RYAM - Rayonier Advanced Materials Inc. (RYAM) Q3 2022 Earnings Call Transcript
Rayonier Advanced Materials Inc. (RYAM)
Q3 2022 Earnings Conference Call
November 2, 2022 9:00 AM ET
Company Participants
Mickey Walsh – Treasurer and Vice President-Investor Relations
De Lyle Bloomquist – President and Chief Executive Officer
Marcus Moeltner – Chief Financial Officer and Senior Vice President-Finance
Conference Call Participants
George Staphos – Bank of America
Paul Quinn – RBC Capital
Roger Spitz – Bank of America
Presentation
Operator
Good morning and welcome to the RYAM Third Quarter 2022 Earnings Conference Call. During today’s presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions with instructions to follow at that time. As a reminder, this conference is being recorded.
I would now like to turn the call over to your host, Mr. Mickey Walsh, Treasurer and Vice President of Investor Relations for RYAM. Thank you, Mr. Walsh. You may begin.
Mickey Walsh
Thank you, and good morning, everyone. Welcome again to RYAM’s third quarter 2022 earnings conference call and webcast. Joining me on today’s call are De Lyle Bloomquist, our President and Chief Executive Officer; and Marcus Moeltner, our Chief Financial Officer and Senior Vice President of Finance. Our earnings release and presentation materials were issued last evening and are available on our website at ryamglobal.com.
I’d like to remind you that in today’s presentation, we will include forward-looking statements made pursuant to the safe harbor provisions of federal securities laws. Our earnings release as well as our filings with the SEC lists some of the factors which may cause actual results to differ materially from the forward-looking statements we may make. They are also referenced on Slides 2 and 3 of our presentation material.
Today’s presentation will also reference certain non-GAAP financial measures, as noted on Slide 4 of our presentation. We believe non-GAAP financial measures provide useful information for management and investors, but non-GAAP measures should not be considered an alternative to GAAP measures. A reconciliation of these measures to their most directly comparable GAAP financial measures are included on Slides 18 through 23 of our presentation.
I’ll now turn the call over to De Lyle.
De Lyle Bloomquist
Thank you, Mickey, and good morning. I would like to start today by providing an update on our near-term initiatives as well as some financial highlights for the third quarter, before turning the call to Marcus to provide additional details on each of our businesses. After Marcus’ update, I will come back and provide additional perspectives on the business and a market outlook before opening the call for questions.
Let’s start by turning to Slide 5. We have made very good progress against our near-term initiatives. Our top priority remains the refinancing of our senior notes, which as you probably know mature in June, 2024. Put us in the best possible position to accomplish this objective. We are working to improve our credit metrics be EBITDA growth and debt reduction. I’m pleased to report that we have improved our net leverage to 5.1 times by reducing net debt by $16 million and growing EBITDA by $35 million in the third quarter.
We will maintain an intense focus on improving our net leverage metric in order to give us the best opportunity to refinance our debt prior to these notes becoming current in 2023. Our EBITDA growth has been driven by success in three areas. First, as we discussed in our last update, we completed extensive planned maintenance outages at all of our facilities in the first half of this year.
As a result, we are now realizing improved productivity and reliability leading to lower unit fixed cost. We believe that we have further opportunities to improve the performance of our facilities, which will likely generate even better results in the future.
Our next area of focus is capturing fair value for our unique product offerings. Generally, demand for our products remains strong. We are capturing value for our commodity products from the current market strength. Regarding our cellulose specialty products, we negotiated significant price and volume increases for 2022 and as we saw inflation accelerate, we implemented a $146 per metric ton cost surcharge effective April 1 and have maintained the surcharge as inflationary pressures continued.
More recently, we implemented a 20% increase effective August 1 on the small sales volume of cellulose specialties that are not under contract. Currently, we are in negotiations with our cellulose specialty customers for 2023 pricing with the objective to fully capture the fair value of these products.
