NewPage Posts 2Q Loss on Weak Demand
Aug. 12, 2008 - NewPage Corp. today announced its results of operations for the second quarter of 2008, including the financial results of Stora Enso North America (SENA) that was acquired on December 21, 2007. Net sales were $1,063 million in the second quarter of 2008 compared to $495 million in the second quarter of 2007, an increase of $568 million, or 115%, primarily as a result of the acquisition.
Net loss was $21 million in the second quarter of 2008 compared to zero in the second quarter of 2007.
Earnings before interest, taxes, depreciation and amortization (EBITDA) were $103 million for the second quarter of 2008 compared to EBITDA of $66 million for the second quarter of 2007.
"The U.S. economy caught up with the coated paper market during the second quarter and we saw a dramatic slowdown in demand for coated papers and rapid increases in input costs," said Mark A. Suwyn, NewPage chairman and chief executive officer. "We took immediate actions and curtailed production to limit inventory growth, raised prices in April and again in July, and initiated additional productivity programs to offset the rising costs. In addition to accelerating the permanent shutdowns we previously announced as part of the integration of Stora Enso North America, we also announced the closure of our mill in Kimberly, Wisconsin, to align capacity with market demand."
The following schedule details key performance and cost metrics for the
Coated paper volume - 000s tons 875 517
Price per ton of coated paper $988 $876
Market downtime - 000s tons 18 0
Maintenance expense - $ million $101 $41
Gross margin 8.4% 11.3%
SG&A expense - % of net sales 5.9% 4.6%
"From an operations perspective, we were challenged during the quarter to manage the decrease in demand for our coated products along with increased inflation for energy, raw materials and transportation," said Richard D. Willett, Jr., NewPage president and chief operating officer.
"Despite the difficult actions we've had to initiate, we are still able meet the needs of our customers. The rapid integration of our production capability allows us to produce most products on multiple paper machines at the mills with the lowest costs. We are moving ahead on all of our key initiatives such as the business systems integration, Lean Six Sigma activities, capital investments to drive cost productivity, and accelerating improvements across the company. These actions will enable NewPage to remain financially strong and maintain its position as the clear industry leader."
Cost of sales continued to increase in the second quarter of 2008 compared to the second quarter of 2007, driven by sales of the acquired business and higher oil and natural gas prices and their effect on energy, transportation and raw materials. "We expect crude oil and energy costs to remain high throughout the year," said Willett. "As a result of these continued inflationary pressures, we raised sales prices, and will continue to closely monitor input costs."
As a result of restructuring plans announced during the first quarter of 2008, cost of sales included pretax charges of $8 million in the second quarter of 2008, consisting of $6 million of accelerated depreciation expense and $2 million of employee-related costs. In addition, the company incurred $13 million of integration related expenses during the quarter. "Our integration activities continued throughout the quarter and we remain on track to meet our previously announced long-term target of $265 million in annual synergies from the SENA acquisition," added Willett.
Interest expense for the second quarter was $68 million in 2008 compared to $32 million for the same period in 2007. The increase was primarily due to higher outstanding debt balances resulting from financing the acquisition.
NewPage closed the quarter with $466 million of liquidity, including $41 million of cash and $425 million of additional borrowing availability under the revolving credit facility.
Headquartered in Miamisburg, Ohio, NewPage Corporation is the largest coated paper manufacturer in North America, based on production capacity, with $4.7 billion in pro forma net sales for the year ended December 31, 2007. The company's product portfolio is the broadest in North America and includes coated freesheet, coated groundwood, supercalendered, newsprint and specialty papers. These papers are used for corporate collateral, commercial printing, magazines, catalogs, books, coupons, inserts, newspapers, packaging applications and direct mail advertising.
NewPage owns paper mills in Kentucky, Maine, Maryland, Michigan, Minnesota, Nova Scotia, and Wisconsin. These mills currently have a total annual production capacity of approximately 4.5 million tons of paper, including approximately 3.3 million tons of coated paper, approximately 900,000 tons of uncoated paper and approximately 300,000 tons of specialty paper.
SOURCE: NewPage Corp.