Good morning. My name is William Shelmire, and I'm an Account Manager here at Three Part Advisors. I want to thank you all for joining us for our 16th annual Midwest Ideas Conference. To start things off today, we have Rayonier Advanced Materials, which trades on the New York Stock Exchange under the ticker symbol RYAM. Representing the company today is their President and CEO, De Lyle Bloomquist.
Good morning, everybody. Thank you for joining us this morning. It's great to see that we got a number of folks that want to hear a little bit about RYAM and about what we're trying to do.
Just as kind of a start, much of the material that I'm going to go over today was actually part of our second quarter analyst call , about 10 days ago, where we took the opportunity to remind our investors about our long-term strategy, about what we were trying to do. Given the uncertain times, we wanted to make sure that people understood that our strategy still was intact and we were still progressing and pursuing the strategy as we had outlined. It's a great strategic document that shows what we're trying to do with the project or with the company. I'm going to go over just a lot of the highlights on the slides.
If you want to get into more of the detail and understand a little bit more about some of the specific projects that we're pursuing, I would invite you to go to our website and listen to the analyst call, and there should be much more detail about what we're trying to do. With that, one of the mistakes that a lot of people make about RYAM is they think that we're a pulp and paper company. We've been around for about 100 years, and people confuse us that we're in the wood business and that from the wood we generate pulp and paper. That is not the case at all. What we do is we produce natural cellulosic fibers that are used in a myriad of different applications, including some cellulose specialties products, particularly around the ethers, acetate, and a number of other cellulose specialties or CS applications.
We also make a number of niche commodity or high-purity commodity products, principally focused on fluff applications, which go into absorptive products, and we'll talk about that a little bit later. We also are merging into our biomaterials, which we think offers significant growth potential with very attractive returns to our shareholders. We got a couple of core non-core businesses, our paperboard business and our high-yield pulp business, which are produced out of our Temiskaming, Quebec operations. Each of those have unique characteristics that give them some comparative advantage. Paperboard, we're the only three-ply paperboard producer in North America, and we have a high-yield pulp product that we ship around the world. It is primarily based off of a maple fiber, which gives it unique surface area-to-weight ratios that are particularly attractive for those who ship their product long distances.
We operate four facilities, two of them in the United States, one in Canada, the Temiskaming operation, and one in France. Our strategy is really focused around adding value through our core business, which is this high-purity specialty business, by reducing its cost structure and leveraging what we think are very advantageous market dynamics, which I'll cover, but also growing the business through biomaterials, which again leverages off of, again, very unique comparative points that we have, and we believe it will add significant shareholder value. Our products, or at least the products that you would be familiar with, they are used by most everyone, every day, and everywhere. Like I said, we've been in the business for 100 years, so our products have gone around the world in most countries.
If you look at the left, those are our cellulose specialty products, the acetates, the ethers, and what we call our other CS products. You can look at the different end uses that it goes into, whether it's food, pharma, natural plastics, entire cord casings like sausage casings, nitrocellulose, which goes into furniture lockers, but also used for munitions. All of those require exact new specifications for our customers. On the right, the top two, fluff, again, a core, one of our core products goes into absorptive products around personal hygiene, adult incontinence, baby diapers, feminine products. Viscose and lyocell goes into textiles. Think of Rayon...Rayon, Ranier. We invented that product back in the 1930s with DuPont. We're in the textile business. You got the paperboard and high-yield pulp businesses, which are being driven by strong megatrends away from oil-based packaging, plastic packaging, more to sustainable packaging.
We see good growth characteristics in that business. Finally, biomaterials, that's where we want to grow the business, and we feel that we've got a strong comparative advantage in. 2025, a very challenging year for us, given all the uncertainty and displacement caused by, I'll call it the tariff wars that we've seen since January 20th . We export 70% of our production. It's no surprise, or shouldn't be a surprise, that we would be impacted in some way due to those tariffs. The EBITDA headwinds that we faced, we estimate around $59 million-$60 million EBITDA for this year. We believe that those issues are non-recurring and are largely behind us. As we enter into 2026, we believe that our normalized EBITDA going into 2026 will be around $200 million when you take into account some of these issues.
