teens for the second half of 2019, subject to fluctuations in commodity prices and tariffs. It also expects cellulose specialties prices and volumes for 2019 to remain stable vis-à-vis 2018.

Rayonier Advanced Materials also envisions commodity product sales volumes to be slightly lower than its original forecast of a 75,000 metric ton increase over 2018 levels.

Moreover, the company sees roughly $100 million in maintenance capital expenditures across all segments in 2019. It also expects to spend around $30 million on high-return strategic projects this year.

Price Performance

Shares of Rayonier Advanced Materials have lost 56.8% over a year, underperforming the industry’s 46.7% decline.



Zacks Rank and Stocks to Consider

Rayonier Advanced Materials currently carries a Zacks Rank #5 (Strong Sell).

Better-ranked stocks in the basic materials space include Materion Corporation MTRN, Flexible Solutions International Inc. FSI and Air Products and Chemicals, Inc. APD.

Materion has an expected earnings growth rate of 23.1% for the current year and carries a Zacks Rank #1 (Strong Buy). The company’s shares are up around 18% over the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.

Flexible Solutions has an expected earnings growth rate of 171.4% for the current year and carries a Zacks Rank #2 (Buy). Its shares have rallied roughly 72% in the past year.

Air Products has an expected earnings growth rate of 10.3% for the current fiscal year and carries a Zacks Rank #2. Its shares have gained around 26% in the past year.

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