Bowater Reports First Quarter Loss
April 27, 2006 (Press Release) - Bowater Inc. reported a net loss of $18.8 million, or $0.33 per diluted share, on sales of $893.2 million for the first quarter of 2006. These results compare with net income of $0.9 million, or $0.02 per diluted share, on sales of $837.0 million in the first quarter of 2005. First quarter 2006 special items, net of tax, consisted of a $17.9 million gain related to asset sales, a $13.5 million charge related to tax adjustments, and other net charges of $4.1 million. Before these special items, the net loss for the first quarter of 2006 was $19.1 million, or $0.33 per diluted share, compared with the 2005 first quarter net loss before special items of $12.6 million, or $0.22 per diluted share.
"A stronger Canadian dollar, seasonally weak coated pricing, and higher labor related expenses affected first quarter results," said Arnold M. Nemirow, Chairman, President and Chief Executive Officer. "We look forward to both steadily improving markets and a better cost structure throughout the year. Also, our timberland sale program is ahead of schedule and is expected to significantly exceed our target of $300 million."
The company's average transaction price for coated papers decreased $25 per short ton in the first quarter compared with the fourth quarter of 2005 due to seasonally slow markets and product mix shifts. The company's average operating cost increased $36 per short ton. In the first quarter, a scheduled pulp maintenance outage at the Catawba, SC facility increased the production costs of coated paper by approximately $4 million.
Compared to the fourth quarter, the cost per ton of specialty papers increased by 5%. The conversion of one of the newsprint machines at Calhoun, TN to a lightly coated product is expected to be completed during the second quarter. The company expects the 18 day outage and startup to reduce operating income by approximately $5 million.
The company's average transaction price for newsprint increased $18 per metric ton in the first quarter. During the quarter, the company's average operating costs increased by $21 per metric ton primarily due to a stronger Canadian dollar and higher labor related costs.
The company's average transaction price for market pulp increased $6 per metric ton compared to the fourth quarter of 2005. Average operating costs decreased $26 per metric ton compared to the fourth quarter due to lower repair costs and increased production. As previously announced, the company will permanently close its high cost Thunder Bay pulp line 'A' in the second quarter. Earnings are expected to improve by $20 million annually, beginning in 2007, due to this closure.
The company's average transaction price for lumber increased $12 per thousand board feet and shipments increased 7% compared to the fourth quarter of 2005. During the quarter, the company paid countervailing and antidumping duties of approximately $4 million, bringing the total paid to-date to approximately $105 million.
The company recorded a net after-tax gain on asset sales of $17.9 million. Proceeds were $36.8 million. The gain reflects the sale of a small sawmill and approximately 24,300 acres of timberlands. Since the asset sale program was announced last October, the company has received proceeds of $78.8 million. In the second quarter, the company expects to sell assets, primarily timberlands, totaling approximately $150 million. The company expects to significantly exceed its $300 million asset sale target by year end.
"In January, I announced my intent to retire upon the appointment of a successor as Chief Executive Officer and President," said Arnold M. Nemirow, Chairman, President and Chief Executive Officer. "I am very pleased that David Paterson, who spent almost 20 years at Georgia-Pacific, most recently as Executive Vice President, Building Products, will join Bowater as President and Chief Executive Officer, effective May 1. He brings excellent credentials and a strong record of accomplishments. Over the last few years, in the face of a very difficult operating environment, Bowater has made considerable progress shifting its product mix and improving its financial performance. David's leadership will be a major factor in Bowater's future success. To help with the management transition, I will remain as non-executive Chairman until the end of the year."
SOURCE: Bowater Inc.