AbitibiBowater Reports Fourth Quarter Loss
Feb. 28, 2008 - AbitibiBowater Inc. today reported a net loss for the fourth quarter 2007 of $250 million, or $5.09 per diluted share, on sales of $1,491 million. These results compare with a net income of $107 million, or $3.58 per diluted share, on sales of $861 million for the fourth quarter of 2006.
For the full year 2007, the Company reported a net loss of $490 million, or $14.11 per diluted share. This compares with a net loss of $138 million, or $4.64 per diluted share, for 2006. Sales in 2007 totaled $3.9 billion, up 11% from 2006 sales of $3.5 billion.
The Company's 2007 fourth quarter and year-end results reflect the full quarter and year-end results for Bowater Incorporated and the results for Abitibi-Consolidated Inc. for the period following its combination with Bowater on October 29, 2007. The Company's fourth quarter and year-end results for 2006 include only Bowater results.
Fourth quarter 2007 special items, net of tax, consisted of the following items: a $53 million gain relating to foreign currency changes and asset sales, a $130 million loss related to asset closures, $27 million severance and merger-related costs and a $31 million charge related to tax adjustments. Excluding these special items, the net loss for the quarter would have been $115 million, or $2.34 per diluted share. A reconciliation of these non-GAAP measures is contained in Note 11 to this release.
During the first quarter of 2008, AbitibiBowater has removed almost one million metric tons of high-cost capacity in line with its previously announced Phase 1 comprehensive review of operations, while also making significant inroads on its cost synergy target of $375 million from the combination of Abitibi-Consolidated and Bowater.
"While markets for wood products remain challenging, market conditions for pulp and paper products are improving significantly and we are pleased with our ongoing progress to make our Company a more globally competitive organization," stated John W. Weaver, Executive Chairman. "Our recently announced agreement with Catalyst Paper, to sell our Snowflake, Arizona newsprint mill for approximately $180 million, including retained working capital, is another important milestone. We remain committed to our debt reduction target of $1 billion over the next three years."
The Company has been actively engaged in its Phase 2 comprehensive review of operations since the merger was completed and expects that an announcement regarding its decisions will be forthcoming during the second quarter of 2008. The Company is focused on further cost reductions and manufacturing platform improvements in both the paper and wood products segments.
"Since our Phase 1 announcement, we have been working with our employees, unions, governments and communities in an effort to address the challenges that we face today. We are operating in a rapidly changing business environment and we will take the necessary steps to position AbitibiBowater for the future," said David J. Paterson, President and Chief Executive Officer. "In order to remain a competitive, viable supplier and provide our stakeholders with appropriate returns, we must significantly improve the margins for our products. Our recently announced price increases were a successful step."
The Company also announced today that it has successfully amended Bowater's credit facilities. The amendments permit, among other things, an intercompany restructuring of the ownership of the Company's Catawba, South Carolina mill in order to permit additional debt financing by Bowater and/or the Company. Among other liquidity needs that must be addressed, the Company's Abitibi-Consolidated subsidiary has second quarter debt maturities of approximately $200 million due April 1 and $150 million due June 20 that have not yet been refinanced. The Company confirmed that it has been reviewing multiple financing alternatives to develop additional liquidity for the remainder of 2008 and 2009. The Company cautioned that continued negative conditions in the credit and capital markets, as well as the difficult industry operating environment, are challenging its ability to obtain such financing and that there can be no assurance that either the Company, Abitibi-Consolidated or Bowater could obtain such financing on terms satisfactory to the Company.
Earnings for the coated papers segment for the fourth quarter increased $2 million from the third quarter to $15 million. The Company's average transaction price for coated papers increased $52 per short ton during the quarter, while average operating costs increased $39 per short ton. Operating costs were higher in the fourth quarter due to a major maintenance outage. The Company has implemented the December $60 per short ton price increase.
Earnings for the market pulp segment of $30 million for the fourth quarter were flat compared to the third quarter. The average market pulp transaction price for the Company increased $16 per metric ton. Average operating costs increased $18 per metric ton, compared to the third quarter due to maintenance related outages. The Company has announced price increases of $20 to $30 per metric ton, depending upon the grade, in the fourth quarter of 2007 and first quarter of 2008.
For the fourth quarter, the newsprint segment had a loss of $52 million, compared to a loss of $40 million for the third quarter. The Company's average transaction price increased $12 per metric ton. Average operating costs decreased $19 per metric ton, compared to the third quarter. The strengthening of the Canadian dollar in the fourth quarter increased costs, compared to the third quarter, by about $20 million. The Company has informed its North American newsprint customers of price increases totaling $120 per metric ton to be implemented in six equal monthly installments beginning in January 2008.
The specialty papers segment had a loss of $56 million, compared to a loss of $20 million for the third quarter. The Company's average transaction price increased $30 per short ton during the quarter, while average operating costs increased $43 per short ton, primarily as a result of the strengthening Canadian dollar during the quarter. The Company is implementing previously announced price increases for various grades of specialty papers.
For the fourth quarter, the wood products segment had a loss of $53 million, compared to a loss of $11 million for the third quarter. The average transaction price for the Company decreased $13 per thousand board feet, while average operating costs increased $54 per thousand board feet compared to the third quarter due primarily to a lower of cost or market adjustment. The Company has announced curtailments of 1.3 billion board feet at facilities in the provinces of Quebec and British Columbia during the first quarter of 2008.
Form 10-K Filing
The Company also announced today that it will not be filing its 2007 Form 10-K Annual Report on February 29 due to the additional time needed to report results representing the first period of combined operations of Abitibi-Consolidated and Bowater since the completion of their combination in the fourth quarter of 2007. The Company is working to complete its Form 10-K as soon as possible and expects to file it within the time period automatically permitted by the extension (i.e., not later than March 17, 2008.)
AbitibiBowater produces a wide range of newsprint and commercial printing papers, market pulp and wood products. It is the eighth largest publicly traded pulp and paper manufacturer in the world. Following the required divestiture agreed to with the U.S. Department of Justice, AbitibiBowater will own or operate 27 pulp and paper facilities and 35 wood products facilities located in the United States, Canada, the United Kingdom and South Korea.