Sylvamo Q4 2024 Earnings Call Transcript

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February 12, 2025

There are 7 speakers on the call.

Operator

Welcome to Savama's Fourth Quarter twenty twenty four Earnings Call. All lines have been placed on mute to prevent any background noise. As a reminder, your conference is being recorded.

Operator

I would now like to turn the call over to Hans Bjorkman, Vice President, Investor Relations. Sir, the floor is yours.

Speaker 1

Thanks, Audra. Good morning and thank you for joining our fourth quarter and full year twenty twenty four earnings call. Our speakers this morning are Jean Michel Rivieras, Chairman and Chief Executive Officer and John Simms, Senior Vice President and Chief Financial Officer. Slides two and three contain important information, including certain legal disclaimers. For example, during this call, we will make forward looking statements that are subject to risks and uncertainties.

Speaker 1

We will also present certain non U. S. GAAP financial information. Reconciliations of those figures to U. S.

Speaker 1

GAAP financial measures are available in the appendix. Our website also contains copies of the earnings release as well as today's presentation. With that, I'd like to turn the call over to Jean Michel.

Speaker 2

Thanks, Hans. Good morning and thank you for joining our call. I'll start on Slide four. 20 20 four, we generated 23% return on invested capital as we executed our strategy and strengthened our competitive advantages in our core uncoated free sheet market. We improved our financial position by repaying CHF144 million in debt, achieving a net debt to adjusted EBITDA of 0.9 times.

Speaker 2

We earned CHF $632,000,000 in adjusted EBITDA, generated CHF $248,000,000 free cash flow and returned $130,000,000 in cash to shareholders. We reinvested $221,000,000 across our manufacturing network and our Brazil forest land to strengthen our low cost position. We are committed to being the investment of choice and believe we can generate significant shareholders' returns in the future by executing our strategy. Slide five highlights our twenty twenty four full year key financial metrics. Our adjusted EBITDA was CHF $632,000,000 with a 17% margin.

Speaker 2

Our $248,000,000 of free cash flow was more than $6 per share. Our adjusted operating earnings was $7.42 per share, which is 14% higher than 2023. We now have three full years under our belt since becoming an independent company. And our financial results have established a solid track record and are indicative of our ability to navigate tough industry conditions, challenging geopolitical events and other uncertainties that we may face. As we enter 2025, we are confident in our ability to continue to create value for our customers and shareholders.

Speaker 2

Let's move to Slide six. We had very strong cash generation to finish the year. This allows us to pay down additional debt, reinvest in our business and return cash to shareholders. Our teams collaborated well with customers to manage through a successful transition as a result of the Georgetown Mill closure. I want to thank our employees for their hard work and execution as we navigated through the transition.

Speaker 2

I also want to thank our customers for the trust they place in us each and every day. We are committed to remain the supplier of choice and we'll work hard to earn and retain the business. Lastly, regarding Project Horizon, our cost reduction program to streamline manufacturing, supply chain and overhead costs, we exceeded our $110,000,000 year end run rate saving goals by $34,000,000 John will cover this in more detail in a few slides. Let's move to the next slide. Slide seven shows our fourth quarter key financial metrics.

Speaker 2

We earned adjusted EBITDA of AUD157 million with a margin of 16%. Free cash flow generation was $100,000,000 as we generated adjusted operating earnings of $1.96 per share. I'm proud of how our teams delivered impressive results while taking care of our customers. More importantly, I'm proud of our team's commitment to putting people before paper to ensure everyone returns home safe at the end of each day. We are focused on building a resilient safety culture by involving every team member in our efforts to proactively eliminate risk and create a safer environment for everyone every day.

Speaker 2

Now John will review our performance in more detail.

Speaker 3

Thank you, Jean Lucille, and good morning, everyone. Slide eight contains our fourth quarter earnings bridge versus the third quarter. The $157,000,000 of adjusted EBITDA was in line with our outlook of $150,000,000 to $165,000,000 Price and mix was unfavorable by $18,000,000 40 percent of this was driven by lower pulp and paper pricing in Europe and about 30% was due to worse mix in North America. Volume increased by 6,000,000 driven by the seasonality of Latin America. Operations and other costs were stable due to favorable FX and less economic downtime in North America, which more than offset the planned ten year turbine generator maintenance event at our Eastover Mill that we highlighted on our last earnings call.

