Resolute says winter transportation backlog may not be cleared up until June
MONTREAL - Resolute Forest Products says transportation bottlenecks caused by severe winter weather will likely linger for months, making it more difficult to ship pulp, paper and lumber to market.
"Generally speaking we're not getting the (railway) cars we need and obviously now we're in the spring weight restrictions for the trucks, so it's going to take probably until the end of June to clear the backlog to bring our inventory down to normal levels," CEO Richard Garneau said Thursday after reporting the company's first-quarter results.
Montreal-based Resolute, which reports in U.S. dollars, posted its lowest adjusted EBITDA (US$40 million) since exiting from bankruptcy protection in December 2010 after absorbing a US$55-million hit from the extreme weather.
The company, formerly known as AbitibiBowater, saw its net loss surge tenfold to US$50 million or 53 cents per share for the period ended March 31.
Excluding one-time items, it lost $26 million or 27 cents per share, compared with a net profit of $28 million, or 30 cents per share, in the prior year as total sales fell by $58 million to about US$1 billion.
The company had been expected to report a 14 cents per share adjusted loss, according to analysts polled by Thomson Reuters.
The weak results caused Resolute's (TSX:RFP) shares to close down 7.6 per cent at C$18.06 in Thursday trading on the Toronto Stock Exchange.
Garneau had warned in February that the results would be hurt by freezing weather across North America, but said Thursday that he hadn't fully anticipated how deep the impact would be.
"I think that it's really a one-time event. We've never seen it before," he said in an interview.
Mills in southern U.S. saw pipes freeze and plants in Canada faced substantially higher electricity and natural gas costs. The transformer at its mill in Mississippi was short-circuited by a snake seeking refuge from the cold.
Sixty per cent of the weather-related costs were in Canada, outweighing the US$32-million favourable effect of the weaker Canadian dollar.
Resolute was also forced to suspend the use of a ship in Thunder Bay, Ont., because of safety issues for employees.
Canadian National Railway (TSX:CNR) has complained that Ottawa's intervention forcing railways to accelerate the shipment of a bumper grain crop has given it a "super priority" over other shippers, allowing them to "jump the queue."
Garneau isn't sure if higher grain shipments have delayed forestry shipments, but he said it is taking a lot longer for rail cars to be returned for loading in Canada.
"We know that some cars are just stuck in some of the yards (but) I don't know enough quite frankly to say it's the cause of the difficulties that we have."
In addition to weather, Resolute faced mechanical failures at several mills, including St-Felicien, Que., that curtailed 25,000 tonnes of production and cost $15 million.
Garneau said a better performance anticipated in the second half of the year may not be enough to offset the weather impact.
"We may recover some of it but the $55 million of weather impact is pretty difficult to catch up."
Meanwhile, he's hopeful that a change in government in Quebec, including the fact that Premier Philippe Couillard represents a big forestry region, could prompt policy changes that would make wood costs more competitive.
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