Pulp and Paper Canada

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Industry News (March 01, 2006)


March 1, 2006
By Pulp & Paper Canada

FINANCIAL

FINANCIAL

CATALYST POSTS LOSS, REMAINS POSITIVE

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VANCOUVER, BC — As was the case for most North American pulp and paper companies, it was a difficult quarter for Catalyst Paper. Citing the “drag of the Canadian dollar,” the company posted an $8 million loss, compared to earnings of $34.2 million for last year’s corresponding quarter. Costs associated with the name change from Norske Canada to Catalyst Paper, compounded by higher legal and auditing costs also factored into the loss.

Despite the disappointing figures, the company remains upbeat and is focusing on the success of its performance improvement program, which enabled a $28 million reduction in costs for the quarter, totaling $84 million in improvements for the year. “This is a tremendous program,” said CEO Russell Horner of the initiative. “We were very successful in 2005 in terms of understanding our markets.” Horner explained that resources directed towards research permitted the company to better understand shipping processes, which in turn led to lower freight costs for the company.

As indication of its positive outlook, Catalyst is planning to spend $100 million on capital expenditures in the upcoming year. “It does get tougher and tougher every year,” Horner conceded. “But we’re confident that we’ll continue to deliver in 2006.”

MILLS

LOSS PROMPTS BOWATER THUNDER BAY CLOSURE

THUNDER BAY, ON — Roughly 280 people will soon be without a job, when Bowater shuts down a pulp mill in Thunder Bay, ON. After announcing a fourth quarter loss of $101.9 million, the company also confirmed plans to close its kraft mill at the end of April, as part of measures it will take in order to streamline operations.

“I regret the impact that our decision at Thunder Bay will have on our employees, their families and the community,” said president and CEO Arnold Nemirow. “However, this restructuring is essential for the viability of this site. Also critical is an improved operating environment in Ontario.”

The province, ravaged by particularly high energy costs, has been the target of many mill closures and resulting job losses over the past year. Estimates have concluded that roughly 3,500 forest industry workers have lost their jobs in the province in the past few months alone.

This most recent closure announcement has provoked a response from the Communications, Energy and Paperworkers’ Union, who is now calling on Prime Minister Stephen Harper to ‘urgently address the crisis in the nation’s forestry sector.’

“Just before the election, the then federal government announced a $1.5 billion aid package for forest based companies and we are asking Mr. Harper to renew that commitment with a firm resolution to tie government aid to maintenance and creation of jobs,” said Brian Payne, union president.

Payne’s appeal came at the same time as CEP Ontario vice president Cecil Makowski demanded that Bowater reverse its decision and join forces with the union in its supplication to Harper and Ontario Premier Dalton McGuinty to find ways to save the Thunder Bay mill, and others like it. “Our members in Thunder Bay need to know that we will leave no stone unturned in fighting this closure,” Makowski added.

Bowater’s fourth quarter loss more than doubled from the corresponding quarter last year. A year earlier, Q4 results were posted at $35.2 million, or the loss of 61 cents a share.

FINANCIAL

TOUGH QUARTER FOR TEMBEC

VANCOUVER, BC — It was another money-losing quarter for Tembec. The company lost $74.9 million as it struggled to contend with pressures exuded by tightening cash flows, weak pulp shipments, a strong Canadian dollar and ruthless energy prices. The loss translates to 88 cents a share for the first quarter that ended on December 24, 2005. That compared to a loss of $700,000, or one cent a share for the corresponding quarter last year.

“The success of getting to free cash flow neutral or positive is really going to be determined by the improvements that we get on the revenue side,” said CEO James Lopez.

The company also confirmed its expectations of less downtime in pulp production in its March quarter, as well as a stronger performance by its lumber and lumber products operations. The $98 million sale of its OSB business is also expected to help line the company’s coffers.

ENVIRONMENT

STORA ENSO AMONG MOST SUSTAINABLE

HELSINKI, FINLAND — Stora Enso is one of the most sustainable countries in the world, according to the Global 100, a list of the top 100 most sustainable enterprises on a global scale. The company was considered among the best in class in the paper and forest products industry through its management of environmental, social and governance risks and opportunities.

FINANCIAL

DISAPPOINTING QUARTER FOR UPM

HELSINKI, FINLAND — UPM has posted an operating loss for the October-December quarter of b71 million. A variety of factors are being held culpable for the disappointing performance. “UPM’s operating profit improved but remained weak,” said president and CEO Jussi Pesonen. “The labour dispute last summer in Finland only partially explains the weak result. Another reason is overcapacity in printing papers. Last quarter was unprofitable because of the non-recurring items.”

A six-week long strike that left the Finnish pulp and paper industry at a standstill last May and June took a heavy toll on the bottom lines of all the affected companies.