Speaker 3

We also had some one time events, some planned like an insurance settlement and others like a LIFO adjustment. Planned maintenance outages costs increased by $17,000,000 as we executed a major planned outage at the East River Mill in the quarter. Input in transportation costs increased by $9,000,000 driven by transportation and seasonally higher energy prices. Move to slide nine. A core pillar of our strategy is to be a low cost producer.

Speaker 3

Project Horizon, our cost reduction program to streamline manufacturing, supply chain and overhead cost is helping us to stay low cost. As Jean Michel mentioned earlier, before inflation, we exceeded our $110,000,000 year end run rate savings goal by $34,000,000 We beat our manufacturing savings targets by delivering results on over 180 initiatives across all three regions. These projects targeted chemical, energy and fixed cost reductions as well as improving fiber efficiency and productivity. We surpassed our supply chain savings targets by reducing approximately 20% of our distribution centers in North America, optimizing sheeting and rewinding outsourcing processes as well as other initiatives across our network. We executed all these initiatives while maintaining our focus on the customer experience.

Speaker 3

As we mentioned several quarters ago, we eliminated about 150 salary positions or 7% globally. These collective efforts are making us a leaner, stronger company. Let's move to slide 10. Another important part of our strategy is to invest in high return projects to strengthen our competitive advantages and increase future earnings and cash flow. Here are two examples at one of our flagship mills in Latin America, a Luis Antonio mill, where we are already seeing positive results.

Speaker 3

The first project increases our self generation of power at the mill by upgrading the turbine and gearbox on one of our turbine generators. This was a $7,000,000 investment that started up in the third quarter of twenty twenty four and is showing approximately a 25% internal rate of return. The second project reduces our production waste by installing a new real transition system on one of our paper machines. This was a $1,000,000 investment that also started up in the third quarter of twenty twenty four and is yielding approximately a 40% internal rate of return. These are just a few of the many high return projects that we were assessing and implementing to make us more competitive in the future.

Speaker 3

Let's go to Slide 11 and look at our first quarter outlook. We expect to deliver first quarter adjusted EBITDA of $85,000,000 to $105,000,000 We project price and mix to be unfavorable by $10,000,000 to $15,000,000 This is due to paper price decreases in Europe and in our Brazilian export regions, plus seasonally unfavorable mix in Latin America. These decreases are projected to be partially offset by realization on paper price increases communicated to customers in North America and Brazil in the fourth quarter. We should see higher realization from these increases in the second quarter. We expect volume to be unfavorable at $20,000,000 to $25,000,000 dollars due to seasonally weakest demand quarter in Latin America and lower North America volume from the Georgetown Mill exit.

Speaker 3

Operations and other costs are projected to be stable to slightly up as our Project Horizon initiatives offset the non repeat favorable fourth quarter events. We expect input in transportation costs to increase by $5,000,000 to $10,000,000 primarily due to seasonally higher energy prices and the longer than expected extreme cold weather across The United States so far this quarter. Planned maintenance outages are projected to increase by $15,000,000 We expect quarterly earnings to improve throughout the year as we benefit from seemingly stronger volume, less maintenance outage expenses in the second half of the year and realize the price increases we are currently implementing. You should note on appendix slides forty four and forty five that about 80% of our planned maintenance outages will be in the first half of this year. Let's go to slide 12.

Speaker 3

I'll shift now to talk about overall industry conditions across our region. In Europe, we're seeing improved order book and industry supply was reduced by 7% after two uncoated freesheet machines closed last year. Pulp and uncoated freesheet prices have also stabilized as we are entering the new year. In Latin America, we expect seasonally weaker industry demand in the first quarter and expect demand to be sequentially stronger in each calendar quarter like every year. In Brazil, we are currently seeing strong demand for back to school orders and notebooks.

