Catalyst Paper Announces First Quarter 2016 Results
In the first quarter, sales volume of coated freesheet products increased by 20 per cent, compared to the same quarter in the previous year.
May 9, 2016 (Press Release) - Catalyst Paper (CYT.TO) today announced results for the first quarter ended March 31, 2016.
Adjusted earnings before tax, depreciation and amortization (EBITDA) was $17.1 million and adjusted EBITDA before specific items was $17.7 million in the first quarter, compared to adjusted EBITDA of $15.1 million and adjusted EBITDA before specific items of $19.8 million in the fourth quarter of 2015.
In the first quarter, the company reported $16.9 million in net earnings and a net loss before specific items of $5.1 million, compared to a net loss of $26.3 million and a net loss of $10.0 before specific items in the fourth quarter of 2015. First quarter earnings benefited from a $22.6 million foreign exchange gain on the translation of U.S. dollar denominated debt. Catalyst's free cash flow was negative $1.7 million, an improvement from negative $11.4 million in the previous quarter. We ended the first quarter with liquidity of $84.0 million.
"In light of the continuing price erosion in some of our products, we are ramping up our programs to reduce costs, improve existing product mix and grow new specialty paper sales," said Joe Nemeth, President & Chief Executive Officer.
Operating results benefited from cost savings driven primarily by Revitalization Programs even though we were challenged by maintenance-related issues in the quarter. Our Revitalization Programs were successfully implemented at three of our mill locations in 2015. The program has now been extended to our two remaining mills and in addition to our corporate group to ensure this program is an enterprise-wide initiative.
Production on Rumford's No. 12 Paper Machine resumed in the quarter after being indefinitely curtailed on September 1, 2015. This decision reflects proactive action by management to more fully leverage integrated capabilities at Rumford. The machine will be dedicated to the production of coated paper and Rumford Offset, a newly developed uncoated free sheet product.
Our progress in safety in the first quarter was overshadowed by the employee fatality that occurred at the Crofton mill in January. We remain diligently focused on improving our performance, and strengthening our safety culture and behaviours.
Market demand for traditional printing and writing papers continues to decline. Reduced paper use, driven by the proliferation of digital options and resulting oversupply, has led to lower prices and declining demand across almost all grades, with coated groundwood and directory grades experiencing the severest declines.
Despite challenging market conditions, we are successfully generating strong sales volume in the Company's targeted market niches. In the first quarter, sales volume of coated freesheet products increased by 20 per cent, compared to the same quarter in the previous year.
Our efforts in entering higher-value markets have been driven by improved brand recognition, consistent product quality, an unmatched environmental pedigree and superior customer service.
Increase to Asset Based Credit Facility
On May 9, 2016, the company amended its revolving asset based loan facility (ABL Facility). The amendment included an increase of the maximum revolving credit commitments by $25.0 million to $250.0 million. The ABL Facility lenders are CIBC as Administrative Agent, Wells Fargo Capital Finance Corporation of Canada, Export Development Canada and Bank of Montreal.
In the second quarter, we expect continued demand and pricing pressure in all grades with the exception of newsprint and NBSK pulp that are benefiting from recent price increases. Energy costs in our British Columbia mills will increase as a result of a four per cent hydroelectricity rate increase in British Columbia effective April 1, 2016. We will continue to be innovative in ways to mitigate this increase. We also face the continued imposition of countervailing duties on the export to the United States of supercalendered paper and are working through the U.S. Department of Commerce's expedited review process.
We believe the Revitalization Programs' focus on cost reduction, combined with our efforts to optimize product mix and increase new specialty paper sales, will serve to lessen the effects of these external pressures.
Planned second quarter maintenance outages at Crofton and Powell River, combined with the impact of the main waterline breach at the Crofton mill in mid-April, will negatively impact maintenance and production costs in the second quarter.
Catalyst Paper manufactures diverse printing papers such as coated freesheet, C1S, coated and uncoated groundwood, newsprint, directory, as well as market pulp. Customers include retailers, publishers and commercial printers in North America, Latin America, the Pacific Rim and Europe. With five mills across North America, Catalyst has annual production capacity of 2.3 million tonnes. To learn more, please visit: www.catalystpaper.com.
SOURCE: Catalyst Paper Corporation