MONTREAL, July 30 /CNW Telbec/ - Consolidated sales for the three-month period ended June 27, 2009 were $407 million, down from $609 million in the comparable period of the prior year. The Company generated a net loss of $38 million or $0.38 per share in the June 2009 quarter compared to a net loss of $27 million or $0.27 per share in the June 2008 quarter. Earnings before non-recurring items, interest, income taxes, depreciation, amortization and other non-operating expenses (EBITDA) was negative $42 million for the three-month period ended June 27, 2009, as compared to EBITDA of $9 million a year ago and negative EBITDA of $63 million in the prior quarter.
Business Segment Results ------------------------
The Forest Products segment generated negative EBITDA of $18 million on sales of $72 million. This compares to negative EBITDA of $28 million on sales of $84 million in the prior quarter. Sales decreased by $12 million due to lower volumes for lumber. US $ reference prices for random lumber increased by approximately US $20 per mbf while stud lumber increased by US $18 per mbf. Currency had a negative effect on pricing as the Canadian $ averaged US $0.858, a 7% increase from US $0.803 in the prior quarter. The net price effect was an increase in EBITDA of $2 million or $15 per mbf. Mill level costs increased by $4 million as the Company continued to absorb higher costs resulting from significant production curtailments necessitated by poor demand for lumber. During the June quarter, the Company absorbed a charge of $2 million on the carrying value of logs and lumber inventories. In the prior quarter, the Company absorbed a charge of $7 million related to a reduction of the carrying value of logs and lumber inventories. During the June quarter, the Company incurred $1 million of lumber export taxes, unchanged from the prior quarter. Lumber export taxes are payable based on the 2006 agreement between Canada and the United States. Applicable export tax rates vary based upon selling prices. During the June quarter, the Company incurred a tax of 15% on Western shipments, unchanged from the prior quarter. On April 15, the tax on Eastern shipments increased from 5% to 15% as a result of an arbitration decision relating to alleged over-shipments of lumber between January 2007 and June 2007.
The Pulp segment generated negative EBITDA of $22 million on sales of $239 million for the quarter ended June 2009 compared to negative EBITDA of $51 million on sales of $223 million in the prior quarter. Sales increased by $16 million primarily as a result of higher volumes partly offset by lower selling prices. While US $ reference prices for North America NBSK and hardwood pulp declined, European softwood pulp prices actually increased. The pricing on the latter grade had dropped considerably below the North American price and it was expected that the gap would tighten at some point. Currency had a negative effect on pricing as the Canadian $ strengthened versus the US $. The net price effect was a decrease of $71 per tonne, reducing EBITDA by $25 million. Pulp demand remained weak and the Company incurred 86,200 tonnes of market related downtime and 1,400 tonnes of maintenance downtime. This compares to 182,600 tonnes of market downtime and 1,300 tonnes of maintenance downtime in the prior quarter. While market downtime remained significant, it was substantially lower than the record amount taken in the prior quarter. The higher productivity positively impacted mill level costs which declined by $71 million. The Company continues to focus on maintaining targeted inventory levels and will initiate production curtailments as required. Inventories were at 22 days of supply at the end of June 2009, as compared to 28 days at the end of March 2009.
The Paper segment generated nil EBITDA on sales of $109 million. This compares to EBITDA of $19 million on sales of $124 million in the prior quarter. The $15 million decline in sales was driven by lower newsprint prices. The US $ reference price for newsprint decreased by US $159 per tonne while the reference price for coated bleached board declined by US $17 per short ton. Currency also negatively impacted pricing as the Canadian $ strengthened versus the US $. The net effect was a decrease of $155 per tonne, decreasing EBITDA by $19 million. Manufacturing costs were similar quarter over quarter as the Company continued to reduce production in view of weak demand. The Company incurred 58,400 tonnes of market related downtime in the June 2009 quarter compared to 36,800 tonnes of market related downtime in the prior quarter. One of the three newsprint machines at the Kapuskasing newsprint mill was idle for the entire June 2009 quarter and the other two newsprint machines were idle for six weeks. The Pine Falls newsprint mill was idled for 10 days. The Temiscaming bleached board mill was also idle for 10 days during the most recent quarter.
