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Presentation

Sylvamo Corporation misses on earnings expectations. Reported EPS is $-0.53 EPS, expectations were $-0.25.

Operator: Good morning. Thank you for standing by. Welcome to Sylvamo Corporation’s first quarter 2026 earnings call. All lines have been placed on mute to prevent any background noise. After today’s prepared remarks, we will host a question and answer session. If you would like to ask a question, please press 1 to raise your hand. To withdraw your question, press 1 again. As a reminder, this conference is being recorded. I will now turn the call over to Hans Bjorkman, vice president, investor relations. Sir, the floor is yours. Thanks, Samantha.

Hans Bjorkman: Good morning, and thank you for joining our first quarter 2026 earnings call. Our speakers this morning are John Sims, Chief Executive Officer, and Donald Devlin, Senior Vice President and Chief Financial Officer. Slides 2 and 3 contain important information, including certain legal disclaimers. During this call, we will make forward-looking statements that are subject to risks and uncertainties.

John Sims: Across our regions, we are looking to reduce costs and taking commercial actions to help offset these impacts. Let us move to slide 5. Our first quarter highlights include implementing the previously communicated uncoated freesheet price increases to our customers across all our regions. We had a difficult first quarter operationally. Reliability issues, particularly in Europe and Brazil, negatively impacted us by almost $9 million relative to the fourth quarter, and we expect some additional costs in the second quarter. The root cause of these issues have been identified and fixed or will be corrected, and the annual outages will be taken this quarter. The one exception is at our Numola mill where an issue with a debarking drum will not be corrected until the fourth quarter.

We took an important step in achieving our vision by launching our lean transformation journey in our Latin American business along with our Moji Wasu mill. I was in Brazil last week and was very encouraged by the energy and commitment the teams have in learning and executing the lean transformation. Lastly, yesterday, we completed the refinancing of our 2027 debt to extend our maturity profile, which sustains flexibility and maintains our strong financial position. Let us move to the next slide. Slide 6 shows our first quarter key financial metrics. As a reminder from our last call, 2026 is a transition year as we work through some short-term capacity constraints due to the termination of the Riverdale supply agreement at the April and the extended outage at Eastover later this year as we complete our strategic investments there.

Our first quarter results came in as expected, except for the operational issues I mentioned. We built inventory, which resulted in lower sales volume, and we also incurred the incremental cost due to sourcing and converting. We earned adjusted EBITDA of $29 million with a margin of 4%. Adjusted operating earnings were negative $0.53 per share. As anticipated, free cash flow was impacted by lower earnings, the unfavorable impacts of our inventory build, and the timing of payments. Keep in mind that our free cash flow is heavily weighted to the second half of the year. In the last few years, we generated the vast majority of our free cash flow in the second half, and we expect to do so again this year. Now I will turn it over to Don to review our performance in more detail.

Donald Devlin: Thank you, John, and good morning, everyone. Slide 7 contains our first quarter earnings bridge versus the fourth quarter. As John mentioned, the quarter played out largely as we expected, with the exception of operations and other costs. In the first quarter, we earned $29 million of adjusted EBITDA compared to $125 million in the prior quarter. Price and mix were unfavorable by $13 million overall. Mix was $17 million unfavorable, which more than offset the price improvements we saw in the quarter, and the other half was driven by unfavorable North American customer and sourcing mix. About half of the mix was due to seasonably weaker mix in Latin America, which is normal for Q1. On the favorable side, paper prices improved in North America and Latin America as Q1 increases were implemented.

Paper prices in Europe bottomed out in the quarter, and previously communicated price increases are expected to realize in Q2. Volume decreased by $36 million due to normal Latin America seasonality and the anticipated inventory build in North America as we prepare for the end of the Riverdale mill supply agreement and the extended Eastover mill outage in the fourth quarter. Operations and other costs were unfavorable by $29 million, with about half due to non-repeat of favorable fourth quarter items from year-end LIFO accounting in North America and green energy in Europe. The other half was related to $9 million in manufacturing cost across our regions that John described earlier, as well as $3 million in FX. Planned maintenance outage costs were flat.

