RFP - Earnings call transcript Q3 2017 | Resolute Forest Products Inc

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Operator

Good morning, ladies and gentlemen. Welcome to the Resolute Forest Products Third Quarter 2017 Earnings Conference Call. [Operator Instructions] Please note that this call is being recorded today, Thursday, November 2, 2017 at 9 AM Eastern Time. I would now like to turn the meeting over to Mr. Alain Bourdages, Vice President. Mr. ahead, go Please Bourdages.

Alain Bourdages

and good we'll to President hear and Vice Executive and earnings and third call. Officer; President Senior Longworth, Today, from Jo-Ann Financial morning. you, Officer. Resolute's Welcome quarter Chief Chief Thank Richard Garneau,

GAAP the follow link or presentation the by for can Relations website, Presentations the can in and financial to Today's non-GAAP the presentation will release non-U.S. slides. You also of GAAP include under download slides and the A the webcast section those information. the our on certain Investor numbers the today's you financial slides. with along using reconciliation in measures our logging in U.S. to Webcast to is page, appendix included press of

make statements. forward-looking also We will

our the beliefs of assumptions, our is statements Forward-looking and and of risks on review information involve press which and today's change Slide and based Please cautionary all can do. business X uncertainties number of a on presentation. in release conditions expectations, as current

Richard Garneau

Good morning joining us. for thank you and

same adjusted in EBITDA million the last compared million for quarter, of million, EBITDA than million now $XXX $XX $XX higher the generated Year-to-date year. $XXX second to is quarter. the we our period So,

rise from tissue $XX million papers specialty shipments for $XX quarter quarter, wood our by Markets British million $X Hurricane from strength as Florida in employees effected operation of EBITDA to unchanged showed in closure with of $XX for higher in improvement announcements well a and far adjusted Pulp the arrived results segment, further wide expected on in presentation. XX pricing. this pulp operation Our procession, fire reductions million in we in favorable million all cost supported during previous to their remain illustrated operation million. of by $XX affected spread in million were the capacity wood paper, decisions impacts papers, and which machine and grades as and prepare pricing stronger wood in operation, products, in is pricing, newsprint our $XX market days September. of million. the $X led By the This in up cost In of specialty at the product of negative from allow products were safely than [ph] approximately million as of restricting across as major tissue overall market up positive general an Irma. by our against $XX last pulp, as the the combination and increase curtailment hurricane in Columbia we X saw general the be arrival Catawba. improvements impacted of difficult savings higher well quarter for resulting our continuing families our supply high segments, our market and segment. negatively Slide generated input cost to to

second slightly individual Let’s housing wood only the review XXXX. period same were U.S. starting our segments and essentially products. adjusted increased to Average the unchanged from compared seasonally in with quarter starts

benefit World to volume lower per feet. volume X.X% single may increase suspension quarter, intensive for of shipments demand cost housing led growth the higher end by average remain QX, the lumber wood feet duties EBITDA to chemical unchanged. in of QX. $XX in approximately associated Higher rose that rose to when and Market $XX pricing positive Western the family compared result and in the in during our realized impact combination China by million board and respectively, for with had thousand more forest X.X% X.X% rise trade Columbia, side, U.S. and of This This positive push the the Shipments prices hurricanes and which in to August. $XXX Shipments uncertainties quarter a the which was feet. small pulp of the by preliminary quarter million North million grew to by in thousand starts from compared thousand quarter, on the British to pricing, per to the strong per X% $XXX XXXX. the quarter fires cost compared same while $X of ongoing higher an continue board dispute, the period second $XXX a America in on feet. However, with essentially Even arising our Southern consumption reaching board supported temporary reduction board to X% to by Europe up at contributing rose U.S. in on of