Liquidity ---------
At the end of June 2009, the Company had net cash of $40 million plus unused operating lines of $110 million. In response to the very difficult 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 $14 million has been achieved, including the sale of the St. Francisville mill site.
Outlook -------
While the June quarterly operating results were an improvement over March, they remained poor. The strengthening Canadian $, the deterioration in the newsprint market and relatively weak pulp and 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 maintain liquidity at $150 million, unchanged from the prior quarter. Looking ahead, lumber markets will remain challenging. European and U.S. pulp markets are weak, but are seeing some improvements in pricing, with continued production curtailments providing the impetus. Newsprint prices decreased in the June quarter and the economic downturn will continue to put pressure on prices and demand. Significant production curtailments will be required to see an improvement in newsprint pricing. Considering the ongoing challenges of the current operating environment and the effect on cash flow, the Company has placed a major emphasis on activities to maintain and enhance liquidity which currently stands at approximately $150 million, virtually unchanged from last quarter. Consequently, a number of liquidity enhancing initiatives have been launched with the target to raise a further $86 million over the next 12 months. Certain additional initiatives are also under evaluation at this time. These measures are necessary due to the volatility of the US $ and product prices.
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 June 27, 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
-------------------------------------------------------------------------
(unaudited) (in millions of dollars)
-------------------------------------------------------------------------
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June 27, Sept. 27,
2009 2008
(Audited)
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ASSETS
Current Assets:
Cash and cash equivalents $ 41 $ 113
Derivative financial instruments - 1
Accounts receivable 269 371
Inventories (note 3) 359 414
Prepaid expenses 22 19
Current assets from discontinued operations
(note 2) - 2
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691 920
Investments 17 9
Fixed assets 641 668
Other assets 4 22
Future income taxes 1 1
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$ 1,354 $ 1,620
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Bank indebtedness $ 1 $ 1
Operating bank loans 80 49
Accounts payable and accrued charges 261 375
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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367 449
Long-term debt (note 4) 403 378
Other long-term liabilities and credits (note 5) 218 229
Future income taxes 1 3
Minority interest - 1
Non-current liabilities related to discontinued
operations (note 2) 36 38
Shareholders' equity:
Share capital (note 6) 570 570
Contributed surplus (note 2) 4 -
Deficit (245) (48)
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329 522
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$ 1,354 $ 1,620
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TEMBEC INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------------------------------------------
(unaudited) (in millions of dollars, unless otherwise noted)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Company Company Company Company Prede-
cessor
-------------------------------------------------------------------------
Three Nine Three Four Five
months months months months months
to to to to to
June 27, June 27, June 28, June 28, Feb. 29,
2009 2009 2008 2008 2008
-------------------------------------------------------------------------
Sales $ 407 $ 1,335 $ 609 $ 797 $ 950
Freight and sales
deductions 55 170 77 99 111
Lumber export taxes
(note 7) 1 2 3 4 4
Cost of sales 372 1,195 496 652 804
Selling, general and
administrative 21 67 24 33 48
Depreciation and
amortization 19 55 24 32 72
Restructuring and
asset impairment
charges (note 8) - 1 - - -
Gain on land sales
and other (note 8) - (1) (2) (2) (20)
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Operating loss from
continuing operations (61) (154) (13) (21) (69)
Interest, foreign
exchange and other
(note 9) 16 7 14 5 32
Exchange loss (gain)
on long-term debt (25) 41 (4) 12 (9)
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Loss from continuing
operations before
income taxes (52) (202) (23) (38) (92)
Income tax expense
(recovery) (note 10) - (1) 2 2 6
Minority interests (1) (1) - - -
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Net loss from
continuing operations (51) (200) (25) (40) (98)
Earnings (loss) from
discontinued
operations (note 2) 13 3 (2) (4) (4)
-------------------------------------------------------------------------
Net loss and
comprehensive loss $ (38) $ (197) $ (27) $ (44) $ (102)
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Basic and diluted
loss per share
from continuing
operations (note 6) $ (0.51) $ (2.00) $ (0.25) $ (0.40) $ (1.14)
Basic and diluted
earnings (loss) per
share from
discontinued
operations (note 6) $ 0.13 $ 0.03 $ (0.02) $ (0.04) $ (0.05)
Basic and diluted
loss per share
(note 6) $ (0.38) $ (1.97) $ (0.27) $ (0.44) $ (1.19)
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CONSOLIDATED STATEMENTS OF DEFICIT
-------------------------------------------------------------------------
(unaudited) (in millions of dollars)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Company Company Company Company Prede-
cessor
-------------------------------------------------------------------------
Three Nine Three Four Five
months months months months months
to to to to to
June 27, June 27, June 28, June 28, Feb. 29,
2009 2009 2008 2008 2008
-------------------------------------------------------------------------
Deficit, beginning
of period $ (207) $ (48) $ (17) $ - $ (271)
Net loss (38) (197) (27) (44) (102)
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(245) (245) (44) (44) (373)
Adjustment for
fresh start - - - - 373
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Deficit, end of
period $ (245) $ (245) $ (44) $ (44) $ -
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TEMBEC INC.
