RYAM - NYSE

Good morning, and welcome to the RYAM Third Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the call over to your host, Mr. Mickey Walsh, Treasurer and Vice President of Investor Relations. Thank you, Mr. Walsh. You may begin.

Good morning, and welcome to RYAM's Third Quarter 2025 Earnings Conference Call. Joining me on today's call are De Lyle Bloomquist, our President and CEO; and Marcus Moeltner, our CFO and Senior Vice President of Finance. Last evening, we released our earnings report and accompanying presentation materials, which are available on our website at ryam.com. These materials provide key insights into our financial performance and strategic direction. During today's discussion, we may make forward-looking statements subject to risks and uncertainties that could cause actual results to differ materially. These risks are outlined in our earnings release, SEC filings and on Slide 2 of the presentation. We will also reference certain non-GAAP financial measures to offer additional perspective on our operational performance. Reconciliations to the most comparable GAAP measures can be found in our presentation on Slides 27 to 30. We appreciate your participation in today's call and ongoing interest in RYAM. I will now turn the call over to De Lyle.

Well, good morning, everyone, and thank you for joining us. Before Marcus walks through the financial results for Q3, I want to cover 5 topics today. First, our updated 2025 bridge and guidance. Second, recent developments in tariffs and trade. Third, our progress resolving the operational challenges we experienced earlier this year. Fourth, the work underway at Temiscaming to restore profitability and position the site for divestiture. And finally, how we're executing to the plan that increases our EBITDA to over $300 million as we exit 2027. 2025 has been a challenging year for RYAM. In response to the extraordinary headwinds, we have focused squarely on strengthening the company's cash generation, enforcing capital investment discipline and protecting our core Cellulose Specialties franchise. I believe that this approach is working and that our third quarter results reflect the normalization of our core business and the continued progress across the strategic plan. Now let's move to Slide 4. Full year adjusted EBITDA guidance is now $135 million to $140 million, refined from our prior $150 million to $160 million range. The change is primarily driven by proactive downtime of our noncore paperboard and high-yield pulp production during the holiday season to monetize inventory and protect cash given the weaker paperboard markets. We also are experiencing increased market weakness in the business, but this negative was largely offset by FX tailwinds in the quarter. We also faced increased headwinds to our fluff business, primarily due to the U.S. fluff industry exports to China being displaced by the China 10% tariffs and creating increased competition into non-China markets. The Cellulose Specialties business performed near expectations and returned to normalized EBITDA margins in Q3. Turning to Slide 5. Please note that importantly, there are still 0 tariffs on our Cellulose Specialties and dissolving wood pulp products into China, 0 tariffs on U.S. sales to the EU and 0 tariffs on Canadian imports into the United States. Though direct tariff impacts have stabilized, we continue to work through the 10% tariff on our fluff products into China. We're collaborating with customers and adjusting geographic mix as part of our mitigation strategy. We're also developing a dissolving wood pulp fluff product that would avoid this China tariff. Our technical team is working to refine this new product to reduce unit production costs. Major development in Q3 was the U.S. ITC's preliminary affirmative injury determination and the ongoing antidumping and countervailing duty investigations covering Brazilian and Norwegian dissolving pulp imports. This determination allows the Department of Commerce to move forward with its investigations with preliminary duty determinations expected in early 2026. As a reminder, an estimated 190,000 tons of specialty grade acetate pulp are imported into the U.S. from Brazil each year and about 5,000 tons of ethers pulp are imported from Europe. So this case matters. It's a significant step toward a fair level playing field for U.S. producers of high-purity specialty cellulose pulp. Overall, we now believe that trade