MONTREAL, July 30 /CNW Telbec/ - Consolidated sales for the three-month
period ended June 27, 2009 were $407 million, down from $609 million in the
comparable period of the prior year. The Company generated a net loss of $38
million or $0.38 per share in the June 2009 quarter compared to a net loss of
$27 million or $0.27 per share in the June 2008 quarter. Earnings before
non-recurring items, interest, income taxes, depreciation, amortization and
other non-operating expenses (EBITDA) was negative $42 million for the
three-month period ended June 27, 2009, as compared to EBITDA of $9 million a
year ago and negative EBITDA of $63 million in the prior quarter.
Business Segment Results
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The Forest Products segment generated negative EBITDA of $18 million on
sales of $72 million. This compares to negative EBITDA of $28 million on sales
of $84 million in the prior quarter. Sales decreased by $12 million due to
lower volumes for lumber. US $ reference prices for random lumber increased by
approximately US $20 per mbf while stud lumber increased by US $18 per mbf.
Currency had a negative effect on pricing as the Canadian $ averaged US
$0.858, a 7% increase from US $0.803 in the prior quarter. The net price
effect was an increase in EBITDA of $2 million or $15 per mbf. Mill level
costs increased by $4 million as the Company continued to absorb higher costs
resulting from significant production curtailments necessitated by poor demand
for lumber. During the June quarter, the Company absorbed a charge of $2
million on the carrying value of logs and lumber inventories. In the prior
quarter, the Company absorbed a charge of $7 million related to a reduction of
the carrying value of logs and lumber inventories. During the June quarter,
the Company incurred $1 million of lumber export taxes, unchanged from the
prior quarter. Lumber export taxes are payable based on the 2006 agreement
between Canada and the United States. Applicable export tax rates vary based
upon selling prices. During the June quarter, the Company incurred a tax of
15% on Western shipments, unchanged from the prior quarter. On April 15, the
tax on Eastern shipments increased from 5% to 15% as a result of an
arbitration decision relating to alleged over-shipments of lumber between
January 2007 and June 2007.
The Pulp segment generated negative EBITDA of $22 million on sales of
$239 million for the quarter ended June 2009 compared to negative EBITDA of
$51 million on sales of $223 million in the prior quarter. Sales increased by
$16 million primarily as a result of higher volumes partly offset by lower
selling prices. While US $ reference prices for North America NBSK and
hardwood pulp declined, European softwood pulp prices actually increased. The
pricing on the latter grade had dropped considerably below the North American
price and it was expected that the gap would tighten at some point. Currency
had a negative effect on pricing as the Canadian $ strengthened versus the US
$. The net price effect was a decrease of $71 per tonne, reducing EBITDA by
$25 million. Pulp demand remained weak and the Company incurred 86,200 tonnes
of market related downtime and 1,400 tonnes of maintenance downtime. This
compares to 182,600 tonnes of market downtime and 1,300 tonnes of maintenance
downtime in the prior quarter. While market downtime remained significant, it
was substantially lower than the record amount taken in the prior quarter. The
higher productivity positively impacted mill level costs which declined by $71
million. The Company continues to focus on maintaining targeted inventory
levels and will initiate production curtailments as required. Inventories were
at 22 days of supply at the end of June 2009, as compared to 28 days at the
end of March 2009.
The Paper segment generated nil EBITDA on sales of $109 million. This
compares to EBITDA of $19 million on sales of $124 million in the prior
quarter. The $15 million decline in sales was driven by lower newsprint
prices. The US $ reference price for newsprint decreased by US $159 per tonne
while the reference price for coated bleached board declined by US $17 per
short ton. Currency also negatively impacted pricing as the Canadian $
strengthened versus the US $. The net effect was a decrease of $155 per tonne,
decreasing EBITDA by $19 million. Manufacturing costs were similar quarter
over quarter as the Company continued to reduce production in view of weak
demand. The Company incurred 58,400 tonnes of market related downtime in the
June 2009 quarter compared to 36,800 tonnes of market related downtime in the
prior quarter. One of the three newsprint machines at the Kapuskasing
newsprint mill was idle for the entire June 2009 quarter and the other two
newsprint machines were idle for six weeks. The Pine Falls newsprint mill was
idled for 10 days. The Temiscaming bleached board mill was also idle for 10
days during the most recent quarter.
Liquidity
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At the end of June 2009, the Company had net cash of $40 million plus
unused operating lines of $110 million. In response to the very difficult
conditions facing the forest products industry, the Company has developed a
focused list of initiatives that should generate approximately $100 million of
incremental liquidity. As of the date of this report, approximately $14
million has been achieved, including the sale of the St. Francisville mill
site.
Outlook
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While the June quarterly operating results were an improvement over
March, they remained poor. The strengthening Canadian $, the deterioration in
the newsprint market and relatively weak pulp and lumber markets all combined
to negatively impact financial performance. In response, the Company continued
with selective production curtailments to manage and reduce inventories. This
was a key factor in the Company's ability to maintain liquidity at $150
million, unchanged from the prior quarter. Looking ahead, lumber markets will
remain challenging. European and U.S. pulp markets are weak, but are seeing
some improvements in pricing, with continued production curtailments providing
the impetus. Newsprint prices decreased in the June quarter and the economic
downturn will continue to put pressure on prices and demand. Significant
production curtailments will be required to see an improvement in newsprint
pricing. Considering the ongoing challenges of the current operating
environment and the effect on cash flow, the Company has placed a major
emphasis on activities to maintain and enhance liquidity which currently
stands at approximately $150 million, virtually unchanged from last quarter.
Consequently, a number of liquidity enhancing initiatives have been launched
with the target to raise a further $86 million over the next 12 months.
Certain additional initiatives are also under evaluation at this time. These
measures are necessary due to the volatility of the US $ and product prices.
Tembec is a large, diversified and integrated forest products company
which stands as the global leader in sustainable forest management practices.
The Company's principal operations are located in Canada and France. Tembec's
common shares are listed on the Toronto Stock Exchange under the symbol TMB
and warrants under TMB.WT. The full quarterly report, including the interim
Management Discussion and Analysis, the interim financial statements and the
accompanying notes for the quarter ended June 27, 2009 can be obtained on
Tembec's website at www.tembec.com or on SEDAR at www.sedar.com.
This press release includes "forward-looking statements" within the
meaning of securities laws. Such statements relate to the Company's or
management's objectives, projections, estimates, expectations or predictions
of the future and can be identified by words such as "anticipate", "estimate",
"expect", "will" and "project" or variations of such words. These statements
are based on certain assumptions and analyses made by the Company in light of
its experience and its perception of future developments. Such statements are
subject to a number of risks and uncertainties, including, but not limited to,
changes in foreign exchange rates, product selling prices, raw material and
operating costs and other factors identified in our periodic filings with
securities regulatory authorities. Many of these risks are beyond the control
of the Company and, therefore, may cause actual actions or results to
materially differ from those expressed or implied herein. The Company
disclaims any intention or obligation to update or revise any forward-looking
statements, whether as a result of new information, future events or
otherwise.
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TEMBEC INC.
CONSOLIDATED BALANCE SHEETS
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(unaudited) (in millions of dollars)
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June 27, Sept.
