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AbitibiBowater head office in MontrealRyan Remiorz

Insolvent newsprint giant AbitibiBowater Inc. says it may be forced to further cut its production capacity this year if market conditions worsen, even as it trimmed losses last year despite lower sales.

The Montreal-based producer said it lost $1.55-billion (U.S.), or $26.91 per share last year. That's an improvement from a loss of $2.23-billion, or $38.79 per share in 2008.

The company spent $639-million on reorganization costs for the year.

Sales fell 35.5 per cent to $4.366-billion, from $6.771-billion.

During the fourth-quarter, AbitibiBowater lost $314-million even as sales fell 30 per cent to $1.1-billion.

The company lost $5.43 per share for the period ended Dec. 31. That compared to a loss of $24.85 a year earlier when the net loss totalled $1.433-billion.

Lower newsprint prices pushed sales down to $1.126-billion from $1.617-billion in the year-ago period.

AbitibiBowater has been operating under court protection from creditors in Canada and the United States since April, 2009.

It hopes to emerge from court protection by the fall if it can successfully present a restructuring plan.

"We are attempting to stabilize our business by preserving all or a portion of the enterprise and evaluating our various operations, corporate structure and head count to develop a comprehensive restructuring plan in an effective and timely manner," the company said in a securities filing.

Formed from the 2007 merger of Canadian and U.S. newsprint companies, it produces newsprint, commercial printing papers, market pulp and wood products.

All of its paper products faced significantly lower demand in 2009 because of trends in the newsprint industry and global economic conditions.

"North American newsprint consumption continued to decline in 2009 due to a significant decline in circulation and advertising," it said.

Global demand for market pulp increased slightly in 2009, despite significant declines in North America and Western Europe, which were partially offset by increased demand from China.

The company has responded by permanently closing some paper facilities, taking downtime to reduce production, increasing prices and idling more than half its lumber production due to a weak U.S. housing market.

AbitibiBowater said it expects to operate its wood products business as "extremely low levels" and will continue to take curtailments.

It has started to raise North American newsprint prices and continues to divest non-core assets, including nearly 200,000 hectares of land, to improve its liquidity.

The company operates 23 pulp and paper mills and 30 wood products operations in the United States, Canada, the United Kingdom and South Korea.

With 12,100 employees, it is the world's largest producer of newsprint. It has 12 per cent of global capacity and 42 per cent of North American capacity.

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