Resolute Reports Preliminary Fourth Quarter and 2019 Results

Resolute Forest Products Inc. (NYSE: RFP) (TSX: RFP) today reported a net loss for the quarter ended December 31, 2019, of $71 million, or $0.79 per share, compared to net income of $36 million, or $0.38 per diluted share, in the same period in 2018. Sales were $668 million in the quarter, a decrease of $264 million from the year-ago period. The fourth quarter of 2018 included sales from the Catawba (South Carolina) and Fairmont (West Virginia) facilities, which were sold in that period. Excluding special items, the company reported a net loss of $53 million, or $0.59 per share, compared to net income of $4 million, or $0.04 per diluted share, in the fourth quarter of 2018.

For the year, the company reported a GAAP net loss of $47 million, or $0.51 per share, compared to net income of $235 million, or $2.52 per diluted share, in 2018. Sales were $2.9 billion, down by 22% from the previous year, or 11% after removing sales from disposed assets. Excluding special items, the company reported a net loss of $46 million, or $0.50 per share, compared to net income of $183 million, or $1.96 per diluted share, in 2018.

“Our fourth quarter results reflect bottom-of-the-cycle conditions in market pulp, ongoing pricing pressures in paper grades and the slow pricing recovery in lumber,” said Yves Laflamme, president and chief executive officer. “The pending acquisition of three sawmills in the U.S. South is an important step in our transformation strategy; it will give us immediate scale in an attractive region, with quality assets in a rich fiber basket, close to growing end-markets. Our financial position will remain strong after this acquisition, and will support us as we continue to progress with our transformation strategy. We’re pleased with the quarterly improvement in tissue EBITDA and the progress around sales growth and productivity gains. We’re also excited about our recently-announced project to modernize the paper machine at Kénogami to produce high-grade SCA+ supercalendered paper and our plans to grow in biomaterials with the construction of a cellulose filament plant at that mill, in both cases taking advantage of synergies within our network of operations in the Saguenay-Lac-Saint-Jean region. While the paper project is focused on nearer-term competitiveness, the cellulose filament project highlights the added value we can bring to fiber through our role in its transformation as we look to build the forest products industry of the future.”

Non-GAAP financial measures, such as adjustments for special items and adjusted EBITDA, are explained and reconciled below.

The company reported an operating loss of $69 million in the quarter, compared to $18 million in the third quarter. Most of the change was attributable to costs associated with the indefinite idling of the Augusta (Georgia) mill ($31 million) and lower selling prices ($17 million). Net of the costs associated with the Augusta idling, manufacturing costs were lower in the quarter ($8 million), due largely to favorable timing of outages, despite production disruptions at the Calhoun (Tennessee) mill. Volumes were lower ($4 million), with most of the impact in wood products (9%).

For all of 2019, the company generated operating income of $17 million, compared to $379 million in 2018. The largest difference was selling prices ($240 million), particularly for wood products and pulp, followed by: higher manufacturing costs ($128 million, net of the costs associated with the Augusta idling) due mostly to higher fiber costs and additional maintenance; an unfavorable variance ($47 million) related to gains on divestitures, impairments, write-downs and closure costs, including Augusta; lost contribution from the divested assets ($46 million); and a decrease in overall shipments ($27 million), with drops in the wood products and paper segments. The unfavorable items were partially offset by: lower depreciation and amortization ($45 million); the favorable impact of the weaker Canadian dollar ($43 million); lower selling, general and administrative (or, “SG&A”) expenses ($29 million) due to lower variable compensation; and favorable freight costs ($11 million).
https://resolutefp.mediaroom.com/2020-01-30-Resolute-Reports-Preliminary-Fourth-Quarter-and-2019-Results

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