conditions are generally trending in our favor as we move towards 2026. On Slide 6, the isolated operational challenges we've discussed previously are stabilizing. In Q3, operational challenges at Tartas continued, including French national strikes that adversely affected Tartas. These were not RYAM-specific strikes, and the RYAM team did an outstanding job keeping customers supplied. As mentioned last quarter, we were understaffed in key technical roles at Tartas. Since June, we filled most of the open key positions via new hires, including the transfer of a couple of technical managers from Temiscaming and expect all key positions to be filled by year-end. Jesup and Fernandina are performing to expectations. Slide 7 outlines the actions underway at Temiscaming. 2025 has been a difficult year for the Paperboard and high-yield pulp business. We now expect an EBITDA loss of about $14 million compared with historical profitability of roughly $30 million. The decrease in 2025 guidance is due primarily to lower paperboard prices and volumes due to new U.S. capacity and our plan to idle the Paperboard line and 1 of the 2 high-yield pulp lines for 3 weeks in the fourth quarter to improve working capital and cash flow. Our plan to return the Temiscaming site to historical profitability is focused on 4 key initiatives. First, reducing Temiscaming costs by approximately $10 million. This initiative has been fully implemented through utility contract improvements and benefits derived from high-return strategic capital investments. Second, improving the Paperboard's line OEE by approximately $10 million in 2026 as a result of fewer economic shutdowns, grade optimization and enhanced maintenance reliability. Further upside of $5 million is expected to be realized in 2027 as supply and demand normalizes, resulting in no economic production shutdowns. Third, advancing the commercialization of new product development to generate an estimated $10 million in 2026 EBITDA and another $5 million in 2027. The new freezer board grade has been qualified and launched in Q3 and orders are being secured. The rolled softwood high-yield pulp qualification trials are advancing well with potential customers and the oil and grease resistant board trials will begin this quarter. Additionally, we are developing another new product, a high-yield pulp wrapper product that is in testing, which we will believe will deliver 2026 cost savings and potential for new market entry. And fourth, we're in active negotiations with U.S. customers affected by the 15% tariff on EU board imports and participating in an AFRY-led study evaluating strategic options for all the assets on the site, including the currently suspended HPC line. We recently responded to an opportunistic inquiry about Temiscaming, so there is current interest in the business. As we restore positive profits and cash flow to Temiscaming in 2026 and once the USMCA free trade review is completed in July of 2026, we believe we can divest the site at a fair value. Turning to Slide 8. Starting from our normalized EBITDA baseline, we've updated our plan to double our EBITDA from our current guidance over the next 2 years. I will walk through each step and provide an update on how we're progressing. On the pricing front, we believe that we're tracking ahead of plan. We are targeting a significant price reset to reflect the inherent value of our Cellulose Specialty products, which we believe requires recapturing lost value from prior year's inflation. On cost, the $30 million reduction program for 2026 is almost fully implemented. And as upside, we are now working on a $20 million of EBITDA benefit for 2027 that would be derived from strategic capital projects. From a specialty commodity sales mix standpoint, we are increasingly confident that we will realize the $30 million in EBITDA growth from margin improvement. I'll expand on why in a moment. Finally, our biomaterials projects are progressing, and I'll cover this progress in more detail in a couple of slides. In short, our strategy remains firmly intact, and we have a clear line of sight to achieving our 2027 run rate target. Slide 9 expands on the pricing and market fundamentals for our core business. We are highly confident that RYAM is in a strong position to realize a significant price reset for its Cellulose Specialty products. We believe that the market is conducive to capturing product value because industry capacity utilization is