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Resolute announces indefinite idling of Calhoun mill’s pulp and paper operations

Resolute Forest Products has announced the indefinite idling of pulp and paper operations at its Calhoun (Tennessee) mill. The mill’s tissue manufacturing and converting operations will continue. Its adjacent distribution centre will remain in full operation.

The company anticipates that the decision will directly affect 350 hourly and salaried positions at the Calhoun mill. The facility currently employs a total of 545 people. It has an annual production capacity of 147,000 metric tons of pulp and 149,000 metric tons of paper as well as 60,000 metric tons of premium tissue.

Despite the current strong market conditions for pulp and uncoated freesheet paper, the company is seeing significant losses at the mill. On a trailing twelve-month basis ending September 30, the pulp and paper operations in Calhoun produced an operating loss of $62 million before corporate expense allocation, including a depreciation expense of $10 million. In addition to these financial losses, the Calhoun mill faced additional significant production upsets in November and December.

“We have taken the very difficult decision to indefinitely idle pulp and paper operations at Calhoun knowing how hard this is for the affected employees and their families,” said Remi G. Lalonde, president and chief executive officer. “Success has proved elusive at Calhoun’s pulp and paper operations, despite the best efforts of our dedicated employees and significant investments of time, energy and resources over the last few years.”

Once the indefinite idling is completed, the company anticipates an improvement in its overall operating income, of approximately $35 million to $40 million, which reflects the lost pulp integration benefit with its tissue manufacturing of approximately $15 million and approximately $5 million from on-going costs associated with closed site maintenance.

The mill’s pulp and paper operations will continue up to 60 days. This is to ensure an orderly shutdown while meeting environmental safeguards and helping customers transition.

“Our focus now will be to support our employees through this difficult time, to operate for the remaining period with the same degree of focus on safety and quality, and to facilitate a smooth transition for our customers,” added Mr. Lalonde. “As business conditions for our tissue operations continue to improve after a challenging 2021, our priorities remain focused on driving performance progress to leverage the full potential of our converting operations and the quality of the paper from the machine, together with the right customer mix, to seize the upside, even as the lost integration benefit will add to pulp costs.”

Resolute expects to record, in the fourth quarter, non-cash impairment and accelerated depreciation charges of approximately $135 million to reduce the carrying value of the pulp and paper fixed assets to their residual value, as well as a write-down of inventory and a write-off of other assets of approximately $32 million in total. The company also estimates cash closure costs of approximately $45 million, mainly related to decommissioning, severance and other termination benefits, and other costs. Most cash closure costs will be disbursed in 2022.