CONSOLIDATED STATEMENT OF CASH FLOW
-------------------------------------------------------------------------
(unaudited) (in millions of dollars)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Company Company Company Company Prede-
cessor
-------------------------------------------------------------------------
Three Nine Three Four Five
months months months months months
to to to to to
June 27, June 27, June 28, June 28, Feb. 29,
2009 2009 2008 2008 2008
-------------------------------------------------------------------------
Cash flows from
operating activities:
Net loss $ (38) $ (197) $ (27) $ (44) $ (102)
Adjustments for:
Depreciation and
amortization 19 55 24 32 72
Unrealized foreign
exchange and
others (3) (2) 2 1 (2)
Exchange loss
(gain) on long-
term debt (25) 41 (4) 12 (9)
Future income
taxes (notes 2
and 10) 3 2 2 2 6
Investment tax
credits and
income tax
refunds - 17 (2) (4) (7)
Restructuring and
asset impairment
charges (note 8) - 1 - - -
Gain on land sales
and other (note 8) - (1) (2) (2) (20)
Gain on sale of
mill site -
discontinued
operations
(note 2) (16) (16) - - -
Differences
between cash
contributions and
pension expense (3) (6) (5) (7) (8)
Other - - (1) 3 5
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(63) (106) (13) (7) (65)
Changes in non-cash
working capital:
Accounts receivable (1) 100 3 (18) 22
Inventories 82 52 43 22 (54)
Prepaid expenses - (3) (3) (4) (4)
Accounts payable
and accrued charges 11 (124) 1 (17) (26)
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92 25 44 (17) (62)
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29 (81) 31 (24) (127)
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Cash flows from
investing activities:
Reduced
participation in
joint venture - 8 - - (5)
Additions to fixed
assets (6) (36) (19) (23) (23)
Proceeds on sale of
mill site -
discontinued
operations (note 2) 7 7 - - -
Proceeds on land
sales - 1 - - 17
Decrease in
investments - 3 22 22 2
Other 2 1 - - 1
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3 (16) 3 (1) (8)
Cash flows from
financing activities:
Change in operating
bank loans (5) 31 (1) 8 (27)
Increase in long-term
debt 3 9 3 3 300
Repayment of long-
term debt (3) (20) (6) (7) (5)
Decrease in other
long-term
liabilities (1) (1) (2) (4) (3)
Other (2) 4 3 3 (36)
-------------------------------------------------------------------------
(8) 23 (3) 3 229
24 (74) 31 (22) 94
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Foreign exchange on
cash and cash
equivalents held in
foreign currencies - 2 (1) (1) 1
-------------------------------------------------------------------------
Net increase (decrease)
in cash and cash
equivalents 24 (72) 30 (23) 95
Cash and cash
equivalents, net of
bank indebtedness,
beginning of period 16 112 56 109 14
-------------------------------------------------------------------------
Cash and cash
equivalents, net of
bank indebtedness,
end of period $ 40 $ 40 $ 86 $ 86 $ 109
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Supplemental
information:
Interest paid $ 9 $ 29 $ 10 $ 10 $ 48
Income taxes
recovered $ - $ (17) $ - $ - $ (1)
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TEMBEC INC.
