SFK Pulp Fund - reports results for fourth quarter and year ended December 31, 2007



    
    HIGHLIGHTS
    - Results for 2007 reflect twelve months of operations of the Fairmont
      and Menominee Mills whereas results for 2006 include only two months of
      operations since these mills were acquired on October 31, 2006.

    - Fourth quarter:
      - Sales totalling $124.4 million with sales volume of 178,669 tonnes.
      - EBITDA(1) of $8.9 million compared to $14.4 million in the fourth
        quarter of 2006.
      - Net loss of $0.4 million compared to a net loss of $0.1 million in
        the same quarter of 2006.

    - Year 2007:
      - Sales totalling $510.1 million, up from $312.4 million in 2006.
      - EBITDA(1) of $61.5 million, up $18.5 million from 2006.
      - Distributions to unitholders totalling $39.8 million or $0.44 per
        unit in 2007.
      - Earnings before income taxes were $3.8 million, up $2.7 million from
        2006.
      - Net loss of $9.4 million, after taking into account a non-cash future
        income tax expense of $12.6 million, compared to net earnings of
        $1.3 million in 2006.

    TSX:SFK.UN
    

    LONGUEUIL, QUEBEC, March 13 /CNW Telbec/ - For the fourth quarter ended
December 31, 2007, SFK Pulp recorded sales of $124.4 million. Earnings before
interest, taxes, depreciation and amortization (EBITDA)(1) stood at
$8.9 million and a net loss of $0.4 million was incurred. This compares with
sales of $110.5 million, EBITDA of $14.4 million and a net loss of $0.1
million for the same period last year.
    For the year ended December 31, 2007, SFK Pulp recorded sales of
$510.1 million, EBITDA of $61.5 million and a net loss of $9.4 million, after
taking into account a non-cash future income tax expense of $12.6 million. For
the year ended December 31, 2006, SFK Pulp recorded sales of $312.4 million,
EBITDA of $43.0 million and net earnings of $1.3 million.
    "Our 2007 year-end results reflect the full effect of our late 2006
acquisition of two RBK mills, making SFK Pulp a stronger and more stable
organization in an ever fast changing business environment. Despite a few
important mechanical failures at the Saint-Félicien mill that negatively
impacted our operational performance, market-related downtime taken by some of
our NBSK customers and the fast strengthening of the Canadian dollar that
offset all gains made on NBSK pricing, we benefited from the contribution of
our RBK assets and finished the year with EBITDA of $62 million and
distributions declared to unitholders of $40 million", said André Bernier,
President and Chief Executive Officer of SFK Pulp.

    FOURTH QUARTER 2007
    -------------------

    Sales in the fourth quarter of 2007 totalled $124.4 million, when
compared with sales of $110.5 million for the same period last year. This
increase of $13.9 million is attributable to RBK pulp sales at the Fairmont
and Menominee Mills for $25.6 million while NBSK pulp sales at the
Saint-Félicien Mill were $11.7 million lower when compared with 2006, due to a
lower sales volume, only partly offset by higher sales prices.
    Total sales volume reached 178,669 tonnes in the fourth quarter of 2007,
compared to 151,313 tonnes in the same period of 2006. RBK pulp sales volume
totalled 99,030 tonnes in the fourth quarter 2007, compared with sales volume
of 59,255 tonnes for the two-month period ended December 31, 2006. NBSK pulp
sales volume totalled 79,639 tonnes in the fourth quarter of 2007, a decrease
of 12,419 tonnes compared with the corresponding quarter of 2006. The
reduction in sales volume is mainly due to customers taking market-related
downtime.
    Production at the mills during the quarter ended December 31, 2007
totalled 179,946 tonnes, compared with 150,759 tonnes for the fourth quarter
of 2006. The change in the production level is attributable to the production
of 100,537 tonnes of RBK pulp in the fourth quarter 2007, compared with
63,684 tonnes in the two-month period ended December 31, 2006. Production at
the Saint-Félicien Mill was lower mainly because of two important equipment
breakdowns, the first one relating to the failure of a stator on the main
turbo generator and the second one relating to a rupture of the pulp
pre-retention tube. The latter incident resulted in the extension of the fall
semi-annual outage by approximately six (6) days in total (representing a loss
of approximately 6,000 tonnes).
    Cost of sales for the Saint-Félicien Mill was CAN$681 per tonne in the
fourth quarter of 2007, an increase of CAN$50 per tonne when compared with the
corresponding period of 2006. The increase is attributable to higher energy
costs as a result of the failure of the turbo generator stator which was down
until the end of November 2007, to the impact of the extended semi-annual fall
outage as well as to higher wood fibre and fuel costs. The sales volume
reduction in the fourth quarter of 2007 also contributed to the increase of
the cost of sales per tonne.
    Cost of sales for the Fairmont and Menominee Mills was CAN$575 (US$586)
per tonne in the fourth quarter of 2007, compared to CAN$559 (US$490) in the
two-month period ended December 31, 2006. The increase of CAN$16 (US$96) is
mainly due to higher wastepaper costs.