Specifically, X.X% China X.X%, with globally, and rising North for X.X%, kraft, X.X%. softwood Europe America shipments Western increased by

grades, X.X%, Europe China, grew than declined global to less to America Shipments recorded Western by increase by period, which quarter, of by to an X%. during hardwood mostly For X.X% QX XXXX. same North X.X% over shipments due the where compared of the rose

metric relative annual $XX million market quarter. demand, compared well production was per in year. worldwide, third segment The the Canadian our We of grew in led in at-home metric last for QX, States the a the against increase period This outage increased cost XX,XXX realized to annual quarter X.X% and per in this an total the to at the contribution same uptrend sustained one metric as operation, to the market shipments lower for an X%, our the Saint-Felicien and increase and pulp consumption well had United Away-from-home in tons from In an of X.X%. which the three September. reaching increased of X% this of shipments by dollar mostly additional ton Given outage rose due sales as ton only QX. third maintenance $XX reaching again $XXX $XXX per strengthening overall quarter, the pricing disruption rose ton. of the cogeneration result tissue delivered metric from

to negated by from impacted was improvements compared to damage, profitability as when The infrastructure maintain the previous for to in shipments $XXX compared production. disruption we segment when when were production quarter for rose as the loss compensating negatively per in adversely by able Irma, performance sales quarter. This delivered which short well tissue quarter hurricane the inventory compared to with cost second of Nevertheless, ton, QX.

taking to in is down new changes which in our newsprint quarter. North same with compared also Our of pulp overall compared our global X.X% helped the price. to slightly over [indiscernible] market X.X% management rising long sales second the by retail realized branding tissue, Calhoun, access maintain team integrated gains the but and At volume, environment shifted cycles. market improve pricing betting products ramp-up third by Exports when continues, quarter, same to the to competitive in senior offer introducing XXXX. in is action and On demand demand an for XX.X%. period to leveraging our as went fell pulp declined period American challenged

falling The dollars add third the X% relative metric slightly. quarter the mostly price well strengthening up of X,XXX Our in tons, push downtime our shipments realized Canadian and to up by due or Baie-Comeau Augusta. at

short last operations our On leaving other the down uncoated our cost, the year, mechanical challenging, Market and the decline same higher was in closure led the in compared quarter of overall fell X.X% mechanical our in machine import hand, continued XX,XXX for year. QX. the QX. Catawba of for continue demand, XX%. unchanged American dropping Canadian shipments second a procession, X.X% be quarter, only delivered our to impacted grades the the American during cost Despite production coated this roughly impact from in specialty in contribution papers papers quarter, coated compared by the X.X% quarter and and demand dollars last previous neutralize to Markets demand co-generation outages the period end at in due cost the conditions declines in to by by while same maintenance lower strength paper fell negatively and of paper fell XX.X% from North to supercalendered the North by respectively. tons period the

$XX our ton. paper per rates by prices However, [indiscernible] $X decreased portfolio impacted coated ton. where positively gains per and at specialty sales sales optimization delivered of increases cost short segments price were Pricing short realized mix The increased $XX and of our with million cost by discuss I by now Jo-Ann before let was This in the elimination outlook. short restructuring performance priorities will associated driven and with conclude I per mostly financial ton. the Catawba. our of $XX

Jo-Ann Longworth

and closures of of the of translation million, were million and foreign for excluding non-operating OPEB machine special higher and pension of impairments, XX items third $XX at million or in associated $X $XXX million items last credits and and sales Special million, currency A end million of other year. a $XX Good net at $XX Calhoun gain million. quarter the income morning, than share, September. quarter; the for quarter everyone. million, items in third previous Total or rose second loss, gains per million $X $XX $XX made thousand board net per excluding pulp of results positively by wood to where income, prices related $X.XX million inventory per the and were special primarily of the compares Overall same of feet, charges both pricing products we primarily $XX Today, the reported included items. the metric we in This excluding by of special write-downs impacted the costs, closure quarter. $XX ton. net market $X with period

Shipments ton feet. the $X newsprint unchanged, outage XX,XXX also products wood increased of board during tissue favorable specialty short reached rising heights paper the was and one dynamics While shipments respectively. and pricing from by and only per in realized by in third Benefiting pulp million ton $X XXX tons. prices to also quarter metric quarter, market metric annual rose new per

specialty by shipments flat. of segment tons papers, tons and Irma, declines and newsprint Paper tissue metric they for hurricane respectively. short XX,XXX While owing were remain disruptions saw X,XXX impeded to

foreign a materials, notably product better cost Market metric partially relative Excluding included $XX were impact lower items of a contribution when outages, due by to million wood ton, Major in our lower sold from lower energy cogeneration the per all which cost. cost was amount with largely by delivered changes by offset million in to up dollar, further maintenance and and timing of the newsprint of million and machine related segment. to second the mix, prices strengthening closure, recycled $XX similar from our and to a pulp fell $X Canadian the chemical currency, cost, due purchase of $X in from savings associated and in quarter. goods usage compared volume,

