Resolute Forest Products has reported a “challenging business environment” in its preliminary Q2 2020 results, with sales of $612m – a decrease of $143m from the year-ago period.
Net income for the quarter ended 30 June was $6m, compared to $25m in the same period in 2019.
Excluding special items, the company reported a net loss of $22m compared to net income of $11m in the second quarter of 2019.
Yves Laflamme, president and chief executive, said: “The Covid-19 pandemic and ensuing economic slowdown have brought with them unprecedented challenges and business uncertainty.
“Despite the challenging business environment, except for the low-interest term loan used to finance the acquisition of the US sawmills, we repaid all of the borrowings we drew in Q1, and our liquidity improved to nearly $400m.
“On the business side, we’ve seen stronger pulp pricing and higher lumber shipments in the second quarter, offset by a weaker paper segment, which reflects lower demand levels since the onset of the pandemic and our resulting capacity adjustments.”
In market pulp, operating income for the segment was $10m in the quarter, an improvement of $13m from the previous quarter.
The average transaction price rose by $34 per metric tonne, or 6%, with gains in each of the grades.
However, shipments were 45,000 metric tonnes lower, due mostly to the timing of annual outages at the Calhoun (Tennessee) and Thunder Bay (Ontario) mills during the quarter, and lower demand for recycled bleached kraft pulp.
EBITDA in the segment was $16m.
The tissue segment generated an operating loss of $2m in the quarter compared to operating income of $2m in the previous quarter.
The average transaction price improved by 4%, or $65 per short tonne, but shipments slipped by 14% to 4,000 short tonnes due to low inventory early in the quarter as a result of the spike in customer demand in the early stages of the pandemic.
Delivered cost per unit increased by $167 per short tonne, or 10%, reflecting the impact of lower sales and also maintenance costs associated with the annual outage in Calhoun. Segment EBITDA was $3m.
Laflamme added: “We continue to focus on the short-term priorities we communicated after the first quarter, including: operating under rigorous protocols around the health and safety of our employees, contractors and suppliers; disciplined liquidity management; monitoring customer credit risk; and controlling spending around SG&A and capital expenditures.
“The significant slowdown in economic activity due to the pandemic will continue to impact demand for paper products, and we will continue to adjust our capacity as conditions evolve.
“Pulp has benefitted from higher demand for higher-quality tissue despite lower printing and writing shipments, but there could be short-term pressure as those markets stabilise in the ongoing pandemic economy.
“We continue to drive for customer portfolio optimisation in the tissue business, particularly in the retail segment where we continue to make inroads as we place volume with new customers and demonstrate the quality of our products.
“We expect to continue to gain momentum in the coming quarters.”
