Catalyst improves Q1 results despite declining markets

    RICHMOND, BC, April 29 /CNW/ - Catalyst Paper (TSX:CTL) recorded net
earnings of $21.0 million ($0.06 per common share) on sales of $352.5 million
in the first quarter of 2009. This contrasts with a net loss of $48.5 million
($0.13 per common share) on sales of $492.2 million in the final quarter of
last year. These results reflect the actions Catalyst has taken to improve its
cost base and competitive position in the face of unprecedented economic and
market challenges. Quarterly results were further improved by a $30.7 million
gain on a debt buy-back.
    In response to the continuation of the severe demand declines of late
2008, Catalyst announced further indefinite capacity closures and took
additional temporary curtailments. Production curtailments during the quarter
totalled 180,300 tonnes and occurred at all operations affecting all product
    Net earnings before specific items in the first quarter of 2009 were $8.6
million, compared to $9.3 million in the preceding quarter ($0.02 per common
share in both cases). Catalyst posted operating earnings during the first
quarter of $24.2 million, up from $11.5 million in the last quarter of 2008.
    At $61.1 million, earnings before interest, taxes, depreciation and
amortization (EBITDA) were comparable to the $64.7 million in the preceding
quarter, and were significantly improved over $12.1 million in the same
quarter a year earlier. Lower fixed costs and favourable exchange rate
movement were the largest contributors to the year-over-year improvement.
EBITDA before specific items - consisting of restructuring costs of $4.2
million - was $65.3 million, compared to $65.9 million in the preceding
quarter. Free cash flow in the quarter was $35.9 million compared to $26.2
million in the prior quarter.
    "Thus far in 2009 we've faced a deepening global recession, accelerating
structural changes in the print media, and overall demand is the worst we can
remember," said President and Chief Executive Officer Richard Garneau. "We've
moved ahead with the often difficult decisions necessary to keep our cost
structure viable while maintaining our strong market position."
    Specialty paper demand was down in the quarter, as the recession resulted
in reduced advertising and as printers and publishers drew down inventories.
The first quarter year-over-year demand declines were the largest recorded in
30 years for coated mechanical and the largest ever recorded for uncoated.
Directory demand was also down significantly, although pricing was stable as a
result of annual contracts. Demand and pricing trends were negative for both
newsprint and pulp.
    In light of these conditions, Catalyst announced in February 2009 the
indefinite curtailment of the Crofton No. 1 paper machine, the Elk Falls No. 2
and No. 5 paper machines, and NBSK pulp production at Crofton. All three paper
machines at Elk Falls are now indefinitely curtailed, and additional
market-related curtailments were also taken during the quarter at the Powell
River, Port Alberni and Snowflake mills.
    Catalyst announced a restructuring plan in February 2009 for its Powell
River mill, with estimated savings that will eventually reach $13 million
annually, an important step toward the achievement of an $80 per tonne
labour-cost target. The plan was developed jointly with the Communications,
Energy and Paperworkers (CEP) locals at the mill, pursuant to commitments made
in collective agreements reached in late 2008. The workforce will be reduced
by 127 positions over 12 months, and related restructuring costs of $2.1
million (of an expected total of up to $12 million) were incurred during the
    Agreements in support of the $80 per tonne objective are already in place
with CEP locals at Port Alberni and with the Pulp, Paper and Woodworkers local
at Crofton, and are under discussion with CEP locals at Crofton. The Snowflake
mill currently operates at the $80 per tonne benchmark at uncurtailed
production levels.
    The quarter was also characterized by a focus on cash flows and
liquidity. A buy-back of US$45.8 million in company debt, at a discount to par
of 53.5%, resulted in the $30.7 million (US$24.5 million) gain noted above.
Proceeds for the buy-back came from the unwinding of currency hedges related
to long-term debt, and therefore did not impact available liquidity. Catalyst
continues to anticipate that the non-recourse debt associated with its 50 per
cent holding in Powell River Energy Inc. will be refinanced prior to its
maturity in July 2009, although a 12-month bridge-financing commitment is in
place as a safeguard in the event of unforeseen delays. Catalyst had liquidity
of approximately $183 million at the end of the quarter, an increase of
approximately $3 million from the prior quarter.
    Global economic conditions are expected to remain challenging throughout
2009, and further demand and price weakening is expected across all of
Catalyst's product lines. Catalyst currently anticipates production
curtailments totalling 269,700 tonnes in the second quarter although further
curtailments may be required depending on market conditions. Broader economic
conditions are expected to reduce the company's ability to sustain recent
operating earnings.

