Fibrek reports financial results for the first quarter of 2012
MONTREAL, May 9, 2012 /CNW Telbec/ - Fibrek Inc. (TSX: FBK), a leading producer and marketer of high-quality virgin and recycled kraft pulp, announced today its results for the first quarter ended March 31, 2012, in accordance with the International Financial Reporting Standard (IFRS). All dollar amounts are expressed in Canadian dollars unless otherwise stated.
(in thousands of Canadian dollars, except per share figures)
|Three months ended March 31|
|(Loss) profit from operations||(19,317)||6,668|
|Net (loss) earnings||(23,216)||3,457|
Net (loss) earnings per share
FIRST QUARTER 2012
In the first quarter of 2012, consolidated sales reached $122.1 million, a decrease of $10.0 million when compared with sales of $132.1 million in the first quarter of 2011. This reduction is mainly attributable to lower pulp prices and an unfavourable sales mix for $20.4 million, which was partially offset by a higher sales volume for $8.5 million and a favourable exchange rate for $1.9 million.
Cost of products sold totalled $109.9 million in the first quarter of 2012, an increase of $6.9 million when compared with the corresponding period of 2011. This increase is primarily due to a higher sales volume for $7.6 million and the impact of the exchange rate on our US operating costs for $0.9 million, which were partially offset by lower cost per tonne for $1.6 million, mainly due to reduced wastepaper prices.
Selling and administrative expenses in the first quarter of 2012 totalled $10.9 million, compared with $3.3 million in the corresponding period of 2011. This increase is primarily attributable to higher consulting fees related to efforts expended by Fibrek to seek out value maximizing alternatives to the unsolicited insider bid (the "Insider Bid") from Abitibi (as hereinafter defined) for a total of $7.7 million.
As a result, EBITDA for the first quarter of 2012 was negative $11.2 million (negative 9.1% of sales), compared to positive $15.8 million (11.9% of sales) for the corresponding period of 2011.
Financial expenses decreased from $3.5 million in the first quarter of 2011 to $2.6 million in the first quarter of 2012. This $0.9 million reduction results mainly from a lower debt level due to the redemption of the debentures, thereby reducing interest for the first quarter of 2012.
In the first quarter of 2011, gain on financial instruments amounted to $2.0 million, resulting from the redemption of approximately 50% of the Company's debentures, amounting in a gain of $1.2 million mainly related to the write-off of the accretion of the equity portion of the debentures.
A net loss of $23.2 million was recorded in the first quarter of 2012, compared with net earnings of $3.5 million in the corresponding period of 2011. The net loss per share amounted to $0.18 (basic and diluted) in the first quarter of 2012, compared with net earnings per share of $0.03 (basic and diluted) in the corresponding period of 2011.
NBSK Pulp Results
(in thousands of Canadian dollars)
|Three months ended March 31|
|(Loss) profit from operations||(11,959)||
FIRST QUARTER 2012
Sales for the first quarter ended March 31, 2012 totalled $64.1 million, compared with $72.2 million for the corresponding period of 2011, representing a decrease of $8.1 million. This reduction is attributable to lower pulp prices for $11.8 million, which was partly offset by a higher sales volume for $2.7 million and a weaker Canadian dollar compared to the US currency for $1.0 million.
According to Resource Information Systems Inc. ("RISI"), the NBSK market pulp price (for pulp delivered in North America) was lower by US$100 per tonne or 10% on average during the first quarter of 2012 when compared with the corresponding quarter of 2011. The reduction in NBSK market pulp prices coupled with a weaker Canadian dollar, when compared with the first quarter of 2011, resulted in an average sales price of $871 per tonne, $85 per tonne below the average sales price recorded in the corresponding quarter of 2011.
The NBSK pulp sales volume totalled 94,196 tonnes in the first quarter of 2012, an increase of 3,997 tonnes when compared with 90,199 tonnes for the corresponding period of 2011. The increase was mainly attributable to additional spot sales to keep inventory at a manageable level.
