RFP - Earnings call transcript Q2 2019 | Resolute Forest Products Inc

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Operator

Good morning, ladies and gentlemen. Welcome to the Resolute Forest Products second quarter 2019 earnings conference call. [Operator Instructions] Please note, this call is being recorded today August 1, 2019 at 9:00 AM Eastern Time.

I would now like to turn the meeting over to Ms. Silvana Travaglini, Treasurer and Vice President, Investor Relations. ahead. go Please

Silvana Travaglini

to from Welcome and earnings Today, Financial call. Lalonde, Good Laflamme, Resolute's President hear Officer. Chief and Yves Vice Officer; and we'll Senior morning. President second-quarter Chief Remi Executive

the with the the or webcast you our to the page along follow the using can slides today's Relations logging webcast presentation presentation the in download website, Investor can slides. for link under also on by and of You section

those financial presentation press to non-GAAP will appendix of include A Today's is release our slides. the numbers GAAP GAAP in information. measures non-U.S. in financial to U.S. the reconciliation certain included and

also will make We forward-looking statements.

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

I will call the to over Yves. now turn

Yves Laflamme

Thank EBITDA is in highs $XX quarter. us. lower you million XXXX. reported decrease Today, the Good second joining prices following lower selling $XXX to of reported million profitability in the $XX for The we for than morning. adjusted due first of the million quarter,

by improved was expense allowed reduction generating this energy and higher benefited which better productivity. a in overall unfavorable our lower also The quarter. cost, seasonally and only This exception from offset incrementally was notable us A partially on tissue, deliver EBITDA mostly to pricing commitment, productivity. positive impact pricing

million product million at from market first positive $X the down for a segment, slight quarterly By of improvement. was down pulp, quarter. we reported Wood million $XX million, EBITDA $X in $X million. adjusted A $XX tissue,

previous paper, from $XX a $XX million million, million the in reduction relatively specialty and Newsprint, of unchanged quarter. $XX

headwinds margin our Despite cyclical actions strength solid helped lumber our business gains challenges, and the with as network, the momentum. to tissue pulp paper we mitigate which in our delivered and in businesses of pricing the

better to price reflect took most our year-to-date like stock that of quarter, also shares. add to operating I segments. underperformance performance In repurchase our results our would we of the across advantage

sheet strong value long growth gives return to opportunities shareholders balance to flexibility to Our and us fund for the term. continue the to

Let's review our pulp. market beginning segment, individual with

shipments pulp of year the hardwood down XX% X% higher significant Latin World same on accumulation, compared and Global weighed period. pulp in XX% mills X% during capacity to year-ago declined the ratio, this by they XX% but which by sales, shipments markets World at at North Shipments quarter. dropped were by the hardwood America five to were months where fell Europe chemical and the XX%, were first of shipments softwood period. to global The Western shipments XX%, softening X% but particularly to China, mill respectively. by pulp rose reflecting America. in X%, to ran softwood our inventory producer

Our end. average in by shipments declined XX%, grades leading quarter realized at increase transaction price was an goods and inventory down finished across to all

margin same away-from-home in compared of improvement quarter, of production U.S. outages offset higher at-home sales. than While EBITDA a sales due operating by it and grew including by efficiency, this in was X.X%, to XX%. period to moderately X.X% to through by interruptions Converted an the June increased shipments were X.X% year. consumption scheduled X.X% better strong contributing product more last Total tissue

the increases quarter away-from-home this segment product sales a Our and with prices revenue positive productivity gains converted a Combined Calhoun as products. EBITDA. tissue positive in trend at facility, again generated our volumes was maintained we marginally up for with

a reflects in to compared the seasonally of basis are momentum. units, lower in We XXXX adjusted will that were confident significant first half year the X% continue have which some startup, in and address the longer and X% gain starts single-family business progress to decrease a the averaging of X% made homes. to multi-family home U.S. from decrease challenges Housing we in the the on X,XXX,XXX

board condition quarter by of more the Weaker to lumber thousand falling market the compared of XXXX. down pulled since feet and prices QX than to $XXX cyclical first same per $XX throughout quarter XXXX,

