MONTREAL, Nov. 18 /CNW Telbec/ - Consolidated sales for the three-month period ended September 26, 2009 were $451 million, down from $629 million in the comparable period of the prior year. The Company generated a net loss of $17 million or $0.17 per share in the September 2009 quarter compared to a net loss of $4 million or $0.04 per share in the September 2008 quarter. Earnings before non-recurring items, interest, income taxes, depreciation, amortization and other non-operating expenses (EBITDA) was negative $9 million for the three-month period ended September 26, 2009, as compared to EBITDA of $29 million a year ago and negative EBITDA of $42 million in the prior quarter.
For the fiscal year ended September 26, 2009, sales were $1.8 billion as compared to $2.4 billion in the comparative 12-month period. The Company generated a net loss of $214 million or $2.14 per share compared to a net loss of $102 million or $1.19 per share in the five-month period ended February 29, 2008 and a net loss of $48 million or $0.48 per share in the seven-month period ended September 27, 2008.
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Business Segment Results
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The Forest Products segment generated negative EBITDA of $5 million on sales of $105 million. This compares to negative EBITDA of $18 million on sales of $72 million in the prior quarter. Sales increased by $33 million due to higher prices and volumes for lumber, as well as higher by-product volumes. US $ reference prices for random lumber increased by approximately US $22 per mbf while stud lumber increased by US $37 per mbf. Currency had a negative effect on pricing as the Canadian $ averaged US $0.910, a 6% increase from US $0.858 in the prior quarter. The net price effect was an increase in EBITDA of $5 million or $27 per mbf. Mill level costs decreased by $11 million due to a combination of lower fibre costs and higher operating rates. Although lumber demand remained relatively weak, shipments were up 41% over the prior quarter. During the September quarter, the Company recorded a favourable adjustment of $2 million on the carrying values of log and lumber inventories. In the prior quarter, the Company absorbed a charge of $2 million related to a reduction of the carrying values of logs and lumber inventories.
The Pulp segment generated EBITDA of $8 million on sales of $276 million for the quarter ended September 2009 compared to negative EBITDA of $22 million on sales of $239 million in the prior quarter. Sales increased by $37 million primarily as a result of higher volumes and selling prices. US $ reference prices increased by US $80-90 per tonne over the prior quarter, as pulp markets and demand improved. Currency had a negative effect on pricing as the Canadian $ strengthened versus the US $. The net price effect was an increase of $13 per tonne, improving EBITDA by $5 million. While pulp demand improved, the Company only operated two of its three high-yield pulp mills, unchanged from the prior quarter. Overall, the Company incurred 55,700 tonnes of market related downtime and 20,900 tonnes of maintenance downtime in the September 2009 quarter. This compares to 86,200 tonnes of market related downtime and 1,300 tonnes of maintenance downtime in the prior quarter. Despite higher maintenance costs, overall mill costs declined by $12 million due to lower fibre, chemical and energy costs. Current quarter margins were also positively impacted by a $14 million favourable adjustment to the carrying values of fibre and finished goods inventories. Inventories were at 16 days of supply at the end of September 2009, as compared to 22 days at the end of June 2009.
The Paper segment generated negative EBITDA of $11 million on sales of $93 million. This compares to nil EBITDA on sales of $109 million in the prior quarter. The $16 million decline in sales was driven by lower newsprint prices and volumes. The US $ reference price for newsprint decreased by US $121 per tonne while the reference price for coated bleached board declined by US $13 per short ton. Currency also negatively impacted pricing as the Canadian $ strengthened versus the US $. The combined effect was a decrease of $110 per tonne, decreasing EBITDA by $12 million. In view of very weak demand for newsprint, the Company undertook significant production curtailments. The Company incurred 2,600 tonnes of maintenance downtime and 55,000 tonnes of market related downtime in the most recent quarter. A further 12,500 tonnes of newsprint production were lost as a result of a work stoppage at the Pine Falls, Manitoba newsprint mill. The unionized employees were locked out in early September after the Company was not successful in negotiating a new labour contract. One of the three newsprint machines at the Kapuskasing newsprint mill was idle for the entire September 2009 quarter and the other two newsprint machines were idle for 17 days. The Pine Falls newsprint mill was idled for 45 days in July and August for market downtime and for 27 days in September subsequent to the lockout. In the prior quarter, the Company had incurred 58,400 tonnes of market related downtime.
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Liquidity
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At the end of September 2009, the Company had net cash of $105 million plus unused operating lines of $65 million, an increase of $20 million over the prior quarter. In response to the challenging conditions facing the forest products industry, the Company has developed a focused list of initiatives that should generate approximately $100 million of incremental liquidity. As of the date of this report, approximately $27 million has been achieved.
