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Q1 2024 Rayonier Advanced Materials Inc Earnings Call

Participants

Mickey Walsh; Vice President, Investor Relations and Treasurer; Rayonier Advanced Materials Inc

DeLyle Bloomquist; President, Chief Executive Officer, Director; Rayonier Advanced Materials Inc

Marcus Moeltner; Chief Financial Officer, Senior Vice President - Finance; Rayonier Advanced Materials Inc

Daniel Harriman; Analyst; Sidoti & Company LLC

Matthew McKellar; Analyst; RBC Capital Markets LLC

Dmitry Silversteyn; Analyst; Water Tower Research LLC

Sandy Burns; Analyst; Stifel, Nicolaus & Company Inc

Roger Spitz; Analyst; BofA Securities Inc

Presentation

Mickey Walsh

Good morning. Welcome again to Ryan's First Quarter 2024 Earnings Conference Call and Webcast. Joining me on today's call are DeLisle Bloomquist, our President and Chief Executive Officer, and Marcus Molnar, our Chief Financial Officer and Senior Vice President of Finance. Our earnings release and presentation materials were issued last evening and are available on our website at RYAN.com.
I'd like to remind you that in today's presentation, we will include forward-looking statements made pursuant to the safe harbor provisions of federal securities laws, our earnings release, as well as our filings with the SEC list. Some of the factors which may cause actual results to differ materially from the forward-looking statements we may wait make. They are also referenced on Slide 2 of our presentation materials. Today's presentation will also reference certain non-GAAP financial measures. As noted on slide 3 of our presentation, we believe non-GAAP financial measures provide useful information for management and investors but non-GAAP measures should not be considered an alternative to GAAP measures. A reconciliation of these measures to their most directly comparable GAAP financial measures are included on Slides 20 through 25 of our presentation. I would now like to turn the call over to Lyle.

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DeLyle Bloomquist

Thank you, Mickey, and good morning.
I'll begin with the financial overview for the first quarter of 2024.
Following that, I'll discuss recent Company actions before handing over to Marcus for additional details on the business segments and our capital structure and liquidity following markets. His comments I'll come back to share additional details on our initiatives and guidance for 2024. This will include updates on the suspension of the operations at our Temiscaming HPC plant in the sales process for this paperboard and high-yield pulp businesses. We will then open the floor for questions.
Let's turn our attention to slide 4, where I will discuss our first quarter performance for 2024 results exceeded expectations with an adjusted EBITDA of $52 million, a $1 million increase from the same period last year.
In the high pulp, I'm sorry.
In the High Purity Cellulose segment, EBITDA rose by $6 million, driven by higher prices for cellulose specialties, along with decreased costs for key inputs and logistics as well as improved productivity. This increase was somewhat moderated by reduced sales volumes, lower prices for commodity products and the absence of energy benefits that we anticipate we will realize later this year.
Conversely, the Paperboard segment experienced a $1 million decrease in EBITDA, primarily due to lower sales prices. Although this was somewhat mitigated by decreased costs for purchase kraft pulp, our high yield pulp business saw a $8 million decrease in EBITDA, largely due to lower sales prices, though this was partially offset by increases in sales volumes and reduced logistics expenses. Additionally, corporate expenses improved by $4 million, largely driven by a favorable foreign exchange impact.
In summary, the overall solid performance was underpinned by strong results at our core cellulose specialty segment and cost reductions across the enterprise, which more than offset the softness in paperboard and high-yield pulp segments.
In terms of cash flow, there was a strategic use of cash to build finished goods inventories in anticipation of the planned annual maintenance outage. It are just a plant and subsequent developments. We have announced the indefinite suspension of operations at our Temiscaming HPC plant. The suspension is expected to provide marginal positive EBITDA benefits and enhance our consolidated free cash flow in 2024. I will share more about the financial implications of this decision after markets his comments this month, we also announced a significant transaction selling the rights to our softwood lumber duty refund for $39 million. The sale not only bolsters our financial flexibility, but also aligns with our strategic goal to reduce our debt by $70 million in 2024. Considering these updates and our strong performance in the first quarter, I am pleased to reaffirm our full year EBITDA guidance of $180 million to $200 million and to raise our full year adjusted free cash flow guidance to $80 million to $100 million.
With that, I'd like to pass the meeting over to Marcus to walk us through the financials for the quarter. Marcus?

