Resolute reports “improved operational performance” but tissue segment incurred operating loss in 2Q results

Resolute Forest Products has reported net income for the quarter ended 30 June 2018 of $72m, compared to a net loss of $74m in the same period in 2017.

Sales were $976m in the quarter, an increase of $118m from the year-ago period.

The company recorded operating income of $121m in the quarter, compared to $48m in the first quarter of 2018, reflecting higher prices realised across almost all of its product offerings, a reduction in energy costs, largely seasonal, favourable fibre usage, and higher shipments following distribution constraints in the first quarter.

Operating results also benefited from the effect of the weaker Canadian dollar.

The company said this compensated for the 20% increase in market-based stumpage fees and a rise in recovered paper prices.

The tissue segment incurred an operating loss of $10m, compared to $1m in the first quarter, largely attributable to the first time inclusion of Calhoun’s results in the second quarter.

When compared to the previous quarter, Calhoun’s operating results improved by $3m, mainly due to an increase in shipments.

If Calhoun’s first quarter sales,included in the tissue segment, overall tissue sales would have risen by 5%, as product mix shifted favourably towards more converted product volume. EBITDA for the segment was negative $5m.

Yves Laflamme, president and chief executive, said: “”Overall positive price momentum and improved operational performance led to record profitability this quarter.

“Our strong financial results allowed repayment of $105m of debt during the quarter, significantly improving our balance sheet and leverage.”

The company’s operating income improved by $169m, compared to the second quarter of 2017.

Laflamme added: “Our view on pulp markets remain optimistic through the third quarter, as supply and demand dynamics are expected to be strong in most markets.

“Despite extensive pulp downtime related to the major capital project in Saint-Félicien, which will increase pulp production in the long term, we expect our pulp performance to remain solid.

“We believe the underlying market fundamentals for lumber will support healthy operating results in the medium term, in spite of a recent pull back in lumber prices.

“For tissue, we have made progress in increasing sales and market penetration. Our operations are now focused on supporting our strengthening market position.”

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