Sylvamo, International Paper Terminate Georgetown Supply Agreement

Rhea-AI Summary

Sylvamo (NYSE: SLVM) and International Paper (NYSE: IP) have agreed to mutually terminate their supply agreement for uncoated freesheet, bristols and specialty papers at the Georgetown, South Carolina mill, effective December 31, 2024. Sylvamo is transitioning paper grades from Georgetown to its Ticonderoga, New York, and Eastover, South Carolina mills to maintain customer supply. The company aims to retain the most profitable products from Georgetown while reducing economic downtime in its mill system and improving product mix.

Positive

• Strategic transition of production to other mills maintains supply chain continuity
• Focus on retaining most profitable products expected to improve product mix
• Reduction in economic downtime across mill system should improve operational efficiency

Negative

• Loss of Georgetown mill production capacity could impact overall output
• Transition costs and potential operational disruptions during production relocation

Insights

Supply Chain Analyst

The termination of the Georgetown supply agreement marks a significant operational shift for Sylvamo. The company's proactive approach in transitioning paper production to Ticonderoga and Eastover mills demonstrates strong supply chain resilience. This strategic realignment could yield improved operational efficiency and cost optimization through reduced economic downtime and enhanced product mix.

The planned transition period through December 2024 provides adequate time for supply chain adjustments and customer relationship management. The retention of profitable product lines while discontinuing less profitable ones suggests a potential margin improvement opportunity. The company's emphasis on high-return mill investments indicates a focus on operational excellence and sustainable growth.

Financial Analyst

This strategic restructuring has mixed financial implications. While the termination may cause short-term disruption, Sylvamo's preparedness since the 2021 IP spinoff suggests minimal operational impact. The focus on retaining profitable products and reducing economic downtime should support margin preservation. The company's commitment to investing in high-return projects signals potential for future earnings growth.

Investors should monitor the transition costs and potential impact on working capital during the consolidation period. The ability to maintain customer relationships and market share through this transition will be crucial. The neutral short-term impact could evolve into a positive long-term outcome if operational efficiencies are realized as planned.

MEMPHIS, Tenn.--(BUSINESS WIRE)-- Sylvamo (NYSE: SLVM), the world’s paper company, and International Paper (NYSE: IP) are mutually terminating a supply agreement for uncoated freesheet, bristols and specialty papers at the Georgetown, South Carolina, mill. The agreement will terminate Dec. 31, 2024.

Sylvamo is successfully transitioning many paper grades from Georgetown to its Ticonderoga, New York, and Eastover, South Carolina, mills to continue supplying customers. International Paper has announced plans to discontinue operations at the Georgetown mill.

“We have been preparing for this possibility since our 2021 spinoff from International Paper. We will support our customers through this transition and will retain the most profitable products from Georgetown, reducing economic downtime in our mill system and improving our mix,” said Jean-Michel Ribiéras, chairman and chief executive officer. “Looking ahead, we are confident in our future and our strategy to grow earnings and cash flow by continuing to invest in high-return projects in our mills and processes.”

More details are available in a presentation available at investors.sylvamo.com. This development will be discussed during the company’s next quarterly earnings call Tuesday, Nov. 12, at 10 a.m. EST/ 9 a.m. CST.

About Sylvamo

Sylvamo (NYSE: SLVM) is the world’s paper company with mills in Europe, Latin America and North America. Our vision is to be the employer, supplier and investment of choice. We transform renewable resources into papers that people depend on for education, communication and entertainment. Headquartered in Memphis, Tennessee, we employ more than 6,500 colleagues. Net sales for 2023 were $3.7 billion. For more information, please visit Sylvamo.com.

View source version on businesswire.com: https://www.businesswire.com/news/home/20241031020380/en/

Investors: Hans Bjorkman, 901-519-8030, hans.bjorkman@sylvamo.com

Media: Adam Ghassemi, 901-519-8115, adam.ghassemi@sylvamo.com

Source: Sylvamo

FAQ

When will Sylvamo (SLVM) terminate its Georgetown supply agreement with International Paper?

The supply agreement between Sylvamo and International Paper for the Georgetown mill will terminate on December 31, 2024.

Which Sylvamo (SLVM) mills will take over Georgetown's paper production?

Sylvamo is transitioning paper production from Georgetown to its Ticonderoga, New York, and Eastover, South Carolina mills.

What types of paper are affected by the Georgetown supply agreement termination?

The termination affects the supply of uncoated freesheet, bristols and specialty papers produced at the Georgetown mill.