Debottlenecking projects at Catalyst Paper’s Crofton pulp mill had a negative effect on the company’s second quarter results, but have already improved pulp production.
Catalyst Paper recorded adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) for the second quarter of $7.1 million compared to $25.7 million in the previous quarter. Strong operating performance was overshadowed by a planned maintenance outage at the Crofton pulp mill, higher power costs due to a hydroelectricity rate increase, a stronger Canadian dollar and lower transaction prices for pulp and all paper grades.
Sales of $283.5 million exceeded the prior quarter by $9.6 million and reflected higher paper sales due in part to the delivery of shipments delayed by the Q1 container truck driver strike at Port Metro Vancouver.
Catalyst recorded a net loss of $6.3 million and a net loss before specific items of $13.6 million in Q2.
Paper production volumes for the quarter were 3.5% higher than average production in 2013 and 2% higher than the first quarter of 2014 due to improved paper productivity. Two major debottlenecking initiatives were completed on the pulp mill during the scheduled maintenance outage to increase future pulp production.
“Our operating results were hampered by the cost and production impact of the recovery boiler shut, the hydroelectricity rate increase, and the strengthening Canadian dollar," said Catalyst President and CEO Joe Nemeth. "On the upside, we achieved a new record in paper productivity in the quarter, we're already seeing improved pulp production as a result of the debottlenecking work completed on the pulp mill, and our program to identify and implement opportunities for improvement is on track to realize significant benefits in 2014 and beyond."
Catalyst Paper management expects the decline in demand for coated and uncoated mechanical paper to continue for the remainder of the year. Demand for directory paper will continue to decrease due to electronic substitution. The company press release states, “While newsprint demand is expected to continue to contract as circulation and page counts fall, the North American market is expected to remain stable due to pending newsprint machine conversions.”
Third quarter earnings will reflect a scheduled total mill outage at Powell River and power boiler shuts at all three mills.
Catalyst Paper manufactures diverse specialty mechanical printing papers, newsprint and pulp at three mills, located in British Columbia.