Positive pricing momentum evident in Catalyst Q2 results

Tag : recycle fibre
Catalyst Paper recorded a net loss of $124.3 million ($0.34 per common share) onsales of $452.9 million in the second quarter. Results weresignificantly impacted by an after-tax impairment charge of $101.0million related to the closure of the Elk Falls pulp and white toplinerboard operation in November. Net loss before specific items inthe second quarter was $22.7 million ($0.06 per common share)compared to $21.8 million ($0.10 per common share) in the previousquarter.
Earnings before interest, taxes, depreciation and amortization(EBITDA) in the second quarter were $29.5 million compared to $12.1million in the first quarter. This primarily reflected lowerrestructuring costs of $1.2 million compared to $14.6 million inthe first quarter and higher product prices which more than offsetthe negative impact of the Canadian dollar and higher input costs.EBITDA before specific items was $30.7 million, compared to $26.7million in the first quarter.
"We realized positive cash flow from operations and pricingmomentum was maintained in the second quarter," said RichardGarneau, president and chief executive officer. "While thishelped offset the twin challenges of declining paper consumptionand inflationary input costs it could not make up for the permanentdisappearance of traditional sawdust fibre supply. This was theprimary factor in our recent decision to shut down pulp and whitetop linerboard operations at Elk Falls later this year."
The fibre shortage which has persisted since late 2007 intensifiedin the second quarter of 2008 as the U.S. housing crisis causedsawmills throughout Catalyst's fibre supply region to shutpermanently, reduce, or divert production. Market supply remainedtight as industry capacity kept pace with reduced paper demand anda decline in print advertising due to the overall U.S. economicslowdown.
Paper markets were mixed. Previously announced price increases werelargely or partially implemented across all grades. Further priceincreases for most paper products were announced to take effectJuly 1 including US$60 per tonne on directory spot volume and anadditional US$60 per tonne on newsprint phased in through the thirdquarter. Pulp and white top linerboard markets were steady in thesecond quarter and demand for Northern Bleached Softwood Kraft(NBSK) pulp is expected to remain in balance for the remainder ofthe year.
Business integration and restructuring continued in the secondquarter with the successful completion of the Snowflake millacquisition on April 10 which added 63,100 tonnes of recyclenewsprint to the production mix in the second quarter. Furtherworkforce adjustments affecting some 227 positions at the Croftonand Elk Falls mills began in May as Catalyst continued to reduceits overall cost structure.
Looking ahead, lumber markets are expected to remain weak throughthe balance of 2008. This will continue to put a strain on fibreavailability and the company will adjust production as required. Asa result of the weaker coated market, Port Alberni mill reducedcoated production in late June and has run uncoated mechanicalgrades on the # 5 paper machine for eight days in July. The companywill continue to take full advantage of machine flexibility toshift production between grades as market demand dictates.