over 90% with no expected major capacity additions before 2029. RYAM holds most of the excess Cellulose Specialty capacity, and the industry is highly concentrated with RYAM and 2 other producers accounting for roughly 80% of the global Cellulose Specialty capacity. This is important because we're making a strong push on 2026 cellulose specialties pricing, i.e., pursuing a meaningful reset beyond prior year increases to reflect the value of our high-purity products, which requires us to recapture lost value from inflation that has increased nearly 35% faster than our average cellulose specialty pricing since 2014. We also continue to capture the opportunities to enrich our sales mix towards specialty cellulose. We are on track to requalify Temiscaming CS volumes to generate $5 million of EBITDA in 2026, with 2 customers already qualified and a third expected by year-end. We also remain highly confident we will generate $20 million in EBITDA over the next 2 years via specialty margin enhancement versus commodity sales. This objective will be driven by organic growth across Cellulose Specialty markets, supported by RYAM's outsized share of available excess capacity and potential upside to the plan from increased cellulose specialty volumes following Georgia-Pacific's Memphis facility closure, which produced an estimated 10,000 to 20,000 metric tons of cotton linter pulp grades that go into cellulose specialty applications. Finally, we continue to expect to realize $15 million of additional EBITDA when ether demand in the EU returns to historical levels, which would also be upside to our plan. On cost, $24 million in strategic investments made this year will generate $20 million in cost reductions at our HPC plants in 2026. We also are taking action to reduce corporate costs by $10.5 million, including eliminating lightly used medical benefits, increasing management span of control, reducing clerical roles via automation and terminating nonemployee technician and professional contracts. We are also working on upside to this cost improvements initiative. We are actively working on projects at the HPC plants to generate another $20 million in EBITDA for 2027 and believe that we can take out another $4 million to $6 million in corporate costs via AI and automation over the next 2 to 3 years. On Slide 10, I highlight the progress we are making on our biomaterial projects. The Altamaha Green Energy or AGE project is a $500 million 70-megawatt renewable power project to be based at our Jesup facility. RYAM will own 49% of this project. Recent progress includes reaching agreement on the EPC contract in September and receiving our air permit in October. Joint venture is now focused on reviewing project financing options, after which the project will move to its FID. RYAM will invest $46 million of equity to realize an annual proportional EBITDA of $50-plus million. Assuming a utility valuation multiple, this project is expected to generate a 12x ROI on RYAM's equity. The $64 million BioNova Fernandina Beach second-generation bioethanol project is expected to generate $15 million (sic) [ $19 million ] of annual proportional EBITDA for RYAM in return for $6 million of RYAM cash equity, generating a 19x ROI on RYAM equity, assuming a comparable multiple. Funding is secured, the air permit has been approved and engagement with the city of Fernandina Beach has begun with respect to a potential settlement on the land use application. The U.S. BioNova CTO project will produce about 13,000 tons per year of CTO from feedstock primarily sourced from our Jesup and Fernandina plants. Engineering for the project is complete that incorporates a high-quality used CTO plant that we acquired for $350,000 in September. Commercial discussions are advancing, and we expect to file the air permit application by the end of November. This project is expected to generate $6 million (sic) [ $7 million ] of annual proportional EBITDA per year on a total CapEx of $9 million, of which RYAM will contribute less than $2 million of equity. Using a comparable market valuation multiple, this project is expected to generate a 16x ROI on RYAM's equity. The European BioNova CTO tolling project is small, but requires no RYAM equity. We'll supply feedstock from our Tartas plant to a third-party toller, which will generate approximately $1 million of annual proportional EBITDA. And finally, the pre-biotics project at Jesup is one of the more exciting projects in