THIRD QUARTER HIGHLIGHTS:
- Strong EBITDA(1) of $19.8 million in the third quarter of 2010 compared to EBITDA of $6.4 million in the same quarter of 2009
- Strong balance sheet following the recent refinancing
- Net earnings of $3.8 million in the third quarter of 2010 compared to a net loss of $14.5 million in the corresponding quarter of 2009
- Cash flows generated from operations of $18.1 million in the third quarter of 2010 compared to cash flows used in operating activities of $7.3 million in the corresponding quarter of 2009. (Cash flows from operating activities for the nine-month period ended September 30, 2010 totalled $46.4 million, compared with cash flows used in operating activities of $5.7 million for the same period of 2009.)
- Woodchip price reductions with all of its suppliers to result in cost savings of approximately $10 million for the 12-month period beginning September 1, 2010
TSX : FBK
www.fibrek.com
LONGUEUIL, QC, Nov. 4 /CNW Telbec/ - Fibrek Inc. (TSX: FBK), a leading producer and marketer of high-quality virgin and recycled kraft pulp, today announced results for the third quarter ended September 30, 2010. Sales amounted to $132.2 million, compared with $112.8 million for the third quarter of 2009. For a fifth consecutive quarter, positive EBITDA(1) were recorded with $19.8 million in the third quarter of 2010 compared to $6.4 million for the corresponding quarter of 2009. Net earnings for the quarter totalled $3.8 million, or $0.03 per share, compared with a net loss of $14.5 million, or $0.16 loss per share, for the third quarter of 2009.
FINANCIAL HIGHLIGHTS
(in thousands of Canadian dollars except per share figures) | Three months ended September 30 (unaudited) |
Nine months ended September 30 (unaudited) |
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2010 | 2009 | 2010 | 2009 | |
Sales | 132,177 | 112,820 | 425,085 | 273,570 |
EBITDA(1) | 19,830 | 6,431 | 55,762 | (12,248) |
Net earnings (loss) | 3,807 | (14,521) | 12,374 | (63,425) |
Net earnings (loss) per share | |
|||
Basic | 0.03 | (0.16) | 0.12 | (0.70) |
Diluted | 0.03 | (0.16) | 0.10 | (0.70) |
Commenting on the third quarter results, Pierre Gabriel Côté, President and Chief Executive Officer, indicated: "Higher market pulp prices, more efficient mill operations and higher pulp output drove year-over-year improvements in our third quarter results. Our refinancing has strengthened our balance sheet and favourably impacted our results for the third quarter with reduced financial charges and increased flexibility in cash management. Our operational excellence initiative helped drive results in the third quarter by increasing productivity and efficiency in our mills. However, in the RBK pulp segment, these gains were largely offset by the cost of sorted office paper (SOP)."
OPERATING RESULTS
THIRD QUARTER 2010
Consolidated sales reached $132.2 million, an increase of $19.4 million when compared with sales of $112.8 million in the third quarter of 2009. This increase is mainly attributable to higher pulp prices and a favourable sales mix of $39.0 million, which was partially offset by a lower sales volume of $12.2 million and an unfavourable exchange rate of $7.4 million.
EBITDA for the third quarter of 2010 were $19.8 million (or 15.0% of sales), compared to $6.4 million (or 5.7% of sales) for the corresponding period of 2009.
Net earnings of $3.8 million were recorded in the third quarter of 2010, compared with a net loss of $14.5 million in the corresponding period of 2009. Net earnings per share amounted to $0.03 (basic and diluted) in the third quarter of 2010, compared with a net loss per share of $0.16 (basic and diluted) in the corresponding period of 2009.
NINE-MONTH PERIOD 2010
For the first nine months of 2010, consolidated sales reached $425.1 million, an increase of $151.5 million when compared with sales of $273.6 million for the corresponding period of 2009. This increase is mainly attributable to higher pulp prices and a favourable sales mix of $107.5 million as well as a higher sales volume of $99.0 million, which was partially offset by an unfavourable exchange rate of $55.0 million.
EBITDA for the nine-month period ended September 30, 2010 reached $55.8 million (or 13.1% of sales), compared to negative EBITDA of $12.2 million (or -4.5% of sales) for the corresponding period of 2009. The first quarter of 2010 included $0.9 million of restructuring charges representing the final portion of Phase III of the cost reduction program initiated in 2009.