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Pulp and Paper Green Transformation Program
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On October 9, 2009, the Company was advised that it had qualified for $24 million of credits under the federal government's Pulp and Paper Green Transformation Program. The credits can be used to finance capital projects that generate environmental benefits, including investments in energy efficiency or the production of renewable energy from forest biomass. The Company has identified several high-returning projects that should qualify for this program and will be submitting them for qualification in the near future.
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Outlook
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While the September quarterly operating results were an improvement over June, they remained relatively poor. The strengthening Canadian $, the deterioration in the newsprint market and weak lumber markets all combined to negatively impact financial performance. In response, the Company continued with selective production curtailments to manage and reduce inventories. This was a key factor in the Company's ability to improve its liquidity to $170 million. Looking ahead, lumber markets will remain challenging. Pulp markets are improving with continued production curtailments and good demand from China providing the impetus. While newsprint prices decreased in the September quarter, price increases are now being implemented, albeit from very low levels. The segment will continue to be under pressure as producers curtail production in the wake of continuously declining demand. The economy and general business conditions have slowly improved and the trend is expected to continue. However, the magnitude of the decline experienced earlier in the year will require several more quarters before we see a more robust economic recovery. Given this and the volatility of the US $ and product prices, the Company has placed a major emphasis on activities to maintain and enhance liquidity. A number of initiatives have been launched with the target to raise a further $73 million over the next 12 months. Certain additional initiatives are also under evaluation at this time.
Tembec is a large, diversified and integrated forest products company which stands as the global leader in sustainable forest management practices. The Company's principal operations are located in Canada and France. Tembec's common shares are listed on the Toronto Stock Exchange under the symbol TMB and warrants under TMB.WT. The full quarterly report, including the interim Management Discussion and Analysis, the interim financial statements and the accompanying notes for the quarter ended September 26, 2009 can be obtained on Tembec's website at www.tembec.com or on SEDAR at www.sedar.com.
This press release includes "forward-looking statements" within the meaning of securities laws. Such statements relate to the Company's or management's objectives, projections, estimates, expectations or predictions of the future and can be identified by words such as "anticipate", "estimate", "expect", "will" and "project" or variations of such words. These statements are based on certain assumptions and analyses made by the Company in light of its experience and its perception of future developments. Such statements are subject to a number of risks and uncertainties, including, but not limited to, changes in foreign exchange rates, product selling prices, raw material and operating costs and other factors identified in our periodic filings with securities regulatory authorities. Many of these risks are beyond the control of the Company and, therefore, may cause actual actions or results to materially differ from those expressed or implied herein. The Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
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TEMBEC INC.
CONSOLIDATED BALANCE SHEETS
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(unaudited) (in millions of dollars)
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Sept. 26, Sept. 27,
2009 2008
(Audited)
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ASSETS
Current Assets:
Cash and cash equivalents $ 105 $ 113
Derivative financial instruments - 1
Accounts receivable 283 371
Inventories (note 3) 319 414
Prepaid expenses 13 19
Current assets from discontinued operations (note 2) - 2
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720 920
Investments 15 9
Fixed assets 626 668
Other assets 5 22
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$ 1,366 $ 1,619
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Bank indebtedness $ - $ 1
Operating bank loans 118 49
Accounts payable and accrued charges 275 375
Interest payable 3 3
Current portion of long-term debt (note 4) 19 18
Current liabilities related to discontinued
operations (note 2) 3 3
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418 449
Long-term debt (note 4) 383 378
Other long-term liabilities and credits (note 5) 219 229
Future income taxes - 2
Minority interest - 1
Non-current liabilities related to discontinued
operations (note 2) 33 38
Shareholders' equity:
Share capital (note 6) 570 570
Contributed surplus (note 2) 5 -
Deficit (262) (48)
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313 522
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$ 1,366 $ 1,619
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TEMBEC INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
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(unaudited) (in millions of dollars, unless otherwise noted)
-------------------------------------------------------------------------
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Prede-
Company Company Company Company cessor
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Three Twelve Three Seven Five