    Adjusted distributable cash(2)

    With total capital expenditures of $7.0 million, SFK Pulp recorded
negative adjusted distributable cash of $2.7 million in the fourth quarter of
2007. Including the $20.3 million cash reserve at the end of the third quarter
of 2007, total adjusted distributable cash available amounted to $13.9 million
at the end of the fourth quarter. Of the adjusted distributable cash
available, SFK Pulp declared distributions of $3.6 million ($0.04 per Unit)
and retained $13.9 million, of which $1.2 million is reserved for the
Saint-Félicien Mill's semi-annual outage in mid-April 2008, leaving a cash
reserve of $12.7 million.
    During the fourth quarter of 2006, SFK Pulp generated adjusted
distributable cash of $6.9 million. Including the $23.1 million cash reserve
at the end of the third quarter 2006, total distributable cash available
amounted to $30.0 million. Of the distributable cash available, SFK Pulp
declared distributions of $5.8 million ($0.08 per unit) and retained
$24.2 million, of which $1.2 million is reserved for the Saint-Félicien Mill's
semi-annual outage in mid-April 2007, leaving a cash reserve of $23.0 million.

    Distributions to unitholders

    During the quarter ended December 31, 2007, SFK Pulp declared total
distributions of $3.6 million ($0.04 per unit), compared with $5.8 million
($0.08 per unit) for the corresponding period in 2006.

    YEAR 2007
    ---------

    In 2007, total sales reached $510.1 million, an increase of
$197.7 million when compared with total sales of $312.4 million in 2006. This
increase is attributable to RBK pulp sales at the Fairmont and Menominee Mills
for $215.0 million while NBSK pulp sales at the Saint-Félicien Mill decreased
by $17.3 million mainly due to lower NBSK pulp shipments.
    Sales volume of NBSK pulp in 2007 reached a level of 323,845 tonnes. This
represents a reduction of 53,548 tonnes when compared to the 2006 record sales
volume of 377,393 tonnes. Of the 53,548 tonne reduction, approximately
37,000 tonnes are related to customers of NBSK pulp taking market-related
downtime during 2007.
    The sales volume of RBK pulp in 2007 reached 378,895 tonnes, compared to
59,255 tonnes for the two-month period ended December 31, 2006.
    Average productivity at the Saint-Félicien Mill was 987 tonnes per day in
2007, compared with 1,036 tonnes per day in 2006.  Productivity at the
Saint-Félicien Mill during 2007 was mainly impacted by the two important
equipment breakdowns mentioned above in the description of results for the
fourth quarter of 2007. Average productivity at the Fairmont and Menominee
Mills was 1,124 tonnes per day in 2007, compared to 1,074 tonnes per day for
the two-month period ended December 31, 2006.
    Cost of sales for the Saint-Félicien Mill increased to CAN$623 per tonne
in the year ended December 31, 2007, from CAN$599 per tonne in the
corresponding period of 2006. The CAN$24 per tonne increase results mainly
from the equipment breakdowns mentioned above, which resulted in production
outages as well as in increases in fibre, energy (electric and fuel) and
repair costs.
    Cost of sales for the Fairmont and Menominee Mills were CAN$589 (US$552)
per tonne, or $223.1 million, in 2007, compared to CAN$559 (US$479) per tonne,
or $33.1 million, for the two-month period ended December 31, 2006. The
increase is mainly due to higher wastepaper costs in 2007 when compared with
2006.

