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Resolute reports losses due to shutdown costs

Resolute Forest Products Inc. recorded an operating loss of US$18 million for the second quarter, compared to operating income of US$16 million in the year-ago period. Key to the quarter’s reported performance was a non-recurring US$37 million closure and impairment related charge, almost all of which resulted from the permanent shutdown of a newsprint machine at the Augusta facility during the quarter.

A decline in sales arising mostly from comparatively weaker prices was almost entirely offset by reductions in costs and the weaker Canadian dollar.

The company invested US$52 million in fixed assets during the second quarter, US$30 million of which was dedicated to its Calhoun tissue project in Tennessee.

“Despite challenging market conditions in certain of our business segments, we recorded a solid performance this quarter,” Richard Garneau, president and CEO of Resolute, said in news release. “Our wood products segment has delivered significant improvements as markets continued their slow recovery. In our paper segments, we continue to demonstrate our ability to generate consistent value despite structurally challenging market conditions, while annual maintenance-related declines in pulp production more than offset benefits of rising market prices. Although our tissue operations continued to underperform and remain a key focus for the year, we are excited by the advancement of our Calhoun tissue project, as we achieve a key milestone this month with the commissioning of our first converting line.”

Resolute reported a GAAP net loss for the quarter of US$42 million, or US$0.47 per share, compared to a GAAP net loss of US$4 million, or US$0.04 per share, in the same period in 2015. Sales were US$891 million in the quarter, down US$35 million, or 4 per cent, from the second quarter of 2015. Excluding special items, the company reported net income of US$6 million, or US$0.07 per share, compared to net income of US$7 million, or US$0.07 per share, in the second quarter of 2015.

The average transaction price for market pulp fell by 8 per cent, newsprint by 5 per cent, and specialty papers by 5 per cent, but rose by 2 per cent in wood products, resulting in an overall unfavourable variance of US$38 million on pricing, excluding foreign exchange, when compared to last year.

“Our views on pulp markets remain unchanged, with near-term perspectives still positive but deteriorating as incremental supply creates unfavourable pressure on prices,” Garneau said in the release. “In wood products, on the other hand, we believe market conditions will continue to improve, diminishing the potential impact of trade restrictions in 2017. We believe paper grades will see a seasonal uptick in the short-term, with newsprint prices continuing to rise while coated and supercalendered grades see sustained downward pressure. Our tissue segment will remain a focus as action plans are executed and profitability improves over the next two quarters. Our greenfield tissue project in Calhoun continues to advance as planned and on budget. The two remaining conversion lines will be commissioned in the next few months, ahead of our tissue machine startup, scheduled for the first quarter of 2017.”