Jacques Boissinot
Tembec's shares surged Friday after the forestry products company signalled that its operating performance is gaining steam as it holds discussions with certain investors about debt maturities resulting from its 2008 recapitalization.
The Quebec-based company forecast early Friday that its operational earnings for the period ending June 26 will be up at least 42 per cent from the prior three-month period.
Tembec shares gained 41 cents or nearly 24 per cent in early trading, rising to $2.15 - their highest since mid-May. The stock hit a 52-week high of $3.09 on April 20.
Tembec said Friday its expects third-quarter EBITDA, a measure of earnings that excludes a number of non-operational items, will be in a range of $47-million to $53-million.
That's up from $32-million in the fiscal second quarter, ended March 27, and a $42-million EBITDA loss in the third quarter of 2009.
The company defines EBITDA as earnings before non-recurring items, interest, income taxes, depreciation, amortization and other non-operating expenses and revenues.
Like other forestry companies, Tembec has benefited from rising pulp prices. But it has also endured a very slow recovery in demand for lumber and weak newsprint prices.
The company made the disclosure about its current quarterly results as it holds talks with some investors.
"The company has debt maturities in 2012 and as the co indicated earlier in the year, this is an area of focus. Accordingly we are evaluating our options," said John Valley, executive vice-president, business development and corporate affairs.
Tembec has a $307-million term loan maturing in February 2012. The debt is part of the result of the plan that gave the company financial flexibility by converting $1.2-billion of bondholders' debt into equity and reducing interest payments.
Following the recent sale of two pulp mills in France for $133-million, Tembec's liquidity is expected to be around $250-million. That's up from $138-million in cash and undrawn line of credit at the end of March, 2010.
Tembec has said the sale would result in a gain of about $20-million in the third quarter.
The company has said it plans to sell about $70-million of non-core assets this year. They include the company's turboprop airplane, hydroelectric facilities, an office building and some land.