Business News
NewPage Announces First Quarter 2009 Financial Results
Thursday 14. May 2009 - NewPage Corporation (NewPage) today announced its results of operations for the first quarter of 2009. Net sales were $722 million in the first quarter of 2009 compared to $1,190 million in the first quarter of 2008, a decrease of $468 million, or 39%, primarily as a result of a decline in advertising spending.
Net loss attributable to NewPage was $(109) million in the first quarter of 2009 compared to net income attributable to NewPage of $7 million in the first quarter of 2008. Debt covenant EBITDA (earnings before interest, taxes, depreciation and amortization) was $97 million for the first quarter of 2009 compared to $179 million for the first quarter of 2008.
“The first quarter continued to reflect the unprecedented decline in spending for advertising, particularly for those customers using print media. Demand for coated paper has declined more than 30% compared to last year and our customers – mostly printers, magazine and book publishers, and catalogers – continue to face similar pressures in their businesses,” said Mark A. Suwyn, NewPage executive chairman. “These challenges have been further exacerbated by our customers managing their cash flow by reducing their inventory levels. To balance supply with demand, we will take at least 300,000 tons of market-related downtime in the first half of 2009. This is in addition to the 1.1 million tons of capacity we shut down last year.”
The following schedule details key performance and cost metrics for the first quarter:
First Quarter
2009 2008
Coated paper sales volume – 000s tons 588 1,037
Price per ton of coated paper $975 $953
Market downtime – 000s tons 149 0
Maintenance expense – $ million $68 $82
Gross margin % 0.3% 11.1%
SG&A expense – % of net sales 6.4% 4.6%
“During the first quarter, we took a number of actions across the company to reduce discretionary spending to sustain our business during these challenging economic times, including the market-related downtime,” said Richard D. Willett, Jr., NewPage president and chief executive officer. “We continue to focus on operating the business in the most cost effective manner possible without losing our ability to deliver high-quality products to our customers. Our workforce is actively engaged in working to achieve efficiencies and conserve resources. One recent example is our renewed focus on strategic sourcing of raw materials. This and similar actions enable us to manage through this weak market while providing a platform for more favorable results as the market recovers.”
“Our integration activities continued throughout the quarter and we remain on track to meet our long-term target in annualized synergies from the acquisition of Stora Enso North America. However, full realization of the synergies have been somewhat delayed by the slowdown in demand and volume,” said Willett. “We should also note the effect of the alternative fuel tax credit on the industry. The forest products industry is the largest producer of renewable electricity in the country, generating more power than all the solar, wind and geothermal producers combined. The U.S. Internal Revenue Code allows a refundable excise tax credit for alternative fuel mixtures produced for sale or for use as a fuel in a trade or business. In April 2009 we received approval for the credit and submitted claims. We have received payments of $45 million during the second quarter of 2009 for alternative fuel used in the first quarter of 2009. The financial effects of this credit are not reflected in the first quarter results. While this program has an expiration date of December 31, 2009, there can be no assurance that we will continue to receive the incentive payments through that date.”
The net effect of the decline in demand and associated market-related downtime, as well as the continued integration costs, was a deterioration in gross margin to 0.3% for the first quarter of 2009 from 11.1% for the first quarter of 2008.
NewPage closed the quarter with $249 million of liquidity, consisting of $2 million of cash and $247 million of additional borrowing availability under the revolving credit facility.