Marcus Moeltner

Thank you, DeLisle. Beginning with our HBC. segment on Slide 5. Quarterly sales declined by $67 million or 18% to $307 million. Overall, HPC pricing declined 2%, driven by a 2% increase in CS sales price, which was more than offset by an 11% decrease in commodity pricing. Total sales volumes decreased 17% as a result of a 16% decline in CS sales volumes and an 18% decrease in commodity sales. Increased sales volumes and in CS were supported by the closure of a competitor's plant in late 2023 and a rise in ethers sales. This was more than offset by destocking in certain acetate products and the impact of a one-time favorable change in customer contract terms from the previous year. The decrease in commodity sales volumes was primarily a result of higher production in favor of CS as the Company built inventory ahead of Chesapeake's second quarter planned maintenance outage other sales for the quarter were $23 million, which included $12 million of green energy sales. EBITDA for the segment rose by $6 million to $50 million, primarily due to higher CS sales prices and decreased key input and logistic costs, along with the benefits of improved productivity. These improvements were partially offset by declines in CS sales volumes, lower commodity prices and volumes and the absence of $7 million in energy related cost benefits from the previous year that are expected to recur later in the year.
Turning to Slide 6. Sales in the paperboard segment declined $6 million, largely attributed to a 12% drop in sales prices resulting from changes in product mix and market driven demand declines. Ebitda for the segment declined $1 million to $12 million, mainly due to lower sales prices. Though this impact was somewhat mitigated by decreased decreased costs for purchased pulp.
Turning to the high yield pulp segment on slide 7, sales declined by $8 million in comparison to the prior year, mainly due to a 27% drop in external sales prices. Partially offset by a 16% increase in sales volumes. The price reductions were a consequence of market supply dynamics, mainly in China. Segment EBITDA reached a breakeven point in contrast to $8 million generated in the prior year.
Transitioning to Slide 8, consolidated operating income for the quarter amounted to $17 million. Sales price improvements in CS were more than offset by pricing declines across all other products. In addition, sales volume and mix impacts were offset by cost improvements. Sg&a and other cost benefits related to favorable foreign exchange rates were partially offset by discounting and financing fees incurred to support enhancements in working capital.
Now let's turn to Slide 9. Total debt ended the quarter at $798 million, a reduction of $54 million from the same period in 2023. Net secured debt reflected in our financial covenant ratio associated with the term loan ended the quarter at $721 million. Net secured leverage closed the quarter at 4.4 times within the original covenant test. Liquidity closed the quarter at $199 million, reflecting $55 million of cash, $131 million available under our ABL facility and $13 million for a French factoring facility. As anticipated, working capital levels increased driven by the inventory build ahead of GES's annual planned maintenance outage.
Capex for the quarter totaled $33 million, with $5 million directed towards strategic capital to support the startup of the Tartas VIA bioethanol project. Additionally, as DeLisle previously noted, we announced the sale of our softwood lumber duty refund rights for $39 million. Overall, liquidity remains strong and we are well positioned to achieve our targeted $70 million debt reduction this year in preparation for the upcoming refi of our 2026 senior notes, we have retained Houlihan Lokey to provide advisory services throughout the process.
With that, I'd like to turn the call back over to Bill.