Production at the Saint-Félicien Mill during the quarter ended March 31, 2012 totalled 87,916 tonnes, compared with 93,595 tonnes in the first quarter of 2011. The lower production volume was due to a combination of less operating days and lower productivity.
On a per tonne basis, cost of products sold increased by 10% in the first quarter of 2012, compared with the same period of 2011. This increase is mainly attributable to higher input costs, mainly energy and chemicals.
RBK Pulp Results
(in thousands of Canadian dollars)
|Three months ended March 31|
|Loss from operations||(7,358)||
FIRST QUARTER 2012
For the quarter ended March 31, 2012, the RBK pulp segment recorded sales of $58.0 million, compared with $59.8 million for the corresponding period of 2011. This reduction of $1.8 million is mainly attributable to lower net realized pulp prices for $8.4 million, which were partly offset by a higher sales volume for $5.7 million and a favourable exchange rate for $0.9 million.
The RBK pulp sales volume reached 92,220 tonnes in the first quarter of 2012, compared with 83,193 tonnes for the corresponding period of 2011. This increase is mainly attributable to additional spot sales to keep inventory at a manageable level. In the first quarter of 2012, RBK pulp average sales prices decreased by 14% compared with the corresponding period in 2011, mainly driven by lower wastepaper prices and spot selling prices. However, as a result of a weaker Canadian dollar, sales per tonne decreased only by 13%.
Production at the Fairmont and Menominee Mills totalled 71,936 tonnes for the quarter ended March 31, 2012, compared with 91,651 tonnes for the corresponding quarter of 2011. The reduction in production volume was mainly due to the market-related downtime at the Fairmont Mill partly offset by better productivity at the Menominee Mill.
On a per tonne basis, cost of products sold for the first quarter of 2012 decreased by 10%, compared with the same period of 2011. This reduction is attributable to lower wastepaper prices.
CASH FLOW AND FINANCIAL POSITION
Since September 30, 2011, Fibrek has had an increased need for liquidity given (i) the recent costs related to efforts expended by Fibrek to seek out value maximizing alternatives to the Abitibi Insider Bid, (ii) the high level of RBK pulp inventories and lower than anticipated sales which have resulted in a market-related shutdown of the Fairmont Mill, (iii) capital expenditures required in connection with Fibrek's power generation initiatives in Saint-Félicien, and (iv) costs associated with growth and diversification opportunities, such as the interrupted tissue company acquisition.
Cash flows from operating activities for the first quarter of 2012 totalled $16.3 million, compared with cash flows from operating activities of $6.4 million for the corresponding quarter of 2011. The increase in cash flows from operating activites is due to the reduction in non-cash working capital, partly offset by lower operating results. The positive variation of $36.7 million in operating working capital is primarily due to a reduction in accounts receivables and inventories, mainly finished goods, partly offset by a decrease in accounts payable.
TERM LOAN CREDIT FACILITY
The Company's term loan provides for an exclusion of up to $150 million of equity reduction following the adoption of IFRS. Considering the equity reduction, the total debt to total capitalization ratio is 24.3% as at March 31, 2012.
The term loan also requires Fibrek to maintain an interest coverage ratio of not less than 2.0:1.0 at all times. On May 2, 2012, the Company's term lender agreed to modify the interest coverage ratio for the remaining of 2012 following the negative impact resulting from the significant expenses incurred in connection with the Abitibi Insider Bid. The new covenants are 1.0:1.0 for the second quarter, 0.35:1.0 for the third quarter, 1.63:1.0 for the fourth quarter of 2012 and back to 2.0:1.0 for the first quarter of 2013.
