Business News
NewPage Sales and Earnings Up Sharply in First Quarter
Wednesday 14. May 2008 - New combined organization reports a positive first quarter.
NewPage Corporation (NewPage) today announced its results of operations for the first quarter of 2008. These results include the first full quarter of combined financial results since the acquisition of Stora Enso North America (SENA) on December 21, 2007. Net sales were $1,190 million in the first quarter of 2008 compared to $476 million in the first quarter of 2007, an increase of $714 million or 150 percent. Net income was $7 million in the first quarter of 2008 compared to a net loss of $20 million in the first quarter of 2007. Earnings before interest, taxes, depreciation and amortization (EBITDA) was $158 million for the first quarter of 2008 compared to EBITDA of $46 million for the first quarter of 2007.
“First quarter 2008 volume and average sales prices were both up considerably, and while most of the increase in volume was from the acquisition, average coated paper prices were also up significantly,” said Mark A. Suwyn, chairman of the board and chief executive officer. “Demand for our products was strong as a result of rationalized industry supply from reduced imports and capacity closures, as well as some inventory builds by customers in advance of a price increase.”
The following schedule details key performance and cost metrics for the first quarter:
First Quarter
2008 2007
Coated paper volume – 000s tons 1,037 508
Price per ton of coated paper $953 $873
Market downtime – 000s tons 0 27
Maintenance expense – $ million $82 $39
Gross margin 11.1% 8.0%
SG&A expense – % of net sales 4.6% 5.5%
“From an operations perspective, we had a solid quarter and we didn’t take any market-related downtime,” said Richard D. Willett, Jr., president and chief operating officer.
Costs in the first quarter of 2008 increased over the first quarter of 2007 driven by oil and natural gas and their effect on freight and raw materials. “We expect crude oil and energy costs to remain high throughout the year,” added Willett. “The increase in maintenance expense primarily reflects the inclusion of SENA’s mills. SG&A expenses declined as a percent of net sales primarily as a result of higher sales prices and efficiencies generated by combining the two companies. We remain on track to meet our previously announced target of $265 million in annual synergies from the SENA acquisition.”
During the quarter, NewPage announced its restructuring plans to create the platform essential to become one company, remain competitive in the marketplace, serve customers more efficiently and deliver the expected synergies. As a result of these actions, during the first quarter of 2008, the company incurred total pretax charges of $9 million, consisting of $6 million in accelerated depreciation and inventory write-offs recorded in cost of sales and $3 million of employee-related costs, of which $2 million is recorded in cost of sales and $1 million is recorded in selling, general and administrative expenses.
Interest expense for the first quarter was $71 million in 2008 compared to $33 million in 2007. The increase in the quarter-to-quarter comparison resulted from higher outstanding debt balances as a result of financing of the acquisition.
There were no outstanding borrowings under the revolving senior secured credit facility as of March 31, 2008. Based on availability under the borrowing base as of that date, there was $421 million of additional borrowing availability under the revolving senior secured credit facility after taking into account $73 million in letters of credit.
“Recently, we were honored to receive ‘Supplier of the Year’ awards from xpedx in three separate regions of North America demonstrating the strong relationship we’ve built with this important merchant,” added Suwyn. “This award recognizes our employees’ team effort for customer service, delivery, product knowledge, product quality, response to issues and new growth opportunities.”