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Resolute reports impact of market pulp pricing on 3Q results

Resolute Forest Products has said the ongoing weakness in market pulp pricing has had “a significant impact” on its third quarter results.

For the period ending 30 September 2019, the company reported a net loss of $43m compared to a net income of $117m in the same period in 2018.

Sales were $705m in the quarter, a decrease of $269m from a year ago.

The third quarter of 2018 included sales from the Catawba (South Carolina) and Fairmont (West Virginia) facilities, which were sold in the fourth quarter of 2018.

Yves Laflamme, president and chief executive, said: “Ongoing weakness in market pulp pricing had a significant impact on our quarterly results.

“While paper has come under pressure this year and lumber markets continue their slow recovery, we are pleased with the progress in sales growth and productivity gains in the tissue business, as we continue to build our position in the segment with positive EBITDA.

“In October, we successfully used our strong financial situation to increase and extend our senior secured credit facility by $175m, providing us additional liquidity at very competitive terms to support our transformation initiatives.

“The proactive steps we have taken over the last few years to strengthen our balance sheet position us well to execute on our strategy despite the cyclical downturn currently affecting the industry.”

The company’s market pulp segment recorded an operating loss of $12m in the third quarter compared to operating income of $27m in the second quarter.

The company said the drop in profitability was mainly due “to the 15% lower average transaction price, to $625 per metric tonne, as global market conditions further weakened”.

The operating cost per unit rose by $34 per metric tonne, to $664, due to additional maintenance costs, mainly incurred during the scheduled outages at two mills.

Given steps taken to reduce finished goods inventory, shipments rose by 63,000 metric tons. Despite the volume increase, EBITDA fell to negative $5m in the third quarter.

The tissue segment incurred an operating loss of $3m in the quarter, an improvement of $1m compared to the second quarter, and building on the gains of the previous quarter.

Favourable product mix and continued pricing gains for AfH products led to a $46 per short tonne increase in average transaction price, to $1,741, offsetting the $32 per short tonne increase in delivered cost.

EBITDA improved slightly to $1m.

Laflamme added: “We expect challenging conditions in market pulp to persist at least through the end of the year, but we see encouraging signs and stronger industry operating rates for softwood pulp, which represents about two-thirds of our production capacity.

“For tissue, we will build on recent improvements around sales growth and productivity gains to deliver steady improvements over the next few quarters.”