the BioNova portfolio. As a result of exceptional efficacy results that show that our product delivers significantly higher weight gain and feed conversion performance in poultry than competing alternative feed additives, we are redesigning the plant to a smaller modular footprint that can scale up with demand growth due to lower initial dosing requirements. We've also signed a commercial sales MOU with a feed additives manufacturer for U.S. poultry and swine feed applications. While the redesign may extend this project's time line, this is a positive adjustment. The trial data confirmed our product's superior performance, and as a result, we believe meaningfully expands the commercial opportunities ahead. Across all these initiatives, RYAM demonstrated its ability to recycle capital into high-return projects due to low capital intensity, attractive project capital and repeatable outsized investment returns. Slide 11 explains why we can do this. The crux of these opportunities is RYAM's extensive and unique asset base. The noted biomaterial projects will be located at existing RYAM Cellulose fiber plants where the infrastructure, utilities, raw material sources and site management are already in place. Thus, RYAM's asset base anchors our ability to scale new biomaterial projects efficiently. We also believe that replicating this asset base would be prohibitively expensive. Thus, it is unique to RYAM. As a case in point, the replacement value of Jesup alone is estimated to be over $4 billion. So we believe that RYAM is uniquely positioned to pursue such opportunities at very attractive ROIs on equity invested. The technical and market viability of most of our projects are already proven. Pre-biotics isn't the only opportunity that would be new. We are, therefore, taking the necessary steps, including animal feed trials and resizing the plant to mitigate the market and capital risk for this project. The project that I summarized on the previous slide will generate high returns and very profitable growth through 2028, 2029. For the 2030s decade, we are investigating promising opportunities today in biomaterials and bioenergy to provide profitable growth. For example, we are currently conducting due diligence with GranBio for a pilot-scale ethanol-to-jet plant at our Jesup facility. If this due diligence concludes that such a project would be successful, we will then proceed to construction, which would be fully funded by a DOE grant. We've also signed an MOU with Verso Energy to evaluate eSAF production at Jesup and Tartas that will align with the EU decarbonization mandate starting in 2030. Just yesterday, we were informed that Verso Energy's project at our Tartas plant was selected by the EU Commission for its innovation fund and will receive a $37 million grant towards the construction and commissioning of the Tartas eSAF project after a final investment decision is made. Turning to Slide 12. I'd like to close with 3 points. First, our near-term issues are mostly behind us. The tariff situation has stabilized and the extraordinary operational challenges, except maybe those challenges tied to political turmoil, are resolved. Second, the underlying fundamentals of our strategy remain intact, and our EBITDA-enhancing initiatives are advancing. The core business is performing to expectations with a significant 2026 pricing reset being pursued. The $30 million in structural cost targets will be delivered for 2026, and we're now working on a further $20 million to $25 million plant and corporate cost reductions for 2027. Our confidence continues to build that organic growth across cellulose specialty markets will further expand EBITDA margins by $30 million over the next 2 years. The Temiscaming turnaround efforts are effectively underway and our biomaterials portfolio continues to progress. Third, RYAM valuation remains compelling. We believe that an up to 5x upside to the stock price for our shareholders would be implied by the comparable double-digit valuation of our competition in a recent transaction on our targeted 2027 $300-plus million run rate EBITDA. 2025 has been a challenging year, but we are getting through it with our strategy intact. Our core is solid and performing and our growth initiatives are advancing. We remain confident in the path ahead and are focused on execution on this plan for our shareholders. With that, I'll hand the call over to Marcus to take us through the Q3 financial highlights.