    Future income taxes

    On June 12, 2007, the Canadian Parliament substantively enacted
legislation to implement a tax on distributions paid by publicly traded income
trusts in Canada, effective in 2011. As a result of this new legislation,
Canadian GAAP requires that publicly traded income trusts reflect future
income taxes in their financial statements beginning in the quarter ended June
30, 2007. Accordingly, the Fund recorded a non-cash future income tax expense
to net earnings of $12.6 million for the year ended December 31, 2007. With
the recording of this future income tax expense, the Fund recorded a net loss
of $9.4 million. Future income tax is a non-cash item that has no current
impact on cash flows from operating activities.

    Adjusted distributable cash(2)

    For the year ended December 31, 2007, SFK Pulp generated adjusted
distributable cash of $29.5 million. Including the cash reserve at the end of
2006, total adjusted distributable cash available amounted to $53.7 million
for the year 2007. SFK Pulp declared distributions of $39.8 million ($0.44 per
unit) and retained $13.9 million as a cash reserve. Of that $13.9 million
reserve, $1.2 million will be used for the Saint-Félicien Mill's semi-annual
outage in mid-April 2008, leaving $12.7 million as a cash reserve. With a
reserve below the level established under the distribution policy, the Board
of Directors reduced the level of distributions from $0.05 per Unit to
$0.02 per Unit for the months of September 2007 and October 2007 and to $0.01
per Unit since November 2007, with the objective of restoring the reserve
level established under the distribution policy.

    Distributions to unitholders

    For the year ended December 31, 2007, SFK Pulp declared total
distributions of $39.8 million ($0.44 per unit), compared with $10.2 million
($0.15 per unit) in 2006.

    OUTLOOK
    --------

    "Markets for NBSK pulp remain balanced, with stable demand in all
markets. Worldwide inventories are still low when compared to historical
levels and efforts of paper producers to consolidate their production capacity
and balance their paper supply are supporting their efforts to improve pricing
for their products.
    Markets for RBK pulp are strong with demand from end-users for recycled
content fibre continuing to increase. This supports the trend to differentiate
RBK pulp pricing from NBHK (northern bleached hardwood kraft) pulp pricing to
which it was historically linked. However, this increased demand for recycled
products is also reflected on the wastepaper market, resulting in tighter
supply and higher prices.
    On the operational side, our Saint-Félicien mill is back to normal
operation and has performed to our expectations since the beginning of 2008.
Despite the difficulties experienced by the sawmill industry in Canada, our
woodchip supply is secure throughout 2008. However, prices are still the
highest in North America.
    We will relentlessly pursue our efforts to reduce our costs in every
aspects of our operations with a particular focus on securing and reducing our
woodchip and wastepaper supply costs. To that effect, we will invest over
$19.4 million in our facilities this year, mostly in projects on cost
reduction and fibre yield improvement strategies.
    We also intend to actively participate in the consultation process
initiated by the Québec Government to revamp the provincial forest legislation
that is no longer applicable to the actual business landscape", said André
Bernier, President and Chief Executive Officer of SFK Pulp.

    ABOUT SFK PULP
    --------------

    SFK Pulp operates, through its subsidiaries, the Saint-Félicien Mill, the
Fairmont Mill and the Menominee Mill and employs approximately 550 people. The
Saint-Félicien Mill (located in Saint-Félicien, Québec, approximately 450
kilometres north of Montréal) has an annual production capacity of
           375,000 metric tonnes of NBSK pulp and supplies NBSK pulp to
various sectors of the paper industry in Canada, the United States and in
Europe for use in speciality products. The Fairmont Mill (located in Fairmont,
West Virginia) and the Menominee Mill (located in Menominee, Michigan), with a
combined annual production capacity of 360,000 metric tonnes, both manufacture
air-dried market recycled bleached kraft (RBK) pulp and primarily supply RBK
pulp to manufacturers of uncoated freesheet, commercial and away-from-home
tissue and coated paper in the United States.

