Resolute hopeful that sawmill startups will breathe life to Ontario communities

Posted: Updated:
Print Article

MONTREAL - Resolute Forest Products says the improving U.S. housing market is allowing the lumber producer to expand its sawmill production capacity for the first time in years, helping breathe new life into several northwestern Ontario communities.

The Montreal-based company expects to create a few hundred direct and indirect jobs over the next year or so as it prepares to restart sawmills in Ignace that have been idled since 2007, build new operations in Atikokan and increase capacity at several other operations in Ontario and Quebec.

CEO Richard Garneau said more than 300 residents flooded into a town hall meeting of one community to express their interest in one the company's projects which together will add 400 million board feet of annual capacity by mid 2014.

"For them it means jobs, it means their living," he said in an interview, pointing out the heavy impact the downturn has had on these isolated communities and nearby aboriginal areas.

Garneau said these sawmills are going to better position Resolute's pulp and paper mills because of the improved quality of chips that will be processed by the company. However, he wouldn't say how much additional earnings are expected to be generated.

Resolute (TSX:RFP) beat expectations even though its net loss surged to $36 million in the fourth quarter due to several factors, including lower prices and volumes in its paper business as well as costs associated with idled operations.

The pulp, paper and lumber producer said Tuesday it lost 38 cents per diluted share for the period ended Dec. 31, compared to a net loss of $6 million or six cents per share a year earlier. Sales were unchanged at $1.1 billion.

Excluding $70 million of special items, the former AbitibiBowater earned $34 million or 35 cents per share, a 24 per cent drop from the $45 million or 46 cents per share earned in the year-ago period.

Analysts had expected Resolute would earn 18 cents per share in adjusted profits.

Paul Quinn of RBC Capital Markets said the impact of the fourth-quarter results was "neutral" as weaker newsprint and specialty paper markets were offset in the quarter by improvements in market pulp due largely to less downtime, and gains in wood products.

Resolute posted a $46-million operating loss in the quarter due to closure costs and impairment charges mainly related to the idling of a pulp mill and specialty paper machine in Fort Frances, Ont., the closure of a specialty paper machine in Laurentide, Que., and costs related to the sale of assets in Mersey, N.S.

Garneau said the company continued to aggressively restructure its operations in the second full year since it exited creditor protection by cutting labour and other costs and focus operations on its most productive and lowest-cost machines and co-generation operations that will eventually add $55 million to $70 million in annual EBITDA.

However, he vowed continue to "turn stones" to find new cost savings.

"We have turned a lot of them in the last two years and in any business it's a never-ending process to reduce costs," he said.

The focus will be on things like better use of power and steam and optimization of wood waste usage rather than cuts that will directly affect employees.

As it has idled machines and closed facilities, Resolute has cut hundreds of jobs. It has 9,200 employees, including 4,844 in Quebec. It has cut nearly 600 pulp and paper positions in Quebec and created 200 to date with the restart of operations in Dolbeau and plans to restart Gatineau.

For the full year, the company lost $2 million or two cents per share on $4.5 billion of sales, compared to a $41 million, or 42 cents per share profit on $4.8 billion of sales.

Excluding $81 million in one-time costs, it earned $79 million or 81 cents per share, compared to $166 million or $1.71 per share.

Garneau expects 2013 could be another challenging year as lumber demand continues to improve and the pulp market slowly recovers along with the global economy. However, he warned that newsprint should continue to be challenged as North American demands weakens and prices are challenged because of the restart of White Birch's operation in Stadacona, Que.

"We've done everything that was possible to continue to position the company to be more competitive and obviously we're more optimistic on pulp and lumber but on paper we're certainly well-positioned with the cost competitive mills and machines that we now have."

The purchase of Fibrek has allowed Resolute to add 750,000 tonnes of annual capacity and become North America's fourth-largest pulp producer. It spent a lot of money last year to remove years of sludge from lagoons and complete costly repairs at St. Felicien and is negotiating labour cost savings by contracting out several full-time positions.

On the Toronto Stock Exchange, Resolute's shares gained 33 cents, or 2.45 per cent, at $13.82 in afternoon trading.