Input and transportation costs were unfavorable by $18 million primarily due to energy in North America, highly impacted by a one-time charge of $10 million from International Paper’s Riverdale mill due to the exceptionally high natural gas cost from the winter storm. Let us move to slide 8. European industry supply and demand remains challenging, but pulp prices improved throughout the first quarter, and we are realizing the previously communicated paper price increases in April. We have communicated a second paper price increase effective in May and expect the realization to occur through the second and third quarters. In Latin America, we moved from the seasonally strongest demand in the fourth quarter to the seasonally weakest first quarter, but now expect demand to increase each quarter throughout the year.

This should positively impact our volume and geographic mix as the year progresses. We are realizing the previously communicated paper price increases to our customers in Brazil, and to our export customers across other Latin American countries, as well as the Middle East and Africa region, and should continue to see additional realization throughout the second quarter. In North America, industry supply and demand dynamics have improved as 7% of annual uncoated freesheet industry supply was removed with the Riverdale mill conversion. After peaking in June, imports into North America have declined significantly throughout the second half of last year and into the first quarter. We also began realizing the previously communicated paper price increase to our customers and expect to see additional realization through the second quarter.

We expect the Middle East conflict to continue pressuring costs across our regions as we go through the year. We are already seeing increases in energy, chemicals, diesel, and ocean freight in the second quarter. Let us move to slide 9. As John mentioned earlier, the changes in U.S. tariffs had led us to bring in product from our Brazil operations while ramping down imports from our Europe operations. Last quarter, we provided you with an estimate of the adjusted EBITDA impacts of the North American footprint transition, which we indicated was about $85 million negative for the full year. Assuming that tariffs remain at the current levels, we now estimate total full-year impact to be around $65 million negative, which is a $20 million improvement from our prior estimate and will be realized mostly in the second half.

This improvement is the result of the mix improvement by redirecting our Brazil imports from the Middle East and Africa to the U.S. We will stay close to the situation and be prepared to go back to our prior plans should the tariffs increase in the second half. Let us move to slide 10. This slide is to remind everyone of our planned maintenance outage schedule for the full year by region and by quarter. We will have an increase of $20 million in the second quarter versus the first quarter as we have more outages in Latin America. 2026 is also different than past few years where we have more than 80% of the total cost in the first half. This year, we have more than 50% of the total cost in the fourth quarter as we complete the investments in Eastover.

Now let us move to slide 11. Our capital allocation philosophy remains unchanged. We will deploy every dollar with the goal of improving our competitive position and delivering the best possible shareholder returns over time. We plan to maintain a strong financial position, reinvest in our business, and return cash to shareholders. The refinancing of our long-term debt allows us to navigate this uncertain environment without changing our thoughtful long-term approach to capital allocation. With a strong financial position, we can navigate the geopolitical and economic challenges and focus on improving customer experience, continue reinvesting in low-risk high-return projects, as well as execute through the end of the Riverdale supply and the Eastover mill outage later this year.

These investments and improvements will help to grow earnings and cash flow in the future. Let us move to slide 12. Yesterday, we refinanced 2027 debt to extend our maturity profile. We refinanced our term loan F that matured in 2027 with a new term loan F3 that matures in 2032. We also extended our accounts receivable securitization facility out to 2029, and here on slide 12, you can see the before and the after picture of our maturity profile. This move provides flexibility and allows us to maintain our focus on taking care of our customers and improving our business while we navigate these external challenges. Further details are in the appendix and will be included in our 10-Q that will be filed later today. I will now turn the call back to John.

John Sims: Thank you, Don. I will pick back up on slide 13. Last quarter, I shared our vision that Sylvamo Corporation will be legendary—legendary for the way we relentlessly pursue and achieve world-class excellence in all that we do. Consistently performing at world-class levels will create substantial lasting value for our employees, customers, and shareowners, and will enable us to be the employer, supplier, and investment of choice. Let us move to slide 14. As we strive to achieve world-class standards in the areas that define our success, we are establishing an employee-driven continuous improvement culture by transforming the company to a lean-driven mindset. By incorporating a lean mindset and best practices into our everyday efforts across all functions, we expect significant improvement in the following areas: Customer centricity—lean transformation will help to enable a new standard of customer experience and loyalty where we strive to be truly outstanding, and this is critical to our strategy.