Just to cover off a couple of them, tariffs, obviously, a big talking point. Total about $21 million impact. Seven of it would be, I would call, non-recurring issues that are behind us just due to people and our customers not completely understanding what the impact was going to be to them. We didn't lose share. We didn't lose price. Once they got their footing, we started seeing the orders starting to normalize. $14 million is tied to our customers, sales to our U.S.-based customers, where their products were impacted by the tariffs as well. We believe in time, given the strong demand-supply dynamics of the business, that we will recoup much of that $14 million. For our outlook and our projections, we've excluded that from those projections. Weaker U.S. dollars impacted us, roughly $8 million.
We're particularly exposed to the Canadian dollar, given our assets up in Canada, but also to the EU, given our French assets. We're seeing some of that come back to us until Friday when the Fed announced their inclination for a rate decrease. We believe that will come back. We had some operational challenges in the first half of the year. Just giving a couple of examples, our facility in France, we had three strikes during the year, first half. Lost about 20 days of production as a result of that. That obviously had a significant impact. Georgia, where our largest facility is located, had snow in January. Severe weather impacted the operations. We're not prepared for the kind of snow that we saw in January. That had some impact to production, and primarily about employees getting to the plant really was our bigger issue.
On top of that, we have seen softness in our paperboard and our high-yield pulp business. New supplies come online. Some of the disruption we're seeing in China, called the evolution disruption, we're not immune to that. We're seeing that in high-yield pulp as well. An important point to make, though, is we believe that 2025 is our trough year, and Q2 was our trough quarter. We believe that as things normalize and as we enter 2026, we'll be back onto the growth track that we were on. If I look forward and look at the next two years, we have very definitive plans to grow our EBITDA through a number of different actions. We'll just quickly lay out the plan. We're going to divest our non-core business, our paperboard and high-yield pulp business.
We plan to remarket that in 2026, proceeds of which will be used to pay down debt. The cellulose specialties business, as I mentioned, is a highly attractive market with very strong supply-demand fundamentals that allow us and give us pricing power in that business. We have a detailed plan to expand our profit margins by lowering cost of production on a sustained basis. I'll talk about that in some depth a little later. We at RYAM, given that we're the largest player in this business and the only player with multiple facilities, believe we control most of the excess capacity in the business. As the business grows or as the demand grows, we believe that will help us offset some of our commodity exposure and replace that with the new demand in cellulose specialties at a much higher profit margin.
Biomaterials is an exceptional growth opportunity for us to recycle capital into high-return projects that we believe will create tremendous shareholder value. We believe we've got a balance sheet that will allow us to fund that growth without any shareholder dilution. We believe because of all these opportunities and because of the strong position that we hold, our current share price does not fully reflect the intrinsic value of our current assets as well as the earning potential from our growth strategy. I believe I'll convince you of that as we go through the presentation. I'll talk quickly about the industry dynamics within our core business, as well as what we believe is our sustainable comparative advantage. As I mentioned, RYAM is the leading producer of cellulose specialties. Very highly specialized products. Our products are known for its purity and its product functionalityc
Our customers have been using our products, which are very bespoke to their customized needs for not just decades, but in the case of a couple of customers, almost 100 years, which is a testament to the stickiness of our customers to the products that we produce and their requirement for the purity of the products that we provide. Very high switching costs that our customers have, and as a result, provides for the lack of alternatives for our products. You look at the industry, the industry has gone through significant consolidation and primarily rationalization over the last, let's say, five years, including the suspension of our HPC operations up in Canada last year. Where that puts the industry today is that the three largest players, ourselves, Brasell, and Borregaard, control about 80% of the market share. The industry capacity utilization now sits near 90%.
We don't expect that there'll be any greenfield expansions or brownfield. We believe that the margins have to get higher to justify either one of those, significantly higher. Any capacity creep from de-bottlenecking, we believe, will be easily absorbed by market growth. As a result, analysts who cover our space are projecting a 4%- 6% price increase on a sustained basis, which if happens, will outpace our all-in cost inflation at RYAM. I mentioned the tariffs and the uncertainty that's caused and the disruption. One of the silver linings to that is that it has underscored this market tightness and the lack of alternatives for our products. A good example of this is back in April or May, China raised their tariffs from whatever it was to 125% in retaliation for the tariffs that were launched by the U.S. administration.