Net earnings of $12.4 million were recorded in the nine-month period ended September 30, 2010, compared with a net loss of $63.4 million in the corresponding period of 2009. Net earnings per share amounted to $0.12 ($0.10 diluted) in the nine-month period ended September 30, 2010, compared with a net loss per share of $0.70 (basic and diluted) in the corresponding period of 2009.
SEGMENT REVIEW
NBSK Pulp
THIRD QUARTER 2010
Sales for the third quarter ended September 30, 2010 totalled $64.9 million, compared with $63.1 million for the corresponding period of 2009, representing an increase of $1.8 million. This increase is attributable to higher pulp prices of $23.8 million partly offset by a lower sales volume of $18.4 million and a stronger Canadian dollar compared to the US currency of $3.6 million.
NBSK market pulp price (for pulp delivered in North America) was higher by US$267 per tonne or 36% on average during the third quarter of 2010 when compared with the corresponding quarter of 2009. The increase in NBSK market pulp prices, partly offset by a stronger Canadian dollar when compared with the third quarter of 2009, resulted in an average sales price of CAN$1,039 per tonne, CAN$234 per tonne above the average sales price recorded in the corresponding quarter of 2009.
The NBSK pulp sales volume totalled 73,920 tonnes in the third quarter of 2010, a decrease of 20,919 tonnes when compared with 94,839 tonnes for the corresponding period of 2009. The lower sales volume was mainly due to a strong recovery quarter in 2009 and an increase in world supply in 2010.
Production at the Saint-Félicien mill during the third quarter ended September 30, 2010 totalled 92,492 tonnes, compared with 89,910 tonnes in the third quarter of 2009. The increase in production volume was due to better productivity.
NBSK Pulp
NINE MONTHS ENDED SEPTEMBER 30, 2010
Sales for the nine-month period ended September 30, 2010 totalled $212.8 million, compared with $146.7 million for the corresponding period of 2009, representing a $66.1 million increase. This increase is mainly attributable to higher net realized pulp prices of $70.7 million and to higher sales volume of $23.0 million which were partly offset by a stronger Canadian dollar compared to the US currency of $27.6 million.
The average NBSK market pulp price (for pulp delivered in North America) for the nine-month period ended September 30, 2010 was US$958 per tonne, an increase of US$274 per tonne or 40%. This increase in average market pulp price, partly offset by a stronger Canadian dollar when compared to the corresponding period of 2009, resulted in a sales price of CAN$992 per tonne, CAN$192 above the sales price of CAN$800 per tonne in the corresponding period of 2009.
During the nine-month period ended September 30, 2010, the Saint-Félicien mill's sales volume was 254,359 tonnes of NBSK pulp, an increase of 27,457 tonnes when compared to the corresponding period of 2009 (226,902 tonnes). This increase in sales volume is mainly due to strong market fundamentals impacted by a shortage in supply.
Production at the Saint-Félicien mill during the first nine months of 2010 totalled 266,643 tonnes, compared with 198,875 tonnes in the corresponding period of 2009.
RBK Pulp
THIRD QUARTER 2010
For the third quarter ended September 30, 2010, the RBK pulp segment recorded sales of $67.3 million, compared with $49.8 million for the corresponding period of 2009. This increase of $17.5 million is mainly attributable to higher net realized pulp prices of $16.8 million and by a higher sales volume of $4.5 million partly offset by an unfavourable exchange rate of $3.8 million.
The RBK pulp sales volume reached 88,905 tonnes, compared with 83,019 tonnes for the corresponding period of 2009. The RBK pulp average sales price increased by 43% over the same period in 2009. In 2009, the black liquor tax credit allocated to US virgin pulp producers negatively impacted the demand for RBK pulp. The impact of the stronger Canadian dollar resulted in a 26% increase in the sales price per tonne.
Production at the Fairmont and Menominee mills totalled 90,316 tonnes for the quarter ended September 30, 2010, compared with 84,110 tonnes for the corresponding quarter of 2009. The increase in production volume was due to more operating time in 2010.