DeLyle Bloomquist

All right.
Thank you, Marcus.
Let's now turn our attention to Slide 10. Where I'll provide an update on our key initiatives for 2024. Our primary goal this year is to refinance the 2026 senior notes before they go current in January 2025 with a particular focus on reducing debt. We are on track to meet our target of reducing gross debt by $70 million in 2024, sort of supported by business, generate free cash flow, a tax refund and proceeds from the recent sale of the softwood lumber duties refund rights. In addition, we are progressing with the sales process of our paperboard in the high-yield pulp assets. Interest remains high among the prospective buyers following the announcement of the suspension of operations at the Temiscaming High Purity Cellulose plant, which has had introduced some delays due to the change in the underlying assumptions of how the site will be managed. While the suspension and asset sales decisions affecting the Temiscaming site have been approached and carried out independently. We believe that suspension will bring clarity to the asset sales diligent process by validating that these assets can be effectively run separately. It's important to reemphasize that this is not a fire sale. We have a value threshold based on the high EBITDA margins and the low custodial capital intensity of the paperboard business. While the proceeds from the sale would obviously reduce our debt load. We are carefully balancing the estimated annual $50 million plus of free cash flow that we receive from these businesses against any potential debt repayment. We plan to complete the transition, provided the terms are acceptable before are NodeScale current in January 2025, we are taking significant steps to optimize our assets and address the ongoing challenges associated with our High Purity Cellulose commodity exposure, which has been impacting our profit margins and earnings stability.
As part of this strategic pivot mirror, we announced the indefinite suspension of operations at our Temiscaming HPC. plant. This decision reflects our commitment to mitigating the financial drag from non fluff commodities, which projected a 2024 EBITDA loss of $48 million following a $60 million loss in 2023. I will provide more details on this announcement in the slide that follows one of the most promising initiatives in just the continued expansion of our biomaterials business, our Tartas bioethanol plant, a first step of this strategy celebrated its first shipment in April. We anticipate this facility will generate $3 million to $4 million in EBITDA this year with projections of $8 million to $10 million annually from 2025 as we achieve targeted production levels.
Looking forward, our biomaterials project pipeline includes the proposed AGE. project at our Chester facility, which will produce green energy for sale and a new prebiotics additives plant at the same site. We continue to advance the proposed bioethanol plant in Fernandina Beach as we've commenced detailed engineering and submitted the project's air permit with the regulatory authorities. Our proposed projects in the works include crude tall oil operations in both France and the US. We aim to finance all these projects with Green Capital.
Let's turn to Slide 11. We will all discuss the recent decision to indefinitely suspend operations at our Temiscaming HBC. plant in April, we made the difficult decision to halt operations at this facility, a move driven by ongoing market weakness in the non fluff commodity markets, certain availability of affordable wood fiber and high capital and fixed costs, which when combined all together created significant significant operating losses.
Financial implications for 2024 include onetime cost around $30 million for severance benefits, extension, outplacement services and mothballing the plant. While we are still evaluating non-cash impairment charges, we anticipate the overall impact on this year's operating results and adjusted EBITDA to be marginally positive. Furthermore, we expect an improvement in 2024 free cash flow by approximately $15 million to $20 million, driven by the monetization of working capital and reduced CapEx, it should more than offset the associated onetime suspension costs. Once mothballed. We believe that this facility will represent the industry's best available idled capacity to satisfy future specialty cellulose demand growth since it will require minimal capital investment investment to restart can re enter supply into the market within a year, they exist within an operating industry, industrial site with utilities and other site services. It is qualified by many customers to supply CS products. Consequently, we plan to at least annually assess the possibility of restarting the Temiscaming HPC. plant during the suspension period and after the CS product qualification process concludes, we estimate that we will realize an annualized improvement in adjusted EBITDA of $15 million to $20 million a year primarily to reduce losses resulting from the HPC. commodity sales. We also anticipate an increase of approximately $30 million in free cash flow, $70 million from this EBITDA improvement in the avoidance of custodial capital expenditures. Customer qualification process is actively ongoing with all targeted customers currently testing the CS products from our other plants as qualification work is expected to take 18 to 24 months. We are building bridge inventory until July to sustain customer demand through this qualification period. See U.S. business that we expect to retain will be produced from our A. and B lines adjusts up and our sulfide plants at Trinity and beach and Tartas. We remain committed to our fluff business and the majority of our C line at Joseph will continue to focus on fluff production.
Let's turn to Slide 12. We expect enterprise EBITDA to be between $180 million to $200 million for the year cash interest expense is projected at approximately $85 million this year, which includes the $50 million payment that was made in early January for last year's Q4 due to the timing of the interest payment around the holidays. As a reminder, the current normalized annual interest expense is estimated at $70 million. Maintenance CapEx is estimated now at $80 million reflecting a $5 million reduction due to the suspension of the Temiscaming HPC. plant. Additionally, we project a $45 million benefit from working capital, which includes a $30 million increase resulting from the Temiscaming HPC plant suspension. Furthermore, we anticipate $40 million in tax refunds and $39 million from the monetization of the lumber duties, which will be partially offset by impacts related to the Temiscaming HPC. plant suspension, deferred energy payments and other accrued liabilities. And some we are raising our adjusted free cash flow guidance to a range between $80 million to $100 million for the year. These funds will be allocated toward debt reduction and strategic capital investments.
As Slide 13, I dive deeper into the expected 2024 performance of each of our businesses. We project EBITDA for our HPC. segment to be in the range of $180 million to $190 million. We anticipate cellulose specialty prices to increase a low single digit percentage as compared to 2023 as we continue to prioritize value over volume for our specialty products. Sales volumes for cellulose specialties are expected to be comparable to last year with increases in market share gains resulting from a competitor's plant closure and a modest rise in either sales volumes, though Easter sales will remain below historical levels. These increases will be partially offset by lower acetate volumes due to modest destocking and a one-time favorable impact from a change in customer contract terms in the prior year, we expect a decline in commodity sales volumes in 2024 due to the planned suspension of operations at our HBC. plant in Temiscaming during the second half of the year. Overall, costs are anticipated to be lower, driven by improved cost management and production efficiencies alongside the impact from the suspension of BOP operations at the Temiscaming HPC. plant. Our growth strategy remains focused on strategic investments in our biomaterials business, capitalizing on the increased demand for sustainable products, Tartas, bioethanol plant, which was successfully completed its first shipment in April is operational and projected to contribute $3 million to $4 million in EBITDA in 2024, with expectations to reach $8 million to $10 million at full production by 2025.
Regarding paperboard, we expect to achieve EBITDA in the range of $50 million to $60 million in 2024. Prices are projected to stay consistent with those seen in the first quarter, and we expect sales volumes to increase due to rising customer demand. Raw material prices are expected to increase due to increased purchases pulp prices. We expect our high-yield pulp business to achieve EBITDA in the range of $5 million to $10 million in 2024. We expect a slight increase in high-yield pulp prices in Q2 or further rises anticipated in the second half of the year. Additional sales volumes are projected to increase as we move into the second half of 2024. Polarcus total CapEx for the paperboard and high-yield pulp businesses is expected to be $5 million for 2024. We expect corporate costs of $55 million to $60 million, up slightly versus 2023 as we are the final year of our multiyear ERP implementation. As the ERP project concludes, we anticipate cost reductions starting in 2025. It's important to note that these costs may vary due to factors like currency fluctuations, environmental charges and other noncash expenses.
On Slide 14, we illustrate the trajectory of our EBITDA margin growth and net leverage decline in 2024, we anticipate our margins to be in the 11% to 12% range. Forecast for net secured leverage at the end of the year stands at three times covenant EBITDA. Our commitment remains resolute in achieving our target net debt leverage ratio of 2.5 times by 2027.
With that, operator, please open the call to questions.

