The Working Forest Newspaper

Tembec's first-quarter loss surges to $16 million on five per cent revenue drop

January 26, 2012

By: Winnipeg Free Press

Tembec's net losses surged to $16 million in the first quarter as the forest products producer's revenue was cut by five per cent on weaker paper pulp markets.

The Montreal-based company said Thursday that it lost 16 cents per share for the period ended Dec. 24, compared to a loss of 11 cents per share a year earlier, or $11 million.

Revenues were $401 million, compared to $422 million a year ago.

Operating earnings before depreciation, amortization and other specific or non-recurring items (EBITDA) was unchanged from a year ago at $12 million, but was down from $19 million in the prior quarter.

Tembec (TSX:TMB) said the results were lower than anticipated because of relatively weak paper pulp markets which impacted prices and led to production curtailments.

The company also absorbed a $4 million negative inventory adjustment and extended maintenance downtime at its NBSK mill.

Revenues and operating profits for its specialty cellulose pulp segment were down during the quarter. But Tembec said the division remains strong and prices should increase this year.

Paper pulp prices are believed to have reached their cyclical lows and should improve in the coming quarters.

The lumber segment continues to deal with sluggish U.S. demand and weak prices, but a slow recovery in housing starts and the annual seasonal pickup should lift prices in the next few quarters.

Markets for coated bleached board and newsprint remain stable.

Tembec has announced a capital spending program which includes $190 million to build a new cogeneration plant at its site in Temiscaming, Que.

The program promises to improve the mill's cost structure and margins.

Tembec also announced the sale of its two B.C. sawmills for $60 million.

Winnipeg Free Press