Resolute reports record Q3 results and declares special dividend
By P&PC Staff
By P&PC Staff
November 1, 2018 – Resolute Forest Products has reported record preliminary third-quarter results, declaring a special dividend of $1.50 per share. All figures below are reported in US dollars.
The company’s net income for the quarter ended September 30, 2018, was $117 million, or $1.25 per diluted share, compared to $24 million, or $0.26 per share, in Q3 2017. Sales were $974 million in the quarter, an increase of $89 million from the year-ago period. Excluding special items, the company reported net income of $96 million, or $1.03 per share, compared to $31 million, or $0.34 per share, in the third quarter of 2017.
“Our best pulp quarter combined with continued positive market dynamics for paper helped offset the effects of a weaker lumber market, leading to another quarter of record results and a further reduction in leverage,” says Yves Laflamme, president and chief executive officer. “Our continued focus on improving operational performance also resulted in a notable increase in the profitability of our specialty papers business.”
“We recently entered into an agreement to sell the Catawba paper and pulp mill for $300 million, and today, we will complete the previously announced sale of the Fairmont recycled pulp mill for proceeds of $62 million, subject to final working capital adjustments. These transactions allow us to maximize the value of these assets and redeploy capital to increase shareholder value. We remain focused on growing our core businesses in line with our transformation strategy, reducing debt and returning capital to our shareholders.”
Operating income in the market pulp segment was $57 million, $16 million higher than the second quarter. The average transaction price continued to rise, up another $37 per metric ton to $784. Shipments also increased by 14,000 metric tons, largely due to improved productivity. Despite higher recovered paper prices and extended downtime planned at the Saint-Félicien mill (Quebec), the operating cost per unit (the “delivered cost”) decreased to $629 per metric ton, mostly due to higher volume. Consequently, record EBITDA of $64 million or, $174 per metric ton, was realized this quarter.
A significant portion of the strategic project at the Saint-Félicien mill to increase production capacity, decrease costs and further reduce greenhouse gas emissions was completed, as planned. Production at the mill restarted in mid-October.
The tissue segment incurred an operating loss of $10 million, unchanged from the previous quarter. Sales continued to improve, rising another five per cent, driven by more converted product shipments and an increase in the average transaction price of $34 per short ton. However, the delivered cost remained elevated in the quarter, at $2,003 per short ton, as we continue to focus on ramping up both the tissue machine and converting lines at our Calhoun (Tennessee) facility. As a result, EBITDA for the segment remained at negative $5 million.
At $32 million in the third quarter, newsprint generated $14 million more operating income than the second quarter. This increase is attributable to the rise in average transaction price, up $45 to $629 per metric ton. Timing of export sales impacted shipments, which decreased by 22,000 metric tons, and contributed to the 11,000 metric ton rise in finished goods inventory. The delivered cost increased by $5 per metric ton, mainly due to higher power costs, associated with abnormally warm weather, and maintenance outages. As a result, EBITDA increased by $13 million to $48 million for the quarter, equivalent to $130 per metric ton.
The specialty papers segment generated operating income of $26 million in the quarter, a $22 million improvement over the second quarter. Sales rose by 10 per cent as pricing increased $36 per short ton, to $737, and shipments were 14,000 short tons higher due to better productivity and the absence of planned maintenance outages at our integrated pulp and paper mills. The delivered cost fell by six per cent, or $41 per short ton, resulting from improved efficiency, as well as lower maintenance and freight costs. EBITDA rose to $38 million, or $131 per short ton, compared to $16 million in the previous quarter. Finished goods inventory was 11 per cent higher this quarter to meet the expected seasonal increase in demand in the fourth quarter for supercalendered paper.
Read the full report here.