Abitibi-Consolidated fourth quarter loss narrows
Feb. 7, 2007 - Abitibi-Consolidated Inc. today reported a fourth quarter loss of $22 million, or 5 cents a share. This compares to a loss of $355 million, or 81 cents a share, in the same quarter of 2005. For the full year, the company recorded net earnings of $54 million, or 12 cents a share, compared to a loss of $350 million, or 80 cents a share, in the same period last year.
Although not a GAAP measure, the loss would have been $61 million, or 14 cents a share, before the impact of specific items in the fourth quarter. This compares to a loss of $51 million, or 12 cents per share, in the fourth quarter 2005, also before specific items (see Table 3 of MD&A).
Major specific items impacting fourth quarter results included the CVD/AD softwood lumber refunds, partly offset by a loss on translation of foreign currencies. In 2005 by comparison, major specific items included asset write downs and tax adjustments.
Before specific items, the Company posted an operating profit from continuing operations of $17 million during the fourth quarter of 2006, with its Newsprint business making a positive contribution of $46 million, while its Commercial Printing Papers and Wood Products segments posted operating losses of $7 million and $22 million respectively. This compares with an overall operating profit of $15 million in the fourth quarter of 2005. For the full year 2006, the Company posted an operating profit of $136 million, compared to $141 million for the full year 2005 (see Table 2 of MD&A).
Before specific items, the $2 million increase in operating profit from continuing operations for the quarter, compared to last year, is mainly attributable to higher prices in the Company's two paper business segments and lower amortization expense. These were mostly offset by strengthening of the Canadian dollar and lower lumber prices.
Q4 2006 and Year-end Highlights
- Sales of $1.18 billion ($4.85 billion in 2006)
- EBITDA of $126 million ($576 million in 2006)
- Refund of US$239 million of softwood lumber duty deposits
- Achieved over $200 million in cost and market mix improvements, beating
$175 million target set at the beginning of 2005
- Achieved $40 million in SG&A cost reductions, exceeding $35 million
goal and six months ahead of schedule
- Sale of Sheldon, Texas mill, resulting in $26 million net proceeds
"Throughout 2006, we maintained our highly disciplined approach to costs and have been remarkably successful. Our achievement of over $200 million in cost and market mix improvements as well as the $40 million annualized reduction in SG&A expense offset increases in energy, fibre and other key inputs as well as the continued rise of the Canadian dollar. This is a credit to the hard work and dedication of our people," said President and Chief Executive Officer John Weaver.
"While 2007 promises to be another challenging year, we are once again taking action to address the reality of our times. The announced merger with Bowater is particularly important and represents a critical step in the continuing evolution of our company," added Weaver.
The recently announced merger with Bowater will create the third largest publicly traded paper and forest products company in North America and the eighth largest in the world. The combination is expected to generate approximately US$250 million in annualized cost synergies, increasing shareholder value, improving financial flexibility and better positioning the company to compete in today's global marketplace.
Other Noteworthy Developments
The Company is selling a 25% interest in its Ontario hydroelectric generation facilities. The transaction will generate gross proceeds of $297.5 million to Abitibi-Consolidated, inclusive of a $250 million loan to ACH Limited Partnership. The Company is also proceeding with the sale of 55,000 acres of woodlands related to its Augusta Newsprint partnership, with all cash proceeds of the sale going to Abitibi-Consolidated.
For the full year 2006, the Canadian dollar strengthened by an average 6.8% compared to the US dollar in 2005. The Company estimates that this had an unfavourable impact on its operating results of approximately $221 million compared to the previous year. Other currency exchange rates, net of hedging, had a negative impact of $10 million.
Capital expenditures were $165 million for the full year 2006, compared to $177 million in 2005. The Company ended the year below its target of $180 million by selecting only the best projects and maintaining a tight control on spending.
SOURCE: Abitibi-Consolidated Inc.