Abitibi-Consolidated Posts 4th Quarter Loss
Feb. 1, 2006 (Press Release) - Abitibi-Consolidated Inc.
reported today a fourth quarter loss of $355 million, or 81 cents a share,
after recording after-tax asset write downs of $228 million. This compares to
a loss of $108 million, or 24 cents a share, in the same quarter of 2004,
which also included mill closure elements and asset write downs as well as a
credit for countervailing and anti-dumping duties (CVD and AD). The Company
recorded in the fourth quarter of 2004, an after-tax gain of $169 million on
the translation of foreign currencies, derived primarily from its U.S. dollar
The write downs were mainly related to the permanent closure of both its
Kenora, Ontario and Stephenville, Newfoundland and Labrador paper mills as
well as impairment charges related to the Lufkin, Texas and Fort William,
Ontario paper mills. In addition to the Kenora and Stephenville mills, the
Company closed its Champneuf, Quebec sawmill and announced its intention to
permanently close one paper machine at its Bridgewater, U.K. facility. Costs
associated with these actions were partly offset by the gain of $53 million on
the sale of timberlands in the Thunder Bay area in Ontario. Also included in
the quarter's results were the following after-tax items: a negative income
tax adjustment of $41 million, $14 million of financial expenses primarily
related to early debt repayment and a $9 million loss on the translation of
foreign currencies, namely the Company's US dollar-denominated debt.
Although not a GAAP measure, the loss would have been $51 million, or
12 cents per share, before the impact of specific items in the fourth quarter.
This compares to a loss of $56 million, or 13 cents a share, in the fourth
quarter of 2004, also before specific items (see Table 2 of MD&A).
The operating loss in the fourth quarter was $352 million compared with
an operating loss of $346 million in the same quarter of 2004. The major
difference year-over-year is higher mill-related energy and fibre costs and a
stronger Canadian dollar. Offsetting these are higher prices for the Company's
two paper segments and lower amortization as a result of mill closures (see
Table 1 of MD&A).
Q4 2005 and year-end highlights
- Sales of $1.31 billion ($5.34 billion in 2005)
- Approximately $1 billion of debt reduction associated with PanAsia
- Price increases implemented for newsprint and commercial printing
- EBITDA before specific items of $139 million ($649 million in 2005)
For all of 2005, the Company reported a loss of $350 million, or 80 cents
a share, compared with a loss of $36 million, or 8 cents a share, for 2004. On
an operating basis, the Company reported a loss of $276 million in 2005,
compared with a loss of $256 million in 2004.
Although not a GAAP measure, the loss would have been $176 million, or
40 cents per share in 2005, before the impact of foreign currency translation
and other specific items. This compares to a loss of $153 million, or 35 cents
a share, in 2004, also before specific items (see Table 2 of MD&A).
The difference year-over-year is higher mill-related energy and fibre
costs and a stronger Canadian dollar. Offsetting these are higher prices in
the Company's two paper segments.
"As promised, we have taken decisive actions which have delivered an
important reduction in our debt and at the same time, sharpened our strategic
focus on our North American portfolio of assets while still serving customers
across the globe," said President and Chief Executive Officer John Weaver. "We
have significantly improved our balance sheet and liquidity position and we
are positioning ourselves for greater financial flexibility for the future,"
For the full year 2005, the Canadian dollar was on average 7.4% stronger
against the US dollar than in 2004. The Company estimates that this had an
unfavourable impact on its operating results of approximately $236 million
compared to the previous year. Other currency exchange rates had a negative
impact of $16 million.
Capital expenditures were $177 million for the full year 2005, compared
to $256 million in 2004. This reduction is mainly attributable to capital
spent on the conversion of the Alma, Quebec machine in 2004 for production of
At the end of the fourth quarter, and following the asset write downs,
the Company's net funded debt to capitalization ratio was 59.1% compared to
its covenant requirement of 70% until December 31, 2007 and of 65% thereafter.
Its EBITDA to interest coverage was 1.9x compared to the 1.5x threshold. These
covenants only apply to the Company's $700 million revolving credit facility
of which $70 million was drawn at year-end.
In-Depth Operations Review Update
"Throughout 2005, the Company undertook an intensive review of its
operations. As a result of this undertaking, the Stephenville and Kenora mills
were permanently closed, removing 434,000 tonnes of newsprint capacity. The
Company also announced its intention to permanently close the 60,000-tonne
no. 4 paper machine at the Bridgewater mill and another 60,000-tonne paper
machine in Grand Falls, Newfoundland and Labrador. The Company sold privately
owned timberlands in Ontario and its interest in PanAsia. In 2006, we will
continue to review options for our Fort William, Grand Falls and presently
idled Lufkin paper mills. We will remain focused and vigilant, doing what is
necessary to restore the Company to profitability," stated Weaver.
Abitibi-Consolidated is a leading producer of newsprint and commercial
printing papers as well as a major supplier of wood products. Committed to the
sustainable forest management of more than 40 million acres through third-
party certification, the Company supplies customers in 70 countries from its
45 operating facilities. Abitibi-Consolidated is also the largest recycler of
newspapers and magazines in North America.
SOURCE: Abitibi-Consolidated Inc.