RICHMOND, BC, July 29, 2014 /PRNewswire/ - Catalyst Paper (TSX:CYT) recorded
adjusted earnings before interest, taxes, depreciation and amortization
(EBITDA) for the second quarter of $7.1 million compared to $25.7
million in the previous quarter. Strong operating performance was
overshadowed by a planned maintenance outage at the Crofton pulp mill,
higher power costs due to a hydroelectricity rate increase, a stronger
Canadian dollar and lower transaction prices for pulp and all paper
grades. Sales of $283.5 million exceeded the prior quarter by $9.6
million and reflected higher paper sales due in part to the delivery of
shipments delayed by the Q1 container truck driver strike at Port Metro
Vancouver.
Catalyst recorded a net loss of $6.3 million ($0.43 per common share)
and a net loss before specific items of $13.6 in Q2. This compared to
a net loss of $3.8 million ($0.26 per common share) and net earnings
before specific items of $6.5 million the previous quarter. Free cash
flow for the quarter was negative $8.6 million. Liquidity decreased
$37.5 million from the prior quarter due to a lower borrowing base,
debt redemption and buybacks in the quarter, the impact of the Crofton
maintenance shut, and a scheduled interest payment.
Paper production volumes for the quarter were 3.5% higher than average
production in 2013 and 2% higher than the first quarter of 2014 due to
improved paper productivity. Two major debottlenecking initiatives
were completed on the pulp mill during the scheduled maintenance outage
to increase future pulp production.
"Our operating results were hampered by the cost and production impact
of the recovery boiler shut, the hydroelectricity rate increase, and
the strengthening Canadian dollar," said Catalyst President and CEO Joe
Nemeth. "On the upside, we achieved a new record in paper productivity
in the quarter, we're already seeing improved pulp production as a
result of the debottlenecking work completed on the pulp mill, and our
program to identify and implement opportunities for improvement is on
track to realize significant benefits in 2014 and beyond."
Quarter Highlights
On July 24, 2014, the Ministry of Energy and Mines and BC Hydro
introduced a new energy efficiency program that provides a three-year
funding injection of $100 million, with $45 million allocated to
Catalyst Paper. The BC Hydro Power Smart program is aimed at reducing
the energy intensity and improving the energy efficiency of
thermal-mechanical pulping facilities in British Columbia. The program
will benefit Catalyst Paper's three mills located in Crofton, Port
Alberni and Powell River by funding 75% of the required capital
investment on projects that will improve the energy efficiency of these
mills. The first project at the Powell River mill is in the advanced
stages of planning, has an expected cost of $25 million of which 75%
will be covered by Power Smart funding, and will reduce the company's
annual energy costs by approximately $5 million.
Catalyst redeemed the US$19.4 million outstanding balance on the
Floating Rate Senior Secured Notes due 2016. The company repurchased
US$5.0 million of its PIK Toggle Senior Secured Notes due 2017 on the
open market.
Market Conditions
North American demand decreased from the second quarter of 2013 for all
paper grades except uncoated paper. Benchmark prices for coated and
uncoated paper declined from the previous quarter while remaining flat
for directory and newsprint. For NBSK pulp, the benchmark price
decreased by 3.1% compared to Q1 due to short-term destocking in the
quarter.
Selected Highlights
|
|
|
|
|
|
| 2014 |
|
2013
|
(In millions of Canadian dollars, except
where otherwise stated)
|
|
YTD
|
| Q2 |
Q1
|
|
Total
|
|
Q4
|
Q3
|
Q2
|
Q1
|
Sales
|
$
|
557.4
| $ | 283.5 |
$
|
273.9
|
|
$
|
1,051.4
|
|
$
|
272.1
|
$
|
268.8
|
$
|
263.4
|
$
|
247.1
|
Operating earnings (loss)
|
|
10.9
|
| (3.9) |
|
14.8
|
|
|
(87.8)
|
|
|
(79.5)
|
|
4.9
|
|
(12.0)
|
|
(1.2)
|
Depreciation and amortization
|
|
21.9
|
| 11.0 |
|
10.9
|
|
|
47.0
|
|
|
11.7
|
|
11.5
|
|
11.4
|
|
12.4
|
Adjusted EBITDA 1 |
|
32.8
|
| 7.1 |
|
25.7
|
|
|
46.1
|
|
|
19.1
|
|
16.4
|
|
(0.6)
|
|
11.2
|
|
- before restructuring costs 1 |
|
32.8
|
| 7.1 |
|
25.7
|
|
|
47.3
|
|
|
20.2
|
|
16.4
|
|
(0.5)
|
|
11.2
|
Net earnings (loss) attributable to the
company
|
|
(10.1)
|
| (6.3) |
|