the were due and increase other first to availability compared U.S. a improved On railcar hand, modest quarter. shipments our in the consumption lumber higher to

for exceeding QX, the to production more As reduced in temporarily previously normal first our we feet year. million lumber end. in by half we total sales of disclosed, of curtailed a board production lumber in the XX approximately the inventory levels quarter quarter With

of compared the by first in easing in continued inventory from first period XX% X% destocking, the June, last through by period same X XXXX. same shipment-to-capacity XX% commercial to reflecting the the in May world XX%. the the pace compared North the Despite dropped while fell to through demand newsprint declined the was decline printers from of demand down part in months XXXX was The consumer in newsprint American fell year, to XX% demand compared year, North newsprint publishers half shipment-to-capacity newsprint ago X%. XX% American to period. Global for ratio ratio of and demand year

fell average this per export metric ton pricing overall in drop to quarter sales. more significant $XXX Our with realized a

by goods we and temporary export short an with During of inventory maintenance quarter, inventory we steps slowdown the shipments, end. levels closer Combined reduce the newsprint downtime, undertook with our to advancing at outages. quarter to in trend finished reduced increase our production

a XX% margin Despite the decline, solid demand in we EBITDA delivered December. continuous structural

of the period. in have that North compete to papers first compared confident we demand mechanical these to American and are right conditions half year XX% for uncoated margin. defend ago assets XXXX We the the manufactured in

Compared in to ratio demand the the for for decreased some inventory decline grades papers to supercalendered dropped to half a destocking led standard XX% consumption of X%. demand grades, for and mechanical XXXX, from first uncoated XX%. consumer while XX% all Lower shipment-to-capacity

the first in pricing realized the price per the remained quarter. to quarter, North compared same the remained compared Despite in in to last decreasing quarter transaction quarter, this short-term as demand year. the by sales accelerated $XX volume decline Even drop our American X% higher second the unchanged, relatively average our

solid generate EBITDA I will our with papers a As have continue result, conclude before I segment discuss XX% a performance our Remi financial outlook. our to margin. specialty now

Remi Lalonde

in Yves. previous share, Today, $X.XX Thank everyone. second the nonoperating quarter share quarter or Special $X.XX of quarter, $XX special income of pension second or items. This last special we excluding the include $XX per and per the $XX the Good to net income year. in $XX reported OPEB same morning, items million of million in you, per share excluding or million compares net $X.XX in items and credits period million.

million were as million, down second million $XX quarter pricing with Our to by Overall, across shipments sales, lower of the first quarter. wood market segments quarter from $XX than exception down more the volumes for total the $XXX higher by favorable all reduction products market the to sales pulp were in almost the lower volumes. pulp newsprint for previous tissue. in due in our compensated segment of and compared The accounts

by and ton fiber ton, operating all-in transaction shipments. lower metric and first $XX removing per offset to the lower cash energy foreign in after costs. were volume cost improved price by million better cost recovered to decline energy But the not quarter, reduction and prices $XX Compared drop per and of impact costs due costs, and market the to the exchange, largely the paper productivity in performance. these average pulp Manufacturing improved a lower decreased in reflecting metric $XXX enough to $XX seasonally

weaker continued short decreased per tissue EBITDA a owing quarter, ton, $X result, segment wood $XXX gains X,XXX products' lower million feet compared growth, cash ton, costs in EBITDA sales XX% stable higher marginally quarter, to a productivity pricing. previous metric due shipments, cost quarter million to in a As was Despite million quarter. per in decreased fell the to maintenance to and improvement positive by Combined $XXX our and the compared EBITDA $XXX with reflecting margin. of per costs. the Cash $XX board this first $X to to

Newsprint by maintenance largely metric $XX EBITDA planned, per metric energy higher per million at expenses, $XX metric $XX decreasing per lower or costs. as by ton. this ton, Pricing, the quarter ton $XXX relatively cash quarter cost declined however, for mostly remained were offset to unchanged

