Abitibi-Consolidated 1st Quarter Loss Narrows
April 26, 2006 - Abitibi-Consolidated Inc. reported today a first quarter loss of $33 million, or 8 cents a share. This compares to a loss of $51 million, or 12 cents a share, recorded in the first quarter of 2005. Included in the quarter's results were the following after- tax specific items: A loss of $12 million on the translation of foreign currencies and a $22 million positive tax adjustment related to the favourable settlement of a prior year income tax issue.
Although not a GAAP measure, the loss would have been $42 million, or 10 cents per share, before the impact of the above-noted items. This compares to a loss of $59 million, or 13 cents a share, in the first quarter of 2005 (see Table 3 of MD&A).
The operating profit in the first quarter was $41 million, compared with an operating profit of $11 million in the same quarter of 2005. The marked improvement in operating profit is mainly attributable to higher prices in the Company's two paper business segments, lower amortization as well as lower rates for countervailing and anti-dumping duties (CVD and AD). These were partially offset by the continued strength of the Canadian dollar, higher cost of goods sold in the Newsprint business and lower prices in the Wood Products segment. Specifically, the 6.3% appreciation of the Canadian dollar compared to the US dollar is estimated to have had an unfavourable impact of $44 million on the Company's quarterly operating results.
Q1 2006 HIGHLIGHTS
- Sales of $1.24 billion ($1.32 billion in Q1 2005)
- EBITDA of $153 million ($147 million in Q1 2005)
- Price increases partially implemented for newsprint and ABIOFFSET(TM)
- Additional price increases announced for various Commercial Printing
- Improved operating profit
- Newsprint inventories 50% lower than Q1 2005; matching record low
Q4 2005 level
- SG&A initiative targets $35 million reduction in costs; will eliminate
over 200 positions
- Permanently closed 60,000-tonne newsprint machine in the U.K.
An in-depth operations review was undertaken throughout 2005 and led to mill closures, capacity reductions and sale of assets. The SG&A initiative was embarked upon to best align corporate and divisional support with the current needs of the organization. The review has included all aspects of SG&A, from the executive to the mill level. "Addressing SG&A expenses was the logical next step to position Abitibi-Consolidated for the future and to exceed our $175 million EBITDA improvement from cost and productivity initiatives. It is our intention to reduce our SG&A costs by 20%, saving the Company approximately $35 million compared to our 2005 baseline, which was already "best in class," said President and Chief Executive Officer John Weaver.
In commenting on the quarter, Weaver also noted positive pricing momentum and continued tight inventory levels corresponding with high industry operating rates in North America. "We are seeing the fundamentals of our business continue to improve. As a Company, we have taken necessary actions over the past several years. This has been a difficult experience but Abitibi- Consolidated emerges stronger, more competitive and better positioned to compete in today's global marketplace."
SOURCE: Abitibi-Consolidated Inc.