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Rayonier Advanced Materials revenue declines by 19 percent

November 1, 2016

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Rayonier Advanced Materials (NYSE: RYAM), a major cellulose produce in Fernandina Beach, had a rocky third quarter: At 44 cents of earnings per share this quarter, it beat analyst expectations of EPS by 21 cents but was down by 32 cents from the same period last year, when EPS was 76 cents.

Revenue was $207 million, down year over year by 19 percent. The company attributes the decrease in sales to lower cellulose specialties prices down by 8 percent and a 13 percent decline in cellulose specialties volumes, as well as lower commodity volumes. The decrease in sales prices and volumes reflect anticipated declines from the prior year, which were more concentrated in the third quarter.

Looking ahead, RYAM said it expects cellulose specialties prices to decline 6 to 7 percent and sales volumes to decline 4 to 5 percent compared to 2015. Acetate pricing in 2017 is expected to be about 2 percent below 2016, based on contractual commitments. Negotiations for other 2017 volumes will conclude over the next few months and may impact next year’s pricing and volumes.

“As previously disclosed, our markets remain challenging as a result of suppressed demand, excess production capacity, and the improved cost position of foreign competitors as a result of weak global currencies relative to the U. S. dollar,” the company wrote in its news release.

Despite the big difference in earnings between last year and the 2016 third quarter, the company is taking a rosy outlook. Its Transformation Initiative, a series of changes the company is making following its spinoff from the real estate segment of Rayonier in 2014, is generating increased savings — the company now expects $35 million in savings rather than $30 million.

Because of this, RYAM is raising its guidance for the year, expecting a net income of $66 million to $72 million and raising its pro forma EBITDA guidance to about $215 million rather than $195 million.

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