Future of Kenora mill dim

Abitibi-Consolidated wants to trim its costs to the point where its North American mills are in the first or second cost quartile of the industry and at least one Ontario mill doesn’t meet that test, company officials said yesterday.
The forestry company wants to cut $175 million from its operations on the continent, chief financial officer Pierre Rougeau told a conference Thursday in Kenora, where an Abitibi mill’s future is in question.
“Our goal is to have our mills in North America in the first or second cost quartile,” Rougeau said.
Company spokesman Denis Leclerc said at least four mills, including the one in Kenora, are underpeforming from a cost point of view.
Industry cost quartiles are based on figures produced by the Pulp and Paper Products Council, which are not released publicly.
The Kenora mill and another in Lufkin, Tex. are both high-cost operations that need an infusion of capital dollars to become profitable.
Lufkin’s machine is much newer than Kenora’s, but it has been idled since December, 2003. Leclerc said the company either will invest in technology which will allow Lufkin to make grades other than newsprint, or sell the mill.
Rougeau said the company will be taking a disciplined approach to capital expenditures in the next few years. They have earmarked $350 million for this year, but just under $100 million will be spent on PanAsia projects.
He said the company plans to spend between $300 and $350 million on capital improvements in future years.
Leclerc said it would be possible for Abitibi to finance projects over a few years, which means capital dollars could flow to both Kenora and Lufkin operations.
But he was quick to add no decisions have been made as of yet.
“Abitibi has a number of assets and has a limited capital dollars. So we have to ask what do we do for the best of our company?” Leclerc said.
Aside from cutting costs, the company also wants to reduce some of its debt load, which currently stands at over $4 billion. Leclerc said the company would like to lower that to between $3 billion and $3.2 billion over the next few years.
One way to do that is through asset sales. Its Fort William mill and a 300,000-hectare parcel of timberland in the Thunder Bay area already are on the block.
Rougeau said the company will begin to look for buyers in the next few weeks and hope to have a deal completed by the end of the third quarter.
The company also announced its second newsprint mill in China is ahead of schedule. The facility is owned by Pan Asia, a joint venture between Abitibi and Norske.
The mill was supposed to open sometime in the third quarter of this year, but Rougeau said operation should begin within days.
“We’ll start producing paper there within 10 days,” he said.