That would have been a big hit to us because we ship a lot of our product to China. What happened was because of the lack of substitute, the lack of quality product to replace us, China published a list of products that would be exempt from those tariffs, and our product was on that list. Just again, just reemphasizing that there is the stickiness of our products, the uniqueness of our products, and the general market tightness within the industry. The demand for our products, about half of it is stable, half of it is cyclical. I would say that in the cyclical sectors, like European construction and industrials, have been severely depressed for a number of years now and believe that those opportunities actually, those are actually opportunities that will provide upside to our business model and our projections going forward. Talked about cost reduction opportunities.
We're obviously focused on making ourselves as competitive long-term as possible. We're focused on three areas: labor, productivity, so we're investing in automation at our facilities, efficiencies, think of using less energy per ton of production or less material input like our chemicals or our wood per ton of product, and then improving reliability, being much more predictive about maintenance needs within the plant. We have a very robust pipeline, multi-years of opportunities that will provide significant return on investment and reduce our cost structures materially. Just for 2026 alone, with for an investment of $24 million that we're making this year, that will drive about a $30 million improvement for 2026. We believe that we have a number of years of opportunities of similar returns. As I stated earlier, we at RYAM believe that we own most of the excess capacity. That gives us the pricing power.
That also provides us a unique, puts us in a unique position to capture market share as demand grows. If you look at the analysts that cover our business and the industry, they expect that demand will grow about 80,000 tons over the next couple of years. From that, just capturing our market share, our current market share of that, we believe that we would grow our EBITDA by about $30 million as a result. We believe that's very conservative, again, because we believe we own most of the excess capacity. Some of the upside that's not in that projection would include things like going back to what's gone on in Europe and in industrials and in construction for the past couple of years. We believe that business is in its trough. We're expecting it to grow out of that trough.
If it happens to grow faster, we have the capacity available to capture that with our France facility. If we were to fill up that excess capacity, we believe that we would generate another 15 million tons in value as we replace commodity business with the specialty business. Finally, as I mentioned, we are one of the leading producers of what's called nitrocellulose for munitions and explosives, and the rising global defense spending that's happening as countries build their stockpiles also provides additional upside. Biomaterials and the high growth potential that we have there, just to take a step back, when we bring wood into the plants, we're harvesting wood off a working forest. Don't think old growth. Think of farms, tree farms. We're harvesting wood off these tree farms, bringing them into the plant. Roughly 50% of that tree is water, and that leaves about 50% dry solids.
Of that 50% of dry solids, we currently, through our cellulose plants, will extract 40% of it to make our cellulose fiber products. The other 60% currently we burn for its BTU value. The opportunity for us is to monetize that other 60% in biomaterials. We can do that through a number of different products. For example, biofuels like bioethanol, crude tall oil, prebiotics, turpentine, lignosulfonates, and so forth. We believe that we're uniquely positioned in that we can leverage our existing facilities to create, I would say, exceptional and tremendous shareholder value over and above what our competitors can do. That's because you're essentially leveraging off of an asset base where you can take advantage of its current infrastructure. The capital intensity of putting into the biomaterials is exceptionally low. These products that we produce, we believe, will be stable.
They will be contracted cash flows, and as a result, would justify a double-digit inflation or EBITDA valuation multiple. We'll be able to use very attractive leverage, call it green financing, at very low interest rates. As a result of that, we'll magnify the return on our equity investment significantly. An example, our Tartas bioethanol facility that we started up in the middle of last year. A $40 million project generates $8 million- $10 million of EBITDA per year. It's backed by a five-year take-or-pay contract with ExxonMobil at a premium versus commodity ethanol. That's because this is a second-generation bioethanol that is sourced or generated from a non-food stock input. It's being generated from wood and not corn. As a result, the Europeans put a premium on that product. We put $5 million of equity into it.
The rest of it was financed with grants, credits, and a very cheap loan at 1.8% interest rate. If you do the math on it, and if you base it on market comps, we believe that the return on investment of that project for RYAM's investors is over 10x. Looking at the portfolio of opportunities we have, we have five projects that we're advancing to final investment decision over the course of the next few months. Four of them are within a joint venture that we have with Swing Capital, including a bioethanol plant in Florida, a couple of CTO plants, and a prebiotics plant for animal feed. A total of $110 million investment generates roughly $39 million of EBITDA once up and running, which implies a build multiple of only 2.8x in leveraging off of the current asset base.
