- IMPROVED NBSK MARKET CONDITIONS WITH HIGHER PULP PRICES AND VOLUMES
- RETURN TO A POSITIVE EBITDA MARKS IMPROVEMENT OVER PREVIOUS QUARTER
- CONTINUED FOCUS ON COST REDUCTION INITIATIVES
- CANADIAN GOVERNMENT PROGRAM TO PROVIDE ALLOCATION OF $20.9 MILLION FOR
GREEN CAPITAL PROJECTS AT SAINT-FÉLICIEN MILLTSX:SFK.UN
LONGUEUIL, QC,
FINANCIAL HIGHLIGHTS
--------------------
-------------------------------------------------------------------------
(in thousands of Canadian Three months ended Nine months ended
dollars except per September 30 September 30
Unit amounts) (unaudited) (unaudited)
-------------------------------------------------------------------------
2009 2008 2009 2008
-------------------------------------------------------------------------
$ $ $ $
-------------------------------------------------------------------------
Sales 112,820 138,305 273,570 406,901
-------------------------------------------------------------------------
EBITDA 2,330 16,867 (20,772) 45,482
-------------------------------------------------------------------------
Net (loss) earnings (14,521) 8,657 (63,425) 13,156
-------------------------------------------------------------------------
Net (loss) earnings per Unit
Basic (0.16) 0.10 (0.70) 0.15
Diluted (0.16) 0.08 (0.70) 0.15
-------------------------------------------------------------------------
"The positive EBITDA of
"Since the beginning of 2009, we have implemented two ambitious cost reduction programs addressing margins, variable costs, SG&A, liquidity optimization and capital expenditures. As at
Under the Canadian Green Transformation Program, earlier this month, the Federal Government announced a
Management remained focused on balancing the order book with inventory levels. Market-related downtime during the third quarter was lower compared to prior quarters and significantly less than initially expected. The RBK mills were impacted by downtime which removed approximately 8,000 tonnes from production. To optimize RBK sales volume, non-traditional markets were developed during the quarter. Based on current demand assumptions, operations at all three sites are expected to run normally during the fourth quarter, with the exception of planned maintenance outages.
OPERATING RESULTS
-----------------
THIRD QUARTER 2009
Consolidated sales declined to
EBITDA was
Net loss was
Adjusted distributable cash
In accordance with the amended credit agreement, SFK Pulp is currently prohibited from declaring distributions and does not expect to reinstate such distributions in the foreseeable future.
NINE-MONTH PERIOD 2009
For the nine-months, total sales reached
Year-to-date EBITDA was
SEGMENT REVIEW
--------------
NBSK Pulp
Third quarter sales were
Sales volume was 94,839 tonnes, an increase of 12,460 tonnes from 2008 due to a recovery in demand. EBITDA for NBSK pulp operations was
NBSK market pulp prices (for pulp delivered in Northern
Nine-month sales totalled
RBK pulp
For the third quarter, the RBK pulp segment recorded sales of
RBK pulp sales volume reached 83,019 tonnes, compared with 94,872 tonnes for the corresponding period of 2008. RBK pulp average sales prices decreased by 27%. A stronger Canadian dollar offset part of the decline, resulting in a 23% decrease in the average selling price in Canadian dollars. EBITDA for the third quarter period stood at
For the nine-months, RBK pulp sales were
Nine-month sales volume was 189,579 tonnes compared with 272,601 tonnes in 2008. RBK pulp average sales prices decreased by 23%. The strengthening of the Canadian dollar partly offset this reduction, resulting in an 11% decrease in the average selling price in Canadian dollars.
OUTLOOK
Pulp and paper markets continued to improve during the third quarter fuelled by strong demand in
RBK pulp sales improved during the quarter with increased offshore shipments. Domestic RBK pulp demand is still impacted by lower demand for printing and writing papers. The black liquor credit provided to US virgin Kraft pulp producers continued to translate into lower costs for virgin paper producers. Although prices for RBK pulp increased every month during the third quarter, price improvements were fuelled by the stronger pulp market in general and the increased cost of wastepaper, rather than by an increase in RBK pulp demand.
