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Adjusted EBITDA: More than doubled sequentially to $60 million, with a margin of 7%.
Adjusted Operating Earnings: $0.03 per share.
Free Cash Flow: Negative $23 million, a $36 million improvement sequentially.
Price and Mix: Favorable by $32 million, reflecting paper price increases in all regions and better mix in the Americas and Europe.
Volume: Increased by $3 million, driven by seasonally stronger demand in Latin America.
Operations and Costs: Favorable by $22 million, largely due to green energy credits in Europe and lower overhead.
Planned Maintenance Outage Costs: Unfavorable by $24 million due to scheduled outages in all regions.
Input and Transportation Costs: Unfavorable by $2 million, with higher purchased wood in Latin America and transportation costs in North America, partially offset by the non-repeat of a one-time $10 million charge from International Paper’s Riverdale Mill.
Release Date: August 07, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Adjusted EBITDA more than doubled sequentially to $60 million, with a margin of 7%.
Price and mix improved by $32 million in Q2, driven by price increases across all regions.
Expect $75-85 million benefit from better price and mix in the second half of 2026.
Strategic investments at Eastover mill are on schedule and budget, expected to generate $55 million in annual benefits.
Lean transformation initiatives are underway, aiming to drive cost savings and operational improvements.
Negative Points
Free cash flow was negative $23 million in Q2, with most cash flow expected in the second half.
Planned maintenance outage costs were unfavorable by $24 million due to scheduled outages in all regions.
North American volumes are expected to decline in the second half due to the loss of Riverdale supply and extended Eastover outage.
Tariff changes have made importing product from Brazil uneconomical, reducing volume and earnings benefits.
European industry supply and demand remains challenging, with margins at unacceptable levels and ongoing cost pressures.
Q & A Highlights
Q: Can you provide more color on the drivers behind the North American margin improvement from 10% in Q1 to 15% in Q2, and where do you expect leverage to end the year given the working capital build?A: Don Devlin (CFO): The North American margin improvement was largely driven by price and mix, along with lower operations and input costs. The working capital build, primarily a 50,000-ton inventory increase in North America for the Eastover project, will unwind by the end of the year, with the drawdown occurring in the second half.
Q: You mentioned lower North American volumes in the second half. Is that sales or production, and what are the main drivers?A: Don Devlin (CFO): It’s both lower production and sales. The loss of Riverdale supply and a longer-than-planned extended outage at Eastover will reduce production and sales. John Sims (CEO) added that due to new tariffs, it’s no longer economical to import volume from Brazil and Europe, so we’ll bring in less than previously expected.
Q: Can you quantify the $75 to $85 million price and mix benefit for the second half, and how will pricing trend sequentially by region?A: Don Devlin (CFO): About 70% of the $75 to $85 million benefit is price, with the majority coming from North America and Europe. John Sims (CEO) noted that a third price increase is being implemented in Europe, and price increases are being realized in Latin America and North America, with most of the flow-through occurring in Q3 and carrying into Q4.
Q: Can you provide an update on the European strategic review, including the timeline for a decision and the options being considered?A: John Sims (CEO): We made significant management changes in Europe and are seeing accelerated performance through mix improvement, cost reductions, and lower wood costs. However, conditions remain difficult. We will likely make a decision in 2027 on whether to continue, and if not satisfied with the outlook, we may pursue other options, including shutting or selling assets. We need roughly $50 million in improvements to get to significantly above cash positive on a mid-cycle basis.
Q: Can you help quantify the benefits from better volumes, operations costs, and input costs in the second half versus the first half?A: Don Devlin (CFO): We provided the $75 to $85 million price and mix guidance because we are confident in it. We are also confident in planned maintenance outages. However, there is more uncertainty around volume, operations, and input costs, so we chose not to provide specific guidance on those items.
Q: Regarding the poison pill that expires in November, what is the plan?A: John Sims (CEO): The shareholder rights plan remains in place. The board has not made a decision yet, but we will address it when we meet in September.
Q: You mentioned the $75 to $85 million price and mix benefit. Will you be at a full run rate on pricing by the fourth quarter?A: Don Devlin (CFO): Yes, we will be at a full run rate by the fourth quarter. North America will definitely be at run rate, and we expect the same for Latin America and Europe.
Q: Why did the effective tax rate move up a couple of points?A: Don Devlin (CFO): The increase is mainly due to a Brazil valuation allowance taken on a deferred tax asset in our Brazil export entity. This was related to changing VAT rules, and we merged two entities to take advantage of $30 million in VAT tax credits, which came at the expense of a $9 million valuation allowance expense. John Sims (CEO) added that we would have stranded the $30 million tax credit if we hadn’t made this move.
Q: How much of the operational focus items, like operational excellence and cost leadership, do you need to get right to achieve the $300 million free cash flow target?A: John Sims (CEO): To achieve the $300 million target, the most important areas are cost leadership and customer centricity. We need to increase the rate and level at which we reduce costs despite high inflationary pressures, and we need intense customer loyalty as the market continues to decline.
Q: Can you update us on the earnings impact from the footprint alignment related to Eastover, given the tariff changes?A: Don Devlin (CFO): Due to tariff changes, we will not be able to bring in as much product from Brazil as anticipated last quarter. We will be back near the $85 million estimate provided in February, and the $20 million add-back from Brazil has essentially gone away.
Q: Can you talk about the impact of additional Canadian tariffs on the U.S. market, and why is it important to be backward integrated into pulp in Brazil?A: John Sims (CEO): The Canadian tariff was applied to a very narrow product line with small import volume, so the impact on the North American market is minimal. Regarding backward integration, the process of producing paper on an integrated mill allows you to reclaim chemicals and produce your own energy, which is typically a much lower cost way to produce products. Where you have low-cost wood, it makes more sense to be fully integrated. Don Devlin (CFO) added that Luisa Antonio is our lowest cost mill, even compared to Tres Lagos, because it is fully integrated and fiber is the smallest cost.
Q: Can you quantify the benefit from improved fiber costs at Nymolla, and what are you seeing in the European pulp markets?A: Don Devlin (CFO): We have seen wood costs decrease about 20% since their peak, and we are starting to see the impact in Q3, which will carry through the rest of the year. Pulp prices are coming up but stabilizing. There are fewer non-integrated players in Europe now, and the traditional relationship where higher pulp prices led to higher paper prices is not as strong. John Sims (CEO) added that we are not going to quantify the exact benefit, but the impact is starting to be seen in Q3.
Q: Can you provide more specifics on the bridge into Q3, assuming $40 million of the price and mix benefit and lower maintenance costs?A: John Sims (
For the complete transcript of the earnings call, please refer to the full earnings call transcript.