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Resolute announces strong 2018 results; tissue segment reports $9m operating loss in Q4

Resolute Forest Products has reported net income of $36m for the fourth quarter of 2018 – up from $13m for the same quarter in 2017.

For the full year, net income was $235m compared to a net loss of $84m a year earlier.

Sales were $932m in the quarter, an increase of $34m. For the full year, sales were $3.8bn, up 7%.

Adjusted EBITDA was $105m in the quarter and $574m for the full year.

The tissue segment incurred an operating loss of $9m in the quarter, relatively unchanged from the previous period, with EBITDA remaining at negative $5m.

For the year, the segment reported an operating loss of $30m compared to a loss of $6m in 2017, as the results of the Calhoun (Tennessee) facility were not included in the segment until 1 April 2018.

While overall sales volumes grew compared to last year, the delivered cost remained elevated, as the company continues to ramp up the production of the tissue machine and converting lines at Calhoun.

EBITDA for the segment was negative at $15m.

Yves Laflamme, president and chief executive, said: “With our optimised asset base, we were able to deliver a strong annual performance with the positive market dynamics in the year, despite cost headwinds and a soft lumber market in the fourth quarter.

“We experienced significantly weaker pricing for lumber in the quarter, unforeseen operational disruptions, planned maintenance, as well as higher energy and wood costs. “Despite these challenges, we generated $435m of cash from operations in 2018, monetised the Catawba and Fairmont assets at attractive valuations, returned $136m of capital to shareholders through a special dividend and further reduced our leverage shortly after year-end.

“Our stronger balance sheet improves our financial strength and flexibility and positions us well for future growth opportunities.”

He added that overall pricing had an unfavourable impact of $33m because of the drop in the average transaction price for wood products, which more than offset the increase in market pulp and paper prices.

Operating income in the market pulp segment was $41m, a reduction of $16m when compared to the previous quarter.

The average transaction price continued to rise across most grades, up a further $25 per metric tonne this quarter to $809.

Laflamme added: “After reaching historical highs in the first half of the year, lumber prices dropped to multi-year lows in the fourth quarter.

“Nevertheless, favourable economic conditions and recent production curtailments among Canadian producers, including ourselves, make us cautiously optimistic that markets will gradually improve in 2019.

“Our long-term view for lumber is unchanged; we believe in the underlying fundamentals and growth prospects for this market.

“Despite recent softening in Chinese buying activity, we expect the fundamentals for market pulp to remain positive, given the limited capacity additions over the medium term.

“For paper, given lower seasonal demand, as well as the continued structural decline, we expect our shipments to be lower in the first quarter.

“We are now making progress in stepping-up the productivity of Calhoun tissue operations, leading us to target positive earnings generation in the first half of 2019.

“We remain optimistic with the long-term growth prospects of our tissue business.”

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