Financial Reports & Markets
Tembec reports lower operating results
By Cindy Macdonald
Tembec reports that its consolidated sales for the three-month period ended June 25, 2016, were $376 million, as compared to $365 million in the same quarter a year ago. The company generated net earnings of $9 million or $0.09 per share in the June 2016 quarter compared to a net loss of $16 million or $0.16 per share in the June 2015 quarter.
Operating earnings before depreciation, amortization and other items (adjusted EBITDA) was $26 million for the three-month period ended June 25, 2016, as compared to adjusted EBITDA of $2 million a year ago and adjusted EBITDA of $36 million in the prior quarter.
A company statement explains that the quarterly results were as anticipated. “A relatively heavy major maintenance schedule combined with an approximate seven per cent increase in the value of the Canadian dollar versus the US dollar led to the decline in operating results.”
“The $7-million decline in the specialty cellulose segment adjusted EBITDA was expected as the Temiscaming specialty pulp mill was idled for six days to carry out annual planned major maintenance. While US dollar and euro specialty cellulose prices were stable, exchange rates led to lower effective Canadian dollar selling prices. The September 2016 quarter results will be substantially better as both mills will see full operations,” the statement continues.
The specialty cellulose pulp segment generated adjusted EBITDA of $10 million on sales of $111 million for the quarter ended June 25, 2016, compared to adjusted EBITDA of $17 million on sales of $120 million in the March 2016 quarter. The pulp sales decrease of $10 million was due to lower prices and lower shipments of viscose and other grades of pulp.
According to Tembec, a $1-million decrease in the adjusted EBITDA for the paper pulp sector was caused by currency. “Hardwood paper pulp markets continue to be soft, as evidenced by the price decline in the benchmark BEK grade. This market will remain challenging.”
The paper pulp segment generated adjusted EBITDA of $1 million on sales of $86 million for the quarter ended June 25, 2016, compared to adjusted EBITDA of $2 million on sales of $77 million in the March 2016 quarter. The $9 million increase in sales was due to higher shipments. US dollar prices for high-yield pulp actually increased by US $14 per tonne, reports Tembec. However, currency was an unfavourable factor as the Canadian dollar strengthened versus the US dollar. Overall, average selling prices in Canadian dollars declined by $15 per tonne, reducing adjusted EBITDA by $3 million, the company says.
A stronger Canadian dollar also takes the blame for a decrease adjusted EBITDA by $5 million in Tembec’s paper segment. The Paper segment generated adjusted EBITDA of $16 million on sales of $99 million for the quarter ended June 25, 2016, compared to adjusted EBITDA of $21 million on sales of $102 million in the March 2016 quarter. The decrease in sales was due to lower selling prices, partially offset by higher shipments of coated bleached board and newsprint, the company says. Tembec also reports that manufacturing costs at the Kapuskasing newsprint mill increased by $1 million due to lower productivity.