Sylvamo Corp

Sylvamo reported second-quarter adjusted EBITDA of $60 million, more than double the $29 million in the prior quarter, with a 7% margin. Adjusted operating earnings were $0.03 per share, and free cash flow was -$23 million, improving by $36 million sequentially. On the bridge, price/mix was favorable by $32 million, volume added $3 million, operations/costs were favorable by $22 million, planned maintenance was unfavorable by $24 million, input and transportation costs were unfavorable by $2 million, and the non-repeat of a $10 million Riverdale-related charge helped versus Q1. For the second half, management expects $75 million to $85 million of benefit from better price and mix versus the first half, around $5 million of unfavorable planned maintenance, and better volume, operations, and input costs, partly offset by higher energy, chemicals, and transportation costs tied to the Middle East conflict.

John Sims framed 2026 as a transition year and said the first half was likely the low point for free cash flow generation. He emphasized that the company is executing on three big priorities: passing through price increases, rolling out lean transformation across regions and functions, and completing strategic investments at Eastover. He was upbeat on Eastover’s progress, the expected long-term earnings and cash benefits, and the potential for Sylvamo to eventually generate more than $300 million of annual free cash flow and greater than 15% ROIC.

Donald Devlin highlighted the quarter-to-quarter EBITDA rebound and broke out the bridge: $32 million from price/mix, $22 million from operations/costs, and lower maintenance partially offsetting a few headwinds. He said the working capital build will unwind mostly by year-end, with about 50,000 tons of North American inventory expected to be drawn down in the second half. He also explained that the higher tax rate was mainly from a Brazil valuation allowance tied to deferred tax asset changes, created to preserve about $30 million of VAT tax credits, with roughly $9 million of expense. On capital allocation, management reiterated disciplined spending and described Eastover and related projects as high-return investments.

Analysts focused on North American volume, pricing cadence, working capital, Europe, and the shareholder rights plan. Management said lower North American volume in the second half reflects both lower production and lower sales from Riverdale’s exit and a longer-than-expected Eastover outage, and that some planned volume shifts from Brazil and Europe are now uneconomic because of new tariffs. On pricing, management said most increases are flowing through in Q3 and that they expect to be at run-rate by late Q4 across North America, Latin America, and Europe. On Europe, John Sims said the business is improving but still under review, and if the outlook is not satisfactory the company may pursue other options in 2027; the board has not yet decided what to do with the poison pill when it expires in November.