Question and Answer Session

Operator

Thank you. We'll now be conducting a question and answer session. If you'd like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two. If you'd like to remove your question from the queue For participants using speaker equipment, it may be necessary to pick up your handset before pressing star two. One moment please while we poll for questions. Thank you. Our first question is from Daniel Harman with Sidoti & Company. Please proceed with your question.

Daniel Harriman

Thank you.
Good morning, guys. I'm happy to see a little uptick in the ethers volume. Could you just provide a little bit more color on what you're seeing in that market, in particular, the European construction market.
And then the destocking that I think you alluded to last quarter and you talked about today in acetate and do you from do you expect that to be mostly finished or should that be ongoing throughout 2024?

DeLyle Bloomquist

And good morning, Daniel.
This is to while I pass to answer your question on ethers we're still trying to figure it out.
To be honest, the we don't know whether this is a restocking by our customers or by our customers' customers in the expectation that the construction markets will start improving in Europe as the ECB is expected to lower interest rates there in the second half of this year or whether it's really truly an underlying increase in demand. I think we'll have a better look on that and a better saying that when we get to the end of Q2. So we'll just have to wait there. And then with respect to the acetate market, again, what we said is that the destocking is really concentrated with a couple of our large customers, principally in China and Asia. And we expected that that destocking will continue through the first half and then we'll start start normalizing in the in the second half of this year.

Daniel Harriman

Okay, great.
Thank you so much.
Best of luck here in the coming quarter.

DeLyle Bloomquist

Thank you.

Operator

Thank you. Our next question is from Matthew McKellar with RBC Capital Markets. Please proceed with your question.

Matthew McKellar

Hi, good morning.
Thanks for taking my questions. First, can you provide a little bit of color on how the requalification process is with OCS volumes historically produced at Temiscaming and have been going with that with that 18 to 24 month timeframe.
You talked a little bit from the time you first started talking about concentrating commodity volumes at Temiscaming and as of last year were from today? And then do you expect you can requalify all of those CS volumes at other facilities? Or do you expect to lose a little bit of business along the way?

