Resolute reports preliminary second quarter 2016 results; reports 4 per cent drop in 2Q sales
(Canada, Aug. 4, 2016) Resolute Forest Products Inc. today reported a GAAP net loss for the quarter ended June 30, 2016, of $42 million, or $0.47 per share, compared to a GAAP net loss of $4 million, or $0.04 per share, in the same period in 2015. Sales were $891 million in the quarter, down $35 million, or 4%, from the second quarter of 2015. Excluding special items, the company reported net income of $6 million, or $0.07 per share, compared to net income of $7 million, or $0.07 per share, in the second quarter of 2015.
“Despite challenging market conditions in certain of our business segments, we recorded a solid performance this quarter,” said Richard Garneau, president and chief executive officer. “Our wood products segment has delivered significant improvements as markets continued their slow recovery. In our paper segments, we continue to demonstrate our ability to generate consistent value despite structurally challenging market conditions, while annual maintenance-related declines in pulp production more than offset benefits of rising market prices. Although our tissue operations continued to underperform and remain a key focus for the year, we are excited by the advancement of our Calhoun tissue project, as we achieve a key milestone this month with the commissioning of our first converting line.”
Operating income in the market pulp segment was $12 million in the second quarter, $8 million lower than the first quarter. The overall average transaction price rose by $6 per metric ton, or 1%, as seasonal supply and demand supported prices. But the operating cost per unit (the “delivered cost”) was higher due to maintenance costs, as well as unfavorable foreign exchange impacts. As a result, the delivered cost, increased by $32 per metric ton during the quarter, to $575 per metric ton. Shipments were down by 7,000 metric tons, or 2% in the quarter. Inventories also fell, by 11,000 metric tons over the same period. This overall decline in production was mostly due to annual outages in Calhoun (Tennessee) and Coosa Pines (Alabama), as well as maintenance-related downtime in Saint-Félicien (Quebec) and Thunder Bay (Ontario).
Our tissue segment incurred an operating loss of $4 million for the quarter, $2 million more than the previous quarter. The overall transaction price increased by $71 per short ton. Our delivered cost increased by $149 per short ton compared to the first quarter, mostly due to productivity challenges as well as unforeseen maintenance and repair spending and other administrative costs. Negative EBITDA of $2 million was incurred in the period, $2 million less than the first quarter of 2016, which was breakeven. Finished goods inventory fell by 2,000 short tons to 3,000 short tons.
The newsprint segment incurred an operating loss of $3 million in the quarter, compared to an operating loss of $5 million in the first quarter. The pricing environment continued to be favorable during the quarter, prompting an increase of $9 per metric ton in the overall transaction price against the first three months of the year. The delivered cost, on the other hand, increased by $7 per metric ton, to $511 per metric ton, fueled by unfavorable foreign exchange impacts and lower volume. Shipments declined by 9,000 metric tons, or 2%, as a result of the permanent closure of one paper machine at Augusta during the quarter as well as market-related downtime taken at our Thorold (Ontario) facility. EBITDA was $16 million for the quarter, equivalent to $31 per metric ton, compared to $29 in the previous quarter and $19 per metric ton on average for the last twelve months. Finished goods inventory declined by 8,000 metric tons to 96,000 metric tons, a reduction of 8% against the previous quarter.
Operating income in the specialty papers segment was $16 million in the second quarter, up by $9 million from the $7 million recorded in the first quarter. The average transaction price was lower by $11 per short ton, mainly as a result of unfavorable markets in coated grades and, to a lesser extent, supercalendered papers. Shipments declined by 3% or 11,000 short tons, following general market trends across specialty paper grades. Despite the lower volumes, the delivered cost in the quarter improved against the prior period, falling to $625 per short ton, a 6% decline. This improvement was prompted mostly by greater operating efficiencies as well as stronger hydroelectric generation. As a result, EBITDA for the segment strengthened by $6 million, reaching $26 million, equivalent to $68 per short ton, $17 per short ton higher than the first quarter, and also higher than the $56 average per short ton recorded over the last twelve months. Finished goods inventory was up by 13%, reaching 88,000 short tons.
Mr. Garneau added: “Our views on pulp markets remain unchanged, with near-term perspectives still positive but deteriorating as incremental supply creates unfavorable pressure on prices. In wood products, on the other hand, we believe market conditions will continue to improve, diminishing the potential impact of trade restrictions in 2017. We believe paper grades will see a seasonal uptick in the short-term, with newsprint prices continuing to rise while coated and supercalendered grades see sustained downward pressure. Our tissue segment will remain a focus as action plans are executed and profitability improves over the next two quarters. Our greenfield tissue project in Calhoun continues to advance as planned and on budget. The two remaining conversion lines will be commissioned in the next few months, ahead of our tissue machine startup, scheduled for the first quarter of 2017.”
To read complete report, please visit: www.resolutefp.com (Source: Resolute Forest Products Inc.)