CONSOLIDATED BUSINESS SEGMENT INFORMATION
-------------------------------------------------------------------------
(unaudited) (in millions of dollars)
The Company
Three months ended
June 27, 2009
-------------------------------------------------------------------------
Corpo-
Forest Chemi- rate Consoli-
products Pulp Paper cals & other dated
-------------------------------------------------------------------------
Sales:
External $ 54 $ 220 $ 109 $ 24 $ - $ 407
Internal 18 19 - - - 37
-------------------------------------------------------------------------
72 239 109 24 - 444
Earnings
(loss) before
the following (18) (22) - 3 (5) (42)
Depreciation
and
amortization 6 11 1 1 - 19
Other items
(note 8) - - - - - -
Operating
earnings
(loss) from
continuing
operations (24) (33) (1) 2 (5) (61)
-------------------------------------------------------------------------
Net fixed
asset
additions - 5 1 - - 6
-------------------------------------------------------------------------
-------------------------------------------------------------------------
The Company
Three months ended
June 28, 2008
-------------------------------------------------------------------------
Corpo-
Forest Chemi- rate Consoli-
products Pulp Paper cals & other dated
-------------------------------------------------------------------------
Sales:
External $ 113 $ 353 $ 112 $ 31 $ - $ 609
Internal 32 16 - 2 - 50
-------------------------------------------------------------------------
145 369 112 33 - 659
Earnings
(loss) before
the following (10) 19 3 3 (6) 9
Depreciation
and
amortization 7 15 1 1 - 24
Other items
(note 8) - - - - (2) (2)
Operating
earnings
(loss) from
continuing
operations (17) 4 2 2 (4) (13)
-------------------------------------------------------------------------
Net fixed
asset
additions 2 16 1 - - 19
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
The Company
Nine months ended
June 27, 2009
-------------------------------------------------------------------------
Corpo-
Forest Chemi- rate Consoli-
products Pulp Paper cals & other dated
-------------------------------------------------------------------------
Sales:
External $ 226 $ 676 $ 359 $ 74 $ - $ 1,335
Internal 76 58 - - 3 137
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302 734 359 74 3 1,472
Earnings
(loss) before
the following (62) (69) 38 8 (14) (99)
Depreciation
and
amortization 18 33 3 1 - 55
Other items
(note 8) 2 (4) - 1 1 -
Operating
earnings
(loss) from
continuing
operations (82) (98) 35 6 (15) (154)
-------------------------------------------------------------------------
Net fixed
asset
additions 5 27 3 1 - 36
-------------------------------------------------------------------------
-------------------------------------------------------------------------
The Company
Four months ended
June 28, 2008
-------------------------------------------------------------------------
Corpo-
Forest Chemi- rate Consoli-
products Pulp Paper cals & other dated
-------------------------------------------------------------------------
Sales:
External $ 149 $ 465 $ 144 $ 39 $ - $ 797
Internal 46 20 - 3 - 69
-------------------------------------------------------------------------
195 485 144 42 - 866
Earnings
(loss) before
the following (20) 32 2 3 (8) 9
Depreciation
and
amortization 10 20 1 1 - 32
Other items
(note 8) - - - - (2) (2)
Operating
earnings
(loss) from
continuing
operations (30) 12 1 2 (6) (21)
-------------------------------------------------------------------------
Net fixed
asset
additions 2 19 2 - - 23
-------------------------------------------------------------------------
-------------------------------------------------------------------------
The Predecessor
Five months ended
February 29, 2008
-------------------------------------------------------------------------
Corpo-
Forest Chemi- rate Consoli-
products Pulp Paper cals & other dated
-------------------------------------------------------------------------
Sales:
External $ 196 $ 533 $ 165 $ 56 $ - $ 950
Internal 59 31 - 1 2 93
-------------------------------------------------------------------------
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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