Resolute Forest Products of Montreal, Quebec, released its preliminary 2017 second quarter results, including a net loss for the quarter ended June 30, 2017, of $74 million (all figures in US funds) compared to a net loss of $42 million in the same period in 2016.
Sales were $858 million in the quarter, down $33 million, or four per cent, from the second quarter of 2016. Excluding special items, the company reported a net loss of $3 million compared to net income of $2 million in the second quarter of 2016.
“This quarter's performance was a clear improvement from the first quarter,” said Richard Garneau, president and chief executive officer. “The results of our wood products segment were strong given higher prices associated with the U.S. imposition of trade barriers, while our market pulp segment recorded a solid performance despite production curtailments associated with annual outages.
“In tissue, the improvement in our profitability continued but remained short of expectations,” continued Garneau. “Paper segments continued to be impacted by adverse market conditions, particularly in specialty grades.”
The company recorded an operating loss of $47 million in the 2017 second quarter, compared to an operating loss of $6 million in the first quarter of 2017, while adjusted EBITDA increased by $22 million over the same period, to $83 million.
The company explains its operating results were positively impacted by overall increases in pricing, particularly in its wood products and market pulp segments. Those improvements were partially offset by lower volumes in its market pulp, continued Resolute, and paper segments, as well as higher maintenance expenses related to annual outages at a number of facilities.
The company also incurred $60 million of non-cash impairment charges in the second quarter in connection with the indefinite idling of a paper machine at Catawba (South Carolina), as well as to reflect the write-down of assets at the Coosa Pines (Alabama) facility.
Focusing on market pulp specifically, operating income in this segment was $16 million, $9 million more than the first quarter. Following price increases implemented from the beginning of the year, realized prices in the segment rose by seven per cent, or $39 per metric ton, to $632 per metric ton.
Shipments to third parties fell by 17,000 metric tons compared to the first quarter. Resolute explains this largely resulted from annual outages in Calhoun (Tennessee), Thunder Bay (Ontario) and Coosa Pines, and lower demand for recycled grades during the period. The operating cost per unit rose by $8 per metric ton, reaching $583 per metric ton, resulting mostly from the maintenance outages. EBITDA per unit was $71 per metric ton compared to $42 per metric ton in the previous quarter. Finished goods inventory was substantially flat when compared to the first quarter.
In the tissue segment, Resolute’s overall shipments rose by 1,000 short tons. The wood products segment recorded operating income of $45 million for the quarter, an improvement of $25 million against the previous quarter. The newsprint segment for Resolute incurred an operating loss of $7 million in the quarter, compared to a loss of $4 million in the first quarter. The specialty papers segment recorded an operating loss of $7 million during the second quarter, a decline of $11 million from the previous quarter.
“As our results continue to improve, we remain focused on our short-term priorities of increasing sales in our tissue segment, battling unfair U.S. countervailing and anti-dumping duties and managing our indebtedness and liquidity to be in a position to continue our long-term transformation,” said Garneau. “Now that the uncertainty surrounding trade duties in lumber has started to dissipate, we expect market conditions to remain favourable. In pulp, we are cautiously optimistic that market conditions will remain relatively favourable at least through the third quarter.”
Resolute Releases Preliminary Q2 Results
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