JACKSONVILLE - Rayonier Advanced Materials Inc. (NYSE:RYAM), a leader in high purity cellulose production, announced today that it has agreed to sell its entitlements to certain softwood lumber export duty refunds to OCP Lumber LLC. The refunds pertain to duties imposed on lumber exported from Canada to the United States between 2017 and 2021.
The deal, valued at $39 million, also includes the potential for additional proceeds dependent on the final resolution of the trade dispute. The transaction is expected to close within the next 30 days, subject to standard closing conditions.
The agreement marks a strategic move for Rayonier (NYSE:RYN) Advanced Materials as it seeks to strengthen its financial standing and concentrate on its core business areas. "By monetizing our rights to these softwood duty refunds, we are unlocking value from a non-core passive asset and further bolstering our balance sheet," said De Lyle W. Bloomquist, President, and CEO of the company.
Previously, Rayonier Advanced Materials had owned six softwood lumber mills in Ontario and Quebec, and during the period in question, had made duty deposits totaling approximately $111 million to the United States. Although the company sold these lumber assets in 2021, it retained all rights and obligations related to the duty deposits.
The company's primary business revolves around cellulose-based technologies, including high purity cellulose specialties used in various applications such as filters, food, and pharmaceuticals. Rayonier Advanced Materials operates manufacturing facilities in the U.S., Canada, and France and reported revenues of $1.6 billion in 2023.
InvestingPro Insights
Rayonier Advanced Materials Inc. (NYSE:RYAM) has made a significant move to sell its softwood lumber export duty refunds, which is expected to enhance its financial flexibility. A look at the real-time data from InvestingPro reveals a mixed financial landscape for the company. With a market capitalization of approximately $267.41 million and a negative Price to Earnings (P/E) ratio of -2.59, reflecting challenges in profitability, the company's financial position appears to be under some pressure.
InvestingPro Tips indicate that Rayonier Advanced Materials' management has been actively buying back shares, which could signal confidence in the company's future prospects. Moreover, the company is trading at a low Price/Book multiple of 0.36, potentially indicating that the stock is undervalued relative to its book value. However, it's important to note the company's weak gross profit margins of 5.36%, which suggest operational challenges in converting revenues to gross profit.
Despite the strategic divestment intended to strengthen the balance sheet, analysts do not anticipate Rayonier Advanced Materials will be profitable this year, and the company has not been profitable over the last twelve months. The stock has experienced a large price uptick over the last six months, with a 34.01% total return, yet it does not pay a dividend to shareholders, which might affect its attractiveness to income-focused investors.
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