Operational excellence—lean transformation will also help to enable best-in-class levels of efficiency, reliability, and performance in our mills and supply chains, ensuring that our operations consistently deliver to the highest standards. Cost leadership—the impact that lean transformation will have on our customer centricity and operational excellence combine to enable us to attain industry-leading cost effectiveness through an employee-driven continuous improvement culture, strengthening our competitive position and ensuring sustainable results. Now let us go to slide 15. Lean is a long-term company-wide strategic transformation, not a short-term change program. Over the next three years, our objective is to embed continuous improvement into how we run the business so performance improvement becomes systematic and self-sustaining.

Our lean transformation is focused on maximizing customer value by eliminating waste, improving performance, and engaging every employee, starting with a structured hands-on rollout supported by expert partners. We kicked off our efforts in our Latin American business and have value stream mapping underway at our Moju Watsu mill to identify waste and unlock cost savings across end-to-end processes. We will also be conducting kaizen improvement events, driving employee engagement, and building a culture of continuous improvement from the ground up. Later this month, we will kick off our lean efforts in our North America business and across our corporate functions at our world headquarters. We will then roll out lean at our Ticonderoga mill later in the second quarter.

We will continue expanding across all regions, businesses, and locations, targeting efficiency improvements and margin gains. Let us go to slide 16, where I will provide an update on investment at our East Dover mill. Our high-return strategic investments at our East River mill are on track and making solid progress. Paper machine optimization project will add 60 thousand tons of uncoated freesheet, reduce costs, and improve our mix and efficiency. This project is on schedule with the bulk of the work to be completed in the fourth quarter during a 45-day planned maintenance outage. The brand-new state-of-the-art sheeter is also on schedule and will start to be installed in the third quarter and will be ramping up in the fourth quarter. Woodyard modernization project is on track.

The hardwood line is operating as of May 1, and we are already seeing significantly improved chip quality and expect to see better yield going forward. We plan to start up the softwood operation in 2027. These are high-return projects that will generate incremental earnings and cash flow for the long term. Now I will conclude my remarks on slide 17. As I stated in my CEO letter to shareowners earlier this year, 2025 and 2026 will be low points in our free cash flow generation as we weather the cyclical industry downturns, particularly in Europe, and complete the investments at our East River mill. We are focused on long-term value creation by making disciplined data-driven decisions that position the company for sustainable success and strengthen Sylvamo Corporation for decades to come.

We will generate strong and sustainable results by diligently executing our flagship growth strategy, adhering to our disciplined capital allocation principles, becoming more customer centric, institutionalizing lean continuous improvement principles, and digitally transforming our business operations. As industry conditions turn, our capital spending normalizes, and the benefits from our investments begin to materialize, we have the potential to generate annually greater than $300 million of free cash flow and greater than 15% returns on invested capital. So with that, I will turn it back over to Hans.

Hans Bjorkman: Thanks, John, and thank you, Don. Okay, Samantha, we are ready for questions.

Operator: We will now begin the question and answer session. If you would like to ask a question, please press 1 to raise your hand. To withdraw your question, press 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Your first question comes from the line of George Staphos with Bank of America Securities. George, your line is open. Please go ahead.

George Staphos: Hi. Thanks very much, everybody. I appreciate the detail. I will ask a couple of questions and come back into queue, but I do have a bunch to go through. First, John, the company talks about operational excellence—being legendary in terms of service and the like—and I recognize you are still early in that journey. That said, what was going on with operations reliability in that $9 million number that you called out, particularly in LATAM? As I recall—and correct me if I am wrong—I thought LATAM was expected to be better operationally, or at least not as much of an issue as Europe in this quarter. Second, you pointed to some mix factors in North America in the first quarter. What was behind that? And, related to price, not asking you to talk about future price increases, but for the pricing that is in the markets right now in the publications, if we hold that, what price benefit do you get in 2Q versus 1Q sequentially or for the year?