    FORWARD-LOOKING STATEMENTS
    --------------------------

    Certain statements made in this press release and in SFK Pulp's annual
management's discussion and analysis including, but not limited to, expected
capital expenditures, estimated sufficiency of wood fibre deliveries,
estimated wood fibre costs, expected ability to make monthly distributions,
expected sufficiency of cash flows to fund operating needs and capital
expenditures and to meet contractual obligations, recoverability of capital
assets and other statements that are not historical facts, are
"forward-looking statements" which reflect the intentions, plans, expectations
and beliefs of SFK Pulp's management ("Management") regarding SFK Pulp's
future growth, results of operations, performance and business prospects and
opportunities. In certain instances, these statements require Management to
make assumptions and there is significant risk that these assumptions may not
be correct. The words "may", "would", "could", "will", "intend", "plan",
"anticipate", "believe", "estimate", "expect", and similar expressions, as
they relate to SFK Pulp or Management, often identify forward-looking
statements. Such forward-looking statements reflect Management's current
beliefs and are based on information currently available to Management.
Forward-looking statements involve known and unknown risks, uncertainties and
other factors outside Management's control. A number of factors could cause
actual results of SFK Pulp to differ materially from the results discussed in
the forward-looking statements, including, but not limited to: risks
associated with pulp prices, exchange rate fluctuations, wood fibre or
wastepaper supply and costs at the mills, cost and supply of raw materials,
competition, dependence upon key customers, increased production capacity in
the market, equipment failure, disruptions of production, capital
requirements, absence of guarantee of cash distributions and other factors
referenced in SFK Pulp's management's discussion and analysis for the year
ended December 31, 2007 and in SFK Pulp's continuous disclosure filings, which
may be found through the internet on the Canadian System for Electronic
Document Analysis and Retrieval (SEDAR) at www.sedar.com. Although the
forward-looking statements contained herein are based upon what Management
believes to be reasonable assumptions, Management cannot assure investors that
actual results will be consistent with these forward-looking statements.
Certain assumptions underlying the forward-looking statement contained in this
press release include assumptions to the effect that future cash flows will be
sufficient to cover capital expenditures, no extraordinary event will require
increased capital expenditures, wood fibre and wastepaper deliveries to SFK
Pulp will remain stable and will be sufficient to fulfill the Mills'
requirements, wood fibre and wastepaper costs will not increase materially,
pulp prices and exchange rates will not significantly deteriorate, future cash
flows will be sufficient to cover operating needs contemplated and contractual
obligations, SFK Pulp will generate positive distributable cash, operation
costs will not increase materially, and interest expenses and production
outputs will remain stable. These forward-looking statements are made as of
the date of this press release, and, except as required by applicable
securities laws, Management assumes no obligation to update or revise them to
reflect new events or circumstances. These statements do not reflect the
potential impact of any special items or of any business combination or other
transaction that may be announced or that may occur after the date hereof.
Readers are cautioned not to place undue reliance on these forward-looking
statements.

    SFK Pulp will hold a conference call Thursday, March 13, 2008 at
2:00 p.m. (Eastern Time), to discuss its results. President and Chief
Executive Officer André Bernier, and Paul Bourque, Chief Financial Officer,
will host the conference call and a question-and-answer session to discuss
earnings. The first 30 minutes will be devoted to questions from investment
professionals while media representatives will be in listening mode only. This
will be followed by a question period for business media. To participate in
the conference call, investment professionals and business media may dial
       1-514-861-1531 in Montreal or 1-877-667-7766 from outside Montreal.
Participants not able to listen to the live call can access a replay of the
archived call by calling 1-800-408-3053, Access code 3249790 (pound key). The
replay will be available until March 31, 2008.