"While we are encouraged by improving market conditions in the NBSK pulp segment, results remain very sensitive to fluctuations of the Canadian dollar which could largely offset higher pulp prices and volumes. We do not expect major changes in RBK pulp market conditions with possibly other US programs being introduced in 2010 to replace the current black liquor tax credit which expires at the end of the year. Management has diligently and strategically spent the past few quarters reviewing all aspects of operations.
"Despite the positive trend of our results, we are focused on implementing further cost reductions. We are currently analysing our organisational structure with an objective to reduce our labour costs by 10%, with expected savings beginning in 2010. Although this will unfortunately impact our employees, we must continue to improve our cost structure given the uncertainty of market conditions and increasing fibre costs. We continue to make progress, however the industry continues to face challenges," concluded Mr. Côté.
CONFERENCE CALL
SFK Pulp will hold a conference call
ABOUT SFK PULP
SFK Pulp (TSX: SFK.UN), a leading producer and marketer of premium virgin and recycled kraft pulp, operates three mills in Saint-Félicien, Québec, Fairmont, West Virginia, and Menominee, Michigan. SFK Pulp employs approximately 550 people and has a total annual production capacity of 745,000 metric tonnes. The Saint-Félicien Mill supplies northern bleached softwood kraft (NBSK) pulp to various sectors of the paper industry in
FORWARD-LOOKING STATEMENTS
Certain statements in this press release and in SFK Pulp's Management's Discussion and Analysis including, but not limited to, expected collection of receivables, expected capital expenditures, estimated sufficiency of wood fibre deliveries, estimated wood fibre costs, expected sufficiency of cash flows to fund operating needs and capital expenditures and to meet contractual obligations, recoverability of capital assets and other statements that are not historical facts, are "forward-looking statements" which reflect the intentions, plans, expectations and beliefs of SFK Pulp's management ("Management") regarding SFK Pulp's future growth, results of operations, performance and business prospects and opportunities. In certain instances, these statements require Management to make assumptions and there is significant risk that these assumptions may not be correct. The words "may", "would", "could", "will", "intend", "plan", "anticipate", "believe", "estimate", "expect", and similar expressions, as they relate to SFK Pulp or Management, often identify forward-looking statements. Such forward-looking statements reflect Management's current beliefs and are based on information currently available to Management. Forward-looking statements involve known and unknown risks, uncertainties and other factors outside Management's control. A number of factors could cause actual results of SFK Pulp to differ materially from the results discussed in the forward-looking statements, including, but not limited to: risks associated with pulp prices and sales volume, exchange rate fluctuations, wood fibre or wastepaper supply and costs at the mills, cost and supply of raw materials (including chemicals), competition, dependence upon key customers, increased production capacity in the market, equipment failure, disruptions of production, capital requirements, absence of guarantee of cash distributions and other factors referenced in SFK Pulp's MD&A for the third quarter ended
Note to readers: Complete unaudited consolidated financial statements
and Management's Discussion & Analysis are available
on SFK Pulp's website at www.sfk.ca
Attached: Summary of Results
SFK Pulp - Financial Highlights - Third quarter ended September 30, 2009
-------------------------------------------------------------------------
(in thousands of Canadian Three months ended Nine months ended
dollars, except per September 30 September 30
Unit amounts) (unaudited) (unaudited)
-------------------------------------------------------------------------
2009 2008 2009 2008
-------------------------------------------------------------------------
$ $ $ $
-------------------------------------------------------------------------
Sales 112,820 138,305 273,570 406,901
Cost of sales 103,111 119,342 270,914 353,999
Selling and administrative
expenses 3,278 3,889 14,904 12,093
(Gain) loss on derivative
instruments (234) 257 1,022 (1,202)
(Gain) loss on disposal of
capital assets (10) - 209 18
Loss (gain) on foreign currency
translation 4,345 (2,050) 7,293 (3,489)
-------------------------------------------------------------------------
EBITDA(1) 2,330 16,867 (20,772) 45,482
Amortization 10,214 9,859 30,606 29,285
Financial charges 6,346 3,664 13,037 10,871
Provision for (recovery of)
income taxes 291 (5,313) (990) (7,830)