We believe when you look at it and use comparable market comps, that the return on equity for RYAM would exceed 7x. How we're funding this, the partnership is 80/20 with RYAM owning 80%. We'll put in $40 million of equity. Swing will put in $32 million. We have $40 million of project debt at 5% interest. The capital's there. The funding is there for those four projects. We're pursuing, expecting a FID by the end of the year and we'll start building. We also have another project outside of BioNova, this partnership called the Altamaha Green Energy Project, or the AGE, a biomass electricity generator that we would locate at our Jesup facility. We're in partnership with Beasley Group, a large biomass supplier for the operation. We'll contribute $40 million / $500 million capital cost for this facility, which will be invested over a three-year period.
When done, this facility will produce 70 MW of renewable energy and will be sold to Georgia Power under a 30-year agreement, a fixed-price power agreement with Georgia Power. Our share of the pre-tax net income will be about $30 million per year. For a $40 million equity investment, we get $30 million a year of pre-tax income. If you go through the math, using market comps, we believe that the return on investment is roughly 10x- 12x of that investment. Why do we have this unique, and I would say powerful, ability to recycle capital at attractive return on investment? It really goes down to that we have very sizable in-place facilities that we can leverage off of. These facilities aren't cheap.
If somebody wanted to do a greenfield in biomaterials, they've got to figure out how to extract the fiber and do something with the fiber to be able to get into the business. We already have that. To show it as an example of what the investment would take, our facility in Jesup, Georgia alone, the replacement cost of that is estimated at $4 billion. These investments, these biomaterial opportunities are all currently commercially viable. There is no technical, there's no market risk to it, as demonstrated by the fact that many of our competitors are already in these businesses and already doing what we want to do. We've got the financing already in place. Post -2028, we have a number of other projects that we're currently evaluating, around ESAF and SAF, where we would site opportunities both in France and the U.S .
We got a solid balance sheet, plenty of liquidity to fund these projects without shareholder dilution. If we sell the, or when we sell the paperboard and high-yield pulp, that will only greatly improve the strength of the balance sheet. Our fixed charge is roughly $170 million. Any EBITDA over and above that is just cash flow to support these projects, as well as further reduced leverage, and possibly look at returning capital back to our shareholders. We can lower those fixed charges in 2026 when our debt becomes callable. That'll be something that we'll be pursuing. If you look at our 2027 run rate EBITDA as we currently project, we believe that our core business would generate nearly $140 million of free cash flow. We believe that RYAM offers a very compelling investment opportunity.
We do believe strongly that our current share price does not fully reflect the intrinsic value of our assets or its earning potential from its growth strategy. The short-term issues, isolated issues, are largely now behind us. The tariff issue is resolved. We believe that the extraordinary non-operational disruptions are behind us, and the non-cash environmental charge and FX issues also will be behind us as we enter into 2026. I've already outlined the underlying fundamentals of the business that we believe make it a very attractive asset, everything from strong demand supply fundamentals for the business that gives us pricing power, our ability to recycle capital into high-return projects from our current asset base, and our compelling opportunities in biomaterials. Our closest market comparable is Borregaard, and they currently trade in the double-digit EBITDA multiples.
We believe that as we scale up and as we execute this strategy, we would earn the same valuation multiples that Borregaard enjoys. If you apply that double-digit multiple to our estimated 2027 core run rate EBITDA, that would apply a stock price of up to 8 x- 10x our current levels. I'll open it up to questions. We have like three minutes. Yeah.
You've got a number of great opportunities, but what's happened? The cause of this now, the management has taken over the company, the money and volume?
Yeah, part of it has to do with the fact that the opportunities have existed in the past, but we were capital constrained. Primarily around the pandemic, the years 2019, 2020, 2021 were difficult, lean years. 2022, 2023 started getting out of the hole. I came on in May of 2022, so put my fingerprints and changed the focus of the strategy at that point and started getting the details of the strategy over the course of the following year. Since then, we've been executing on that strategy. That's kind of generally what's happened. Any other questions? We've got about a minute and a half, guys. I really don't want me to start singing. All right, again, yes.
What range of value?
If you look at other similar deals for similar businesses, 5 x-6x EBITDA is generally what we've seen in the recent past for market comps. Thank you for your time. Again, Mickey Walsh is my Treasurer and VP of Investor Relations.