RBK Pulp
NINE MONTHS ENDED SEPTEMBER 30, 2010
For the nine-month period ended September 30, 2010, the RBK pulp segment recorded sales of $212.3 million compared to sales of $126.9 million in the corresponding period of 2009. This $85.4 million increase is attributable to a higher sales volume of $72.9 million and to higher net realized pulp prices of $40.0 million partly offset by an unfavourable exchange rate of $27.5 million.
The RBK pulp sales volume reached 288,657 tonnes during the nine-month period ended September 30, 2010, compared with 189,579 tonnes for the corresponding period of 2009. The black liquor credit allocated to US virgin pulp producers negatively impacted the demand for RBK pulp in 2009. The RBK pulp average sales price increased by 24% over the same period in 2009. The impact of the stronger Canadian dollar resulted in a 10% increase in the sales price per tonne.
Pulp production at the Fairmont and Menominee mills totalled 267,484 tonnes for the nine-month period ended September 30, 2010 compared to 197,365 tonnes during the corresponding period of 2009.
CORPORATE DEVELOPMENTS
A more agile organization
As of September 1st, 2010, Fibrek's executive team was realigned in order to further drive margin improvements and cost reduction. With the retirement of Bob Balogh, Vice President of Sales, at the end of 2010, Jean-Pierre Benoit, Vice President, Sales and Operations, is now combining responsibilities of both operations and sales with high priority on margin improvement for our RBK business. This new unified Sales and Operations team will better meet the ever-evolving needs of the Company's customers and increase the competitiveness of its mills in their respective markets.
The Company's supply chain team was also enhanced to support its focus on reducing overall procurement and delivery costs, while providing the highest level of service to its customers. Dany Paradis, Vice President, Change Management and Supply Chain, is leading the efforts towards the implementation of the Company's supply chain business model. The Supply Chain team will ensure that, throughout the organization, most optimal results are achieved in terms of customer response time and cost management.
These changes will contribute to Fibrek's future success and, in turn, create value for its shareholders. Ultimately, the new, more agile organization will better support the achievement of our stated vision to create innovative solutions for a sustainable future.
OUTLOOK
"NBSK pulp market has begun to soften towards the end of the third quarter but at a slower pace than anticipated. In a downward commodity market, it is normal behavior for customers to hold back orders until prices are confirmed. There is currently no consensus amongst forecasters in our industry, but market fundamentals such as tight inventories, a weak US dollar and a significant Chinese presence in the market continue to support a soft landing for NBSK pulp prices. As per the October 21, 2010 issue of the Pulp & Paper Products Council's report, sales to China amounted to 685,000 tonnes in September, up 70% from August. Year-over-year world pulp shipments were up 2.9% with softwood pulp shipments up by a healthy 6.2%.
The RBK pulp market continues to be negatively impacted by dropping hardwood kraft pulp prices. RBK pulp prices typically follow wastepaper prices which, at this time, are not going in the same direction as hardwood kraft pulp prices. Consequently, customers who can substitute RBK pulp for hardwood kraft pulp and who have no recycled content requirements have left the RBK market. While, the financial results of this business segment are disappointing, North American RBK volumes continue to increase as demand for greener applications and recycled contents are coming back.
The expected woodchip price reduction has materialized during the third quarter through the yearly exercise of setting the market price, effective September 1, 2010, as part of the supply agreement with AbitibiBowater. Fibrek has reached price reductions with all of its woodchip suppliers which will result in cost savings of approximately $10 million for the 12-month period beginning September 1, 2010.
During the month of October 2010, the Fairmont Mill took its scheduled maintenance shutdown resulting in 10 days of downtime. As for the Saint-Félicien Mill, it will proceed with its regular major maintenance in November 2010 and plans to benefit from the downtime to install a machine press, an investment project that should increase production efficiency, reduce costs and result in an additional capacity of approximately 13,000 tonnes per year. The major maintenance shutdown and installation of the machine press should take eight days to complete and the Saint-Félicien Mill is expected to run at the new capacity level in December 2010.
The impact of our refinancing has not only strengthened our balance sheet but also reduced financial charges and provided increased flexibility in cash management. As of today, Fibrek's $75 million ABL credit facility is totally unused," concluded Pierre Gabriel Côté.