STATISTICS

NEWSPRINT INDUSTRY STATISTICS

MONTREAL, QC — The Pulp and Paper Products Council announced that production at North American newsprint mills declined 3.2% in December, resulting in a 96% operating rate for the month. For 2005 mills ran at 95% of their capacity, as production contracted 4.6% over last year. Total North American newsprint shipments decreased 4.3% in 2005 due to a 5.4% drop in deliveries to the domestic market, whereas overseas sales remained unchanged. North American mill stocks declined by 7,000 tonnes month-over-month, finishing the year with 315,000 tonnes in stock.

FINANCIAL

ABITIBI POSTS LARGE LOSS

MONTREAL, QC — Abitibi-Consolidated also posted large losses in the fourth quarter. The company was out $355 million, or 80 cents a share, from $108 million, or 24 cents a share just one year earlier. In addition to high energy prices and a strong Canadian dollar, Abitibi had the additional pressure of shut mills and idled machines to contend with.

The closing of paper mills in Kenora, ON, and Stephenville, Newfoundland and Labrador, as well as a sawmill located in Champneuf, QC, totaled $228 million in terms of expenses and writedowns. Had writedowns been excluded, the company confirmed it would have lost $51 million.

RESEARCH

UQTR ANNOUNCES CIBA CHAIR

TROIS-RIVIERES, QC — The Universit du Qubec Trois-Rivires and Ciba Specialty Chemicals announced the launch of the Ciba Specialty Chemicals Industrial Chair in Paper Chemicals. Dr. Franois Brouillette of the department of chemistry at UQTR is the holder of the chair, a position established in order to optimize the possible uses of paper in printing. The basic funding of the chair will be provided by Ciba under a five-year renewable agreement whereby the university will receive $150,000 annually for a total of $750,000.

ENERGY

PRICE CAP NOT ENOUGH: CEP

THUNDER BAY, ON — An announcement made by Ontario Energy Minister Donna Cansfield of a three year extension of the price cap on electricity rates for large industrial users has the Communications, Energy and Paperworkers’ Union scoffing.

“This announcement preserves the status quo and it is the status quo situation which has cost more than 3,500 of our members
their jobs in the last two years,” said Cecil Makowski, Ontario region vice-president of the CEP. “We need special provisions to reduce the energy bill for paper mills and other forest-based industries or we are going to have many more closures in the weeks to come.”

According to Statistics Canada, Ontario suffered the loss of upwards of 52,000 well-paying industrial jobs in 2005, the bulk of which were taken from the pulp and paper, auto and chemical sectors.

PAPERCLIPS

TRADING UP

In our December 2005 issue, our paperclip section featured the story of an Auckland teenager who sold a red paperclip online for $173. New Zealanders aren’t the only ones cleaning up on the net with sales of the tiny paper tool. Kyle MacDonland of Montreal, QC, has managed to do some serious trading up with his red clip.

It started off fairly simply. On July 12, 2005, MacDonald was struck by an idea. “One day I was sitting in my apartment and writing at my computer, and I started thinking it would be nice to have a house,” he said. Due to the financial impossibility of this prospect, MacDonald pondered the potential of online training. “That’s when I looked down and spotted a red paperclip laying on my desk. I decided to see what would happen.” After posting a photograph and description of the clip online, MacDonald began a series of trades that went as follows: The clip was traded for a fish pen, which was then exchanged for a doorknob. The doorknob was subsequently bartered for a Coleman stove, which was then swapped for a generator. The generator was traded to finance a keg, which was then traded for a skidoo. The skidoo was traded for a trip to Yahk, BC, which was then exchanged for a one-cube van.

MacDonald is now taking offers for the cube van in his initiative to eventually buy a house. Check out the offers on oneredpaperclip@blogspot.com. Beats a 5% down payment!

SAFETY

BC APPOINTS SAFETY CORONER

PRINCE GEORGE, BC — A staggeringly high death toll in the forestry industry has prompted the BC government to appoint a safety coroner to investigate the situation. A total of 43 people died in the western province last year, while another 110 workers were injured. The figures add up to render BC the holder of the worst forestry safety record in all of Canada.

According to a report by the CBC, the number of loggers killed last year is roughly two and a half times what it was in 2004.

The decision to hire a safety coroner was announced at the annual truck loggers convention, held in mid January, in BC. At the same time, Forest Minister Rich Coleman unveiled a new set of safety standards established to put unsafe companies out of business, the CBC reported. According to the plan, companies will be subjected to the investigation of auditors, who will analyze safety records, and employee training practices. Companies that pass inspection will benefit from a 5% discount on workers’ compensation payments. Should a company fail to pass inspection, it will be prohibited from working on Crown land.

The move to instate a safety coroner has the endorsement of the United Steelworkers, however, the union is calling for a more in-depth examination of the problem.


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