Speaker 3

We previously communicated uncoated free sheet price increases to our customers in Brazil effective in January. We are seeing uncoated free sheet pricing pressure for our Brazilian papers export to other Latin America and offshore markets. In North America, we are seeing slightly lower industry demand in line with our expectations. Domestic industry supply was reduced by 10% after a few machines closed in the second half of last year. We previously communicated uncoated freesheet price increases to our North American customers effective in January.

Speaker 3

Globally, pulp industry conditions appear to be stabilizing and are anticipated to improve over the course of the year. I'll turn back over to Zohmichelle to pick up on Slide 13.

Speaker 2

Thanks, John. We have generated substantial cash since our inception and have allocated over 1,800,000,000.0 as you can see on this slide. Over 70% of this cash was used to repay debt and reinvest in our business. After starting out with over 1,500,000,000.0 in growth debt, we have reduced it by almost 50% and have achieved a net debt adjusted EBITDA ratio of 0.9 by the end of twenty twenty four. Keeping a healthy financial position is a cornerstone of our capital allocation framework.

Speaker 2

This allows us to invest in our business to strengthen our competitive advantages to the cycle and to increase future earnings and cash flow. As most of you already know, many people are investing to get out of uncoated refit, while we have reinvested over $600,000,000 in our business in the last three years in order to improve our competitive position. One of the main advantages we have as an independent company is that it allows us to invest in our future in a way that we could not do before. Improving our financial position allowed us to return almost $350,000,000 to share owners to dividend and share repurchases. We will continue to look for opportunities to repurchase shares at attractive prices.

Speaker 2

We have generated substantial cash over the past three years and plan to continue to do so moving forward. For 2025, we are planning $220,000,000 to $240,000,000 in capital spending. Our outlooks include approximately 125,000,000 in maintenance and regular spending. Our Brazil forest land has significant competitive advantage. This Galoptoos plantations provide a material cost advantage relative to most other global competitors.

Speaker 2

We plan to invest roughly $35,000,000 in our forest land to increase our efficiency and reduce wood costs. Additionally, we will complete the $30,000,000 3 years wood supply agreement to ensure adequate wood supply from 2024 to '26. As we have been saying for several quarters, we will continue to ramp up our high return projects to strengthen our lower cost asset to increase our earnings and cash flow. This year, we expect to invest $50,000,000 to $70,000,000 for high return project. Slide 15.

Speaker 2

Speaking of reinvesting in our low cost assets, we're excited to announce that we're investing in the future of what our flagship mills Eastover South Carolina. We have three high return projects that will reduce cost while improving efficiency and mix of the most competitive uncoated free sheet mills in North America. First, we are investing to optimize more for a two paper machine. Second, we are replacing an existing cut size sheeter with a brand new sheeter. These first two projects will require a total investment of approximately €145,000,000 over the next three years.

Speaker 2

The spending will start this year with the majority occurring in 2026. Once completed, this combined investment should have an internal rate of return of greater than 30%. This should create incremental adjusted EBITDA of more than $50,000,000 per year, resulting in additional cash flow as well. Third, we're partnering with an industry leader in wood yard operations to modernize our wood yard and improve our efficiency, while avoiding about $75,000,000 in capital over the next five years. This is a very exciting moment for all of us.

Speaker 2

I'll turn it to John to discuss these higher return projects in more detail.

Speaker 3

Yes. Thank you, Jean Michelson. This is exciting. I'm on Slide 16. The first of these high return projects at our flagship Eastover Mill will be to optimize one of our two paper machines, modernizing it to the same world class level as our other paper machine at Eastover.

Speaker 3

We plan to make investments starting at the head box continuing all the way down the paper machine through the forming, press and dryer sections, including modifications to the winder at the end of the machine. These enhancements will allow us to reduce costs while improving our product mix across both paper machines. This deep bottleneckling should result in up to an incremental 60,000 tons of uncoated free sheet. The project has an investment of approximately $100,000,000 over the next three years with an expected startup in the fourth quarter of twenty twenty six. Let's turn to Slide 17.

