Business News

AbitibiBowater Delivers Ongoing Improvements in Q2 Operating Results

Thursday 07. August 2008 - - Annual Synergy Run Rate of Over $270 Million at End of Q2 - Operating Income Improvement of $86 Million, $104 Million Excluding Special Items - Newsprint Segment Improves to Break-Even - Phase 2 Review of Operations Ongoing

AbitibiBowater Inc. today reported a net loss for the second quarter 2008 of $251 million, or $4.36 per diluted share, on sales of $1.7 billion. These results compare with a net loss of $248 million, or $4.32 per diluted share, on sales of $1.7 billion for the first quarter of 2008.

Second quarter 2008 special items, net of tax, consisted of the following: an $11 million loss relating to foreign currency changes, an $11 million gain on asset sales, a $29 million loss related to asset closures, impairment and severance and a $72 million charge related to tax adjustments. Excluding these special items, the net loss for the quarter would have been $150 million, or $2.60 per diluted share. Reconciliations of non-GAAP measures are contained in Notes 5 and 6 of this release.

“Although our financial results remain unacceptable, we did see a significant improvement in our operating performance in the quarter. Our efforts to offset cost pressures with synergies, combined with our announced price increases, should provide a significant improvement in both our operating efficiency and financial performance through the balance of this year,” stated President and CEO David J. Paterson. “Recognizing continued market and economic challenges, AbitibiBowater is ready to take all actions it believes necessary, including the elimination of unprofitable production. Also, as our Phase 2 review of operations continues, an important consideration will be the renewal on acceptable terms of the CEP labor agreements of our Canadian operations in 2009.”

Segment Detail
————–

Coated Papers



Income for the coated papers segment of $35 million for the second quarter was essentially flat compared to the first quarter of 2008. EBITDA from the segment was $45 million. The Company’s average transaction price for coated papers increased $44 per short ton during the quarter, while average operating costs increased $28 per short ton mainly due to higher energy related costs. The Company is implementing the third quarter price increase of $50 per short ton. Building on the Catawba success, AbitibiBowater is examining options for a future conversion of a newsprint machine to coated mechanical paper.

Market Pulp

Income for the market pulp segment of $21 million for the second quarter was lower by $10 million compared to the first quarter of 2008. EBITDA was $34 million. The average market pulp transaction price for the Company increased $6 per metric ton, while average operating costs increased $47 per metric ton compared to the first quarter, mainly as a result of higher fiber and energy costs, as well as scheduled annual outages at the Calhoun, Tennessee and Thunder Bay, Ontario facilities.

Newsprint

For the second quarter, the newsprint segment generated income of $1 million, compared to a loss of $69 million for the first quarter of 2008, while EBITDA improved from $14 million to $81 million. The Company’s average transaction price increased $49 per metric ton. Average operating costs decreased $5 per metric ton, compared to the first quarter as a result of mill closures or idling in the first quarter and the realization of significant merger-related synergies. The Company has implemented the previously announced $20 per metric ton per month price increases for newsprint for the first eight months of this year and anticipates implementing the September $20 per metric ton price increase.

Specialty Papers

The specialty papers segment had a loss of $32 million, compared to a loss of $39 million for the first quarter and EBITDA improved to $37 million. The Company’s average transaction price increased $35 per short ton during the quarter, while average operating costs increased $29 per short ton, mainly due to repair spending and higher energy related costs.

Wood Products

For the second quarter, the wood products segment had a loss of $13 million, compared to a loss of $35 million for the first quarter and EBITDA improved from a loss of $24 million to a loss of $2 million. The average transaction price for the Company increased $9 per thousand board feet, while average operating costs decreased $51 per thousand board feet compared to the first quarter due to continued cost reduction efforts, the idling of higher cost facilities and a $15 million benefit as a result of the sale of log inventory previously subjected to lower of cost or market adjustments.