Moreover, the term loan contains a change of control provision. The term lender has agreed to amend such change of control provision should Abitibi acquire control of Fibrek (as such term is defined in the term loan), up until the earlier of i) the date of the next annual general meeting of Fibrek; or ii) the date on which a majority of the actual Board members of the Company resigns or is replaced by nominees designated or proposed by Abitibi; or iii) June 29, 2012. A default under the term loan would trigger a cross default under the ABL credit facility.
On November 28, 2011, AbitibiBowater Inc., doing business as Resolute Forest Products ("Abitibi") announced its intention to make an Insider Bid to purchase all outstanding common shares of Fibrek (the "Common Shares") for a consideration per Common Share of $1.00 payable in cash only, in Abitibi shares only, or a combination of both. On December 15, 2011, Abitibi officially launched its Insider Bid.
On December 18, 2011, the Board of Directors of Fibrek received an opinion from its financial advisor, TD Securities Inc. ("TD Securities"), that the consideration offered to shareholders of Fibrek (other than those who entered into lock-up agreements with Abitibi) pursuant to the Insider Bid was inadequate, from a financial point of view, to such shareholders. On January 3, 2012, Fibrek announced that it filed its Directors' Circular recommending that Fibrek shareholders reject the Abitibi Insider Bid. The Board of Directors of Fibrek also recommended that any shareholders who had tendered their Common Shares withdraw them immediately. Its formal recommendation and the reasons supporting such recommendation are outlined in its Directors' Circular dated December 26, 2011.
On February 6, 2012, the Board of Directors of Fibrek announced the results of Canaccord Genuity Corporation's ("Canaccord Genuity") formal valuation of Fibrek's Common Shares complying with the requirements of Multilateral Instrument 61-101 - Protection of Minority Securityholders in Special Transactions. Based upon and subject to the analyses and assumptions set out in its valuation, Canaccord Genuity was of the opinion that, as at February 3, 2012, the fair market value of a Common Share of Fibrek was in the range of $1.25 to $1.45.
On February 10, 2012, Fibrek announced that it had entered into a support agreement (the "Support Agreement") with Mercer International Inc. ("Mercer") pursuant to which Mercer offered to acquire all of the issued and outstanding Common Shares of Fibrek (the "Mercer Offer") by way of takeover bid. The consideration for each Common Share of Fibrek under the Mercer Offer was $1.30 payable in cash only, in Mercer shares only, or a combination of both.
The Board of Directors of Fibrek also indicated on February 10, 2012 that it had received a fairness opinion from its financial advisor, TD Securities, that the consideration to be received under the Mercer Offer was fair, from a financial point of view, to the shareholders of Fibrek (other than those who entered into lock-up agreements with Abitibi).
Mercer and Fibrek also entered into a special warrant agreement pursuant to which Mercer agreed to purchase 32,320,000 special warrants of Fibrek (the "Special Warrants") on a private placement basis, at a price of $1.00 per Special Warrant for total subscription proceeds of $32,320,000. On February 23, 2012, the Bureau de décision et de révision (Québec) (the "Bureau") issued a cease trade order against the Special Warrants (the "Cease Trade Order") further to an application filed by Abitibi. The Cease Trade Order was re-established by the Québec Court of Appeal on March 27, 2012 and permission to appeal this decision before the Supreme Court of Canada was dismissed on April 18, 2012.
On April 11, 2012, Fibrek and Mercer entered into an amendment to the Support Agreement (the "Amended Support Agreement"), pursuant to which, among other things, Mercer agreed to increase the offer price per Common Share to $1.40 and Fibrek agreed to increase the expense reimbursement fee payable to Mercer in certain circumstances from $2.0 to $2.4 million.
On April 12, 2012, Abitibi announced that the applicable conditions to its Insider Bid had been satisfied, and that it had taken up and accepted for payment all Common Shares tendered under its bid, representing approximately 46.8% of the currently outstanding Common Shares. Abitibi also announced that it was further extending its bid to April 23, 2012.
On April 12, 2012, pursuant to the terms of the Amended Support Agreement, Mercer was paid an expense reimbursement fee of $2.4 million in connection with Abitibi's take up and acceptance for payment of all Common Shares tendered under the Abitibi Insider Bid.