Speaker 3

The second high return project will be to replace an existing seater with a state of the art cut size seater. This new and more efficient seater will lower our seeding costs up to 15%, reduce waste by maximizing paper machine trim, while providing incremental cut size volume capability. This seater will allow us to reduce outsource heating, while providing better reliability and additional flexibility to better service our customers. This $45,000,000 project expected to start up in the fourth quarter of twenty twenty six. Let's turn to Slide 18.

Speaker 3

And the third high return project at Eastover will be to improve our wood yard efficiency through innovation, innovative modernization. We are entering into a twenty year partnership with an external provider, The Price Company, who is an industry leader in woodyard operation. They design, finance and operate the most efficient wood yards in the world. They will invest the capital to upgrade our wood yard and they will also operate and maintain the wood yard at the Eastover Mill. This will result in more efficient, reliable and cost effective wood processing operations.

Speaker 3

This project will greatly improve the overall reliability of our operations by replacing our aging wood yard equipment. As Jean Michel mentioned earlier, this project will enable us to avoid spending about $75,000,000 in capital over the next five years. The anticipated startup is in the first quarter of twenty twenty six. These high return projects reinforce our commitment to reinvest to strengthen our low cost assets to increase earnings and cash flow. I'll now turn it back over to Zombe Zombe.

Speaker 3

Thanks, John. I'm on Slide 19.

Speaker 2

We strive to create long term shareholder value by executing our strategy and delivering on our investment thesis. Since becoming an independent company just over three years ago, we have achieved a total shareholders return of almost 150% and over 2,000,000,000 in adjusted EBITDA generated over 900,000,000 in free cash flow reduced debt by almost $725,000,000 reinvested over SEK600 million to strengthen our business and returned almost SEK350 million in cash to shareholders. I'll conclude my comments on Slide 20. I continue to be impressed with our team as we work to take care of our customer needs and remain the supplier of choice. We are reducing our cost structure and are reinvesting in our business through a great pipeline of high return capital projects, which will enable us to grow our earnings and cash flow in the coming years.

Speaker 2

It's BAMU is creating shareholder value through strong cash generation and disciplined capital allocation. We believe in the promise of paper for education, communication and entertainment. And we intend to increase our competitive advantages in the regions we serve. We're confident in our future and motivated by the opportunities that lie ahead. With that, I'll turn the call back to Hans.

Speaker 1

Thanks, Jean Michel and thank you, John. Okay, Audra, we're ready to take questions.

Operator

Thank And we'll take our first question from George Staphos at Bank of America.

Speaker 4

Thanks so much, everyone. Good morning. Thanks for the details. My two questions and congratulations on the progress over the last few years. My two questions.

Speaker 4

First of all, can you talk a little bit about what impact of pricing that might be in the process of being implemented is in your guidance for the first quarter, if anything at all? Or is all of that pricing more or less locked and loaded from prior efforts? And then if I go to Slide eight, I believe, and we look at volume, you touched a little bit on it, but volume was a little bit weaker than what you'd been looking for in the fourth quarter. Can you give us a bit more detail on what was going on there? Thank you, guys.

Speaker 3

Yes, George, and thank you. To your first question, actually the so we have two price increases that we have announced to our customers as we mentioned, one in Brazil, remember Brazil, so that's about 50% of our volume down in LatAm and one in North America. And we're in the process of implementing that in the first quarter because we are implementing, I can't give you a lot of details. But I can say that the realization because of the timing of those, is going to be more in the second quarter and very little in the first quarter than our outlook. The second question in terms of volume, volume was lower than what we expected, really across all the regions, mostly in North America.

Speaker 3

And so, that's really the difference between our outlook and the actual results.

Speaker 2

I guess, John, why was it

Speaker 4

a little bit weaker North America than the other regions, if you had a view? I'm sorry, keep going.

Speaker 3

Yes. Oh, I'm sorry. George, we were a little bit lower in the commercial printing and envelope market. Actually, the cut size, the copy paper business was actually stronger than what we expected, but it was more so in the commercial printing area.

