Rayonier Advanced Materials Inc., a U.S. maker of cellulose fiber, plunged 44 percent after its largest customer disputed the terms of a supply contract.
The shares tumbled to $7.62 at the close in New York, the most since the Jacksonville, Florida-based company began trading in June 2014. A record 18 million shares traded Wednesday, according to data compiled by Bloomberg.
According to Rayonier, Eastman Chemical Co. is seeking clarification in a Tennessee court on whether the so-called meet-or-release provisions in its contract apply to all volume supplied. Such provisions typically allow a customer to switch to a cheaper supplier if the original seller can’t compete on price. Rayonier is seeking a declaration from a Georgia court that the provisions apply to no more than 7,500 metric tons a year of product, or less than 2 percent of expected 2015 cellulose specialties sales, it said in a separate statement.
“It is hard to see how this is anything but bad news for” Rayonier, Paul Quinn, an analyst at RBC Capital Markets, said Wednesday in a note. In the worst case, Eastman may get the entire supply contract declared invalid, he said.
Rayonier first commented on the issue in a filing after the close of trading on Tuesday. The company was spun off from former parent Rayonier Inc. last year.
“We remain committed to resolving our differences with our largest customer in a constructive manner and continuing our 85-year relationship,” Rayonier Chairman Chief Executive Officer Paul Boynton said in the statement.
Eastman accounts for 31 percent of Rayonier’s revenue, according to data compiled by Bloomberg. The supply contract started in 2012 and goes through 2018. The dispute relates to 2016 and beyond, Rayonier said.
“We expect all of our suppliers to continually improve quality and to remain competitive in an ever-changing global market,” Candy Eslinger, a spokeswoman for Kingsport, Tennessee-based Eastman, said in an e-mail.
Cellulose is used in consumer products including cosmetics, paints, pharmaceuticals and filters.