Our final area targets responding to the current inflationary environment and supply chain challenges, while inflation remains persistent, we have a multi-pronged approach to help mitigate these pressures. As already noted, we implemented a cost surcharge to help offset this extraordinary inflation.
We also are leveraging our scale, managing discretionary spending and decreasing the input material usage to reduce our cost. Additionally, we are seeking alternative supply options in wood, chemicals and transportation, including utilizing multiple shipping channels, carriers, and shipment modes to reduce shipping delays, improve reliable service to our customers, and manage our logistic cost.
Let’s now turn to Page 6 for an overview of our financial performance. Our revenues increased 25% from prior year to $466 million as a result, a price increases in strong demand across all segments, reflecting a 25% increase for our cellulose specialty products, inclusive of our cost surcharge, and a 34% increase for our paperboard products.
Adjusted EBITDA for the quarter was $68 million, up 106% from the prior year, as the price and volume increases more than offset cost inflation. The increases from prior year were led by our high purity cellulose segment, which delivers $53 million of adjusted EBITDA in the third quarter, an improvement of $21 million or 66% from prior year.
Paperboard delivered $15 million of adjusted EBITDA, which was $9 million or 150% favorable to prior year results, driven by strong demand and higher prices. High-yield pulp contributed positively to the results with $6 million of adjusted EBITDA. Corporate expenses improved $8 million from last year, driven by a change in valuation of GreenFirst shares, which negatively impacted prior year results by $8 million.
With these strong financial results in the third quarter and a solid outlook for the fourth quarter, we are increasing our full year 2022 guidance to now exceed $175 million of adjusted EBITDA, an increase of $15 million from prior guidance.
Now, I’d like to ask Marcus to take us through the financial details for the quarter, Marcus?
Marcus Moeltner
Thank you, De Lyle. Starting with the company’s high purity cellulose segment on Slide 7. Third quarter sales increased $81 million or 28% to $369 million, driven by a 21% increase in total sales prices, which includes a 25% increase in CS prices from prior year. Sales volumes increased 7% to 240,000 metric tons for the quarter, driven by improved productivity and logistics.
Net sales also included $33 million of other sales, primarily from bio-based energy and lignin. EBITDA for the segment improved $21 million to $53 million driven by higher prices and volumes, which were partially offset by the impact of significant cost inflation.
Turning to Slide 8, our Paperboard segment sales grew $14 million, driven by a 34% increase in sales prices, partially offset by a 7% decline in sales volumes. EBITDA for the segment grew by $9 million to $15 million as higher pricing more than offset increased costs for purchase pulp, chemicals and logistics, as well as the impact of lower sales volumes.
Turning to our high-yield pulp segment on Slide 9. Sales declined by $2 million from prior year, driven by an 18% decrease in sales volume, as a result of productivity challenges in the quarter and supply chain congestion. Sales prices increased 15% due to strong demand for global market pulp.
EBITDA for the segment declined $3 million to $6 million for the quarter, as the higher prices only partially offset lower volumes and cost increases for chemicals and logistics due to inflation.
Turning to Slide 10 on a consolidated basis, operating income improved $26 million from prior year to $29 million. Sales price increases across each segment and volume improvements in HPC more than offset $63 million of higher costs driven by persistent inflation on key cost inputs and logistic constraints. SG&A and other expenses increased $2 million, primarily driven by higher variable stock compensation.
Turning to Slide 11, our net debt declined $16 million to $748 million, as we continue to repay debt. Through October, the company has reduced debt by $59 million, while still preserving adequate liquidity. Liquidity ended the quarter at $283 million including $132 million of cash. We continue to make solid progress towards our stated goal of $725 million of net debt by the end of the year.
With lower debt and improving credit metrics, we continue to monitor capital markets and are prepared to opportunistically refinance our 5.5% senior notes, which mature in June of 2024. We remain confident that the company will obtain an acceptable refinancing at the appropriate time and prior to the notes becoming current in mid 2023.