Speaker 4

Okay. That makes sense.

Speaker 2

Anyway, we had in North America to be high, John. Michel, thanks for joining. Michel. In North America, we had a with November, I think we didn't anticipate it well enough all the holidays and the impact it had. So we had as planned October and December months, but November was below.

Speaker 4

Okay. Thank you. I'll go back to queue.

Operator

We'll take our next question from Matthew McKeller at RBC Capital Markets.

Speaker 5

Hi, good morning. Thanks for taking my questions. I'd like to start by asking about tariffs. If The U. S.

Speaker 5

Were to apply sustained 25% tariffs on goods from Canada and Mexico and they in turn applied retaliatory tariffs on The U. S, how do you think your business would be affected? And what would be your response in that scenario?

Speaker 2

So, thanks for joining the call, first of all. This is still very difficult to assess, to be very honest. I think the 25% on aluminum and steel would have some impact that we've anticipated potentially on some of the equipment we buy because the steel and aluminum might get more expensive in The U. S. In general.

Speaker 2

But that's not material for us. I would not be too worried about that. The rest with Canada, Mexico, if it was to happen, It's more a question of what is the retaliation we're going to get. I don't think it's going to impact us really at all if there is no retaliation. But as of now, if Zustar, if we're to put in place, we don't know what Canada or Mexico will do.

Speaker 2

And that's a question, Marc, I don't have the answer.

Speaker 5

Okay. Thanks for that color. Maybe shifting to Latin America, I think you mentioned seeing some positive trends in demand in Brazil. I'd also like to ask about your expectations for demand through the textbook order this year. And maybe putting it all together, what that implies for how your volumes and mix kind of evolved through 2025?

Speaker 5

And maybe put differently, do you expect the seasonality we typically see in LatAm to be exaggerated this year with a bigger ramp through the year than usual, driven by a more significant shift in mix, maybe especially given the prices in Brazil are going up that you called out prices in the export channel is being under some pressure?

Speaker 3

Yes, Matthew. I think one of the questions you asked is just around the textbooks and the school business. So, if I heard that correctly, yes, we're seeing improved order book demand for that down in Brazil. You got to remember in Brazil last year demand was down. So that does impact us from a negative mix perspective as we ship less into Brazil.

Speaker 3

This year, we're seeing it up to flat to slightly up and we expect as we said that Brazil and also LatAm markets will sequentially increase throughout the year. So that's going to be positive from a volume perspective but also very positive from a mix perspective. And that'll start to really materialize itself more as the year goes on second and third quarter.

Speaker 5

Thanks. That's helpful. I'll turn it back.

Operator

We'll go next to Daniel Harriman at Sidoti.

Speaker 6

Hey, guys. Good morning. Thanks for taking my question. Just a quick one here today for me. Can you help us a little bit with the cadence of your capital spending in 2025 within that range of 02/20 to February.

Speaker 6

Should we expect more or less that CapEx to kind of follow the cadence that it did in 2024?

Speaker 3

Yes. Daniel, are you talking about and thanks for joining, Daniel. Are you talking about in terms of the timing of the spend? Is that what you mean by?

Speaker 6

Yes. Just how should we think about it being spread out throughout the year on a quarterly basis?

Speaker 3

Yes. And I think the way to think about that is, more heavily weighted to the first half because you can see 80% of our outages are in there. Now, with the spending for the spending that we'll do on the Eastover projects that we talked about, that will occur throughout the year, not really tied to the outages as we prepare for that implementation in 2026.

Speaker 6

Okay. All right. Thank you, John.

Speaker 2

Yes. The outage this year particularly, it's probably one of the most extreme we've had in terms of timing of outages first half versus second half of the year, which is part of our earnings growth where we have an hockey stick. You have 80% of our outage spending in the first half of the year versus 20% only in the second half. So that's a big component to take into consideration.

Speaker 6

Thanks so much, Grant.

