Catalyst improves Q1 results despite declining markets
By Pulp & Paper Canada
By Pulp & Paper Canada
Catalyst Paper recorded net earnings of $21.0 million on sales of $352.5 million in the first quarter of 2009. This…
Catalyst Paper recorded net earnings of $21.0 million on sales of $352.5 million in the first quarter of 2009. This contrasts with a net loss of $48.5 million on sales of $492.2 million in the final quarter of last year. The company says these results reflect the actions it has taken to improve its cost base and competitive position in the face of unprecedented economic and market challenges. Quarterly results were further improved by a $30.7 million gain on a debt buy-back.
Lower fixed costs and favourable exchange rate movement were the largest contributors to the year-over-year improvement.
Production curtailments during the quarter totalled 180,300 tonnes and occurred at all operations affecting all product lines.
Net earnings before specific items in the first quarter of 2009 were $8.6 million, compared to $9.3 million in the preceding quarter. Catalyst posted operating earnings during the first quarter of $24.2 million, up from $11.5 million in the last quarter of 2008.
“Thus far in 2009 we’ve faced a deepening global recession, accelerating structural changes in the print media, and overall demand is the worst we can remember,” said president and CEO Richard Garneau. “We’ve moved ahead with the often difficult decisions necessary to keep our cost structure viable while maintaining our strong market position.”
Specialty paper demand was down in the quarter, as the recession resulted in reduced advertising and as printers and publishers drew down inventories. The first quarter year-over-year demand declines were the largest recorded in 30 years for coated mechanical paper and the largest ever recorded for uncoated paper. Directory demand was also down significantly, although pricing was stable as a result of annual contracts. Demand and pricing trends were negative for both newsprint and pulp.
In light of these conditions, Catalyst announced in February 2009 the indefinite curtailment of the Crofton # 1 paper machine, the Elk Falls # 2 and # 5 paper machines, and NBSK pulp production at Crofton. All three paper machines at Elk Falls are now indefinitely curtailed, and additional market-related curtailments were also taken during the quarter at the Powell River, Port Alberni and Snowflake mills.
Global economic conditions are expected to remain challenging throughout 2009, and further demand and price weakening is expected across all of Catalyst’s product lines. Catalyst currently anticipates production curtailments totalling 269,700 tonnes in the second quarter although further curtailments may be required depending on market conditions. Broader economic conditions are expected to reduce the company’s ability to sustain recent operating earnings.