Abitibi-Consolidated posts wider first quarter loss
May 8, 2007 - Abitibi-Consolidated Inc. today reported a first quarter loss of $70 million, or 16 cents a share. This compares to a loss of $33 million, or 8 cents a share, recorded in the first quarter of 2006. The quarter's results include the following after-tax specific items: a gain of $29 million on the translation of foreign currencies mostly related to the Company's long-term debt denominated in U.S. dollars, an $8 million favourable tax adjustment and a charge of $8 million for merger and integration-related costs.
Although not a GAAP measure, the loss would have been $95 million, or 22 cents per share, before the impact of the above-noted and other specific items. This compares to a loss of $36 million, or 8 cents a share, in the first quarter of 2006.
In the first quarter of 2007, the Company posted an operating loss of $39 million before specific items, compared to an operating profit of $52 million in the first quarter of 2006. The Newsprint segment achieved an operating profit of $5 million, while the Commercial Printing Papers and Wood Products segments had operating losses of $9 million and $35 million respectively. The Wood Products segment includes a $7 million charge relating to inventory devaluation.
Before specific items, the $91 million reduction in operating results in the first quarter of 2007 is mainly attributable to lower prices in the Company's Newsprint and Wood Products business segments, higher cost of products sold and lower sales volume for all segments.
Q1 2007 Highlights
- Sales of $1.07 billion ($1.24 billion in Q1 2006)
- EBITDA of $70 million ($162 million in Q1 2006)
- Decrease in average newsprint prices in the United States by
approximately US$30 per tonne compared to the previous quarter
- Positive demand outlook for uncoated groundwood papers
- Decrease in wood products sales volume driven by a reduction in
U.S. housing starts
- Indefinite idling on February 25, 2007, of the Company's Fort William,
Ontario, paper mill due to market conditions and high production costs
Proposed Merger with Bowater
On January 29, 2007, Abitibi-Consolidated Inc. and Bowater Incorporated (Bowater) announced a definitive agreement to combine in an all-stock merger of equals. The combination will create a new leader in publication papers, the third largest publicly traded paper and forest products company in North America and the eighth largest in the world. The combination is subject to approval by the shareholders of both companies, regulatory approvals and customary closing conditions. Abitibi-Consolidated and Bowater continue to operate separately until the transaction closes.
Fort Frances Biomass Energy Generator
On March 8, 2007, Abitibi-Consolidated announced an investment of $84.3 million in a new biomass energy generator to be located at its Fort Frances, Ontario, pulp and paper mill. The Company's net contribution to this project will be $61.8 million. Construction is scheduled to begin in the summer of 2007, and the generator is anticipated to be in operation during the fall of 2008. The equipment will use renewable, cost-effective fuel from wood waste to generate steam and 45.5 MW of electricity for the mill, which should reduce costs by approximately $26 million annually and eliminate about 90% of the mill's current greenhouse gas emissions.
Comments by the CEO
"Deteriorating conditions in most markets provided significant challenges for the Company during the quarter. The situation does, however, underscore the strategic rationale and timing for our merger with Bowater. Together, our two companies will be stronger and better equipped to compete in the fiercely competitive global marketplace," said John Weaver, Abitibi-Consolidated President and Chief Executive Officer.