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John Sims: Yes, George, thank you for joining the call and for your questions. I anticipated the questions on the reliability issues, and yes, key to our performance—if we are going to delight the customer and increase customer loyalty—reliability and operational efficiency are critical. That is why we are implementing the lean process, but we are also strengthening and have been focusing on reliability processes and systems. The biggest focus is ensuring that we are investing to maintain the equipment, putting in the right processes, and also training and development of our workforce. Those are all critical aspects to being world class in that performance, and we are clearly not there, which these issues indicate. As it pertains to the particular items we had: both Moji and Luis Antonio had issues in the power plant and also in the digesters that needed to be fixed in the annual outage.

MOSI is right now down going through its annual outage, so the issues that we had in the first quarter continued into the first month of this quarter, and we are planning on fixing that. Luis Antonio’s outage is not until June, so we are continuing to struggle with that mill and its performance, and that is driving increased operating costs, use of chemicals, and whatnot. In Europe, the biggest issue we had was at Ziot: there was a turbine generator operated by a third party that tripped during a cold winter period, probably the worst time it could have. This issue knocked the SIOP mill offline for a couple of days until we could get back up and running, and we also had boiler issues at the beginning of the year. As I mentioned, we have two debarking drums in Pneumla, but one of the debarking drums, due to mechanical failure, is offline and we will not be able to fix that until the fourth quarter this year.

George Staphos: You described what happened, but why did the issues come up at Moji and Luis Antonio? Why was the team not able to determine and prevent it from occurring? And the same thing in Pneumila, especially with the boiler and the debarking.

John Sims: The “why” is different for each of these—whether it is mechanical failure or an operating error. We do a detailed root cause failure analysis on any of these significant events, and those have been done here. Then we put a lot of effort into ensuring that we correct and also communicate what we have learned across those failures. Except for the one in SIOP, which was out of our control as it was a third-party operator, the root causes point to areas where we must either improve our reliability processes and systems, identify failure-prone areas and take corrective actions before failure occurs, or enhance training and improve the capability of our workforce so that the right operating decisions are made. That is all work we are doing.

Donald Devlin: George, this is Don. I will take your mix and pricing questions. For Q1 mix, two big things. In Latin America, it is seasonally weaker for us. Typically, there is less domestic Brazil volume—which is our most profitable—and more export as a percentage of the mix, so that is an expected headwind that improves as the year goes on through the fourth quarter. In North America, as we prepare for the Riverdale agreement ending and the Eastover outage later in the year, we are using third-party sheeting and buying some volume from third parties. We are doing this so that we have the inventory to serve our customers and preserve relationships as we ramp up Eastover later in the year. It shows up in mix because margins on externally sourced or converted paper are lower. We cited this as a one-time for 2026 in our February call that we would not expect next year as we ramp up Eastover and the sheeting operations in Sumter.

John Sims: On pricing realization, we announced increases across all regions, so I will go around the regions. In North America, we communicated a price increase of 5% to 8% to our customers. We are realizing within that range. We began to see that in March, and the bulk will flow through in the second quarter. In Brazil, we announced a 5% increase on cut size for January and realized about two-thirds of that in the first quarter. In the other LatAm markets, we communicated about a 7% increase for Q1 and realized about one-third of that in the first quarter, and that is about all we will get from that one. We announced a second increase of 7% for the second quarter and will start to realize that in May. In Middle East and Africa, exported mostly from Brazil but also some from Europe, we implemented a 4% increase in the first quarter and realized it, and we are implementing a second increase for the second quarter that should start realizing in May.

In Europe, we communicated a 4% increase to our customers in the first quarter. Prices went down in January, then we started to realize the 4% increase and will get about half of it through April. We also communicated a second increase of 8% effective in May and expect to start realizing that in the second quarter.

George Staphos: Understood, and you would rather not quantify the dollar benefit 2Q versus 1Q at this juncture?

John Sims: That is right.

Operator: Your next question comes from the line of Matthew McKellar with RBC Capital Markets. Matthew, your line is open. Please go ahead.