DeLyle Bloomquist

Yes. Good morning, Matt. With respect to your question on the requalification process itself is going well. The all of our targeted customers see us customers that we were supplying at Temiscaming are taking product from our various plants. And I could just say that the process is proceeding as planned.
With respect to the period of time, I would say that, you know, the 18 to 24 months is from the beginning of the process. So we probably have got a little less than that in terms of remaining time going forward to conclude and conclude those processes. And the question about are we including all of our customers in the process. All of our customers were certainly invited to be part of the qualification process. Some of them given that they had they were qualified with some of our competitors chose not to. And so consequently, we think that some of our customers that we're currently supplying out of Temiscaming will likely go to of our competitors. But we do believe that we will retain what we think are most most important in higher margin business.

Matthew McKellar

Great.
Thanks for that.
Color.
And then just sticking with the Temiscaming HPC, indefinite curtailments, could you talk about how that will affect your wood chip and residual flight residual fiber supply agreement with green first your investment in Atomera and then the operation of the co-generation facility at the site.

DeLyle Bloomquist

Okay. Right. With respect to our chip supply agreement with GreenFirst, are we fully intend to continue to honor that agreement. Again, this is a suspension of operations and not a closure. So there may be times sometime in the future that will need to have a ship supply but obviously with the suspension, we're not going to consume chips anymore. So the focus would be working with GreenFirst to resell the chips into the market on the just as a reminder, respected accurate payment is based on the transfer price between the parties is based on market pricing. So we expect that any impact to us with respect to profits or losses will will largely be mitigated with respect to the Animal Care business. Again, they take a small volume. We'll be able to supply that from our other plants to keep keep that operation moving and growing. And then the last issue with respect to the boiler 10, I think is what you're talking about, our liquor liquor boiler that is part of the suspension so we're planning to shut those operations and close those operations down for for the period.

Matthew McKellar

Okay, great. Thanks for that detail. And the last one for me. As part of that softwood lumber duty refund sale, you called out an opportunity for the Company to receive additional future sale proceeds contingent upon the timing in terms of the ultimate trade dispute outcome can you provide any color here and under what circumstances you would receive additional proceeds in the future?

DeLyle Bloomquist

Really can't do the math. You the U.S. Those are under under NDA on those type of type of details.
So we can't really share that with you.

Matthew McKellar

Okay, understood.
Thanks.
That's the back.

Operator

Thank you. Our next question is from Dmitry Silversteyn with Water Tower Research.
Please proceed with your question.

Dmitry Silversteyn

Good morning, gentlemen. Thank you for taking my question. I was just I want to circle back to a couple of things. First of all, the $7 million energy benefits that you will realize later in the year. Can you provide a little bit more detail of what that is? And is it likely to fall in the first half of the year and the second half of the year.

DeLyle Bloomquist

Okay, Dmitry, the what we're talking about is the CO2 credits that we that we receive it in France with our Tartas facility. And historically, we've usually been able to realize those and recognize those as part of EBITDA, either in the first or second quarters of the year. Right now, we're thinking that it's likely to occur in the third quarter of this year, largely due to the government authorities and pushing out the to the payment, the payment potential on that. The So again, it will be there roughly about the same amount as we've seen in the past, just a little delay.

Dmitry Silversteyn

Got it.
Thank you, Mick. And then just a follow-up on your comment about the market conditions in China that are impacting your high-yield plant, a pulp business. Can you provide a little bit more detail on what's going on there in China and how long this these market conditions are expected to last?

DeLyle Bloomquist

Well, you have the conditions continue. As we discussed last quarter of the skilled. It's an excess supply of high-yield pulp or mechanical pulp in China due to new capacity that came on. And I would expect that that's probably going to continue through most of the year. There's a lot of lot of excess supply in that market. The impact is having with respect to global pricing on high yield pulp is though limited to China. We're not really seeing a lot of that bleed out to other regions in the world. So pricing in the Indian subcontinent area as well as Europe continues to be strong and we expect will continue to improve as we go through the year and in response to what we're seeing in China, we are obviously then repositioning our sales and our supply into those markets that are more attractive. And then we believe that as a result of the stronger dynamics, we'll be able to improve our average pricing as the year progresses.