$XX The the to improved U.S. ton cash by cost wood even as cost in in specialty per $XXX, papers

high. lower and sales EBITDA margin total relatively maintenance $XX XX%. to improved remained ended and liquidity at with $XXX million with for Lower unchanged million. or million expense per We energy The strong at quarter $XXX EBITDA $XX the compensated remained Southeast ton. cash, a of short

in generated Net the reflects market and the quarter, pulp and the finished lumber $XX as million at X.Xx. lower increase in second capital than $XX half reduction million in expenditures from spent we goods of the quarter. newsprint This in the cash million very the inventory in of We $XX inventory. in log first the more operations, year. EBITDA inventory debt-to-EBITDA seasonal first remained drop low offset In

approximately the for We full $XXX than slightly expect million invest year, $XXX previous of our estimate million. to lower

XXXX at the phase to of costs improve and of as our as organic CapEx at project Our productivity investments Saint-Felicien expansion next includes a number well sawmills.

in we to on due have we lumber the sheet. the quarter, For million paid softwood now and $XXX $XX recorded deposits, balance million

of and bank advantage liquidity a and years, source position further term. the of another market providing facility credit quarter, our with long balance the During attractive strong us to our financial sheet for ABL our strengthening took conditions we X competitive renew for

to capital shares shareholders we shares. X% stock price our the under our million recent outstanding X.X total date buyback $XX remains program. repurchase of of with million XXXX, existing $XX to million the also the Given share in of representing approximately underperformance, returned There

the we an adjusted million Finally, in $X OPEB quarter payments expense of to pension made in $X included million $XX plans and EBITDA. contributed million of with

in million in associated of to XXXX an expect EBITDA. to million $XXX adjusted OPEB We payments and make $XX $XX contribution pension million with of of expense continue

back will turn I concluding it for remarks. to Yves now

Yves Laflamme

Thank you, Remi.

affect most our of market to the the third to our continue We results expect in quarter. recent segments business trends of

term, softer to are conditions We continue to demand. industry higher. in Shipments, given in our profitability and pricing global the pulp, impacting third market quarter. will short remain high pressures however, believe inventories the weak, expected be expected further are For

remains the fundamentals that with additions pulp the We over market unchanged. demand supply Our dynamics believe favorable market medium and view growing super limited of term.

lost pulp quarter scheduled at quarter. outage led Thunder extended outage and of in our earnings metric the tons first Calhoun our mentioned Bay call XX,XXX to We second in annual at production facility

approximately third will the in outages quarter tons. scheduled that by impact production metric pulp X,XXX expect We

focus Our and on with we gains. productivity growth tissue segment remains further continue realized to improvements key the date build to as sales a encouraging

in as soft. are short For our lumber, outlook term cautious in we the demand remains

While we for the in results growth are second outlook lumber for paper is markets. prospects expected year. in our grades to of measures believe half including the Pricing affect our in India protectionist headwind more continue near-term uncertain, to the

declining. demand manage goods the finished to will We our structural carefully have inventory offset ongoing

platform, well operating diversified assets, financial and pursue competitive opportunity us in growth our trends current to the weather headwind Our and position to businesses.

Silvana Travaglini

will This concludes questions. Operator, the open we presentation. our for now formal call

Operator

[Operator Instructions].

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

Hamir Patel

was today? markets. wondering you I to your expand Yves, What's the where near-term in inventories channel if lumber outlook are as your sense for could cautious on

Yves Laflamme

inventory is a the going also And the in of in and did, the sawmills as been channels. this a our down The the emptying very stable. pretty to pretty market. and We time think there channel is it stable, kind more to shutdown we customers morning, temporary from curtailments like and but saw I you well. the has demand did going lot as competitor certainly takes some of high, with not see, can the

going it's see while be not than it. to that impact to high. take be I that's a we that channel sure confident make little probably that I'm that of quarter But going But going is the to a And forward, balanced. going see to

As as even we're as I as pretty what inventory, lately, so... said, shape did far not us, we bad

Hamir Patel

And yet? for lumber announced have any curtailments you QX

Yves Laflamme

but or that yet, have reduce shifts, say. would down of still mills I a Not we still couple are

certainly volume, on going to is have in which is we sawmill. third So be its which the some already mostly that's way quarter, done now, right

Hamir Patel

enough. Fair Okay.

