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Tembec operations in Senneterre Que. The company reported a loss of $17-million in the latest quarter, largely due to maintenance upgrades at a B.C. mill. (Jacques Boissinot/The Canadian Press/Jacques Boissinot/The Canadian Press)
Tembec operations in Senneterre Que. The company reported a loss of $17-million in the latest quarter, largely due to maintenance upgrades at a B.C. mill. (Jacques Boissinot/The Canadian Press/Jacques Boissinot/The Canadian Press)

FOREST PRODUCTS

Tembec loses $17-million in quarter on weakened sales Add to ...

Forest products company Tembec Inc. missed expectations by losing $17-million in its fourth quarter on lower sales, as the company's B.C. pulp mill was shut for maintenance work.

The Quebec-based company lost 17 cents per share for the period ended Sept. 24. That compared to a 2 cents per share profit a year earlier when net earnings reached $2-million.

Sales decreased 5 per cent to $421-million, from $444-million in the prior year period on lower shipments of its various products.

Tembec was expected to earn 10 cents per share on $431-million of revenues in the fourth quarter, according to analysts polled by Thomson Reuters.

Pre-tax operating earnings (EBITDA) decreased to $19-million from $36-million a year ago, and less than the $30-million consensus forecast of analysts.

The quarter included 17 days of planned maintenance downtime related to the annual shutdown of the pulp mill in Skookumchuck, B.C.

Tembec said the longer-than-normal shutdown was required to proceed with significant work on the mill's recovery boiler. As a result, manufacturing costs at the mill increased by $13-million, mainly for maintenance material and unabsorbed fixed costs.

The company incurred 13,900 tonnes of pulp worth of overall maintenance downtime in the quarter, compared to 1,300 tonnes in the prior period.

For the full year, Tembec lost $3-million, or three cents per share, compared to $52-million, or 52 cents per share in net earnings. EBITDA decreased 28 per cent to $95-million from $132-million in 2010.

Sales decreased 7.1 per cent to $1.7-billion from $1.88-billion a year ago.

During the quarter, the dissolving and chemical pulp segment generated $30-million of earnings on $180-million of sales, compared to $45-million on $188-million of sales in the 2010 quarter.

Sales decreased because of lower shipments of chemical pulp. Pulp shipments equalled 85 per cent of capacity, compared to 92 per cent in the third quarter.

Chemical prices decreased but that was partially offset by a 1-per-cent decrease in the value of the Canadian dollar.

Dissolving pulp prices increased by $28 per tonne, increasing EBITDA by $2-million as it benefited from favourable market conditions.

Paul Quinn of RBC Dominion Securities said Tembec's lower-than-expected fourth-quarter results has “neutral implications” for the company.

“We continue to expect specialty dissolving pulp producers to realize a $100 (U.S.) a tonne price increase in 2012,” he wrote in a report.

High-yield pulp lost $9-million on sales of $76-million, compared to a $3-million loss on $93-million of sales in the prior year.

A labour strike at its facility in Matane, Que., resulted in 51,300 tonnes of reduced production, compared to 30,100 tonnes of downtime in the third quarter.

The strike ended in mid-September. The strike and startup costs increased manufacturing costs by $5-million from the prior quarter.

Low inventory levels as a result of the strike, should be replenished in December.

The paper segment earnings decreased by $3-million to $6-million on $84-million of sales.

Weak demand for newsprint prompted Tembec to continue with production curtailments.

Higher energy costs at the Kapuskasing, Ont., facility increased mill costs by $4-million.

The lumber segment lost $10-million on $121-million of sales, compared to a loss of $16-million on $113-million of sales.

Tembec is considering a $190-million cogeneration plant to be constructed at the Temiscaming, Que., site over two years.

“The project will materially improve the mill's cost structure and margins. The current focus is on finalizing all required agreements in order to proceed with the project,” Tembec said in a statement.

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