Sylvamo (NYSE: SLVM) lines up a Europe exit and books a $284 million loss

What happened

Sylvamo Corporation (NYSE: SLVM) lined up a possible sale of its Europe business to Midas Atlantic Partners, in partnership with The Najafi Companies. Europe now sits in discontinued operations. The continuing business had a better quarter than the second quarter but a weaker one than a year ago.

Sylvamo entered a put option agreement for a binding offer to buy the business, according to its third-quarter earnings release dated Nov. 6. The business includes the uncoated freesheet paper mills in Saillat, France, and Nymolla, Sweden, plus forestry and supporting operations. CEO John Sims said the company believes the potential deal is an important strategic step.

Prior periods have been recast. Unless noted, the release's results and comparisons exclude Europe. Europe had net sales of $178 million in the third quarter and a $284 million loss, mainly from a noncash impairment charge.

The release shows a $342 million pre-tax impairment of the Europe segment. A $67 million pre-tax gain partly offset it. The gain is tied to the expected cumulative foreign currency translation gain and other accumulated other comprehensive loss for Europe.

Key numbers

Metric	Latest	Change	Source
Net sales from continuing operations	$645 million	from $662 million, -2.6%	Calculated from SEC 8-K
Adjusted EBITDA (non-GAAP)	$128 million	from $158 million, -19.0%	Calculated from SEC 8-K
Net income from continuing operations	$85 million	from $71 million, +19.7%	Calculated from SEC 8-K
Adjusted operating earnings (non-GAAP)	$53 million	from $72 million, -26.4%	Calculated from SEC 8-K
Free cash flow (non-GAAP)	$16 million	from $64 million, -75.0%	Calculated from SEC 8-K
Discontinued operations result (Europe)	$284 million loss	from $14 million loss	SEC 8-K, Exhibit 99.1

Read more: Sylvamo (SLVM) company research

How the continuing business performed

Net sales from continuing operations were $645 million. That is up 5.0% from $614 million in the second quarter and down 2.6% from $662 million in the third quarter of 2025.

Adjusted EBITDA, a non-GAAP measure, was $128 million, a 20% margin. That is up 93.9% from $66 million, an 11% margin, in the second quarter. It is down 19.0% from $158 million, a 24% margin, a year earlier.

Against the second quarter, price and mix improved by $25 million, mainly from previously announced paper price increases. Volume was relatively flat. Planned maintenance outage costs were $38 million lower, as expected. So the largest single driver was lower outage costs, not price. Operations and other costs were favorable. Input and transportation costs were unfavorable, mainly on higher transportation costs.

Latin America earned a segment operating profit of $22 million after an $18 million loss in the second quarter, but below its year-earlier profit. North America earned $65 million, up from $46 million in the second quarter and down from $80 million a year earlier.

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How special items lift the reported profit

Reported net income from continuing operations was $85 million ($2.13 per diluted share), a 13% margin, up from $71 million a year earlier. Adjusted operating earnings, which exclude special items, were $53 million ($1.33 per diluted share), down 26.4% from $72 million.

The gap comes from net special items, a net after-tax benefit of $33 million ($0.83 per diluted share). They include a $36 million tax benefit related to the company's investment in its European subsidiaries.

Cash did not follow the earnings rebound. Cash from operating activities in continuing operations was $70 million, against $114 million a year earlier. Free cash flow was $16 million, down 75.0% from $64 million. It was negative in the second quarter.

Continuing operations now also carry about $6 million to $7 million a quarter of corporate costs once allocated to Europe.

Why it matters

OptimistFi has argued that Sylvamo works if its mill network keeps pricing and cash flow resilient. The price and mix gain supports the pricing half of that view. Free cash flow well below last year's level leaves the cash half unproven.

The company says its strategy is unchanged. It will focus on uncoated freesheet, concentrated in Latin America and North America. It also names headwinds. Imports in both regions keep rising year over year, and persistently high oil prices keep affecting chemicals, energy and fiber costs. In North America, the company says industry supply and demand remains healthy and its price increases are mostly in place with customers.

Long-term debt was $861 million on Sept. 30, against $758 million on Dec. 31, 2025. Cash and temporary investments were $93 million. Sylvamo declared a dividend of $0.45 per share, paid Oct. 16. It says it will maintain a strong balance sheet and return cash to shareowners.

What's next

Sylvamo will host an audio webcast at 10 a.m. EST at investors.sylvamo.com. Replays will be available there for one year.

At the Eastover mill, the paper machine optimization project remains on schedule and within budget. It will add 60,000 short tons of uncoated freesheet capacity a year. The woodyard softwood line and the warehouse expansion at the sheeting plant are due to start up in the first quarter of 2027. A new sheeter adding about 200,000 short tons of cutsize converting capacity is expected to start early in the third quarter of 2027.

The next quarterly report will show whether price and mix gains keep lifting adjusted EBITDA. It will also show whether free cash flow moves back toward its year-earlier level. Adjusted EBITDA slipping back toward the second quarter's level would weaken the case.

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