Matthew McKellar: Good morning. Thanks for taking my questions. A couple on costs. Could you speak to the input and transportation cost pressures you are seeing compared to where you were at the start of the year? What does that incremental headwind look like on an unmitigated basis, and what amounts do you expect to be able to mitigate? And then circling back on Neemula’s debarker, what is the ongoing cost impact there until you can address that in Q4? Is that just a cost issue, or are there constraints on production as well?

Donald Devlin: Thank you, Matt. Relative to input and transportation, Q1 was relatively small, but looking forward for Q2 in particular, we think it will be about $15 million across chemicals, energy, and distribution, split fairly evenly across our regions—roughly $5 million per region. For Newmala, the debarking drum issue occurred in March. We are incurring about $1 million to $2 million a quarter of additional cost. The plan is to do the repair in September, so in the fourth quarter we should see improved cost. We have no impact to production, as we are sourcing external chips, and that is the incremental cost.

Matthew McKellar: Thanks. As a follow-up, is the $15 million essentially the sequential impact we should expect quarter-on-quarter? Any difference in the run-rate cost impact based on current costs?

Donald Devlin: It would be roughly that amount sequentially in Q2, yes.

John Sims: And, Matt, these are costs due to the Iran war and situation in the Hormuz region. How that plays out going forward is anyone’s guess, but that is what we see for the second quarter.

Donald Devlin: We had less than $2 million—call it $1 million to $2 million—of what we would call war-related inflation in Q1. So it is $15 million versus about $1 million—roughly $14 million incremental.

Matthew McKellar: Understood. One more from me. You have talked about having the potential to generate $300 million of annual free cash flow. With Eastover expansion, LatAm fiber supply, lean transformation, and prices inflecting in all regions—particularly North America where conditions seem tight—what else still needs to change in the markets or at Sylvamo Corporation to drive you to that $300 million level in 2027 on a run-rate basis, especially if we strip out remaining Eastover spend trickling into next year?

John Sims: Matt, I think you captured most of the big items. Certainly the Eastover investments and what we are doing there, better mix in Latin America shifting exports from MEA to the U.S., improving mid-cycle margins—particularly in Europe but also in Brazil and the other LatAm markets—lower cost and improved productivity driven by lean, increasing reliability, and workforce planning and training. Lower wood costs particularly in Europe—at Pneumov we are seeing those decreases coming through. We will provide more detail around our digital transformation in mill systems and in the commercial area in future earnings calls. And then capital spending will normalize after East River, returning to normal levels.

Matthew McKellar: So fair to say continued execution on programs within your control and markets getting a bit better in LatAm and Europe?

John Sims: That is correct.

Operator: Your next question comes from the line of Daniel Harriman with Sidoti. Daniel, your line is open. Please go ahead.

Daniel Harriman: Hey, good morning. Thanks for taking my questions. Following up on Matt’s last question, I think the $300 million cash flow target came out prior to these price increases across all three regions. Where do you see the stock’s valuation right now and other uses of that cash? There have not been any share repurchases in the past two quarters. Does that have to do with a leverage ratio you want to get to prior to getting back into the market? And around tariff sensitivity, based on the 10% tariff in place through July 24, how are you thinking about the second half if that structure changes? Would you go back to importing from Europe, or are you exploring other opportunities as well?

John Sims: Daniel, on the $300 million, as I stated in my CEO letter, our expectation included that margins, particularly in Europe, normalize. It was not sustainable where margins were in Europe and in the other LatAm markets. That is part of the path to achieving $300 million of free cash flow.

Donald Devlin: I would add that a large portion of the path to $300 million is Eastover. We pointed out in our February call the one-times we are experiencing, but you will also see benefits of additional volume from Eastover, which is our lowest-cost mill. A significant portion of the $300 million will be Eastover operating after the speed-up and new sheeter. We never said 2027 specifically; $300 million is a goal for us in the future, within three to five years.

John Sims: Within three to five years.

Donald Devlin: Relative to the stock and capital allocation, for 2026 we have big commitments at Eastover. Last year, we returned 350% of our free cash flow to shareowners. We are managing cash levels as we execute the Eastover footprint transition and make strategic investments. We want a strong balance sheet through 2026. Our philosophy on buybacks is the same: if the shares trade below our intrinsic value, we will buy back. For 2026, we are being prudent to manage through an uncertain year with tariff changes, economic changes, and Middle East conflict impacts.