Dmitry Silversteyn

And so I mean, if I look at your slide for the volume and price and high yield pulp. It does look like it's come off the bottom a little bit, but obviously not to the level that we saw in 2022 is the expectation that the sort of the normal pricing is somewhere more in line, let's say, with the first half of '23? I mean, how should we think about kind of sustainable pricing for this for this business?

DeLyle Bloomquist

Yes, that's again, that's a good question of what would be a normalized price. Normally in know, over the over a cycle, our high yield pulp business, it generates positive EBITDA and positive cash flow. Obviously, we're coming off the trough and starting to see improvements. And as we get into later part of this year, we'll start to enjoy positive EBITDA. And the positive cash flow, I really can't right now tell you where the where the normalized pricing would be and it's likely going to be higher than we are today. Will I get all the way back to another first quarter of 2023?
I that's I think right now it's probably of that would be a guess on my part, I'm really really don't want to speculate on that.

Marcus Moeltner

And Dmitry, remember, there's a lag effect on our high-yield business, giving our order file and or logistics supply chain.

Dmitry Silversteyn

Got you.
So yes, I understand that.
Okay.
Thank you.

DeLyle Bloomquist

All right. Thank you, Dmitry.

Operator

Thank you. Our next question is from Sandy Burns with Stifel. Please proceed with your call.

Sandy Burns

Hi, good morning and good start to the year. Maybe just to clarify one item about the EBITDA guidance. The $30 million in onetime cash charges for the Temiscaming closure suspension, is that added back to get to the $180 million to $200 million? Or are you including those as valid expenses for 2024?

DeLyle Bloomquist

So we're adding that back to the adjusted EBITDA guidance.

Sandy Burns

Okay.
So that is that is an add-back and those are all cash costs just to confirm.

DeLyle Bloomquist

There are no, no, they're not all cash costs, but a good, good, good majority of it is.
And just the other point to make is that the $30 million it will be spread out over there over the course of multiple years it's not all going to happen in 2024.

Sandy Burns

Okay, good. Okay.
And maybe just to follow up on that prior question about the duty sale, and I appreciate you don't want to get into too much detail, but maybe just to clarify, was that a sale of all of the duty refunds you were expecting?
Or was it just a portion of those.

DeLyle Bloomquist

Was the sale of all of our duty refund rights. So not just the amount that was in receivables, so the full $111 million.

Sandy Burns

All right. Great.
Thank you.

Operator

As a reminder, if you'd like to ask your question, please press star one on your telephone keypad. Our next question is from Roger Spitz with Bank of America. Please proceed.
With your question.

Roger Spitz

Thanks very much. Good morning. I wanted to see EBITDA impact of that Q2 '24 JSF turnaround, if any?

DeLyle Bloomquist

Well, that's a good question, Roger, in your you got me stumped off halfway, I would save in the neighborhood of $10 million, something like that. But again, that's it that's going to be, I guess, just thinking about historical impacts with that. But given the size of the plant, given the of the obviously the impact it has, it's going to be it can be material.

Roger Spitz

Are you getting off all lines or just one particular line.

DeLyle Bloomquist

We brought the whole plant down for about three weeks.

Roger Spitz

Okay.

Marcus Moeltner

And Rodger and Howard, and the note we're through that shutdown right.

DeLyle Bloomquist

The important point is that the plants back up and running now Got it. And we brought it back up on a little earlier than planned.
So it was a very successful outage perfect on.

Roger Spitz

So I'm regarding Temiscaming, you're going to idle your HPC. plants, obviously continuing to run the paperboard and higher pulp plants. And the slide talks about what you save in EBITDA. But my question is, is if we look at the paperboard and high-yield pulp, you both you both have EBITDA associated with it. Presumably there will be some additional EBITDA pressure or costs from running those plants, but not having the benefit of the HPC. plan to absorb the the other fixed costs of running the whole complex. So how should we think about on like LTM EBITDA of those two segments?
Hpc wasn't running as they're like, so they have to absorb another X million dollars of fixed cost from from not running HPC.

DeLyle Bloomquist

And you're getting into some details relevant relative And with respect to some of the negotiations and discussions we're having with potential suitors of the paperboard business.
So I don't really want to get into the details on that.
But I will say that any of the stranded costs that right now that we've forecasted for the business is in that $15 million to $20 million of benefit that we've got in the EBITDA for the business for the business going forward. So we've got included in the estimates we've given you.