(3.8)
|
|
|
(127.6)
|
|
|
(95.0)
|
|
5.2
|
|
(28.0)
|
|
(9.8)
|
|
- before specific items 1 |
|
(7.1)
|
| (13.6) |
|
6.5
|
|
|
(31.5)
|
|
|
1.7
|
|
(3.5)
|
|
(18.1)
|
|
(11.6)
|
Adjusted EBITDA margin1 |
|
5.9%
|
| 2.5% |
|
9.4%
|
|
|
4.4%
|
|
|
7.0%
|
|
6.1%
|
|
(0.2%)
|
|
4.5%
|
|
- before restructuring costs 1 |
|
5.9%
|
| 2.5% |
|
9.4%
|
|
|
4.5%
|
|
|
7.4%
|
|
6.1%
|
|
(0.2%)
|
|
4.5%
|
Net earnings (loss) per share attributable to
the company's common shareholders
(in dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- basic and diluted from continuing
operations
|
$
|
(0.70)
| $ | (0.43) |
$
|
(0.26)
|
|
$
|
(9.01)
|
|
$
|
(6.55)
|
$
|
0.36
|
$
|
(1.93)
|
$
|
(0.89)
|
|
- basic and diluted from discontinued
operations
|
|
-
|
| - |
|
-
|
|
|
0.21
|
|
|
-
|
|
-
|
|
-
|
|
0.21
|
|
- before specific items 1 |
|
(0.49)
|
| (0.94) |
|
0.45
|
|
|
(2.17)
|
|
|
0.12
|
|
(0.24)
|
|
(1.25)
|
|
(0.80)
|
(In thousands of tonnes)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
692.2
|
| 356.5 |
|
335.7
|
|
|
1,373.3
|
|
|
346.5
|
|
350.6
|
|
346.6
|
|
329.6
|
Production
|
|
702.5
|
| 349.7 |
|
352.8
|
|
|
1,382.6
|
|
|
350.2
|
|
357.6
|
|
338.5
|
|
336.3
|
1 Refer to section 6, Non-GAAP measures in Management's Discussion and Analysis (MD&A).
Outlook
The decline in demand for coated and uncoated mechanical paper is
expected to continue for the remainder of the year. Demand for
directory paper will continue to decrease due to electronic
substitution. While newsprint demand is expected to continue to
contract as circulation and page counts fall, the North American market
is expected to remain stable due to pending newsprint machine
conversions.
Global pulp inventories are very low and this may put upward pressure on
future pulp pricing. However, China's seasonally low demand and tight
monetary policy are expected to negatively impact the softwood pulp
market. Pulp is therefore expected to trade in a narrow range for the
balance of the year.
The Power Smart Program will result in improved energy efficiency and
will partly mitigate the impact of energy cost rate increases.
Discussions will continue with key stakeholders on a suite of potential
initiatives to further mitigate the impact of energy rate escalation.
Third quarter earnings will reflect a scheduled total mill outage at
Powell River and power boiler shuts at all three mills.
Further Quarterly Results Materials
This release, along with the full annual Management Discussion &
Analysis, Financial Statements and accompanying notes are available on
our web site at www.catalystpaper.com/Investors. This material is also filed with SEDAR in Canada and EDGAR in the
United States.
Catalyst Paper manufactures diverse specialty mechanical printing
papers, newsprint and pulp. Its customers include retailers,
publishers and commercial printers in North America, Latin America, the
Pacific Rim and Europe. With three mills, located in British Columbia,
Catalyst has a combined annual production capacity of 1.5 million
tonnes. The company is headquartered in Richmond, British Columbia,
Canada and is ranked by Corporate Knights magazine as one of the 50
Best Corporate Citizens in Canada.
Forward-Looking Statement
Certain matters in this news release, including statements with respect
to general economic and market conditions, demand for products, pricing
expectations, anticipated cost savings and capital expenditures, are
forward looking. These forward-looking statements reflect management's
current views and are based on certain assumptions including
assumptions as to future economic conditions, demand for products,
levels of advertising, product pricing, ability to achieve operating
and labour cost reductions, currency fluctuations, production
flexibility and related courses of action, as well as other factors
management believes are appropriate. Such forward looking statements
are subject to risks and uncertainties that may cause actual results to
differ materially from those contained in these statements, including
those risks and uncertainties identified under the heading "Risks and
Uncertainties" in Catalyst's management's discussion and analysis
contained in Catalyst's annual report for the year ended December 31,
2013 available on the company's website at www.catalystpaper.com/investors and at www.sedar.com.
SOURCE Catalyst Paper Corporation