Yves Laflamme

know, the two there is length. as a between random difference you with significant So

and mills what So to we're random-length random have lengths. running trying this we now, we're the more focus to fiber using maybe run is doing our

Hamir Patel

turning then segment. newsprint And quarter. just Right. Analyst per realizations quarter were down to about It looks like the $XX your ton over

suggest reading a falling been than more I've are everything lot prices that. For export

Yves Laflamme

Yes.

Hamir Patel

should that's lag how about show think drop-off going into just So it about should price QX? in How to Is mix? the your given and we a think sequential up we pricing QX?

Yves Laflamme

on for said, we're market. I going third we India sure more I think, the feel effect as impact on the I the on mills, Well, on talk certainly have this to the did as have, to quarter about certain going quarter. tariff, Certainly, pressure a no the that's shipments. there's

to overseas maintenance a and doing lot it part more going competitors, going our what And well. be we're or as of it's so means that

inventory as far, we a our So that the at far done U.S., situation. depends I pretty the And as with it to as think manage least, the inventories. job gap a on as company, we've so said, good

So we're going needed. to keep as doing so that

Hamir Patel

Thanks. That's I great. I'll Okay, it turn all over. had.

Yves Laflamme

Thank you.

Operator

Instructions]. [Operator

Your of comes line next Securities. from TD question from Sean the Steuart

Sean Steuart

questions. Two

with respect give us business of a all, can sense what now? right of offshore of First you to to your would India, go India percent

Yves Laflamme

newsprint we buyer will would us, going our say, what for to India, it's And about would Yes, I products sales. of know, we're the would customers and just say, export significant for exports about so. not exporting about, newsprint the a I of XX% as of I say industry, India, our percentage of you

Sean Steuart

Yves, North of pressure at customers the you have more you being destocking Is Do this newsprint buyer front? And inventory. point? on with the are lean American their referenced to some a sense go to the year-to-date of there market, it. Got inventories respect volume how destocking

Yves Laflamme

No, the can the see down the talking decrease forward and decrease. we don't beginning going going we the as we're know saw XX% we that expect month year far numbers for of at last the for it's now sure. that, as I that significantly But about that

So we year. can that the is We're about talking XX%. gap compared to this, last see closing

overall, talking XX%. year, probably we're about Now this

we the so... today, XX% I'm probably is and you where feeling more, the the of there beginning it is if the down, So are that going year, means just inventory X% that take definitely at

Sean Steuart

sense priorities capital have more on but for given priorities buyback, Understood. maybe the thoughts for you position, shaping us a broader bit robust Last can is I And capital a CapEx your give XXXX allocation? on your question, Remi, budget thoughts you know of any liquidity broader how allocation on up? your

Remi Lalonde

trend, CapEx. for So the we've tended to Sean, $XXX million million in range to $XXX

million to for special next is any year absent $XXX a projects, number. So pretty good using $XXX million

As far as back some couple the we last far as goes. in bought priorities going allocation obviously, forward, months, of as capital shares

million that's there. of forward. in debt to that continue to amount can we've shareholders terms $XX know, And the you that of it's that And So something earlier EBITDA. review projects we we've going then also generate this returned year, as our most reduced

in going lumber that that the things Clearly, and of that a the setting we're on we to do to we're the or year. quite prices us look some various in pulp some market now flexibility the are so. low, some have bit year last yes, look So at could our up priorities And opportunities. owing into done for for to a for work prices next we've open where balance sheet of opportunities

Operator

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

Silvana Travaglini

Yes.

today. So this concludes call conference everyone, our joining. Thank for you,

Operator

call. concludes today's conference this And

disconnect. now may You

Resolute Forest Products (RFP) 4 Aug 192019 Q2 Earnings call transcript