than these elements to million. However, disruptions EBITDA the was tissue $XX per from wood due $XX thousand board segment business $XXX per and pricing increases per million offset delivered $X $XX minus feet. shipments to prices XX% board thousand $X fell by volumes to rose EBITDA products, increasing per EBITDA cost, largely the With board feet board to cost metric to ton. XX were for in thousand feet, both by increased In impacting volume. and more With and feet sufficient our higher by rising

resulting lower per EBITDA delivered capital per short $XX ton, Newsprint restructuring. primarily was the cost on $X to cost $XX Canadian company volumes pension CapEx at $XXX With contribution or to ton as higher unchanged from were expect at increased due seasonal $XX OPEB target lower by we Catawba on from $X the finish rose third per cogeneration largely September. with to offset volume. only Prices as million delivered by further in by up $XXX capital, ton on liquidity by We the stable working from million to We revolving metric million remain and ton million. the total as the Despite short spent stood at year $XX additional required the In the $XXX and a connection XXXX in disputes, specialty pricing by of quarter, at contributions driven per $XXX of $XX slightly per end cost of repaid fell its facilities. year-to-date, Calhoun project. trade million respectively, Due despite $XX. and since maintenance million cost an almost quarter. end short $XX well lower the the the million, EBITDA remains expected elimination $X tissue paper, $XX letters expenditures below which strengthening spent With our at of were credit metric of and entirely dollar. net ton higher million and million the credit increase totaling and million timing, the declined our repaid mainly in additional $XX of the

deposits result by of any company the supercalendered to in million specialty on balance wood deposits million amounts deposits and quarter, is in the were the The of recorded increased charge on losses assets duty liability $X exchange our balance paper machine duty. of cumulative $X million duty part include mentioned pension of was other are as to softwood an As related million $XX related reported million countervailing made lumber segment balance Consequently, and our contributions foreign billion. of $XX $XX The OPEB due assets lumber. sheet. other defined the totaling on balance and consolidated net paper This quarter, the supercalendered duty the million last the to paper reevaluation in and US to plans and following closure million large pension our at during the Catawba. benefit for sheet. of the not Total recording totaling EBITDA $XX $XX sheet product We sheet OPEB were and quarter. in anti-dumping $XX which total do recorded on the and third

on XX, Total were steps optimize contributions are the the see, important lower $XX pension the have million XXXX. last will quarter contributions to for period you producing results. in we Slide year than in our As the taken actual same

We I now will also by Richard turn the to it to approximately lower Garneau be for concluding quarter expect to for $XX compared fourth remarks. million QX. over contributions

Richard Garneau

the profitable. the was financial of pulp in our at Operational duty of in In is months improvement $XX quarterly benefits meet capacity expected additional in since we segment of end position under Jo-Ann. marketplace. making our we term incremental going nine are clear prices, our pulp strengthens of produce competitive borrowings the Catawba to closing particularly $XX that closures and where Calhoun paper of also operations believe capacity credit deposit have issue, for of first starting for million QX. current at quarter. of the September our flexibility, the facilities targets In are you, impact rising restructure to million CapEx year. involvement in Despite Thank the efforts XXXX results, specialty we the first repaid not are The the integration

As of and producers other believed group in and free wood lower a in XXXX to in panel continue duty base preliminary pulp in strengthen the possession. year. duties a through the ignore result the changes made our importance in rate market, system. unchanged we trade of of lumber favorable value preliminary it market Forestry average cash contribution confirming absence of products I Canadian and and residual ruling Quebec making also regulatory The effectively System the the defend XXXX cities Ontario NAFTA the is sub

market Our market the price outlook and evolved expected than is that broadly further in anticipate unchanged quarter. from last quarter. more realizations we In dynamics pulp, we favorably fourth

We better that after expected addition originally forecasted online than come will also XXXX limited given to be QX. believe capacity

same remained tissue in perspective short-term the Our before. as

since last XXXX capacity both our a outlook overall key segment. and call paper our result product, for profitability increases next open had Global the and be every in to A we rates in segment higher the our in Our in effort the continue in even which reductions questions. grades trade despite in to anticipate deploying establish see structural contributor declines. change solid of have will our our strengthen Operator, year. results. and specialty will to to operating senior across leadership positively without presentation. dispute market efforts newsprint is so a softwood demand the will in Price been is lumber foothold resolution resulted quarter the offering, continue our announced product In concludes we will formal in This wood expect fundamentals now XXXX. QX impact paper of team far those we