With that, I’d like to turn the call back over to De Lyle.
De Lyle Bloomquist
Thank you, Marcus. Expanding on Marcus’ point about reducing debt, we have a target to achieve 2.5x net debt to EBITDA leverage in the next three to five years. We have made significant progress toward this goal.
Turning to Slide 12. We can see that we reduced our leverage from 10x at the end of 2020 to 5.1x as of the third quarter of this year. By reducing our debt balance by $215 million and increasing our adjust EBITDA margin from 7.4% to 10%. We expect that we will achieve a net leverage ratio of 4.1x by year end 2022. To get to our 2.5 leverage ratio goal, we will focus on further increasing our EBITDA margins, while also continuing to pay down our debt. Our objective over the next three to five years is to increase EBITDA margins into the 13% to 15% range and reduce debt by another $100 million.
Let’s now turn to Slide 13. We plan to deliver our EBITDA margin goal by addressing four drivers of total shareholder return. First, we are focused on capturing the fair value for our products. As mentioned earlier, we have already taken positive actions toward this objective. Specifically, we negotiated double digit price increases for our cellular specialty products coming into 2022. Then as we saw inflation accelerate, we led the market with a cost surcharge on all our cellular specialty products, and to top it off, we recently implemented a 20% increase for non-contract cellular specialty business. Beyond our core cellular specialty products, we have also led price increases for our paper board and high-yield pulp products. As for 2023, our objective is to realize further price increases. We will also plan in the years ahead on improving our mix of cellular specialties and capturing additional value as market demand for sustainable and renewable products increase.
The second area to drive shareholder value is around cost reduction. Recently we’ve taken several key actions to position us for success. First, we significantly invested in our assets this year to improve reliability and this investment is yielding results. We expect further benefits of $20 million to $30 million in fixed cost absorption as additional reliability improvement is realized. Second, we are reducing our expenses by closely managing our discretionary spending as well as more efficiently consuming key inputs in production. Looking forward, we have set for ourselves a 2% per annum labor productivity objective, which we can realize through improved reliability, increased production via new products and automation. Third, we are diversifying our logistic channels in order to bypass the constraints of a couple of shipping points. This will allow us to reduce our freight cost, improve our on-time shipping experience and reduce our working capital.
The next area to improve shareholder value is reducing debt. As discussed, we have reduced debt by $59 million this year, primarily by using the proceeds from the sale of our equity ownership in GreenFirst and the collection of $23 million in cash tax refunds. Looking forward, we plan to repay additional debt in the fourth quarter and then further reduce debt in the next few years with free cash flow from operations and reduced working capital.
Our last area of focus is on innovation. We plan on leveraging RYAM’s deep experience and capability by developing specialized sustainable products. For example, our second-generation bioethanol facility in France is expected to come online in 2024. It’s important to note that though the strategic project is expected to cost $33 million, it will be primarily financed with low cost green loans. In addition, our world class R&D labs are working to bring to market very high intrinsic viscosity ethers to compete with cotton linter and unique value-added niche products such as odor control and non-compressible fluff products.
Turning to Slide 14. I believe that RYAM offers a very compelling investment proposition. RYAM has been a renewable and sustainable company for over 95 years. And as the world moves away from products that are made from fossil fuels, the world will demand more and more of our products. A renewable and sustainable manufacturing process starts with wood harvested from working forests. Working forests are forests that are profitably managed to supply wood related products, not only for today, but for generations to come, as new trees are planted and the current crop is harvested. We then utilize the full inherent value of the harvested tree.
Today, we developed the world’s highest quality cellulose products and utilize much of the lignin, sugars and extractives for our own internal energy needs. In the near future, we believe that we will have many opportunities to extract much greater value from these wood constituents to produce new renewable and sustainable products as customer demand shifts away from current fossil fuel based products.