months months months months months
to to to to to
Sept. 26, Sept. 26, Sept. 27, Sept. 27, Feb. 29,
2009 2009 2008 2008 2008
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Sales $ 451 $ 1,786 $ 629 $ 1,426 $ 950
Freight and sales
deductions 54 224 82 181 111
Lumber export taxes
(note 7) 2 4 3 7 4
Cost of sales 383 1,578 487 1,139 804
Selling, general
and administrative 21 88 28 61 48
Depreciation and
amortization 18 73 19 51 72
Restructuring and
asset impairment
charges (note 8) 2 3 (3) (3) -
Gain on land sales
and other (note 8) (5) (6) - (2) (20)
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Operating earnings
(loss) from
continuing operations (24) (178) 13 (8) (69)
Interest, foreign
exchange and other
(note 9) 15 22 8 13 32
Exchange loss (gain)
on long-term debt (20) 21 3 15 (9)
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Earnings (loss) before
income taxes and
minority interest from
continuing operations (19) (221) 2 (36) (92)
Income tax expense
(recovery) (note 10) - (1) 3 5 6
Minority interest - (1) - - -
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Net loss from continuing
operations (19) (219) (1) (41) (98)
Earnings (loss) from
discontinued
operations (note 2) 2 5 (3) (7) (4)
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Net loss and
comprehensive loss $ (17) $ (214) $ (4) $ (48) $ (102)
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Basic and diluted loss
per share from
continuing operations
(note 6) $ (0.19) $ (2.19) $ (0.01) $ (0.41) $ (1.14)
Basic and diluted
earnings (loss) per
share from
discontinued operations
(note 6) $ 0.02 $ 0.05 $ (0.03) $ (0.07) $ (0.05)
Basic and diluted loss
per share (note 6) $ (0.17) $ (2.14) $ (0.04) $ (0.48) $ (1.19)
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CONSOLIDATED STATEMENTS OF DEFICIT
-------------------------------------------------------------------------
(unaudited) (in millions of dollars)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Prede-
Company Company Company Company cessor
-------------------------------------------------------------------------
Three Twelve Three Seven Five
months months months months months
to to to to to
Sept. 26, Sept. 26, Sept. 27, Sept. 27, Feb. 29,
2009 2009 2008 2008 2008
-------------------------------------------------------------------------
Deficit, beginning
of period $ (245) $ (48) $ (44) $ - $ (271)
Net loss (17) (214) (4) (48) (102)
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(262) (262) (48) (48) (373)
Adjustment for fresh
start - - - - 373
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Deficit, end of period $ (262) $ (262) $ (48) $ (48) $ -
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TEMBEC INC.
CONSOLIDATED STATEMENT OF CASH FLOW
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(unaudited) (in millions of dollars)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Prede-
Company Company Company Company cessor
-------------------------------------------------------------------------
Three Twelve Three Seven Five
months months months months months
to to to to to
Sept. 26, Sept. 26, Sept. 27, Sept. 27, Feb. 29,
2009 2009 2008 2008 2008
-------------------------------------------------------------------------
Cash flows from
operating activities:
Net loss $ (17) $ (214) $ (4) $ (48) $ (102)
Adjustments for:
Depreciation and
amortization 18 73 19 51 72
Unrealized foreign
exchange and others (2) (4) (3) (2) (2)
Exchange loss (gain)
on long-term debt (20) 21 3 15 (9)
Future income taxes
(recovery)
(notes 2 and 10) 1 3 (1) 1 6
Investment tax
credits and income
tax refunds - 17 3 (1) (7)
Restructuring and
asset impairment
charges (note 8) 2 3 (3) (3) -
Gain on land sales
and other (note 8) (5) (6) - (2) (20)
Gain on sale of mill
site - discontinued
operations (note 2) - (16) - - -
Differences between
cash contributions
and pension expense (3) (9) (4) (11) (8)
Other - - 1 4 5
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(26) (132) 11 4 (65)
Changes in non-cash
working capital:
Accounts receivable (18) 82 (17) (35) 22
Inventories 34 86 13 35 (54)
Prepaid expenses 9 6 4 - (4)
Accounts payable and
accrued charges 21 (103) 46 29 (26)
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46 71 46 29 (62)
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20 (61) 57 33 (127)
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Cash flows from
investing activities:
Reduced participation
in joint venture 10 18 6 6 (5)
Additions to fixed
assets (6) (42) (17) (40) (23)
Proceeds on sale of
mill site -
discontinued
operations (note 2) - 7 - - -
Proceeds on land sales - 1 - - 17
Decrease in investments 1 4 - 22 2
Other - 1 2 2 1
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5 (11) (9) (10) (8)
Cash flows from
financing activities:
Change in operating
bank loans 38 69 (21) (13) (27)
Increase in long-term
debt - 9 2 5 300
Repayments of long-term
debt - (20) (2) (9) (5)
Increase (decrease) in
other long-term
liabilities 1 - 2 (2) (3)
Other 1 5 (3) - (36)
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40 63 (22) (19) 229
65 (9) 26 4 94
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Foreign exchange on
cash and cash
equivalents held in
foreign currencies - 2 - (1) 1
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Net increase (decrease)
in cash and cash
equivalents 65 (7) 26 3 95
Cash and cash
equivalents, net of
bank indebtedness,
beginning of period 40 112 86 109 14
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Cash and cash
equivalents, net of
bank indebtedness,
end of period $ 105 $ 105 $ 112 $ 112 $ 109
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Supplemental
information:
Interest paid $ 8 $ 37 $ 11 $ 21 $ 48
Income taxes
recovered $ 1 $ (16) $ (1) $ (1) $ (1)
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TEMBEC INC.