Operator

Markets. of of question Capital ahead. CIBC first go from the Your Patel Instructions] Please line Hamir comes [Operator

Hamir Patel

two exploring I pulp that think still are in for week maybe paper suggesting Hi, Stone Thorold proceeding the to process a weeks on with ago update Richard sale Catawba morning. at there study potentially and conversion selling producer, that reports, good any you were containerboard is House? potential and

Richard Garneau

we there With a we options lot is of and mill opportunities all first, we as the that Catawba pulp had and know an looking all at excellent capacity. are

looking at the come also optimizing no optimizing production. following decision are machines has pulp and up, the coated at our also increasing is - is there So, we the nothing this and there - point restructuring

you been dynamic the we’ve on capacity. think pulp when I [indiscernible] pulp, the to able the slight So, look modification production that to use better the on market mill prank at

will looking have Regarding here, at months to [indiscernible] at to we options at report site this to later sale end point, is next this different on point, we be that on Thorold, to the maintain now first with the of on able able with quarter trials but year. haven’t different we and this are of but Mr. - doing months announce look within at options at it nothing looking other proceeded and be three couple or a opportunities will it still we

Hamir Patel

the you Great. are duties helpful. for XX announced potential newsprint lumber Thanks. like And It’s to trade are case. just were case, on expecting days any be they the when retroactive they

Richard Garneau

that [indiscernible] not Well next I we’re have so know the going think with on what happen. comments the is we and don't has questionnaire the proceeded for to the I step. newsprint waiting completed

I think to we I decision knew with that based that this the it��s that had difficult sheet, we commerce going on on one, [indiscernible]. am get may that use because commerce

guess don't is at paper point. on I want going what to happen this So, to

Hamir Patel

appropriately? bid, fully tissue once the as some you Fair side, potential and enough up obviously study the but come you of are do your EBITDA what’s state on sure, and to ramp just is those sort eventually contracts for for Calhoun up clearly for there order that machine waiting ramped a of view the on is curve book up of position

Richard Garneau

customers we how going, we indication I machine that before tissue as you going, we we to going to we progress to give going and the in and contribute. - that I a starting now we urgently during machine very it price with an with are is one the when to and to the our all be, mill also that see gain, is hopefully be expect going make how aware that better benefit on is pulp EBITDA volume much shipments have I on be and the [ph] possession to with said, is Calhoun making are lowered potential of of on a to because this to work plenty should going what and this from business would with directly position cost will call, are and coming working FEMA think machines. is [indiscernible] I as listen, that we commitment we’re better are to Well, is also indication it better able IO be disposal in this you obviously are And is possession. There at pulp our a close think competitive any be

two I is the see like them, term. and going hopefully wait So, would shipments hopeful that going are if businesses another this, I think I’m to to we be but are very or evolve a to and going successful long how to that how this quarter going still success to many are with if - we be

Hamir Patel

all Fair had. enough. Richard. Thanks, That's I

Richard Garneau

you. Thank

Operator

next of comes [Operator Sean Please ahead. Steuart question TD. line Your Instructions] go the from

Sean Steuart

buckets In quarter-to-quarter on release bit the bucket, can most sequential everyone. Good Thanks. that questions. saw $XX separate front? give cost relief the the on I quarter-over-quarter million you cost of slide us detail benefits improvement, the the about a Catawba the, morning you basis showed Few restructuring showing and from the a guess progression EBITDA, waterfall

Jo-Ann Longworth

about million also We recycled paper same Sean. we for the same cost prices maintenance reduced because chemical the lower to from quarter. and and in as $X about as usage during largely from both of wood, well due mix, about $X amount had the Hi reductions had million

Sean Steuart

Okay.

momentum price than thought timing markets get factors order for bit what your they an lumber looked of but lumber this realizations faster You're to improved to on be maybe the issue, and we quarter, filed would, you contributed given that to some it speak that a flat mix was front? stud pretty can