Roger Spitz

Got it. So --

DeLyle Bloomquist

We're a little below what we had.
The last point, I would make one more point to Roger's.
Once again, this is not a closure.
This is a suspension.
So any of these retained costs of these stranded costs, or however you want to describe some of the plan is that HPC. will retain those costs ongoing and won't affect the paperboard business or the or the high-yield pulp business, again, because the rate there's a likelihood that we would actually restart these operations sometime in the future.
So these these ongoing fixed costs that we would have the site, we would we would need to retain to support that, that potential.

Roger Spitz

Well, I guess, at least for Farhan two questions. One is where are you in the process, have you thought you said last time you received indications of an interest which suggest you did on your first round of bids and that are you know on. So where are you are you have you asked for second round bids? Have you run management presentations headed the second rounds? Have you sent out no contracts for potential buyers tomorrow, Mark.

DeLyle Bloomquist

We have had management presentations.
We've had site visits with interested parties. We are a have provided some draft or draft APA agreements. But with the as a result of the suspension. Obviously, the underlying fundamentals and assumptions relative to how the site will operate have now changed. And so because of that, the diligence process is going to be extended as I said at our suitors, we'll have a chance to understand what it would mean to the paperboard and a high-yield pulp business relative to the suspension that we've discussed. The B. So anyway, the delay, the delay, we believe is actually relatively minor. It isn't a it doesn't come out at all talk about or even suggests that there's a lack of enthusiasm for for the assets. In fact, I would suggest that as a result of the suspension that enthusiasm has actually increased from the parties that are interested. And I would actually suggest also that we've actually seen increased interest from other other parties. So we will continue to run the process as we as we as we see necessary to get the best value for those assets.
As I said earlier, this is not a fire sale.
We want to make sure we get fair value for these assets and we'll run the process as we as we deem necessary to extract that value.

Roger Spitz

Got it.
If I can take from our frontline on this subject, you're shutting you're idling the planned July second. So Q3 will be relatively are substantially clean. Do you think that you really need to go back out and show them the Q3 numbers and with one quarter of clean quarter, I note to shown that when you can restart or do you think you'll after we show them two full quarters of quote unquote clean numbers without HPC. operating, it does potential buyers for confidence to make a as high a bid, hopefully as I can.

DeLyle Bloomquist

It depends on the suitor.

Roger Spitz

Right.

DeLyle Bloomquist

So it's up to them. But our goal is to conclude the deal if the terms are attractive before we have to by the end of the year as part of the refi process.

Roger Spitz

Adding Hainan, I depend on Qunar Connect, Tim.

DeLyle Bloomquist

Yes, go ahead and ask couple more questions.

Roger Spitz

Sure.
I maybe you said this, I missed it. The 2024 HBC. EBITDA. Did that change from the [$180 million to $190 million] and the paperboard from [$50 million to $60 million]. I just maybe I missed it.
You said it on prepared remarks.

DeLyle Bloomquist

So I didn't change the same as we gave last last time.

Roger Spitz

Got it. And then lastly, regarding the GreenFirst WISChip supply agreement, is that based on take-or-pay volumes requirements contracts or is it just general volume min-max under the supply agreements?

DeLyle Bloomquist

We required to take a certain amount of volume every year from GreenFirst and that. So we will need to take the volume even though we're not operating the facility, but the pricing is based on market and market pricing at the time. And as a consequence, as I said, we will look to resell them working with GreenFirst. And as a result of that our expectation is that we will not see either profit or loss from that resell.

Roger Spitz

Glad to hear. Thanks for the extra time.
Appreciate it.

Operator

Yes, if there are no further questions, at this time, I'd like to hand the floor back over to Lyle Bloomquist or any closing comments.

DeLyle Bloomquist

All right. Again, as always, thank you for joining us today. And I appreciate all your interest and support of the company. I am very proud of the hard work and dedication that we've shown that has been shown by our team and very confident in our ability to continue to enhance the profitability while we work to reduce our debt and our leverage. And I look forward to providing updates on all of our ongoing projects and initiatives in the and valued your continued support as we strive for long-term success and growth. I'm as always, we're committed to maintaining transparency and open communication. So feel free to contact us if you have any further questions or you need any further information.
Thank you again for your participation.