We also believe that RYAM’s assets and know-how are very hard to replicate. We have invested over $2.8 billion in our assets and very few businesses have the technical capabilities and product know-how to compete in this demanding cellulose specialties market. RYAM also is committed to do its part to reduce its environmental impact. We have committed to reduce our greenhouse gas emissions by 40% from 2020 to 2030. In just our first year, we have reduced total emissions by 8%.
Regarding our renewable and sustainable products, our specifications are some of the most demanding in the industry. Our products are used by consumers every day, including LCD screens, plastic, acetate, eyeglasses, pharmaceuticals, filtration, food, textiles and baby products. Given our success in developing products that meet the exacting specification of our customers, we enjoy many long-term relationships, including some that span over 90 years. We sell our products into over 80 countries with no one country accounting for more than 35% of our revenue. Consequently, we believe that our diversity of customers and markets in geography help mitigate our exposure to our potential global recession.
Turning to Page 15, I will conclude with an update on each of our segments. We continue to experience strong demand for our high-purity cellulose products, albeit tempered by a slowing economy. Average sales prices for this segment are expected to decline modestly in the fourth quarter as a greater mix of commodity sales is forecasted as production and logistic constraints improve. We also forecast that key raw material inflation will persist. Consequently, we expect EBITDA to decline slightly in the coming quarter, but will still be well above prior year.
In paper board, strong demand for packaging and commercial print products is expected to continue, which will drive higher prices in the fourth quarter. Volumes and costs are expected to hold steady. As such, our Paper Board business is expected to deliver strong EBITDA in the coming quarter.
In high-yield pulp, though price indices appear to be peaking, we expect to realize higher prices due to the sales timing lag. EBITDA is anticipated to increase as productivity and logistics improve. Corporate expenses are expected to be approximately $45 million for the full year, which is $5 million favorable to our previous expectations driven by the strength of the U.S. dollar. Lastly, we remain committed managing our capital expenditures to within our original $140 million to $150 million guidance for the full year.
With that operator, please open the call to questions.
Question-and-Answer Session
Operator
Thank you. [Operator Instructions] And we’ll take our first question from George Staphos from Bank of America. Please go ahead, George.
George Staphos
Thanks, operator. Hi, everyone. Good morning. Hi guys. Thanks for the details. A couple questions and I’ll turn it over. First of all, to the extent that you can comment, how are your customer negotiations and discussions going this year? I realize there’s not much perhaps you can say. But where you can, what are kind of the key issues that you’re reviewing? How might they vary from past negotiations that you’ve had this time of year going back?
De Lyle Bloomquist
Good morning, George. This is De Lyle. Really can’t say much given that discussion. It just started. But we do believe that the momentum that we have experienced in 2022, we’ll be sustained as we go into 2023 because the drivers really aren’t changing much. Other than we’re starting to see some softening in the economy. But at the end of the day, we still got to cover inflation. We still believe that many of our products are such that there is few substitutes for them, and we believe that we still got some room to go before we capture full fair value for them. So we will continue to be pressing for some price increases in 2023.
George Staphos
Understood. On the capturing of fair value, and again, I realize there’s not much that you’ll maybe be able to say on live mic call. But what are you trying to illustrate to your customers in terms of where you feel there’s a gap to fair value? How are you demonstrating that? Are you demonstrating that in terms of the value of their product in the final market relative to the cost of your product? How are you doing that? And then a couple quick follow-ons.
De Lyle Bloomquist
Well, primarily the way I look at it is I just look at my EBITDA margin and compare that to the rest of the world. And right now I believe that there’s room to go with respect to that. So that’s my principle metric.
George Staphos
Okay. We wish you well in that effort. And then just CS volumes increased 7%. How do you feel about that continuing at that pace, recognizing we’re seeing a bit of a slow in the economy as you pointed out? Would there be any situation where there might be some pre-buying ahead of next rounds of pricing that you’re talking about now that would’ve driven that 7%? How should we think about the sustainability of that growth rate? Thank you.
