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AbitibiBowater head office in Montreal (Ryan Remiorz)
AbitibiBowater head office in Montreal (Ryan Remiorz)

AbitibiBowater makes big gains Add to ...

AbitibiBowater Inc.'s newsprint business has made major gains but is still losing money as the Montreal firm works to re-establish itself after a massive restructuring.

The company had a $12-million (U.S.) operating loss in its newsprint division on sales of $486-million in the fourth quarter, according to partial financial results filed with the U.S. Securities and Exchange Commission.

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The loss is considerably smaller than it was during the first quarter of 2010, when the newsprint business lost $102-million on sales of $433-million.

Abitibi plans to file its full fourth-quarter results by the end of March. Analyst Paul Quinn of RBC Dominion Securities Inc. said the numbers will be a "mishmash," as they cover the period before and after its exit from a 21-month restructuring under court protection from creditors.

The process, which ended in early December, helped Abitibi slash its debt by $6-billion to $850-million.

The company plans to cut another $100-million from its debt, using the proceeds of the $300-million sale of hydroelectric assets announced in early February.

In the SEC filing, Abitibi stated that its fourth-quarter and 2010 numbers reflect the "predecessor company."

Mr. Quinn said investors are looking ahead to Abitibi financial results from 2011.

"We anticipate that investors are focused on the [first-quarter, 2011] results, which will reflect the balance sheet revisions under fresh-start accounting and a full quarter of the new, lower-cost operating platform," Mr. Quinn said in a report.

In the restructuring, Abitibi slashed its work force by 7,000 people to 11,000 - a 40-per-cent reduction, as it cut its newsprint capacity by about 40 per cent. The company said it has reduced its fixed costs to about $473-million from $1.35-billion at the time of the merger of Abitibi and Bowater.

Investors have welcomed the new version of the company. Shares of Abitibi, which trade on the New York Stock Exchange, opened at about $22 in December and have steadily climbed, rising by about a third. The stock closed at $29.53 on Friday and markets were closed on Monday because of holidays in the United States and Ontario.

Abitibi's strategy is to move away from the newsprint business, which is in secular decline in North America, though it is growing elsewhere, in countries such as India.

Newsprint was previously about half of Abitibi's business and now accounts for about 40 per cent. The company exports half of its newsprint outside North America.

The company wants to focus more on higher grades of paper that generate better returns.

In the fourth quarter, Abitibi's coated paper and specialty paper businesses produced an operating profit of $12-million on sales of $480-million.

Total sales in the fourth quarter were $1.27-billion, with an operating profit of $19-million. Beyond newsprint and other paper, Abitibi had a profit of $45-million in its pulp business and recorded a loss of $31-million in the "corporate and other" category.

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