    Selected Financial Highlights

    (In millions of dollars, except where otherwise stated)
                     2009                         2008
                      Q1      TOTAL       Q4        Q3        Q2        Q1

    Sales         $  352.5  $1,849.4  $  492.2  $  504.8  $  452.9  $  399.5
     earnings (loss)  24.2    (157.4)     11.5      14.0    (153.3)    (29.6)
    EBITDA(1)         61.1     159.4      64.7      53.1      29.5      12.1
      - before
         items(1)     65.3     189.5      65.9      66.2      30.7      26.7
    Net earnings
     (loss)           21.0    (221.1)    (48.5)    (10.9)   (124.3)    (37.4)
      - before
         items(1)      8.6     (28.0)      9.3       7.2     (22.7)    (21.8)
     margin(1)       17.3%      8.6%     13.1%     10.5%      6.5%      3.0%
      - before
         items(1)    18.5%     10.2%     13.4%     13.1%      6.8%      6.7%
    Net earnings
     (loss) per
     share (in
      - basic and
         diluted  $   0.06  $  (0.66) $  (0.13) $  (0.03) $  (0.34) $  (0.17)
      - before
         items(1)     0.02     (0.08)     0.02      0.02     (0.06)    (0.10)
    (1) EBITDA, EBITDA before specific items, EBITDA margin, EBITDA margin
        before specific items, net earnings (loss) before specific items, and
        net earnings (loss) per share before specific items are non-GAAP
        measures. EBITDA margin and EBITDA margin before specific items are
        defined as EBITDA and EBITDA before specific items as a percentage of
        sales. Refer to Q1, 2009 MD&A - Section 8, "Non-GAAP measures" for
        further details.

    Further Quarterly Results Materials

    This release, a summary slide presentation, and full quarterly report
(MD&A, financial statements and accompanying notes) are available on our web
site at The full quarterly report is also
filed with SEDAR in Canada and EDGAR in the United States.

    Catalyst is the largest producer of specialty printing papers and
newsprint in Western North America and also produces market kraft pulp and
owns Western Canada's largest paper recycling facility. The company's six
mills have a combined annual production capacity of 2.5 million tonnes.
Catalyst is headquartered in Richmond, British Columbia, Canada and its common
shares trade on the Toronto Stock Exchange under the symbol CTL.

    Richard Garneau, president and CEO and David Smales, vice-president,
finance and CFO will hold a conference call with financial analysts and
institutional investors on Thursday, April 30, 2009 at 11 a.m. ET, 8 a.m. PT
to present the company's first-quarter results. Media and other interested
people may listen to the live broadcast at

    Forward-Looking Statement

    Certain matters in this news release, including statements with respect
to general economic and market conditions, demand for products, pricing
expectations, expected production curtailments, anticipated cost savings,
including labour costs, are forward-looking. These forward-looking statements
reflect management's current views and are based on certain assumptions
including assumptions as to future economic conditions, demand for products,
levels of advertising spending, product pricing, our ability to achieve
operating and labour cost reductions, including an $80 per tonne labour cost,
currency fluctuations, production flexibility 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 Catalyst's management's discussion and analysis
contained in Catalyst's first quarter 2009 interim report available at

For further information:

For further information: Investors: David Smales, Vice-President,
Finance & CFO, (604) 247-4013; Media: Lyn Brown, Vice-President, Corporate
Relations, (604) 247-4713

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Catalyst Paper Corporation

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