John Sims: To be clear, we believe our share price does not reflect the intrinsic value of the company. We believe it is undervalued. But we are taking a very conservative approach to cash because we are in this transition period with a big use of cash in the first half and geopolitical uncertainty, so we are deferring more to balance sheet strength than buybacks right now.

Donald Devlin: On tariffs, today paper products from Brazil are subject to a 10% tariff under Section 122, consistent with other countries. As of today, that expires July 24. We expect the administration will apply new tariffs on Brazil before that expiration. It is difficult to predict the level. There was a Trump and Lula meeting yesterday and preliminary feedback is positive, but no indication on levels. We have flexibility. At 10%, it makes a lot of sense for us and we will continue to do that. If it goes to a different rate, we will reconsider plans for the balance of the year after July.

Daniel Harriman: Thanks. I will get back in the queue.

Operator: Your next question comes from the line of Analyst with Truist Securities. Your line is open. Please go ahead.

Analyst: Hi, this is Nico Buccini on for Mike Roxland. Thanks for taking the questions. First, on Europe, you have mentioned in the past that business has been more of a bet on the future. How do you see the path to improving earnings there, especially as peers are either contracting or reorganizing given weaker supply-demand dynamics? And when is Europe slated to be in the lean transformation process?

John Sims: Thank you for the question. On Europe, yes, it is a bet on the future because we believe that over time the industry will continue to consolidate and become more hospitable to earning above cost-of-capital returns as the market declines. Right now it is fractured and margins are low. We are focusing on what we can control at each of our two facilities. At Siyat, we have been reducing fixed cost and improving our product mix, shifting out of commodity cut size into higher-margin value-added roll business and other grades, and that mix improvement is going better than planned. At our New Miller mill, it is about reducing wood cost. When we purchased that mill, wood was to be supplied from a joint venture Sodra. We moved away from that, taking control of our own wood sourcing.

We have seen wood costs come down and expect that to continue. We are also increasing yield and consuming less wood, and importing cheaper wood from local sources. We believe these moves—along with increasing pricing and margins—will improve the business. On lean, we expect a three-year process with immediate results where implemented. We started at Emojiwasu mill recently and already have target improvements in certain areas approaching 50%. As shared, we are rolling out in North America and corporate this quarter, then back to Brazil, and early next year we will be in Europe as well as at the Eastover mill.

Analyst: Two follow-ons. One, on the mix issue in North America in the first quarter related to the Eastover 4Q downtime and the Riverdale conversion—should that change Q1 to Q2? And second, can you comment on your relationship with your large shareholder?

Donald Devlin: On mix, we do expect that to continue into Q2. We are building inventory to get through the Riverdale supply agreement expiration and the Eastover 45-day outage in Q4. We will build more inventory in Q2. It will look similar.

John Sims: On our largest shareholder, I met with them in the first quarter. They continue to support our strategy and have confidence in the management team. They were very supportive of my CEO letter and the long-term value creation targets of greater than $300 million of free cash flow and a 15% return on invested capital. I would characterize the relationship with Atlas as very positive. We continue to meet almost quarterly, expect to meet this quarter, and appreciate their feedback.

Operator: As a reminder, if you would like to ask a question, please press 1 to raise your hand. To withdraw your question, press 1 again. Our next question comes from George Staphos with Bank of America Securities. George, your line is open. Please go ahead.

George Staphos: Thanks very much. A few follow-ons. First, Eastover—are you still on track for $50 million? Should we expect that in 2027? How is it going in terms of value generation? Second, on lean programs: usually you put in lean when things are relatively smooth. Right now you have a lot of fires—digester and power issues in South America, debarking issues, bringing up Eastover. Why put in a lean program now? Would it not be better to implement when everything is established? And lastly, what incremental benefit should we get out of lean next year, and on an ongoing basis? And does Europe ever become too much of a drag relative to performance elsewhere, requiring a more significant portfolio decision?

