RICHMOND, BC, July 7 /CNW/ - Catalyst Paper announced today the permanent
closure of the sawdust pulp and containerboard operation effective Nov. 30,
2008 at its Elk Falls Division in Campbell River. The decision reflects the
severe impact of a permanent loss of traditional sawdust supply, as well as
significant energy and chemical cost inflation, high labour costs and the
heavy toll being taken by the uncompetitive major industry municipal tax
levied on the Elk Falls mill.
"Our Elk Prime pulp product is made primarily from sawdust," said Richard
Garneau, president and chief executive officer. "With the permanent closure of
the TimberWest sawmill in Campbell River, other coastal sawmill shutdowns, and
the reduced sawdust supply from the Interior, it has become clear the Elk
Falls sawdust pulp and containerboard mill operating losses would increase
significantly if we don't take this action."
Closure of the Elk Falls pulp mill will remove 200,000 tonnes of annual
sawdust pulp and 131,000 tonnes of annual containerboard capacity.
Notice has been given to CEP Union Locals 630 and 1123. Meetings with
employees are underway to outline transition details and develop next steps
for the coming months.
Approximately 440 hourly and salaried employees will be impacted by the
closure with severance costs estimated to not exceed $21 million. The
associated asset impairment charge is estimated to be $137 million. A
historically low-return business, Elk Falls' pulp operating losses continued
into the first quarter of 2008. With the sawdust shortage forecasted to
increase, there is no realistic prospect of profitable pulp and containerboard
production at the Elk Falls mill.
"We know this decision will be difficult on employees and their families,
Mr. Garneau said, "and we appreciate all that has been done at the mill to
become more competitive. Still, we have not been able to overcome the sawdust
supply challenge - which has only worsened with the US housing crisis - and
jobs can't be sustained on the basis of an unprofitable pulp operation."
The Northern Bleached Softwood Kraft (NBSK) long-fibre pulp business at
Catalyst's Crofton Division is not dependent on sawdust supply and therefore
is not affected by this announcement.
Catalyst is a leading producer of mechanical printing papers,
headquartered in Richmond, British Columbia, Canada. The company also produces
market kraft pulp and owns Western Canada's largest paper recycling facility.
With six mills strategically located within western North America, Catalyst
has a combined annual capacity of 2.8 million tonnes of product. Catalyst's
common shares trade on the Toronto Stock Exchange under the symbol CTL.
Certain matters set forth in this news release, including statements with
respect to severance costs and asset impairment charges related to the
shutdown of the Elk Falls pulp mill, are forward looking. These
forward-looking statements reflect management's current views and are based on
certain assumptions and courses of action, as well as other factors management
believes are appropriate. Such forward looking statements are subject to risks
and uncertainties that may cause actual results to differ materially from
those contained in these statements, including those risks and uncertainties
identified under the heading "Risks and uncertainties" in the management's
discussion and analysis contained in Catalyst's first quarter 2008 interim
report available at www.sedar.com.
For further information:
For further information: Lyn Brown, Vice-President, Corporate Relations,