SLVM · Sylvamo Corporation

Sylvamo's Q1 2026 results reflect a challenging transition year marked by capacity constraints from the Riverdale supply agreement termination and an upcoming Eastover mill outage, leading to lower sales volumes and incremental costs from importing product and building inventory. Net sales fell 15% quarter-over-quarter to $755 million, driven by declines across all regions: Europe at $190 million, Latin America at $187 million (down sharply from $270 million in Q4), and North America at $390 million. Operating losses totaled $15 million, with Europe deteriorating to $(44) million on lower prices, mix, and higher input costs; Latin America dropping to $4 million due to seasonal weakness, lower volumes, and maintenance; and North America at $25 million impacted by volume declines and rising energy/chemical costs tied to Middle East conflict. Despite the GAAP net loss of $3 million, adjusted EBITDA held at $29 million (4% margin), supported by initial realization of uncoated freesheet price increases across regions. Management notes tariff changes enabled a shift to Brazil imports, cutting expected 2026 North America transition costs by $20 million. Cash flow was pressured with operating cash use of $10 million and free cash flow of negative $59 million, attributed to inventory builds, incentive payments, offset partially by Latin America collections; however, flows are back-half weighted. Capital allocation remains disciplined, with a $0.45 Q2 dividend declared and 2027 debt refinanced for maturity extension. Strategic investments at Eastover remain on track, with potential for >$300 million annual free cash flow and >15% ROIC as benefits emerge and capex normalizes. Price increases continue into Q2, and lean transformation initiatives aim for long-term cost leadership.