Speaker 3

But Dan, we do look at, like the monthly spend, the projections that we have and as we forecast, it's really not much different than what we had last year in terms of the monthly spend on capital.

Speaker 6

Okay. That's helpful. Thank you.

Operator

We'll move next to Dirk Staphos with Bank of America.

Speaker 4

Hi, guys. Thanks for taking the follow ons. My next two, can you talk a little bit about how the cost curve is shifting in Europe? Certainly, pulp prices stabilize or it looks like that in a few markets, but it was a declining situation in second half. What did that mean for the cost curve and ultimately pricing and your market shares in the region?

Speaker 4

The related question, what do you think the industry operating rate is in Europe right now? Thank you.

Speaker 3

Yes, George, I think when we take a look at the cost curve, it has certainly moved up, as really since the Russian invasion into Ukraine. And that's really driven, what that has driven is increased energy costs, gas costs as well as wood. The wood costs we've seen go up across the region. If you look at Dave pricing, that's what we looked at Europe uncoated free sheet pricing is stabilizing because about 20 or so maybe even more, a quarter of the cost curve is right now the pricing is below the cash cost. So, right now, we got about 20%, twenty five % of the capacity that even with the pulp prices where they are today, which is bottoming, we have cost that's above the current pricing in Europe.

Speaker 3

In terms of the operating rate, it has improved because of the outages or because of the closures that occurred. Yes. And so it's in the mid-80s right now.

Speaker 4

Including the 10%, I think you said, reduction from closures?

Speaker 3

That's right, including that. Okay.

Speaker 4

And John, just a point of clarification, I'll turn it over. So your view is the cost curve actually is up over the last quarter, two quarters in Europe? Or it's more or less stable and certainly up over the last several years because of Ukraine and the like?

Speaker 3

It's a ladder. I mean, with the decreasing pulp prices, you can say that maybe quarter sequentially quarter is slightly down, but overall, the cost curve has increased, if you will, gotten higher cost because we

Speaker 4

have mentioned.

Speaker 3

Okay. Thank

Speaker 4

you, John. I'll turn it over.

Operator

And we'll take a follow-up from Matthew McKellar at RBC.

Speaker 5

Thanks very much. I'm just following up on an earlier response. I think you mentioned you saw lower commercial printing and envelope volumes in North America in the quarter than maybe you were anticipating. Just wanted to, I guess, get a little bit more color on that. Have you seen any kind of rebound in volumes maybe start Q1?

Speaker 5

Or whether maybe you're expecting to see some more permanent kind of demand destruction, maybe on the back of higher postal rates or any other factors?

Speaker 3

No. I think, we don't see that as a systemic issue. We see that coming back. And our projections are for North America that demand will be down about 3%. The historical trend that we have been seeing or well, we haven't been seeing really because of the inventory corrections and all, all, but that we've generally been seeing over the industry.

Speaker 3

So, nothing different than normal.

Speaker 5

Okay. Okay. Thanks for that. And if I could just sneak one more in on the Eastover Woodyard operations. Of course, your partner will be laying out some capital and you're going to be avoiding spending your own capital.

Speaker 5

You also mentioned more efficient, reliable and cost effective operations. I guess with this agreement, how should we think about the impact to operating costs at Eastover both in 'twenty six versus in 'twenty five? And then how things progress over the longer term, just specific to what you've announced with the wood yard here?

Speaker 2

I think just the wood yard has had a huge impact in cost. It's avoidance of capital spending, the first thing. And then the yield and all of that, we continue to put our wood, which is very competitive, even more competitive once transformed at the mill. So it's a small impact, but not we'll take every penny, you know, it counts everything in this industry. It's a small impact in the cost side, better reliability, flexibility and avoidance of capital.

Speaker 2

That's the way I would look at it.

Speaker 5

Okay. Thanks for the help. I'll turn it back.

Operator

And we'll go back to George Staphos at Bank of America.