After extending its bid for the eighth time, Abitibi announced on April 23, 2012 that it had taken up and accepted for payment 2,664,351 additional shares of Fibrek, bringing Abitibi's holdings from 46.8% to approximately 48.8%. Abitibi also extended its Insider Bid to May 4, 2012.
On April 30, 2012, Mercer announced that its offer had expired on April 27, 2012 and that it had terminated the Amended Support Agreement.
Abitibi announced on May 2, 2012 that it had taken up and accepted for payment 1,633,800 additional shares of Fibrek, bringing Abitibi's holdings from 48.8% to 50.1%. Afterward, Abitibi announced that it had taken up and accepted for payment an additional 4,893,197 shares of Fibrek, bringing Abitibi's holdings to 53.8%.
On May 4, 2012, Abitibi announced that it had taken up and accepted for payment 12,305,679 additional shares of Fibrek, bringing Abitibi's holdings to 63.3%. Abitibi also extended its Insider Bid to 5:00 p.m. (Eastern Time) on May 17, 2012.
NBSK pulp prices remained relatively flat throughout the first quarter of 2012, mainly driven by a strong demand coming from China. With global softwood pulp inventories back around the balanced 30-day level at the end of March 2012, and the approach of the annual spring maintenance season, NBSK pulp prices are projected to recover during the second quarter. However, pulp price increases are expected to be gradual as they may be impacted by the increasing Chinese pulp inventory levels. Price increases of US$30 per tonne in North America and US$20 per tonne in Northern Europe have been implemented in the month of April, bringing the list prices up to US$900 per tonne and US$870 per tonne respectively. There is no maintenance shutdown scheduled during the second quarter of 2012 at the Saint-Félicien Mill.
RBK market pulp domestic demand was negatively impacted during the first quarter of 2012 mainly due to paper machine closures and low hardwood kraft pulp prices which benefited customers with no recycled content requirements. Looking forward, wastepaper prices are expected to remain relatively flat with a similar impact on RBK prices. However, as hardwood kraft pulp price increases are expected, RBK demand should also improve.
On May 4, 2012, Fibrek announced that it has concluded an agreement for the sale of green energy produced at its cogeneration facilities located at the Saint-Félicien mill in connection with Hydro-Québec Distribution's Power Purchase Program for electricity derived from forest biomass cogeneration (PAE 2011-01), which was launched on December 20, 2011. The 33.23 MW of green energy currently produced by Fibrek is sold to Hydro-Québec Distribution since May 5, 2012 for a 25-year period. The contract will generate approximately $16.0 million a year in EBITDA. This production will further increase the previously announced 9.56 MW that Fibrek will be supplying to the government corporation starting in December 2012. By the end of this year, the Saint-Félicien mill will be producing 42.79 MW in green energy for Hydro-Québec Distribution.
Due to current circumstances related to the take-over bid, Fibrek will not hold a conference call to discuss its financial results of the first quarter of 2012.
Fibrek (TSX: FBK) is a leading producer and marketer of high-quality virgin and recycled kraft pulp. The company operates three mills located in Saint-Félicien, Québec, Fairmont, West Virginia, and in Menominee, Michigan with a combined annual production capacity of 760,000 tonnes. Fibrek has approximately 500 employees. The Saint-Félicien mill provides northern bleached softwood kraft pulp (product known as NBSK pulp) to various sectors of the paper industry mainly in Canada, the United States and Europe, for use in the production of specialized products. The Fairmont and Menominee mills manufacture air-dried recycled bleached kraft pulp (product known as RBK pulp) and primarily supply manufacturers of fine uncoated paper, household paper for commercial and industrial uses, and coated paper in the United States.
