MEMPHIS, Tenn. - Sylvamo (NYSE: SLVM), self-described as the world's paper company, has announced the mutual termination of its supply agreement with International Paper (NYSE: IP) for various paper products from the Georgetown, South Carolina mill. The termination is effective as of December 31, 2024.
The company has been preparing for this change since its 2021 spinoff from International Paper and is planning to transition the production of many paper grades from the Georgetown mill to its facilities in Ticonderoga, New York, and Eastover, South Carolina. This move aims to maintain the supply to Sylvamo's customers without interruption.
International Paper has disclosed its intention to cease operations at the Georgetown mill, which prompts Sylvamo's strategy to focus on retaining the most profitable products and improving its overall product mix. The company seeks to reduce economic downtime across its mill system through this strategic shift.
Jean-Michel Ribiéras, Sylvamo's chairman and chief executive officer, stated, "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." Ribiéras expressed confidence in Sylvamo's future, emphasizing the company's commitment to growing earnings and cash flow by investing in high-return projects within its mills and processes.
The upcoming quarterly earnings call, scheduled for Tuesday, November 12, at 10 a.m. EST/9 a.m. CST, will provide further details about this development.
Sylvamo, headquartered in Memphis, Tennessee, operates mills across Europe, Latin America, and North America, employing over 6,500 people. The company reported net sales of $3.7 billion for 2023. The transition reflects Sylvamo's larger strategy to adapt to market changes and optimize its operations.
The information in this article is based on a press release statement from Sylvamo.
In other recent news, International Paper Co (NYSE:IP) has announced a comprehensive corporate restructuring plan, aiming to reduce its workforce by approximately 650 employees. The restructuring is expected to result in pre-tax charges ranging from $80 million to $100 million, mainly related to severance payments and other employee termination benefits. The company has also declared quarterly dividends for its common and preferred stock. In acquisition news, International Paper is making significant strides in its acquisition of DS Smith Plc, with plans to list on the London Stock Exchange.
Leadership changes at the company include the appointment of Andy Silvernail as Chairman of the Board and Tom Hamic as the Executive Vice President and President of North American Packaging (NYSE:PKG) Solutions. Senior Vice President Tom Plath is set to leave the company by the end of the year. Despite underperforming in its second-quarter earnings, International Paper is shifting towards customer-driven strategies and cost optimization. RBC Capital Markets has raised the stock's price target, maintaining an Outperform rating, indicating confidence in the company's management and strategy. These are recent developments shaping International Paper's future.
InvestingPro Insights
As Sylvamo navigates this strategic shift in its operations, InvestingPro data offers additional context to the company's financial position. International Paper, from which Sylvamo was spun off, boasts a market capitalization of $19.11 billion, indicating its significant presence in the paper industry.
International Paper's P/E ratio of 44.09 suggests that investors are willing to pay a premium for its shares, possibly due to growth expectations or market position. This valuation metric becomes particularly relevant as Sylvamo restructures its supply agreements and production strategies.
Notably, International Paper has maintained dividend payments for 54 consecutive years, as highlighted by an InvestingPro Tip. This long-standing commitment to shareholder returns could be a factor in Sylvamo's strategic decisions as it aims to grow earnings and cash flow.
Another InvestingPro Tip indicates that International Paper is trading near its 52-week high, with a substantial price uptick over the last six months. This market performance aligns with Sylvamo's optimistic outlook on its future prospects following the supply agreement termination and production reorganization.
For investors seeking a more comprehensive analysis, InvestingPro offers additional tips and insights that could further illuminate the implications of Sylvamo's strategic moves within the broader context of the paper industry.
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