Speaker 4

Thanks guys. I want to piggyback off of Matt's question. So what does your partner get from you in exchange for operating the Woodyard, if you can talk about the terms there? Second question, penciling it out, free cash flow for the first quarter looks to be, on our math kind of neutral to maybe up $20,000,000 I don't know if you called it out actually in the deck or the release. If you did, I apologize for missing it, but if you could sort of give us some thoughts there, and then I'll turn it over and come back into queue.

Speaker 3

Yes. I think the, to your first question, George, we're not going to really disclose the terms of the agreement other than what we said, the twenty year agreement, we are paying them to service the wood yard. And the way Michelle and Michelle talked about it, we're going to get some efficiencies on yield, but that's going to pay the service fee that we're charging them. So, the big benefit there is really the capital avoidance because they will be investing the installing the equipment and maintaining the equipment in the wood yard, which will significantly monitor it. So that's how that's going to work.

Speaker 1

And on free cash flow?

Speaker 3

All right. And I'm sorry, you're going to have to repeat your question again.

Speaker 4

John, as I was penciling it out, and I don't know if you've actually mentioned in the deck or the release, if you did, I missed it. I'm kind of coming out with sort of flat to up $20,000,000 on free cash flow for the first quarter. Could you give us some thoughts on that?

Speaker 3

Yes. I'm sorry, I didn't remember that question. But yes, we don't George, we don't give any guidance on free cash flow.

Speaker 2

Just one thing I would say is like 2024, I will expect a 2025 with a seasonal stronger cash flow in the second half than first half. And remember in the first half, especially first quarter, we've got these allergies in Europe, which impact the cash. We've got the annual incentive compensation and customer rebates. So we've got quite a one time season of cost in Q1 versus the rest of the quarters. So it's I won't get exact number, but it might be more pressure than you have

Speaker 3

in your numbers. Yes, the first quarter is always more challenging in terms of cash flow.

Speaker 2

No worries for the year. It's just the timing.

Speaker 4

Understood. Hey guys, maybe I'll throw my last two in here, if it's okay. Tax rate ticks up a little bit, 28% to 29%, what's in that? And could you give us my last question, what was the effect of the one timers in the quarter that I know you'll be offsetting with Horizon in the first quarter? But what was kind of that benefit that you got in the fourth quarter?

Speaker 4

Thanks and good luck in the first quarter.

Speaker 3

Yes. Thanks, George. And the question on the taxes, we had a benefit last year. We bought some credits that we were able to use, and so that lowered our tax. So, we're not going to have that repeat right now.

Speaker 3

We're going to be continuing to look at that, but that's not in our outlook. And the other thing is lower earnings in Europe as and so that increases our tax, the overall tax rate because we have less earnings in Europe.

Speaker 4

Okay. And one timers from 4Q?

Speaker 3

One timers, yes. So, specifically, we had $5,000,000 insurance payment that we got in the fourth quarter. Lipo was about $7,000,000

Speaker 1

Okay. Thanks very much.

Operator

I'll now turn the call back over to Hans Bjorkman for closing comments.

Speaker 1

All right. Thank you. Before we close-up, I'm going to let John Michel kind of wrap up the call today.

Speaker 2

Yes. So thank you everybody for joining. Exciting times and we're writing our strategy about reinvesting in our high return projects. One thing for 2025 is I don't intend to give you numbers on the annual earnings guidance, but with all the uncertainty of the macro and the geopolitical, I'll be prudent. But on a high level color, if you look at 2025 versus 2024, both in North America and Latin America, we plan a slightly better '25 than '24 on adjusted EBITDA.

Speaker 2

For Europe, with the $35,000,000 incremental maintenance outage, we plan to be worse than $24,000,000 So I'm putting that with some salt, of course, because as you mentioned all tariffs and macro is very difficult to forecast and it's not an exact number, but it gives you a trend which I hope helps you. As we mentioned, we expect our quarterly earnings to improve throughout the year due to three main factors: seasonality, strong volume, realization of the price increase in North America and Brazil and less maintenance outages in the second half of this year. So with that, I thank you for joining the call and have a good day.

Operator

Once again, we would like to thank you for participating in Silvana's fourth quarter twenty twenty four earnings call. Thank you. You may now disconnect.

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