Thank you, De Lyle. Let's now turn to Slide 13, which summarizes our third quarter 2025 financial highlights. In the third quarter, revenue was $353 million, down $48 million year-over-year. Operating income was $9 million, an improvement of $26 million compared to the prior year. Adjusted EBITDA was $42 million, a $9 million decrease from Q3 2024. And adjusted free cash flow year-to-date was negative $83 million, driven by working capital timing that is expected to improve in the fourth quarter. The primary drivers of the EBITDA change this quarter can be summarized with the following highlights. In Paperboard, earnings decreased by approximately $10 million, reflecting lower sales volumes and pricing from tariff uncertainty, competitive EU imports and new U.S. capacity, along with higher fixed costs for market-related downtime and the allocation of Temiscaming net custodial site expenses. In high-yield pulp, earnings declined by approximately $10 million due to continued oversupply in China and higher fixed costs resulting from market downtime. And in Cellulose Commodities, earnings increased by $7 million, driven by stronger fluff pricing, improved mix and the absence of prior year impairment and suspension charges. Given these weaker-than-expected results in our noncore business, we have now refined our full year 2025 adjusted EBITDA guidance to a range of $135 million to $140 million, implying $25 million to $30 million of adjusted free cash flow for the fourth quarter. Let's now review our segment results, beginning with Cellulose Specialties on Slide 14. Quarterly net sales for CS were $204 million, down $28 million or 12% from the prior year. The decline was driven by a 17% decrease in sales volumes, partially offset by a 7% increase in average sales prices from negotiated price actions and improved mix. Operating income was $49 million compared to $46 million in the third quarter of 2024. The improvement was driven by higher average selling prices, lower fixed costs related to the Temiscaming Cellulose indefinite suspension and a $7 million energy cost benefit from the sale of excess emissions allowances, partially offset by lower volumes, higher operating costs and the impacts of national labor strikes in France. Adjusted EBITDA was $66 million compared to $65 million last year, with margins increasing to 32% from 28%. Turning to Slide 15. Quarterly net sales for Biomaterials were $8 million, flat compared to the prior year. Higher turpentine volumes were offset by lower bioethanol sales volumes caused by temporary feedstock constraints and labor disruptions at Tartas. Operating income was $1 million compared to $3 million in the third quarter of 2024, reflecting higher shared and ancillary service costs. Adjusted EBITDA was $1 million compared to $4 million in the prior year, with margins of 13% versus 50% in Q3 of 2024. Turning to Slide 16. Quarterly net sales for Cellulose Commodities were $85 million, down $1 million or 1% from the prior year quarter. A 2% decrease in volumes, mainly due to the prioritization of production towards cellulose specialties and the absence of Temiscaming sales volumes following the indefinite suspension was largely offset by additional viscose sales as part of inventory and cash management efforts and an 8% increase in average selling price driven by higher fluff pricing and mix improvement. Operating loss was $13 million compared with $55 million last year. The improvement reflects the absence of a $25 million noncash impairment charge and $7 million of indefinite suspension costs recorded in the prior year, combined with higher selling prices, lower fixed costs following the indefinite suspension of Temiscaming Cellulose operations and improved cost performance. Adjusted EBITDA was negative $3 million compared to negative $10 million in the prior year quarter. Let's now move to Slide 17, which covers our Paperboard segment. Quarterly net sales were $39 million, down $16 million or 29% compared to the prior year. Average sales prices decreased 10% and sales volumes were down 21%, driven by mix, shifting customer dynamics associated with tariff uncertainty and increased competitive activity due to EU imports and the start-up of new U.S. capacity. Operating loss was $4 million compared to operating income of $7 million in the prior year quarter. The change was driven by lower sales, higher fixed costs for market downtime and the allocation of Temiscaming net custodial site costs, partially offset by lower purchase pulp costs. Adjusted EBITDA was $1 million compared to $11 million in Q3 of 2024, with margins of 3% compared to 20% in the prior year. Turning to Slide 18. Quarterly net sales for high-yield pulp were $24 million, down $4 million or 14% compared to the prior year quarter. Average sales prices declined 10% and volumes decreased 8%, reflecting weaker demand, oversupply in China and shipment delays to customers in India. Operating loss was $10 million compared to breakeven results in the prior year. The decline reflects lower sales, higher fixed costs from market downtime and the allocation of net custodial site costs. Adjusted EBITDA was negative $9 million compared to positive $1 million in Q3 of 2024, with margins of negative 38% compared to 4% last year. Slide 19 provides an overview of our balance sheet and liquidity. We ended the quarter with $140 million of total liquidity, including $77 million of cash and a net secured leverage ratio of 4.1x within the 5x covenant threshold. During the quarter, we experienced working capital outflows across receivables, payables, customer rebates and inventory, which pressured free cash flow. These outflows also reflect temporary inventory management actions by a large Cellulose Specialties customer that affected order timing. We expect working capital levels to normalize as we progress through the fourth quarter and as sales volumes increase. We remain focused on driving working capital efficiency and improving cash flow generation. For the full year, we expect adjusted EBITDA in the range of $135 million to $140 million and positive free cash flow in the fourth quarter as these timing effects ease. In addition, we have $40 million of committed green debt available to support the execution of our Biomaterials portfolio as the projects move forward. The company will also look to proactively pursue a refi in 2026 to lower interest expense by leveraging RYAM's expected stronger operating performance and potentially lower debt as a result of the targeted divestment of Temiscaming. With that, operator, please open the call for questions.

