Business News
ABITIBIBOWATER ANNOUNCES THIRD QUARTER 2008 FINANCIAL RESULTS AND POSITIVE OUTLOOK FOR THE FOURTH QUARTER
Thursday 06. November 2008 - - Annual Synergy Run-Rate Increases to $320 million; - Continued North American Consumption Decline Results in Increased Market-Related Downtime; - Price Improvement Continues for Major Paper Grades in Q3
AbitibiBowater Inc. today reported a net loss for the third quarter 2008 of $302 million, or $5.23 per diluted share, on sales of $1.7 billion. These results compare with a net loss of $142 million, or $4.75 per diluted share, on sales of $815 million for the third quarter of 2007, which consisted only of Bowater Incorporated. The Company’s 2008 third quarter results reflect the full quarter results for Abitibi-Consolidated Inc. and Bowater Incorporated as a combined company following their combination on October 29, 2007.
Third quarter 2008 special items, net of tax, consisted of the following: an $18 million gain relating to foreign currency changes, a $3 million gain on asset sales, a $154 million charge related to closure costs, impairment and severance, and a $65 million charge related to tax adjustments. Excluding these special items, the net loss for the quarter would have been $104 million, or $1.81 per diluted share. Reconciliations of non-GAAP measures are contained in Notes 7 and 8 of this release. Included in the charge for closure costs is an impairment charge for the permanent closure in the third quarter of the Donnacona, Quebec and the Mackenzie, British Columbia facilities, which were indefinitely idled during the first quarter of 2008.
“Although the market and overall economy remain very challenging, we continued to make progress during the third quarter, particularly with pricing for our paper grades,” stated President and Chief Executive Officer David J. Paterson. “Given the significant decline of the Canadian dollar and rapidly declining input costs related to recycled fiber and energy, we expect a significant improvement in our financial results in the fourth quarter.”
“Based on customer input, we expect a further decline in North American newsprint consumption. In light of these developments, we plan to reduce capacity in 2009 by taking 50,000 metric tons of downtime monthly recognizing the need to be flexible, responding to exchange rate volatility, fiber and energy costs as well as other market and economic developments,” added Paterson.
Segment Detail
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Coated Papers
For the third quarter, the coated papers segment generated income of $30 million and EBITDA of $39 million. The Company’s average transaction price for coated papers increased $33 per short ton during the quarter compared to the second quarter, while average operating costs increased $63 per short ton, mainly due to higher energy-related and scheduled maintenance costs. The Company anticipates 15,000 short tons of coated mechanical production curtailments in the fourth quarter during the year-end holidays.
Market Pulp
Income for the market pulp segment was $6 million for the third quarter, while EBITDA was $19 million. The average market pulp transaction price for the Company increased $4 per metric ton, while average operating costs increased $68 per metric ton compared to the second quarter, mainly as a result of higher fiber and energy costs, as well as scheduled annual outages at various facilities.
Newsprint
For the third quarter, the newsprint segment generated income of $28 million, compared to income of $1 million for the second quarter of 2008, while EBITDA improved from $81 million to $110 million. The Company’s average transaction price increased $46 per metric ton. Average operating costs increased $24 per metric ton, compared to the second quarter, primarily as a result of recycled fiber and energy-related costs. Recycled fiber costs increased $8 million and repair spending increased $8 million from the second quarter to the third quarter.
Specialty Papers
The specialty papers segment had income of $7 million for the third quarter, compared to a loss of $32 million for the second quarter. EBITDA improved by $36 million from $37 million to $73 million during the quarter. The Company’s average transaction price increased $33 per short ton during the quarter, while average operating costs decreased $31 per short ton.
Wood Products
For the third quarter, the wood products segment incurred a loss of $10 million, compared to a loss of $13 million for the second quarter. EBITDA improved to $1 million in the third quarter compared to a loss of $2 million in the second quarter. The average transaction price for the Company decreased $7 per thousand board feet, while average operating costs decreased $7 per thousand board feet compared to the second quarter.
Synergy Update
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The Company continues to make significant progress toward its $375 million synergy target. As of the end of the third quarter, the annual run-rate of synergies achieved is $320 million. The Company fully expects to achieve the targeted level by the end of 2009.
Bowater Incorporated Credit Facility Amendment
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The Company’s Bowater subsidiary is currently finalizing an amendment that is supported by its agent bank. The amendment will extend the dates by which the facilities convert into asset backed loan facilities until the spring of 2009, as well as to waive compliance with certain financial covenant requirements for the third quarter of 2008. The Company expects to complete this amendment over the next few days.