John Sims: On Eastover, everything is on track as we have reset. We are on schedule and within our capital budget. Installation is in the fourth quarter. The sheeter will land shortly, we will begin installation and crew training, and have it ready as Eastover ramps. We still stand 100% behind the $50 million. You will not see the full $50 million in the first year due to ramp, but you will see a significant portion in 2027.

Donald Devlin: And the reminder: the one-times go away. You have the ramp-up of benefits and the one-time costs roll off, so Eastover improvement next year is significant relative to the $85 million we previously cited, now $65 million.

John Sims: On lean timing, we believe we can fully implement the lean management system now. We have a highly engaged team and there is a lot of opportunity to tap into their talent. Lean is the best mechanism to do that through an employee-driven continuous improvement culture. We are not in crisis mode. We had an issue that hit us in the first quarter, but it is not systemic, and we would miss an opportunity if we waited. On benefits, we think we can achieve roughly double the improvement rate we have been achieving once fully implemented over three to five years. Given elevated inflation and cost pressure across industry, our prior improvement rates are not sufficient to sustain margins; lean helps us accelerate. On quantifying dollars, we have not publicly disclosed our year-over-year improvement levels or targets, so we are hesitant to provide a number.

Regarding Europe, we continuously evaluate our portfolio as part of capital allocation. We look at all options—operating differently, accelerating improvements. Ultimately, we want to drive value for shareholders. As of today, we believe we have the right strategy in Europe, the right leadership team, and strong customer relationships. Our strategy is to continue improving performance there.

Operator: Next question comes from the line of Matthew McKellar with RBC Capital Markets. Matthew, your line is open. Please go ahead.

Matthew McKellar: Hi. One follow-up. With how tariffs have evolved and assuming no change in magnitude from here—so whatever happens after Section 122 looks something like the 10% level—would you expect to continue to supply some amount of Latin American paper into North America even after Eastover ramps? Relatedly, what is your sense of how imports into the U.S. might be evolving more broadly at an industry level with tariffs resetting lower?

Donald Devlin: Relative to Brazil imports, if tariffs are in the right range for us—and 10% works—we will continue to import from Brazil into North America as part of the supply plan even after the Eastover speed-up. It makes more sense versus Brazil exporting to Middle East and Africa at low margins. We have a pretty wide range on what makes sense from a tariff standpoint, so we will continue to import.

John Sims: On industry imports into North America, we did see imports increase at the beginning of the year to around 16% of demand, but we have seen a steady decrease, roughly down to the lower end of the typical range around 10% of total demand. Some of that is driven by tariffs, some by the Iran war increasing freight costs, and there was a mill exporting to the U.S. from that area that is not operating as a result of the war. Also, a mill in Finland exporting roughly 30 thousand tons annually to the U.S. has been indefinitely idled as of November. Over the past month, imports have continued to decrease, and we expect that to continue.

Operator: We have reached the end of our Q&A session. Thank you. I will now turn the call back over to Hans Bjorkman for closing comments.

Hans Bjorkman: Alright. I will let John do a quick wrap-up, and then we will let you get on to the rest of your day.

John Sims: Thanks, Hans, and thank you for joining the call. As I said, 2025 and 2026 will be low points in our free cash flow generation as 2026 is a transition year for us, and it will be a year of two halves. In the first half, we will be impacted by transition costs plus input cost inflation, while the second half should see improved pricing and margins and mix improvements across all our regions. This will be a year where we are executing our most significant investments in our East River mill that will drive a lot of value in the years to come. We have launched our lean transformation and are focusing on exceeding our customers’ expectations and driving improvement across our operations. We are focused on long-term value creation that will generate strong and sustainable results by executing our flagship growth strategy and disciplined capital allocation.

As industry conditions turn, our capital spending normalizes, and the benefits from our investments begin to materialize, we believe we have the potential to generate greater than $300 million of free cash flow and greater than a 15% return on invested capital. Thank you for joining, and I hope everybody has a good day. Bye.

Hans Bjorkman: Thank you.

Operator: Thank you for participating in Sylvamo Corporation’s first quarter 2026 earnings call. You may now disconnect.

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