De Lyle Bloomquist
With respect to pre-buying, I don’t think we’ve seen that as of yet. Through the end of the third quarter, there may be some of that in Q4. Although I would suspect that folks are probably trying to conserve cash, so they probably wouldn’t want to build much inventory. So I don’t think that’s going to be a big play this year going into 2023.
With respect to the impact of the economy and general GDP on our business going forward. With respect to cellulose specialty demand, I would say that a good two-thirds of our demand is largely recession resistant. For example, one of our largest segments is going to acetate that goes into tow applications. And I don’t see that that demand is going to be much – is going to be much impacted by what’s going on with respect to the economies right now.
And there’s a number of other applications, particularly with our ethers that go into food and pharmaceutical applications and even in our fluff products, we don’t expect that there’ll be a lot of impact with respect to any decline in the economy. That being said, there’s roughly a third of our business that will be. And so we’re not immune to what’s going on, but fortunately, I would say that a good chunk of our business is somewhat resistant.
George Staphos
Understood. Just a quickie and I’ll turn it over. On acetates and screen sales, technology sales, are you seeing any kind of negative effect in your business relative to what we might have seen in headlines?
De Lyle Bloomquist
That’s a great question. But I would suspect very little right now. So again, it’s a small portion of our business, so a small change in that demand is going to be relatively de minimis.
George Staphos
Thank you for the detail.
Operator
Thank you. And we’ll take our next question from Paul Quinn from RBC Capital. Please go ahead, Paul.
Paul Quinn
Yes. Thanks very much. Good morning, guys.
De Lyle Bloomquist
Good morning, Paul.
Paul Quinn
Just want to follow-up on George’s question on, on the one-third of HPC where you’re sensitive, what are those products? And what are you seeing on the demand side for those products?
De Lyle Bloomquist
Okay. You’re talking about the one-third that’s exposed or possibly – yes, so construction ethers particularly in Europe is, we’re seeing exposure there right now. So we’re seeing some softness in construction ethers. Anything that’s related to automotive end markets, including tire cord and filtration, we’re seeing some softness and expected that would be highly correlated to the GDP activity. And then, obviously viscose right now and the very low operating rates that we’re seeing in China is having some impact on demand as well as on pricing. So those are probably the big areas that I would suggest that we’re seeing some exposure.
Paul Quinn
Okay. Thanks for that. And then just on the volumes, last year you’re kind about in the 913,000 tons on HPC volumes and 654,000 tons year to date, which if you equal last year, it’s kind of 259,000 tons for the quarter. Is that something that you’re capable of doing? And how weak is the mix shift going to be in Q4?
De Lyle Bloomquist
Well, again, we think for the full year in terms of HPC demand we should make the 913,000 ton – you said 913,000, right?
Paul Quinn
Right, yes. That’s what you did last year.
De Lyle Bloomquist
Right, right. In fact, I think we’ll exceed that number this year. And with respect to Q4, we’re not expecting a significant drop off in demand in Q4 versus Q3. The issue around the change in EBITDA really would be a change in mix versus our cellulose specialty business and our commodity business.
Paul Quinn
Okay, that’s good. And I just wanted some background on the refi potential. I’m sure you’re talking to that group quite extensively. Based off your expectation of where your leverage, where your net debt is going to be, do you foresee any issues? Or are they saying, yes, if you get there, you’re good? Can you just help us try to understand the potential of that refi?
De Lyle Bloomquist
Well, our strategy all along has been to improve our credit metrics this year. And so, we believe that we’re going to go out of this year at a 4x leverage ratio. And I think we believe that that puts us in a pretty good position to go into the credit markets to refinance the 2024 unsecured notes. But I’ll tell you obviously the credit markets are fragile right now. And we recognize that. So we’re keeping all of our options open and having discussions with a number of parties, looking at different possibilities of what we can do there. We are very confident, we’ll be able to refinance the notes, but how we’re going to do it, we’re still in discussions.