[Operator Instructions] Our first question comes from the line of Daniel Harriman with Sidoti.

Just wanted to hit on two in the beginning, one for De Lyle and one for Marcus. De Lyle, just going back to the Paperboard and High-Yield Pulp assets. Can you just talk again, I know you went through it all, but what specific operational and financial milestones do you think you need to achieve in 2026 to make those assets viable for a sale? And then Marcus, you touched on this at the end of your comments, but with leverage at 4.1x, can you just talk a little bit about how you're thinking about refinancing and repricing opportunities considering that the debt is callable in '26? And then what level of EBITDA would give you comfort that you can regain full balance sheet flexibility? Really appreciate it, guys.

Daniel, this is De Lyle. I'll see if I can address your question on the Paperboard and High-Yield Pulp business. The way I would look at it is that before I can sell it, there's 2 gating items that we have to get passed. One is the USMCA renewal that is under negotiations right now between the 3 governments. And let's say that, that gets done by the deadline, which should be around July of 2026. I don't think there'll be any interest on anybody's part until we get -- in terms of buying those assets until we get to that point. The other gating item is that the -- I believe that the business needs to get back to positive EBITDA and positive cash flow. And I outlined 4 different things that we're pursuing to make that happen. I would say 2 of them are high probability or locked. One is the cost reduction, which is largely locked and given the activity we've already done. The other is the OEE of the paperboard plant, which has been demonstrating significant improvement over the past couple of months, and we expect to continue to do so as we go into 2026. The last element I would say is really big is really the new product development and the uptake of those new products into the market. So to get to a positive EBITDA, I need all 3 of those elements. And so really, the last critical element that needs to fall in place is the successful commercialization of those new products, which we should start seeing in the first quarter and second quarter of '26. So once I get to a positive EBITDA, positive cash flow and we get past the negotiations on the USMCA, I think at that point, we've got an asset now that's attractive, and we'll be able to dispose of it.

Dan, thanks for your question. Yes, as you mentioned, the term debt becomes callable in May of next year, and there's a 2% takeout premium, right, which falls to 1% in November. I think the key here is, as we've gone through the materials, navigating these transitional headwinds and then demonstrating that this business should return to historical levels of EBITDA, right? We exited last year at $50 million quarters. And when we demonstrate that kind of cadence, we'll anniversary some weaker quarters that we had this year and get our LTM back up over the $200 million level. That certainly is going to give us a better leverage profile to be out in the marketplace and then continue to tell our story on the backdrop of all the positive items De Lyle mentioned in his review and look to do the breakeven on a refi. And we certainly see a line of sight where we can take a measurable amount of interest out of this business at that time.

Does that answer your question, Daniel?

Yes, it does.

Yes, yes. Now $10 million of EBITDA loss or nonrecurring impact as a result of the, we call it, market or economic shutdowns of the Temiscaming facility. That's over the whole year. So the $14 million benefit is really over the whole year.

Yes. And Nick, to De Lyle's comment, the -- so that's the portion related to downtime. If you look at our guidance in Q4, we're expecting close to $30 million of working capital release, as you saw in the bridge.

Our next question comes from the line of Amit Prasad with RBC.

It's Amit on for Matt. Just starting off with Temiscaming. You noted a $5 million benefit in 2026 from qualifying volumes in other lines. What would that be on a run rate basis? And when do you expect those incremental volumes to show up? And I guess, how much of that historical Temiscaming business do you expect to ultimately have retained through transferring production to other facilities by the end of 2026?

So you're asking on the amount of volumes that we're able to convert from our old HPC line in Temiscaming over to our facilities in Jesup, Fernandina and Tartas. What we're talking about with respect to the $5 million that we're looking to see in terms of increased EBITDA for '26 is conversions that have occurred this year, all right? We've already seen a significant amount of conversion since we suspended the operations back in July of 2024. So what we're saying is that -- and as we said at the time of the suspension, there was a number of products that would take multiple years in terms of qualification. So we're just now getting through the conversion on -- with 3 customers this year. And when those conversions are completed this year, that should add another $5 million of EBITDA for our business going forward. That being said, there'll be more opportunities in 2026 and probably after that, that's probably about the extent we're going to be able to get to as some of the business like MCC and some other grades that we are producing in Temiscaming have gone to the competition. But we're getting to the end of the road with respect to what we're going to be able to realize from the full conversion of those Specialty Cellulose business that we had up at the Temiscaming facility. I hope that answers your question.

Yes, that's perfect. And I guess one other quick one for me. We saw paperboard realizations move significantly lower quarter-on-quarter. How much of that was just pricing related being down on a like-for-like basis versus just mix and potentially some FX?

That's a really, really technical question and probably beyond my ability to answer it specifically, but we certainly would be happy to try to answer that question to you one-on-one. Amit, after we've done a little bit of investigation, is it okay just to punt that for a couple of hours.

Yes, absolutely. No problem at all.

[Operator Instructions] Our next question comes from the line of Dmitry Silversteyn with Water Tower Research.