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Net (loss) earnings (14,521) 8,657 (63,425) 13,156
-------------------------------------------------------------------------
Net (loss) earnings per Unit
Basic (0.16) 0.10 (0.70) 0.15
Diluted (0.16) 0.08 (0.70) 0.15
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(in thousands of Canadian Three months ended Nine months ended
dollars, except per September 30 September 30
Unit amounts) (unaudited) (unaudited)
-------------------------------------------------------------------------
2009 2008 2009 2008
-------------------------------------------------------------------------
$ $ $ $
-------------------------------------------------------------------------
Cash flows from operating
activities (7,305) 12,078 (5,658) 13,941
-------------------------------------------------------------------------
Less:
Capital expenditures - cash 612 3,907 4,616 13,175
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Standardized distributable cash (7,917) 8,171 (10,274) 766
Less adjustments to standardized
distributable cash:
Changes in non-cash working
capital items (7,236) (2,218) 20,246 (20,975)
Capital expenditures accruals (151) 661 (1,268) (410)
Amortization of deferred
financing fees 661 262 1,263 771
Deferred financing fees 1,909 - 1,909 -
Employee future benefits 243 180 861 84
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Adjusted distributable cash (3,343) 9,286 (33,285) 21,296
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Distributions declared - 2,714 - 8,143
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(Shortfall) excess over adjusted
distributable cash (3,343) 6,572 (33,285) 13,153
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Reserve for distributions at the
beginning of the period(2) (293) 20,528 29,649 13,947
-------------------------------------------------------------------------
Reserve for distributions at the
end of the period(2) (3,636) 27,100 (3,636) 27,100
-------------------------------------------------------------------------
Per Unit amount
- Standardized distributable cash (0.088) 0.090 (0.114) 0.010
- Adjusted distributable cash (0.037) 0.100 (0.368) 0.230
- Distributions declared 0.000 0.030 0.000 0.090
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(in thousands of Canadian Three months ended Nine months ended
dollars except per September 30, 2009 September 30, 2009
Unit amounts) (unaudited) (unaudited)
-------------------------------------------------------------------------
Total Per Unit Total Per Unit
-------------------------------------------------------------------------
Total distributions declared - - - -
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(in thousands of Canadian Three months ended Nine months ended
dollars except per September 30, 2008 September 30, 2008
Unit amounts) (unaudited) (unaudited)
-------------------------------------------------------------------------
Total Per Unit Total Per Unit
-------------------------------------------------------------------------
Total distributions declared $2,714 $0.03 $8,143 $0.09
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(1) Earnings before amortization, financial charges and income taxes
("EBITDA") is not a recognized measure under Canadian GAAP and is
unaudited. Management believes that this measure is useful
supplemental information as it provides investors with an indication
of cash available for distribution prior to debt service, capital
expenditures and income taxes. Investors should be cautioned however
that this information should not be confused with or used as an
alternative for net earnings determined in accordance with GAAP as an
indicator of SFK Pulp's performance or cash flows from operating,
investing and financing activities as a measure of liquidity and cash
flows. SFK Pulp's method for calculating this information may differ
from that used by other issuers and, accordingly, this information
may not be comparable to measures used by other issuers. EBITDA shown
herein represents earnings before amortization, financial charges and
income taxes in the Financial Statements.
(2) SFK Pulp's reserve is a financial indicator comprised of working
capital and cash, established to protect SFK Pulp's long standing
commitment to capital investment, including its major maintenance
program, provide for scheduled debt reimbursement and reduce the
impact of negative fluctuations in future cash flows.
%SEDAR: 00018041EF
For further information: Investors and Analysts: Mrs. Patsie Ducharme, SFK Pulp, Vice President and Chief Financial Officer, (450) 442-8884; Media and others: Mr. Dany Paradis, SFK Pulp, Vice President, Change Management and Public Affairs, (450) 442-8882; Mr. Rick Leckner, MaisonBrison, (514) 731-0000 ext. 222
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