    Attached: Summary of Results

    

    SFK Pulp - Financial Highlights - Fourth Quarter and Year ended
    December 31, 2007

    -------------------------------------------------------------------------
    (in thousands
    of Canadian dollars           Three months ended              Year ended
    except per unit amounts              December 31             December 31
    and percentage figures)               (unaudited)             (unaudited)
    -------------------------------------------------------------------------
    FINANCIAL RESULTS               2007        2006        2007        2006
    -------------------------------------------------------------------------
                                       $           $           $           $
    -------------------------------------------------------------------------
    Sales                        124,354     110,486     510,143     312,367
    -------------------------------------------------------------------------
    Cost of sales                111,110      91,246     424,692     259,150
    -------------------------------------------------------------------------
    Selling and administrative
     expenses                      3,729       3,602      14,531       8,436
    -------------------------------------------------------------------------
    Loss on derivative
     instruments                      13       1,017          56       1,017
    -------------------------------------------------------------------------
    Loss on disposal of capital
     assets                            -           -         624           -
    -------------------------------------------------------------------------
    Loss on foreign currency
     translation                     636         265       8,713         777
    -------------------------------------------------------------------------
    EBITDA(1)                      8,866      14,356      61,527      42,987
    -------------------------------------------------------------------------
    EBITDA Margin(%)                 7.1%       13.0%       12.1%       13.8%
    -------------------------------------------------------------------------
    Amortization                   9,585       9,178      38,713      31,546
    -------------------------------------------------------------------------
    Financial charges              4,024       5,633      19,028      10,298
    -------------------------------------------------------------------------
    Provision for (Recovery of)
     income taxes                 (4,361)       (313)     13,139        (142)
    -------------------------------------------------------------------------
    Net (loss) earnings             (382)       (142)     (9,353)      1,285
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
                                  Three months ended              Year ended
                                         December 31             December 31
    DISTRIBUTABLE CASH(2)                 (unaudited)             (unaudited)
    -------------------------------------------------------------------------
    (in thousands of Canadian       2007        2006        2007        2006
    dollars except per unit
    amounts and percentage
    figures)                              restated(3)             restated(3)
    -------------------------------------------------------------------------
                                       $           $           $           $
    -------------------------------------------------------------------------
    Cash flows from operating
     activities                    8,611     (18,381)     39,155       7,413
    -------------------------------------------------------------------------
      Less: Capital
       expenditures - cash         5,728       2,657      15,128       6,500
    -------------------------------------------------------------------------
    Standardized distributable
     cash                          2,883     (21,038)     24,027         913
    Adjustments to standardized
     distributable cash:

    Increase / (Decrease)
      Changes in non-cash
       working capital
       items                      (4,118)     31,072       5,677      29,643
      Capital expenditures
       accruals                   (1,258)     (2,708)        293      (2,708)
      Amortization of deferred
       financing fees               (232)       (283)       (923)       (478)
      Employee future benefits        36        (162)        449        (544)
    -------------------------------------------------------------------------
    Adjusted distributable
     cash(2)                      (2,689)      6,881      29,523      26,826
    -------------------------------------------------------------------------
    Distributions declared         3,624       5,799      39,813       9,947
    Distribution equivalent
     accrued on subscription
     receipts                                      -           -         223
    -------------------------------------------------------------------------
    (Shortfall) / Excess over
     adjusted distributable
     cash                         (6,313)      1,082     (10,290)     16,656
    -------------------------------------------------------------------------
    Reserve for distributions
     at the beginning of the
     period                       20,260      23,155      24,237       7,581
    -------------------------------------------------------------------------
    Reserve for distributions
     at the end of the period     13,947      24,237      13,947      24,237
    -------------------------------------------------------------------------
    Per Unit amount
     - Standardized
        distributable cash          0.03       (0.29)       0.27        0.01
     - Adjusted distributable
        cash                       (0.03)       0.10        0.33        0.37
     - Distributions declared       0.04        0.08        0.44        0.15
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Distributions to unitholders              Three months ended December 31
                                                                  (unaudited)
    -------------------------------------------------------------------------
    (in thousands
     of Canadian dollars
     except per unit amounts)            2007                    2006
    -------------------------------------------------------------------------
                                       $    Per unit           $    Per unit
    -------------------------------------------------------------------------
    Total distributions declared  $3,624     $0.0400    $5,799(*)  $0.0800(*)
    -------------------------------------------------------------------------
    (*) Including a distribution equivalent of $0.3 million ($0.02 per
        subscription receipt) on the subscription receipts issued on
        September 7, 2006.