I have a couple of them. First of all, you talked about working on a new fluff product that would avoid the tariffs, the 10% import tariffs from China or into China. Can you talk about sort of what would allow -- kind of what the changes are that would allow the new product to bypass these tariffs? And when do you think this product will be available for commercial sales?

Dmitry, welcome, and thank you for being on the call. Great question with respect to our new product development around fluff. We've developed it. We have a product that we believe that would qualify as a dissolving wood pulp product from a tariff perspective into China that would go into the fluff business, all right, or into the fluff market. And that's really the key is that it has to be a dissolving wood pulp product to be able to get into China without any tariffs. And that's -- and we're really the only, I believe, the only fluff producer who can do that because we're a specialty cellulose producer that can make dissolving wood pulp, whereas all the other fluff producers in the world cannot. So it's a real comparative advantage to be able to do that. So we can do that today. The issue that we're dealing with is that the cost of that conversion from fluff to a dissolving wood pulp product as the cost per ton is higher than the cost we would bear by paying a 10% fluff duty right now. So we've -- we continue to work on seeing if there's a means to lower the unit cost of production to make that dissolving wood pulp fluff. And in the meantime, we'll continue to do what we're doing, which is extend and expand our geographical diversity away from China to keep our fluff volumes high and keep the operation at capacity. But the truth of the matter is we have a product. We just have to figure out a way to make it cheaper.

Understood. That's a very good level of granularity there. I appreciate it, De Lyle. My next question is, you talked about the $30 million in cost reduction projects that you announced last quarter being pretty much fully implemented by now, and we're just sort of waiting for the ramp-up and get to that run rate. You also mentioned that there's an additional $20 million in EBITDA improvement projects for -- through 2027. Is it too early to ask you to provide sort of some major buckets of where that cost saving is going to come from?

Well, it can be the same major buckets that we've had for 2025 and '24, which is around improving reliability, improving material usage on our variable inputs through automation, through, I would call it, preventative and even predictive maintenance practices and measuring devices so that we can capture or catch maintenance requirements before any kind of catastrophic failure. Those are the things we've been focusing on in the past. That's what we'll be focusing in the future. And as I said in the past, a couple of analyst calls, we have a good backlog of projects that we're going through to -- that we'll invest in. And as capital gets available, we'll execute, that will give us the returns that we've been seeing for the last couple of years on these type of investments. Those are generally the same -- the buckets, though, Dmitry, that we'll be investing similar to the investments we did last year or this year.

Okay. So basically, kind of like a Japanese Kaizen approach where you just do better every time you go through this and get a little bit more out of it.

That's exactly right. Exactly right. Yes.

Okay. Okay. Great. And then my last question, you mentioned in your High-Yield Pulp business that there was a shipment delays of a business going to India, and that accounted for some of your volume losses in that business in the quarter. What was the nature of those delays? And have they been resolved? Is there going to be a catch-up in the fourth quarter? Or is this sort of missed until next year?

It's just a timing issue. We'll capture it in the fourth quarter. And really, what it comes down to is the lane between Montreal, Canada and the ports in India, the capacity of those ocean lanes are pretty slim, pretty narrow. And as a consequence, if you miss a ship, then you got to wait a month, right, for the next ship to show up to take it to India. So that's really the issue that we're dealing with.

Mr. Bloomquist, we have no further questions at this time. I'd like to turn the floor back over to you for closing comments.

Okay. Well, thank you. In closing, just to reiterate, the temporary headwinds that defined 2025, we believe are now largely behind us and that our core business is now performing as expected. As we talked about in the Q&A, pricing negotiations are underway, and we will continue to value and put priority on value -- on the value we provide to our customers so that we can be able to get the money that needed to reinvest back into our assets. Our operations are stable, and our teams are executing with discipline. We have a clear strategy and a strong portfolio of high-return projects that position the company for margin expansion and stronger cash generation and we are very disciplined in our capital deployment. These actions should reinforce your confidence in our path to sustain the growth and the long-term value creation of the project or of the company. Our focus now is very simple: execute with precision and continue to demonstrate the strength and potential of the company. And thank you for joining us this morning.