Resolute reports losses, shuts paper machine
By Cindy Macdonald
Resolute Forest Products Inc. reported a net loss for the quarter ended March 31, 2016, excluding special items, of US$18 million, almost equal to the net loss, excluding special items, of US$19 million in the same period in 2015. Sales were $877 million in the quarter, down $43 million, or five per cent, from the first quarter of 2015.
The company also announced the permanent shutdown of one newsprint machine at its Augusta, Georgia facility. In a statement, Resolute says the decision is motivated by ongoing structural challenges in the newsprint market and “is necessary to avoid costly rotating downtime.”
Richard Garneau, president and chief executive officer, says: “Long-term market conditions remain challenging for newsprint, particularly for our U.S. mills, which are especially vulnerable in the present U.S. dollar environment.”
Summing up Resolute’s performance, Garneau states: “Even as pricing headwinds continue, we delivered a solid performance this quarter, by maintaining our focus on costs, with improvements coming largely from increased contributions from our cogeneration assets as well as lower natural gas and power prices.”
Production is ramping-up for the new continuous pulp digester at the Calhoun, Tenn., facility, which was commissioned in January. The Calhoun tissue project is on time and on budget, said Garneau.
Regarding market pulp, Resolute reports that operating income in the market pulp segment was US$20 million in the first quarter, US$3 million higher than the fourth quarter of the prior year. The company says the overall average transaction price slipped by US$22 per tonne, or four per cent, as growing global capacity continued to mitigate any substantive pricing recovery, especially in softwood and fluff. Resolute’s shipments were up by 16,000 tonnes, or five per cent higher in the quarter, mainly for softwood and recycled bleached kraft due to productivity gains in some of its softwood mills and increased demand for recycled bleached kraft.
The company broke even on operating income in the quarter, compared to a US$226 million operating loss in the fourth quarter of 2015. Adjusted EBITDA was US$18 million higher than the fourth quarter at US$59 million. The company’s operating results were positively impacted this quarter by a decline in the value of the Canadian dollar (US$12 million) and net reductions in manufacturing costs of US$35 million, which include a US$22 million decline in total pension and other post-retirement benefits expenses.
Looking ahead, Garneau stated: “Although we are cautious about prospects for later in the year, we expect a moderate improvement in pulp market dynamics in the short-term. The integration of our Atlas Paper acquisition will be a key focus over the next quarter, as we move past early challenges and fully implement Resolute operating practices. Despite pricing improvements, we still believe that newsprint prices do not reflect current market conditions. To that effect, we recently announced price increases applicable to our newsprint sales in the United States. Nevertheless, our longer-term demand expectations in newsprint remain unchanged, thus our announcement for the Augusta newsprint machine closure.”