CONSOLIDATED BUSINESS SEGMENT INFORMATION
-------------------------------------------------------------------------
(unaudited) (in millions of dollars)
The Company
Three months ended
September 26, 2009
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Corpo-
Forest Che- rate & Consoli-
products Pulp Paper micals other dated
-------------------------------------------------------------------------
Sales:
External $ 78 $ 256 $ 93 $ 24 $ - $ 451
Internal 27 20 - - 1 48
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105 276 93 24 1 499
Earnings
(loss)
before the
following (5) 8 (11) 2 (3) (9)
Depreciation
and
amortization 6 11 - 1 - 18
Other items
(note 8) (5) - 2 - - (3)
Operating
earnings
(loss) from
continuing
operations (6) (3) (13) 1 (3) (24)
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Net fixed
asset
additions 1 4 1 - - 6
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The Company
Three months ended
September 27, 2008
-------------------------------------------------------------------------
Corpo-
Forest Che- rate & Consoli-
products Pulp Paper micals other dated
-------------------------------------------------------------------------
Sales:
External $ 127 $ 345 $ 126 $ 31 $ - $ 629
Internal 40 16 - - 1 57
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167 361 126 31 1 686
Earnings
(loss)
before the
following (9) 36 7 2 (7) 29
Depreciation
and
amortization 6 11 1 1 - 19
Other items
(note 8) (3) - - - - (3)
Operating
earnings
(loss) from
continuing
operations (12) 25 6 1 (7) 13
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Net fixed
asset
additions 4 11 1 1 - 17
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The Company
Twelve months ended
September 26, 2009
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Corpo-
Forest Che- rate & Consoli-
products Pulp Paper micals other dated
-------------------------------------------------------------------------
Sales:
External $ 304 $ 932 $ 452 $ 98 $ - $ 1,786
Internal 103 78 - - 4 185
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407 1,010 452 98 4 1,971
Earnings
(loss)
before the
following (67) (61) 27 10 (17) (108)
Depreciation
and
amortization 24 44 3 2 - 73
Other items
(note 8) (3) (4) 2 1 1 (3)
Operating
earnings
(loss) from
continuing
operations (88) (101) 22 7 (18) (178)
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Net fixed
asset
additions 6 31 4 1 - 42
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The Company
Seven months ended
September 27, 2008
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Corpo-
Forest Che- rate & Consoli-
products Pulp Paper micals other dated
-------------------------------------------------------------------------
Sales:
External $ 276 $ 810 $ 270 $ 70 $ - $ 1,426
Internal 86 36 - 3 1 126
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362 846 270 73 1 1,552
Earnings
(loss)
before the
following (29) 68 9 5 (15) 38
Depreciation
and
amortization 16 31 2 2 - 51
Other items
(note 8) (3) - - - (2) (5)
Operating
earnings
(loss) from
continuing
operations (42) 37 7 3 (13) (8)
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Net fixed
asset
additions 6 30 3 1 - 40
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The Predecessor
Five months ended
February 29, 2008
-------------------------------------------------------------------------
Corpo-
Forest Che- rate & Consoli-
products Pulp Paper micals other dated
-------------------------------------------------------------------------
Sales:
External $ 196 $ 533 $ 165 $ 56 $ - $ 950
Internal 59 31 - 1 2 93
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255 564 165 57 2 1,043
Earnings
(loss)
before the
following (43) 50 (18) 4 (10) (17)
Depreciation
and
amortization 23 31 15 1 2 72
Other items
(note 8) (18) (3) (1) - 2 (20)
Operating
earnings
(loss) from
continuing
operations (48) 22 (32) 3 (14) (69)
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Net fixed
asset
additions 2 19 2 1 (1) 23
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For further information: Michel J. Dumas, Executive Vice President, Finance & CFO, (819) 627-4268, michel.dumas@tembec.com; John Valley, Executive Vice President, Business Development and Corporate Affairs, (416) 775-2819, john.valley@tembec.com; Source: Tembec Inc.
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