Bowater Fourth Quarter Loss Widens
Jan. 26, 2006 (Press Release) - Bowater Inc. reported for the year 2005 a net loss of $120.6 million, or $2.10 per diluted share. This compares with a net loss of $87.1 million, or $1.52 per diluted share in 2004. Sales in 2005 totaled $3.5 billion compared with $3.2 billion in 2004. Excluding impairment and other special items, the loss for 2005 was $39.6 million, or $0.69 per diluted share, compared to a 2004 loss of $73.2 million, or $1.28 per diluted share.
Bowater had a net loss of $101.9 million, or $1.78 per diluted share, on sales of $876.4 million for the fourth quarter of 2005. These results compare with a net loss of $35.2 million, or $0.61 per diluted share, on sales of $823.0 million in the fourth quarter of 2004. Before special items, the net loss for the fourth quarter of 2005 was $14.4 million, or $0.25 per diluted share, compared with the 2004 fourth quarter net loss before special items of $23.6 million, or $0.41 per diluted share. Special items in the fourth quarter included a gain on asset sales of $21.7 million offset by charges of $109.2 million, principally related to a restructuring at the Thunder Bay, Ontario mill.
Specifically, the company will permanently close the Thunder Bay "A" kraft mill in the second quarter of 2006. This facility produces approximately 210,000 metric tons of market pulp per year. The closure will improve the financial performance of the site by reducing the use of high cost wood and energy. It will result in a 20% employment reduction at the site.
"I regret the impact that our decision at Thunder Bay will have on our employees, their families and the community. However, this restructuring is essential for the viability of this site. Also critical is an improved operating environment in Ontario," said Arnold M. Nemirow, Chairman, President and Chief Executive Officer. "Although better than 2004, our 2005 financial results were very disappointing, as we continued to face a stronger Canadian dollar, and higher energy and wood costs. With this restructuring, as well as the $80 million cost reduction program announced last quarter and better markets, we expect to continue to improve our financial results in 2006."
Fourth quarter special items consisted of a $21.7 million gain related to asset sales, an asset impairment charge of $69.3 million, primarily related to the permanent closure at Thunder Bay, tax charges of $27.3 million related to the elimination of deferred tax assets, primarily associated with the Thunder Bay operations, a severance charge of $12.8 million, a $0.7 million gain resulting from currency changes primarily related to the appreciation of the Canadian dollar and a $0.5 million charge related to the adoption of an accounting standard related to asset retirement obligations. Additional pension charges related to the closure of approximately $17.0 million are expected to occur in 2006.
Operating costs for the company's pulp and paper products increased during the fourth quarter, primarily as a result of rising energy costs and the stronger Canadian dollar. In addition, repair spending was higher as a result of maintenance outages. Maintenance downtime at the Coosa Pines, Alabama pulp mill was longer than anticipated as a result of limited labor availability due to hurricane reconstruction projects in the region.
Bowater's average transaction price for newsprint rose $13 per metric ton in the fourth quarter compared to the third quarter, while the company's average operating costs increased $19 per metric ton. Inventory decreased by 13,900 metric tons. The company curtailed 54,000 metric tons of newsprint production in the fourth quarter for market and maintenance reasons. In the first quarter, the company expects to curtail approximately 39,000 metric tons representing maintenance outages and the continued idling of a machine at Thunder Bay. The company has informed its North American customers of a $40 per metric ton price increase effective February 1.
Bowater's average transaction price for coated and specialty papers increased $9 per short ton compared to the third quarter, while the company's average operating costs increased $14 per short ton. The company has informed its North American customers of a $60 per short ton price increase, effective February 1, for certain of its uncoated mechanical grades.
Bowater's average transaction price for market pulp was essentially flat compared to the third quarter of 2005, while operating costs increased $23 per metric ton. The company curtailed 24,000 metric tons of market pulp due to maintenance outages in the quarter and expects to curtail approximately 6,000 tons in the first quarter.
The company's average transaction price for lumber decreased $9 per thousand board feet compared to the third quarter of 2005. During the quarter, the company paid countervailing and antidumping duties of approximately $6.2 million. In December, these duties for the company were reduced from 20.15% to 10.81%.
Bowater Inc, headquartered in Greenville, SC, is a leading producer of newsprint, coated mechanical and specialty papers. In addition, the company makes bleached kraft pulp and lumber products. The company has 12 pulp and paper mills in the United States, Canada and South Korea and 12 North American sawmills that produce softwood lumber. Bowater also operates two facilities that convert a base sheet to coated products. Bowater's operations are supported by approximately 1.4 million acres of timberlands owned or leased in the United States and Canada and 30 million acres of timber cutting rights in Canada. Bowater is one of the world's largest consumers of recycled newspapers and magazines. Bowater common stock is listed on the New York Stock Exchange and the Pacific Exchange. A special class of stock exchangeable into Bowater common stock is listed on the Toronto Stock Exchange (TSX: BWX).
SOURCE: Bowater Inc.