    -------------------------------------------------------------------------
    Distributions to unitholders                      Year ended December 31
                                                                  (unaudited)
    -------------------------------------------------------------------------
    (in thousands of
     Canadian dollars
     except per unit amounts)                   2006                    2005
    -------------------------------------------------------------------------
                                       $    Per unit           $    Per unit
    -------------------------------------------------------------------------
    Total distributions
     declared                    $39,813     $0.4400   $10,170(*)  $0.1500(*)
    -------------------------------------------------------------------------
    (*) Including a distribution equivalent of $0.3 million ($0.02 per
        subscription receipt) on the subscription receipts issued on
        September 7, 2006.


    (1) Earnings before amortization, financial charges and income taxes
        ("EBITDA") is not a recognized measure under Canadian GAAP and is
        unaudited.  Management believes that this measure is useful
        supplemental information as it provides investors with an indication
        of cash available for distribution 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 GAAP as an
        indicator of SFK Pulp's performance or cash flows from operating,
        investing and financing activities as a measure of liquidity and cash
        flows.  SFK Pulp'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 amortization, financial
        charges and income taxes in the Financial Statements.

    (2) During the third quarter of 2007 and in accordance with the Canadian
        Institute of Chartered Accountants' interpretive release
        "Standardized Distributable Cash in Income Trust and Other flow-
        through Entities" issued in July 2007, SFK Pulp amended the
        distributable cash calculation to conform with this section of the
        new guidance.  In summary, standardized distributable cash is defined
        as the periodic cash flows from operating activities as reported in
        the GAAP financial statements, including the effects of changes in
        non cash-working capital items less total capital expenditures (cash)
        as reported in the GAAP financial statements.
        Although SFK Pulp has decided to conform with this new guidance,
        Management nonetheless makes a number of other adjustments to cash
        flows from operations to determine cash available for distributions.
        Accordingly, Management also makes adjustments for changes in non-
        cash working capital items, capital expenditures accruals,
        amortization of deferred financing fees and employee future benefits.
        Standardized distributable cash as adjusted by Management is referred
        to herein as "adjusted distributable cash".
        Adjusted distributable cash is a non-GAAP measure generally used by
        Canadian open-ended trusts as an indicator of the issuer's ability to
        generate cash that could be used for distributions to unitholders and
        it should not be seen as a measure of cash flows or a substitute for
        comparable metrics prepared in accordance with GAAP. SFK Pulp's
        adjusted distributable cash may differ from similar calculations as
        reported by other similar entities and accordingly may not be
        comparable to distributable cash as reported by such entities.
        Management believes that SFK Pulp's adjusted distributable cash
        calculated from cash flows from operations is the most appropriate
        measure to help readers evaluate the ability of SFK Pulp to generate
        cash that could be used for distributions.

    (3) SFK Pulp retroactively applied the recommendations of the Canadian
        Securities Administrators staff notice 52-306 issued on
        August 4, 2006. According to this notice, the Canadian Securities
        Administrators staff is of the view that distributable cash should be
        calculated from cash flows from operating activities as presented in
        the issuer's financial statements rather than from EBITDA. The
        retroactive impact of this change on SFK Pulp's distributable cash
        and reserve was not material.
    




For further information:

For further information: Investors & Analysts: Paul Bourque, Chief
Financial Officer, (450) 677-7857 ext. 2224.; Media & Other: Mathieu Claise,
Optimum Public Relations, (418) 521-3770

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SFK PULP FUND

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