Chief executive James Lopez said the Montreal-based producer has to decide whether to invest up to $60 million in its lumber facilities or pursue alternatives.
"We're not announcing that we're spinning off the lumber business or selling or anything like that today, but all those things are up for review," he said Thursday during a conference call after posting disappointing quarterly results.
Tembec's (TSX:TMB) shares closed down more than 11 per cent to $3.09 in Thursday trading on the Toronto Stock Exchange.
It widely missed analyst forecasts by losing $14 million, or 14 cents per share for the period ended March 24. That compared with a profit of six cents per share or $6 million a year earlier.
Sales fell to $407 million from $452 million.
Lopez said he's met with investment bankers and a special committee of three is "turning over stones and looking for strategic options constantly."
The most obvious business that could be unloaded is lumber. Tembec already sold its B.C. lumber assets in March to Canfor (TSX:CFP) for $65 million.
Tembec's lumber segment lost $11 million on $112 million of sales in the second quarter, compared to a loss of $9 million on $98 million of sales in the prior-year period.
But Lopez believes the segment is "poised for a recovery over the next couple years" once the U.S. housing market bounces back.
Tembec's high-yield pulp business also faced another tough quarter, losing $16 million on $70 million of sales. That compared to a $2-million profit on $95 million of sales a year ago.
"Any business that runs negative EBITDA is getting a hard look by the company," Lopez said, adding that decisions won't be made based on a single quarter.
But he said "the worst of the bleeding is without a doubt behind us." He expects the segment will move back to positive earnings in the next quarter or two.
Tembec was expected, on average, to break even on $412 million of revenues in the quarter, according to analysts polled by Thomson Reuters.
Paul Quinn of RBC Capital Markets said the "results are poor all around."
The pulp, paper and lumber producer took a $16-million writedown related to its 50 per cent ownership in an idled beam plant LVL in Amos, Que.
Tembec said its operating earnings before depreciation, amortization and other items (adjusted EBITDA) was $2 million for the quarter, compared to $34 million a year ago and $12 million in the first quarter.
All operating segments reported lower sales and earnings this year, led by high-yield pulp.
"Needless to say management's not happy with the results of the last quarter, we did expect to do better," he told analysts.
It was hurt by a stronger Canadian dollar and lumber pricing which it had expected to be much better.
Despite favourable market conditions, the specialty cellulose and chemical pulp segment generated adjusted EBITDA of just $31 million on sales of $172 million, compared with $44 million on $176 million of sales last year.
The paper segment earned $4 million on $79 million of sales, compared with $9 million on $83 million of revenues a year ago.
Meanwhile, Tembec expects an 11th-hour collective agreement reached at its Kapuskasing, Que., mill will initially result in substantial cost reductions. New employees will be paid lower rates and work under defined contribution pension plans.
Tembec has more than $500 million of capital investments planned over five years, including a $190 million project to replace old boilers and an expansion of specialty dissolving pulp capacity in Temiscaming.
Tembec is an integrated forest products company, with operations in North America and France and some 4,000 employees.