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Press Release

  • Q3 GAAP net income of?$117 million?or?$1.25?per diluted share
  • Adjusted EBITDA of?$189 million
  • Net debt to trailing 12 month adjusted EBITDA drops to 1.0; liquidity at?$654 million
  • Completion of the sale of?Fairmont?for?$62 million
  • Special dividend of?$1.50?per share

MONTRéAL,?Nov. 1, 2018?/CNW Telbec/ – Resolute Forest Products Inc. (NYSE: RFP) (TSX: RFP) today reported net income for the quarter ended?September 30, 2018, of $117?million, or?$1.25?per diluted share, compared to?$24 million, or?$0.26?per share, in the same period in 2017. Sales were?$974 million?in the quarter, an increase of?$89 million?from the year-ago period. Excluding special items, the company reported net income of?$96 million, or?$1.03?per share, compared to?$31 million, or?$0.34?per share, in the third quarter of 2017.

“Our best pulp quarter combined with continued positive market dynamics for paper helped offset the effects of a weaker lumber market, leading to another quarter of record results and a further reduction in leverage. Our continued focus on improving operational performance also resulted in a notable increase in the profitability of our?specialty papers business,” said?Yves Laflamme, president and chief executive officer.

“We recently entered into an agreement to sell the Catawba paper and pulp mill for?$300 million, and today, we?will complete?the previously announced sale of the?Fairmont?recycled pulp mill for proceeds of?$62 million, subject to final working capital adjustments. These transactions allow us to maximize the value of these assets and redeploy capital to increase shareholder value. We remain focused on growing our core businesses in line with our transformation strategy, reducing debt and returning capital to our shareholders.”

Non-GAAP financial measures, such as adjustments for special items and adjusted EBITDA, are explained and reconciled below.

Operating Income Variance Against Prior Period


The company reported operating income of?$135 million?in the quarter, compared to?$121 million?in the second quarter of 2018. Despite weaker lumber markets, overall results increased by?$14 million, supported by higher pricing and improved productivity in our pulp and paper operations. Higher manufacturing expense, mostly associated with rising fiber costs, were mitigated by the favorable impact of the weaker Canadian dollar and improved freight costs.

Market Pulp

Operating income in the market pulp segment was?$57 million,?$16 million?higher than the second quarter. The average transaction price continued to rise, up another?$37?per metric ton to?$784. Shipments also increased by 14,000 metric tons, largely due to improved productivity.?Despite higher recovered paper prices and extended downtime planned at the Saint-Félicien mill (Quebec), the operating cost per unit (the “delivered cost”) decreased to?$629?per metric ton, mostly due to higher volume. Consequently, record EBITDA of?$64 millionor,?$174?per metric ton, was realized this quarter.

A significant portion of the strategic project at the Saint-Félicien mill to increase production capacity, decrease costs and further reduce greenhouse gas emissions was completed, as planned. Production at the mill restarted in mid-October.


The tissue segment incurred an operating loss of?$10 million, unchanged from the previous quarter. Sales continued to improve, rising another 5%, driven by more converted product shipments and an increase in the average transaction price of?$34?per short ton. However, the delivered cost remained elevated in the quarter, at?$2,003?per short ton, as we continue to focus on ramping up both the tissue machine and converting lines at our?Calhoun (Tennessee)?facility. As a result, EBITDA for the segment remained at negative?$5 million.

Wood Products

Compared to the second quarter, operating income in the wood products segment dropped?$34 million, to?$45 million, largely due to weaker pricing. Our average transaction price retreated from record levels in the second quarter, to?$457?per thousand board feet this quarter, down 11%, or?$57?per thousand board feet. Shipments also decreased by 49 million board feet, pushing finished goods inventory up to 162 million board feet. Despite higher?log costs and lower sales volume, the delivered cost remained unchanged at?$355?per thousand board feet, mainly due to the favorable effect of the weaker Canadian dollar, and lower freight costs as shipments to the U.S. decreased. EBITDA for the segment decreased to?$53 million, compared to?$86 million?in the second quarter.