Paul Quinn
Okay. That’s good. And then just lastly, just on Anomera that was an investment a couple years ago, just wondering how that – if you could give us an update on that.
De Lyle Bloomquist
Yes. We actually had our first commercial sales this year. Really the sales were fairly de minimis but they were sales that we made to customers that needed the product for product qualifications. We expect that we’ll go into full commercialization in 2023 and 2024 with a goal of breakeven in mid 2025.
Paul Quinn
Okay. Great. Best luck. Thanks guys.
De Lyle Bloomquist
Okay.
Operator
[Operator Instructions] And next we’ll take Roger Spitz from Bank of America. Please go ahead.
Roger Spitz
Thanks and good morning. First, with the repayment of $9 million of additional debt in October, was that the 5.5s?
Marcus Moeltner
Roger, Good morning. It’s Marcus. That was on our cogen facility up in Canada that we paid that principal payment.
Roger Spitz
Got it. And then can you tell us what kind of working capital dollar inflow you might be thinking about in Q4? I mean, among other things you’re at – instead of 880 now, you want to get to 725. That’s a 155 repayment. You’ve just done $9 million in October. So that suggests that there’s – unless you take your cash balances down, further that you’re going to be generating some free cash – operating cash flow here, less CapEx.
Marcus Moeltner
Yes, Roger, as you mentioned, we’re focused on the working capital item. You can see year-to-date, the changes in working capital on our cash flow statement that we disclosed was around $68 million. We’re going to be focused on working on our accounts receivable and improving that cash conversion cycle to the support that next step to the 725 target.
Roger Spitz
Got it. And are there any assets that you could consider selling or perhaps a sale lease back to further reduce debt?
De Lyle Bloomquist
Roger, this is De Lyle. Not right now. We don’t see that we have any assets that are available and – readily available to sell, so we’re going to have to kind of monetize the working capital, manage and tighten down our custodial CapEx, other elements to, to make sure at the end of the day we’ll have the free cash flow to pay down our debt going forward.
Roger Spitz
Got it. Thank you very much.
De Lyle Bloomquist
Yes, and Roger, thanks for the questions. Mickey and I will plan to be down at the conference at the end of the month that you’re hosting.
Roger Spitz
We look forward to that. Thank you.
Operator
Thank you. And we’ll take another question from George Staphos from Bank of America. Please go ahead, George.
George Staphos
Thanks very much. Hi guys. Just a couple of quickies for me to finish up, and this has come up I think in past calls. As you think about the high-yield pulp markets that you operate in, we’ve obviously been going through a couple years of very, very strong pricing. Earnings have improved somewhat, but it would seem like pricing has gone up a lot more and the cycle is probably closer to a peak than closer to a trough.
So how – what would you say to us as we try to figure out what your earnings trajectory can look like when we may be looking at pricing that’s plateauing, if not declining over the next few quarters, and then separately, can you give us a bit more color? You’ve probably talked about this in the past, just the interplay on some of the production issues that you’ve had in your non-cellulose specialty markets relative to demand and what kind of latent or incremental demand pickup could you get once those are resolved over the, let’s say the next one to two quarters. Thank you.
Marcus Moeltner
Yes, it’s Marcus. I can touch on the high yield question certainly. Given our range of products that we produce in the high-yield, our customer base is very focused on three ply board and packaging, which as you know, in this economy really resonates from a sustainability footprint. And we’re seeing our product well placed in that market. You’re right, there is more capacity in the future, but given the bulk attributes of our products, we’re seeing the ability to perhaps be positioned in a niche where we will on a mix basis versus BK still have a pretty good position.
De Lyle Bloomquist
George, does that answer that one question before we try to address your second question?
George Staphos
Yes, it’s helpful. I appreciate it. Why don’t we move on to the other ones, guys. That would be great. Thank you.
