Industry Trends (September 01, 2007)
September 1, 2007 By Pulp & Paper Canada
SECOND QUARTER RESULTS
SECOND QUARTER RESULTS
The following is a compilation of pulp, paper and forestry company second quarter results. Please note that further financial statements from other firms may have been released since the time of publication.
Canfor Pulp Income Fund announced its second quarter 2007 results as well as the results of Canfor Pulp Limited Partnership which the Fund has a 49.8% ownership. The Partnership reported sales of $239.4 million and net income of $35.9 million, or $0.51 per unit, for the quarter ended June 30, 2007. These results are down from the prior quarter due primarily to the impact of the strengthening Canadian dollar, which more than offset increases in NBSK list prices. An increase of 7% in fibre costs also contributed to the lower earnings.
Bowater Incorporated reported a net loss for the second quarter of 2007 of $62.6 million, or $1.09 per diluted share, on sales of $798.6 million. These results compare with a net loss of $10.6 million, or $0.18 per diluted share, on sales of $899.4 million for the second quarter of 2006. “During the quarter, we faced difficult market conditions as well as significant cost pressures as a result of the very strong Canadian dollar,” said David J. Paterson, Chairman, President and Chief Executive Officer. “We mitigated these cost pressures through our focus on operational excellence and I expect these improvements to provide further benefits going forward.”
Abitibi-Consolidated reported second quarter net earnings of $148 million, or 34 cents a share, compared to net earnings of $157 million, or 36 cents a share in the second quarter of 2006. For the six-month period ending June 30, 2007, the Company recorded net earnings of $78 million, or 18 cents a share, compared to net earnings of $124 million, or 28 cents a share, for the same six-month period last year. Although not a GAAP measure, the second quarter results before the impact of specific items would have been a loss of $111 million, or 25 cents per share, compared to a loss of $29 million, or 7 cents a share, in the second quarter of 2006.
West Fraser Timber reported a second quarter loss of $14 million or $0.33 per share on sales of $948 million compared to a loss of $5 million or $0.12 per share on sales of $759 million in the first quarter of 2007 and earnings of $104 million or $2.41 per share on sales of $888 million in the second quarter of last year. For the first half of 2007, West Fraser recorded a loss of $19 million or $0.45 per share on sales of $1,707 million. This compares to earnings of $110 million or $2.55 per share on sales of $1,790 million for the first half of 2006. EBITDA(1) was $28 million or 3% of sales for the second quarter compared to EBITDA of $87 million or 10% of sales for the comparable period last year.
Kimberly-Clark Corporation reported that net sales in the second quarter of 2007 increased 8.2 % to $4.5 billion, establishing a new quarterly record for the twelfth consecutive quarter. The improvement was broad-based, with organic sales growth of 5 % or better for the company’s Personal Care, Consumer Tissue and K-C Professional & Other businesses and continued double-digit sales gains in developing and emerging markets.
International Forest Products Limited reported a net loss for the second quarter of 2007 of $3.4 million, or $0.07 per share, compared to net earnings of $0.6 million, or $0.01 per share, for the first quarter of 2007, and net earnings of $8.0 million, or $0.17 per share, for the second quarter of 2006. The current quarter’s earnings include a foreign exchange loss of $5.3 million ($3.5 million, or $0.07 per share, after tax) arising from the translation at quarter end of the Company’s net U.S. dollar denominated cash balances. Before taking account of this foreign exchange loss and other one-time items, the Company recorded a net loss of $0.3 million for the quarter.
Tembec reported consolidated sales for the second quarter that ended March 31, 2007, of $790 million, down from $818 million in the comparable period last year. The company generated a net loss of $45 million or $0.54 per share compared to a net loss of $168 million or $1.96 per share in the corresponding quarter that ended March 25, 2006. Earnings before unusual items, interest, income taxes, depreciation, amortization and other non-operating expenses (EBITDA) was $17 million, as compared to EBITDA of $4 million a year ago and EBITDA of $13 million in the prior quarter.
Norbord Inc. reported EBITDA of $17 million in the second quarter, a $13 million increase over EBITDA of $4 million in the prior quarter. The EBITDA improvement was largely due to continued strong results from European operations and modest North American OSB price increases at the end of the quarter. Norbord recorded a loss of $15 million in the second quarter of 2007 or $0.11 per share compared to a loss of $16 million or $0.11 per share in the first quarter of 2007.
Smurfit-Stone Container Corporation reported a net loss available to common stockholders of $5 million, or $0.02 per diluted share, for the second quarter of 2007. These results compare to a net loss available to common stockholders of $50 million, or $0.20 per diluted share, in the prior year quarter. Sales for the second quarter 2007 were $1.87 billion, up 6 percent from second quarter 2006. Adjusted net income for the second quarter 2007 was $0.06 per diluted share, which excluded the following items: A loss of $0.08 per diluted share from non-cash foreign currency translation charges, charges totaling $0.02 per diluted share from restructuring activities and a loss on early extinguishment of debt, and a $0.02 per diluted share income tax benefit from the resolution of a prior year tax matter.
A report issued by PricewaterhouseCoopers on the financial results for the world’s 100 largest forest, paper and fibre-based packaging products companies indicated vast differences in the major producing regions. In terms of Canadian results, an excerpt from the report confirmed, ‘Canadian producers faced many challenges [in] 2006 — a strengthening dollar against the US currency, a decline in the North American housing market, increased production costs, and some regions were affected by the Mountain Pine Beetle infestation. One bright spot for profits was NBSK pulp production. 2006 also saw a settlement of the Canada-US softwood lumber dispute, with over US$4 billion in duties returned to Canadian producers.
Canada contributed 12 companies to the 2006 Top 100 list, with aggregate sales of US$25.9 billion, up slightly from US$25.6 billion in 2005. Overall net income for these companies shot up to US$890 million from a loss of US$528 million during the same period, due in large part to the re-payment of countervailing duties collected during the softwood lumber dispute with the US. ROCE tumbled to 2.0% in 2006 from 4.5% the previous year, reflecting the declining health of the Canadian forest industry. Norbord enjoyed the best ROCE number in Canada for 2006 at 11.4%, a distinction it also held the previous year with 23.7%. Interfor held the second place ROCE spot with 6.7%, followed by West Fraser Timber with 4.3%.
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