The Spinoff International Paper (IP) spun off 80.1% of its stake in Sylvamo (which I’ll refer to by its ticker; SLVM) on October 1st, 2021. The distribution ratio was 11 IP shares to 1 SLVM share. As of 7th January, IP retained its 19.9% stake in the new firm, but plans to exit completely within 9 months.
One concern should be that 20% of shares overhang owned by International Paper. But once that is disposed of it will be a big net positive. So question is buy now, or in a year?
Interesting company, but the high debt levels are concerning. In the past I've considered investing in navigator (the European market leader) but ultimately i came to the conclusion that these commodity businesses have margins that are too thin to justify the capital expenses.
Still, I'll see if i keep an eye on this company in the future.
Hey Tiago, thanks for your comment. If I may start a productive discussion... SLVM has an operating margin of 12.3% (2019) and net income margin of 9.4% (2019), which appears solid. Regarding debt, if I project out normalised free cash flow (at high end of expected capex and incorporating the expected boiler expenses) from 2022-2029 - the period when debt comes due - I end up with total FCF of ~$3 billion, compared to total principal repayments of ~$1.4 billion. That looks like a 'debt margin of safety' to me, if I can use the term for that. Still, the low multiple is the cherry on top here really. Let me know what you think!
One concern should be that 20% of shares overhang owned by International Paper. But once that is disposed of it will be a big net positive. So question is buy now, or in a year?
Interesting company, but the high debt levels are concerning. In the past I've considered investing in navigator (the European market leader) but ultimately i came to the conclusion that these commodity businesses have margins that are too thin to justify the capital expenses.
Still, I'll see if i keep an eye on this company in the future.
Hey Tiago, thanks for your comment. If I may start a productive discussion... SLVM has an operating margin of 12.3% (2019) and net income margin of 9.4% (2019), which appears solid. Regarding debt, if I project out normalised free cash flow (at high end of expected capex and incorporating the expected boiler expenses) from 2022-2029 - the period when debt comes due - I end up with total FCF of ~$3 billion, compared to total principal repayments of ~$1.4 billion. That looks like a 'debt margin of safety' to me, if I can use the term for that. Still, the low multiple is the cherry on top here really. Let me know what you think!