This press release contains "forward-looking statements" within the meaning of applicable securities laws. These statements can be identified by expressions of belief, expectation or intention, as well as those statements that are not historical facts and include statements concerning Fibrek's future outlook, business strategy, plans, expectations, results or actions, or the assumptions underlying any of the foregoing. Forward-looking statements can generally be identified by words such as "may", "should", "would", "could", "will", "intend", "plan", "anticipate", "believe", "estimate", "expect", "outlook" and similar expressions. These statements are based on information currently available to Fibrek's management ("Management") and on the current assumptions, intentions, plans, expectations and estimates of Management regarding Fibrek's future growth, results of operations, performance, business prospects and opportunities and ability to attract and retain customers as well as the economic environment in which it operates. Forward-looking statements are subject to known and unknown risks, uncertainties and other factors which could cause actual results of Fibrek to differ materially from the conclusion, forecast or projection stated in such forward-looking statements. These risks, uncertainties and other factors include, but are not limited to: actions taken by Abitibi, actions taken by shareholders of Fibrek in respect of Abitibi's Insider Bid, the possible effect of Abitibi's Insider Bid on Fibrek's business, general economic conditions, pulp prices and sales volume, exchange rate fluctuations, cost and supply of wood fibre, wastepaper and other raw materials, pension contributions, competitive markets, dependence upon key customers, increased production capacity, equipment failure, disruptions of production, capital requirements and other factors referenced in Fibrek's continuous disclosure filings which are available on SEDAR at www.sedar.com. Readers should not place undue reliance on these forward-looking statements. These forward-looking statements are made as of the date of this press release and, except as required by applicable securities laws, Fibrek assumes no obligation to update or revise them to reflect new events or circumstances.
Note to readers: Complete unaudited condensed consolidated interim financial report and Management's Discussion & Analysis are available on the Company's web site at: www.fibrek.com and SEDAR web site at: www.sedar.com.
Fibrek Inc.: Financial Highlights - First quarter ended March 31, 2012
|(in thousands of Canadian dollars except per share figures)||Three months ended March 31|
|Cost of products sold||109,893||102,970|
|Selling and administrative expenses||10,907||3,319|
|(Loss) profit from operations||(19,317)||6,668|
|Loss (gain) on financial instruments||1||(1,965)|
|Loss on disposal of property, plant and equipment||24||10|
|Loss on foreign currency translation||1,311||1,821|
|(Loss) earnings before income taxes||(23,216)||3,457|
|Provision for income taxes||-||-|
|Net (loss) earnings||(23,216)||3,457|
|Net (loss) earnings per share|
|(in thousands of Canadian dollars)||As at|
||March 31, 2012||December 31, 2011|
|Cash and cash equivalents||10,485||5,576|
|Property, plant and equipment||303,326||307,553|
|Total Consolidated assets||450,306||481,792|
|Accounts payable and accrued liabilities||58,097||66,488|
|ABL Credit facility||35,979||34,789|
|(1)||References to "EBITDA" are to earnings before depreciation, financial expenses and income and income taxes and also before other non-operating income and expense such as gain or loss on financial instruments, on disposal of property, plant and equipment and on foreign currency translation. EBITDA is not a recognized measure under IFRS and is unaudited. Management believes that this measure is useful supplemental information as it provides investors with an indication of cash generated prior to debt service, capital expenditures and income taxes. Investors should be cautioned, however, that this information should not be confused with or used as an alternative for net earnings determined in accordance with IFRS as an indicator of Fibrek's performance or cash flows from operating, investing and financing activities as a measure of liquidity and cash flows. Fibrek's method for calculating this information may differ from that used by other issuers and, accordingly, this information may not be comparable to measures used by other issuers. EBITDA shown herein represents earnings before depreciation, financial expenses and income, other non-operating income and expense as well as income taxes in the Financial Report.|
For further information:
Patsie Ducharme (514) 871-0550
Vice President and Chief Financial Officer
Dany Paradis (514) 871-0550
Vice President, Change Management and Supply Chain