Sylvamo Corporation (NYSE:SLVM) Q4 2022 Earnings Call Transcript

You have to — in 2016 dollars, you have to inflate it and there was quite a bit of inflation, the last two years that we’ve seen in the maintenance spending. So, I guess the short answer to your question is, yes, I think the range that we talked about earlier the $175 million to $190 million for maintenance, regulatory and forestry is probably — what we feel is the appropriate number going forward. We didn’t mention this, but — so I’m going to — George, I’m going take a little extra time. But I think it’s good to point out why we are increasing spending in forestry down in Brazil. So, we are increasing by 10%. And it’s really because of what I said earlier, back in 2019, ’20 and ’21, we underinvested in our forestry in Brazil. And then, we also — which means that we typically have 80% of our wood that we consume is our own forest, and 20%, we have to go out in much more expensive outside market to get the wood, because we underinvested.

Not only that, but we also — there were forest fires. There was some insect damage. We are now probably approaching 70%, and that actually 10% is a big deal from a cost perspective for us. And so, we’re going to be investing more in the forestry to replant land that we have, that we own or through our partnerships that we’ve been — we hadn’t been adequately sustaining, and so we’re spending that to go forward. But again, because of the rotations of the wood, six to seven years, we really won’t see the benefit of that until out in the future, but that’s the other reason why we’re increasing our spending.

George Staphos: Yes, that makes sense, and certainly is consistent with a lot of the things that the LatAm folks talk about. And it’s a low-cost source of wood, so you are seeing investing in conversion of that fiber as well, so you’ve got to keep your base. Thank you, John.

John Sims: Thank you, George.

Operator: Thank you. I’ll now turn the call back over to Hans Bjorkman for closing comments.

Hans Bjorkman: Thank you for joining us today. We appreciate your interest in Sylvamo. I’m going to ask Jean-Michel to give a quick summary of the call today.

Jean-Michel Ribieras: So, thanks to all of you for joining, first of all. I just want to remember maybe what’s our key message is. In 2023, we expect to increase our earnings and free cash flow versus 2022. We expect — and it’s a clear objective of us to return more cash to shareholders. And in terms of capital allocation, we want to keep a strong financial position, return cash to shareholders and reinvest in our business. I’m sure ’23 has a lot of uncertainty, but we’ve got the right strategy and the right people to execute it. So, we feel confident in this outlook. Thank you very much.

Operator: Once again, we’d like to thank you for participating in Sylvamo’s fourth quarter 2022 earnings call. You may now disconnect.