CONFERENCE CALL
Fibrek will hold a conference call on Friday, November 5, 2010 at 10:00 a.m. (Eastern Time), to discuss its results. Pierre Gabriel Côté, President and Chief Executive Officer, and Patsie Ducharme, Vice President and Chief Financial Officer, will host the conference call followed by a question-and-answer session to discuss earnings. To participate in the conference call, investment professionals and business media may dial 647-427-7450 (for all Toronto and overseas participants) or 1-888-231-8191, access code 18790366# (for all other North American calls). Participants not able to listen to the live call can access a replay of the archived call by calling 1-800-642-1687, access code 18790366#. The replay will be available until 11:59 PM on Friday, November 12, 2010.
About Fibrek
Fibrek (TSX: FBK) is a leading producer and marketer of high-quality virgin and recycled kraft pulp. The Company has approximately 500 employees and operates three mills located in Saint-Félicien, Québec, Fairmont, West Virginia, and in Menominee, Michigan with a combined annual production capacity of 745,000 tonnes. The Saint-Félicien mill provides northern bleached softwood kraft pulp (product known as NBSK pulp) to various sectors of the paper industry 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.
Forward-Looking Statements
This press release contains "forward-looking statements" within the meaning of applicable securities laws. These statements include, but are not limited to, statements about expected collection of accounts receivable, expected capital expenditures, estimated sufficiency of wood fibre deliveries, expected sufficiency of cash flows to fund operating needs and capital expenditures and to meet contractual obligations, recoverability of capital assets and similar 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: 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, labour relations and other factors referenced herein under "Risk Factors" and in Fibrek and SFK Pulp Fund'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 consolidated financial statements 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 - Third quarter ended September 30, 2010
(in thousands of Canadian dollars except per share figures) | Three months ended September 30 (unaudited) |
Nine months ended September 30 (unaudited) |
||
2010 | 2009 | 2010 | 2009 | |
Sales | 132,177 | 112,820 | 425,085 | 273,570 |
Cost of products sold | 99,938 | 93,698 | 328,936 | 248,384 |
Delivery costs | 9,695 | 10,438 | 31,391 | 25,489 |
Selling and administrative expenses | 2,714 | 2,253 | 8,996 | 11,945 |
EBITDA(1) | 19,830 | 6,431 | 55,762 | (12,248) |
Amortization | 9,764 | 10,214 | 28,964 | 30,606 |
Operating profit (loss) | 10,066 | (3,783) | 26,798 | (42,854) |
Financial charges | 4,295 | 6,346 | 13,553 | 13,037 |
(Gain) loss on derivative instruments | (94) | (234) | (98) | 1,022 |
Loss (gain) on disposal of capital assets | 8 | (10) | (5) | 209 |
Loss on foreign currency translation | 2,055 | 4,345 | 979 | 7,293 |
(Recovery of) provision for income taxes | (5) | 291 | (5) | 990 |
Net earnings (loss) | 3,807 | (14,521) | 12,374 | (63,425) |
Net earnings (loss) per share | ||||
- Basic | 0.03 | (0.16) | 0.12 | (0.70) |
- Diluted | 0.03 | (0.16) | 0.10 | (0.70) |
Financial Position
(in thousands of Canadian dollars) | As at | |
September 30, | December 31, | |
(unaudited) | 2010 | 2009 |
Cash & Cash Equivalent | 24,952 | 19,064 |
Accounts Receivable | 60,361 | 53,424 |
Inventories | 79,760 | 79,003 |
Capital Assets | 517,227 | 542,360 |
Total Consolidated Assets | 689,447 | 699,669 |
Accounts Payable and Accrued Liabilities | 55,501 | 45,658 |
Revolving Credit Facility | 3,089 | 35,146 |
Long-term Debt | 82,332 | 118,776 |
Equity | 481,842 | 434,647 |
(1) | References to "EBITDA" are to earnings before amortization, financial charges and income taxes and also before other non-operating income and expense such as gain or loss on derivative instruments, disposal of capital assets and foreign currency translation. 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 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 amortization, financial charges, other non-operating income and expense as well as income taxes in the Financial Statements. |
For further information: For further information:
Investor Relations: | Patsie Ducharme | (450) 442-8884 |
Vice President and Chief Financial Officer | ||
Media Relations: | Dany Paradis | (450) 442-8882 |
Vice President, Change Management and Supply Chain |
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