De Lyle Bloomquist
All right, George. Can you just articulate your first question again just to make sure I got it right?
George Staphos
Well, the first question was on really the high-yield outlook, which I thought you were largely covering, but…
De Lyle Bloomquist
Yes, the other questions what I was referring to?
George Staphos
Yes, just can you – you’ve had production issues in your non-cellulose specialties markets, which implicitly have impacted your demand. What kind of demand pickup can you get once you’ve gotten those issues resolved over the next one to two quarters?
De Lyle Bloomquist
All right. And we’re talking about HPC, kind of our commodity HPC business. Is that your question?
George Staphos
Yes. And also I think Paperboard, you said you’ve had some issues there.
De Lyle Bloomquist
Right. So quickly about to talk about Paperboard, we’ve got largely the issues around Paperboard are addressed and will be addressed in Q4. We believe that business will remain sold out as we go into 2023. In fact, we are very confident that we will realize higher prices in 2023 for our Paperboard business. So as I mentioned earlier, we believe that we should have a very strong year in 2023 with that particular business.
With respect to our HPC column, the commodity grades that I think you’re referring to, whether it’s the fluff business, the viscose business, we’ve already touched on the viscose business a little bit. There’s a lot of excess capacity in that market. Pricing is going down. And so we’re not really targeting that business. We look at that business as a business to fill up capacity if we need to at our mills. But it’s not a business that is particularly attractive right now.
The fluff business again we are spent a lot of money and made a number of investments to improve its reliability in 2022. And we see that as a business that we can differentiate ourselves on by bringing in some new product characteristics. For example, the order control or non-compressible fluff products that we’re hoping to launch in 2023. And so we continue to look at that as a business that we will continue to consider strategic and we’ll take a product differentiation strategy as we go forward there.
George Staphos
On Paperboard, one last one, I’ll turn it over and good luck the rest of the quarter. On pricing for Paperboard, I assume you’re referring more to just pricing that’s already been recognized and that you’ll have a benefit from on an average basis in 2023 versus 2022, or you suggesting you think you can see further pricing, incremental pricing in 2023, i.e. new pricing?
De Lyle Bloomquist
Well, I think certainly the pricing that we’ve – the momentum that we’ve had in 2022 will also be sustained into 2023, it’s too early to tell whether we’ll be able to get anything higher in that, be able to press further prices in 2023 right now.
George Staphos
Understood. Thank you, guys.
Operator
Thank you. And we’ll take another question from Paul Quinn from RBC Capital. Please go ahead.
Paul Quinn
Yes, thanks very much. Just one further one, you already stated that you’re trying to improve your HPC mix in 2023. Just wonder where you’re sitting on your commodity mix between fluff and viscose. Where are you heavy to now and what’s your ability to switch from viscose to fluff, viscose markets are really weakening.
De Lyle Bloomquist
Yes. Marcus, you may have better insight
Marcus Moeltner
Well, it’s Marcus. So we’re definitely a larger waiting to fluff given the sealine at Jessup. And then at viscose, it’s mainly Témiscaming, so certainly a larger waiting to fluff. And as you know, the market’s holding pretty good for fluff right now. And on softwood, we’re still getting the premium versus hardwood viscose in the market even though it’s softened a bit.
Paul Quinn
Okay. That’s helpful. Thanks a lot guys.
Operator
[Operator Instructions] And there appear to be no further questions at this time. I’d like to turn the floor back over to Mr. Bloomquist for closing remarks.
De Lyle Bloomquist
Well, thank you everybody for your time today. I’m very proud of the accomplishments we’ve made this past quarter and confident that we will continue to execute on our near-term initiatives to improve our profitability and to reduce our debt. And I look forward to our next update. Until then, if you have any questions or need to reach out to us, please feel free to do so.
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Rayonier Advanced Materials Inc. (RYAM) Q3 2022 Earnings Call Transcript