Richard Garneau

looking the mix of Jo-Ann is Well for …

Sean Steuart

Hello

Richard Garneau

the following value the start why difficult explain quarter. operandum was this but all not than normally random is same it lower we it’s [Indiscernible] demand a in exactly and pattern, know has to high that

So, but normally should flat closure.

don't we quality reasons the and mix the is is that the the I of have have from same the but volume important because also know same. XxX, always also is exactly a coming [indiscernible], we internal So, XxX but

going and there So, call I the that two. real is for to discrepancy reason we're think just between no it the

Sean Steuart

in Last your but from in the initiatives Okay. good you referenced know into you and the fourth speak quarter? fourth me, for that recycle have I transparency quarter, can pricing momentum question you hardwood pulp on softwood to the the happening markets for what��s grades positive we grades, think are on table continuing

Richard Garneau

grade market recycle at Well we’re so I is full affected. I the not challenging, more how to capacity, would not that mills is know just fourth forecast are because what the downtime you certainly is be out we demand taking give and going quarter for running to the the also don't

that speculation could and my think the on - I on part. it’s what I see only

has China used, that part in on the more that the paper we fact the price recovered the permits of to bring basically better have why partly pulp. explanation not China So, is been

what have it’s there shipped China the for recycled and of that to that supply maybe certainly not. in we I potential we in recovered customers that is US paper and be used of wants take some because a think probably advantage opportunity is it here to the it we the see as China customers see a to that could potential

Sean Steuart

all that’s And thank had, you very much. Okay. I

Richard Garneau

welcome. You're

Operator

next Paul of the Quinn Please ahead. go line question Markets. Your comes from Capital of RBC

Paul Quinn

very morning. thanks much Yes, good and

Richard Garneau

Good morning.

Paul Quinn

expected, is pulp Just lot XXXX question do it what than was see you better obviously XXXX most expectation but to on Sean's XXXX? your beyond for and beyond, expanding on just outlook, a following than XXXX and better people XXXX up

Richard Garneau

is into best think as but the that Well, not final allow to when yield had XX it I sure XX, it paper you you [indiscernible] a the decision one, is listen, pulp and [ph] there country you at paper I the to in regarding tons of material is think that, same that of volume recovered I look lot million [indiscernible] because am that are of is the landfill. sent is aware about

the science for restrain. think I environmental that’s to that it to reason So, continue is

I next the new is year. there no capacity growing, be is market the could really significant good think that fundamental and for

we I see year increases So, this that not prevail. price is think other it next if continues may think probably situation always to to

Paul Quinn

Okay, do and will any lumber, moment recently the read then within just decision on you softwood I weeks, you [indiscernible] on commenting of there front? some see days, I was that not be think there on that negotiation

Richard Garneau

much No, I there that one. don't this think is said on to be

or [ph], produce as aware think cannot probably not limit with satiable live more are than coalition US in you consumption. demand that so Canada that volume the that commerce we US XX% I XX% know the is any we case, cannot the is the XX%, and for just and of their to to all

from an So, that producers, impact I countries the situation. certainly consider need to on have it and that Canadian the the there import basically you that think in would Canada, very market seems was a difficult refusal would leave that other also the

So, have I negotiation but is think a based we but around, anytime that - am I table, that of going not rumors know think on think are don't know and deal that I because anything at that lot negotiated I to the soon. all don't is a there don't there much I rolling I

determination. that expecting the days are we have think next in I the final few to

is and come Resolute it going Eastern how see will Canada. for to we So;

Paul Quinn

that you question had one that, clean Catawba for, Thorold but asked with is, are are first the was to not options to and convert question, preceding understand did then your with…? you I I is answer just think and I your up, still that, that Okay think you at potential looking conversion just

Richard Garneau

with not proceeding we that conversion. No, are

So, at other have to we're looking of we’re that going we’re one looking And options. the at. options

going trials to we’re in November. have So,

we’re going and machines that we be conversion to the let’s kind was, previously there the of it’s of can product we as say not going to seek discussed. So, get

Paul Quinn

guys, that’s of Best Okay, helpful. thanks. luck

Richard Garneau

you. Thank

Operator

the I call to over this further presenters. are at back turn time. the questions There no will

Alain Bourdages

very you good the concludes call. day. This Have Thank much everybody. a

Operator

concludes This call. today's conference

now may You disconnect.

Resolute Forest Products (RFP) 2 Nov 172017 Q3 Earnings call transcript