Resolute still out to reposition mill
Resolute Forest Products Inc. reported yesterday it still is working to reposition the pulp and paper mill here, but has been unsuccessful so far.
Resolute president and CEO Richard Garneau said yesterday during a conference call to investors that the company spent about $9 million in the first quarter to keep the mill in idle mode.
That’s down from $28 million, or $0.30 per share, in the first quarter of 2013.
Sales were $1.0 billion in the quarter—down by $58 million from the first quarter of 2013.
The company also reported a $55-million “unfavorable impact” due to abnormally cold winter during the first quarter.
“Operating costs ordinarily peak in winter, but this year has been extremely cold and its effects weighed heavily on our quarterly results,” Garneau said.
“The abnormally cold winter caused a material increase in energy costs, production
disruptions, equipment failures, and distribution constraints,” he noted.
“Though some of these effects will carry into the second quarter, we’re focused on moving beyond this disappointing quarter, committed to maximize our competitive advantage in this challenging industry and improve our earnings power,” he pledged.
Newsprint generated an operating loss of $15 million in the first quarter, compared to $19 million of operating income in the fourth quarter of 2013.
Specialty papers generated an operating loss of $24 million in the quarter, compared to operating income of $11 million the previous one.
Operating income was $8 million in the first quarter, compared to $16 million in the previous quarter.
The average transaction price rose across all grades—by three percent overall—but shipments fell by 20 percent.
Compared to the fourth quarter, operating income in the wood products segment rose by $3 million, to $12 million.
The average transaction price rose by two percent but shipments dropped by seven percent and inventory rose significantly—mostly due to softer demand as a result of the abnormal winter and distribution constraints for lack of carrier availability.
Looking ahead, Garneau said the costs of natural gas and Ontario power normalized through April.
But he noted distribution constraints likely will continue through the second quarter, which will weigh on shipments, as well as freight and warehousing costs.
“Despite that, we expect to reduce inventory and increase shipment volumes across all segments,” Garneau remarked.
“Recent industry conversion announcements suggest higher newsprint operating rates toward the later part of the year.
But Garneau warned the coated papers portion of the company’s specialty papers segment is expected to remain under pressure as a result of lower demand.
“Market prices for lumber have been trending down until recently due to the cautious recovery in U.S. housing starts,” he added.