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Investing.com -- Sylvamo (NYSE:SLVM) shares tumbled 11% after the company released its fourth-quarter earnings, which, despite beating analyst expectations, signaled potential challenges ahead.
The paper company reported Q4 earnings per share (EPS) of $1.96, marginally surpassing the analyst estimate of $1.80. Revenue for the quarter was reported at $970 million, slightly above the consensus estimate of $965.41 million. While these figures represent an uptick from the previous year’s Q4 results, investors appeared to focus on the forward-looking statements and operational concerns outlined in the company’s press release.
For the full year of 2024, Sylvamo achieved a net income of $302 million, or $7.18 per diluted share, compared to $253 million, or $5.93 per diluted share, in the previous year. Adjusted EBITDA for the year stood at $632 million, reflecting a 17% margin, an improvement from the $607 million, or 16% margin, seen in 2023. However, cash provided by operating activities decreased to $469 million from $504 million YoY, and free cash flow also saw a reduction to $248 million from $294 million YoY.
The fourth quarter compared to the third quarter of 2024 showed declines in net income and adjusted EBITDA, with notable increases in planned maintenance outage expenses and input and transportation costs. These costs were attributed to higher transportation and seasonally higher energy prices.
Looking ahead to the first quarter, Sylvamo projected adjusted EBITDA to be between $85 million and $105 million. The company anticipates paper price decreases in Europe and Brazil, along with seasonally weaker demand, to impact revenues negatively. Additionally, input and transportation costs are expected to rise due to higher energy prices in North America.
Chairman and Chief Executive Officer Jean-Michel Ribiéras highlighted the company’s achievements in 2024, including a 23% return on invested capital and significant debt repayment. He also emphasized the company’s ongoing structural cost reduction program, Project Horizon, which exceeded its savings goal. Despite the termination of a supply agreement and various challenges, the company plans to invest in high-return capital projects to enhance competitiveness and cash flow.
The market’s reaction suggests concerns over the immediate future outweighed the positive full-year performance and strategic initiatives. Investors may be weighing the short-term increases in costs and the impact of seasonality on the company’s performance.
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