At?$32 million?in the third quarter, newsprint generated?$14 million?more operating income than the second quarter. This increase is attributable to the rise in average transaction price, up?$45?to?$629?per metric ton. Timing of export sales impacted shipments, which decreased by 22,000 metric tons, and contributed to the 11,000 metric ton rise in finished goods inventory. The delivered cost increased by?$5?per metric ton, mainly due to higher power costs, associated with abnormally warm weather, and maintenance outages. As a result, EBITDA increased by?$13 million?to?$48 million?for the quarter, equivalent to?$130?per metric ton.

Specialty Papers

The specialty papers segment generated operating income of?$26 million?in the quarter, a?$22 million?improvement over the second quarter. Sales rose by 10% as pricing increased?$36?per short ton, to?$737, and shipments were 14,000 short tons higher due to better productivity and the absence of planned maintenance outages at our integrated pulp and paper mills. The delivered cost fell by 6%, or?$41per short ton, resulting from improved efficiency, as well as lower maintenance and?freight costs. EBITDA rose to?$38 million, or?$131?per short ton, compared to?$16 million?in the previous quarter. Finished goods inventory was 11% higher this quarter to meet the expected seasonal increase in demand in the fourth quarter for supercalendered paper.

Consolidated Quarterly Operating Income Variance Against Year-Ago Period

The company’s operating income improved by?$89 million, compared to the third quarter of 2017. Favorable pricing in all segments added?$134 million?to our results compared to 2017, as the average transaction price increased by 23% for newsprint, 21% for market pulp, 12% for specialty papers, and 11% for wood products. In addition, no closure and related inventory write-down charges were recorded in the quarter, compared to?$19 million?in the year-ago period.

These favorable items were partially offset by an increase in manufacturing costs of?$46 million, mainly resulting from higher market-related fiber costs and maintenance. Results were also impacted by?lower volume ($5 million), mainly due to weaker lumber demand, and a 13% rise in freight expense ($14 million), largely higher rates.

Corporate and Finance

During the quarter, the company generated?$131 million?of cash from operations. In addition, following the revocation of the countervailing duty order on supercalendered paper,?$25 million?of the?$61 million?of cash deposits were returned with interest. After?$41 million?of capital expenditures and?$21 million?of lumber duty deposits,?$30 million?of debt was repaid, leaving nothing drawn on the revolving credit facilities on?September 30, 2018. As a result, liquidity rose to?$654 million?and our net debt to trailing 12 month adjusted EBITDA dropped to 1.0x.

Cumulative duty deposits of?$130 million?were recorded on our balance sheet, including?$88 million?for softwood lumber. Following the termination of cash deposit requirements for our paper products, outstanding deposits of?$36 million?for supercalendered paper and?$6 million?for uncoated groundwood papers will be refunded, with interest, largely in the fourth quarter.

On?August 14, Moody’s Investors Service upgraded the company’s corporate family rating to Ba3 and affirmed a stable outlook.


“Our view on pulp markets remains positive through the fourth quarter, supported by continued market supply disruptions and steady demand growth. For lumber, the recent price declines are expected to negatively impact our results in the fourth quarter. In the medium to long term, we believe that the ongoing recovery in U.S. housing starts and the growth in the repair and renovation segment should improve demand. While paper markets continue to be impacted by the structural decline in demand, we expect the implementation of previously announced price increases for some of our paper products to continue to favorably impact our results in the fourth quarter. For tissue, we continue to focus on operational improvements to support our sales growth,”?added Mr. Laflamme.

Special Dividend

The company is announcing?a special cash dividend of?$1.50?per share. The special dividend will be payable on?December 20, 2018?to shareholders of record at the close of business on?December 6, 2018.

Earnings Conference Call

The company will hold a conference call to discuss the financial results at?9:00 a.m. (ET)?today. The public is invited to join the call at (877) 223-4471 at least fifteen minutes before its scheduled start time. A simultaneous webcast will also be available using the link provided under “Presentations and Webcasts” in the “Investors” section of? A replay of the webcast will be archived on the company’s website; a phone replay will also be available until?November 15, 2018, by dialing (800) 585-8367, conference number 7256676.

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