RFP - Earnings call transcript Q3 2019 | Resolute Forest Products Inc

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Operator

Good morning, everyone. Welcome to the Resolute Forest Products' Third Quarter 2019 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the presentation we will conduct a question-and-answer session. [Operator Instructions] Please note, that this call is being recorded today October 31, 2019 at 9:00 AM Eastern Time.

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

Silvana Travaglini

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

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

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

statements. make also forward-looking will We

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

to I will now turn over the Yves. call

Yves Laflamme

you market for we reported we third The lower but most million $XX morning. of EBITDA pressures reported than pricing quarter, the in $XX our Good second the reflects adjusted of joining mainly decline in quarter. for Thank pulp. across million million $XX Today, principally segments us.

this freight and While were expense, outages these decrease an more outweighed of usage. costs our favourable increase chemical by from quarter results in benefited lower maintenance plant items a in and share-based compensation the impact

EBITDA specialty $XX million $X million, with we down million to the wood of was of adjusted positively in in of and as papers, lumber the to build contributed we million product newsprint were the reduction tissue, quarter, down business $XX $XX pulp, from reserve, for segment, previous down a million million million million $X second quarter. $XX $X $XX $X reported from QX. quarter, million, reserves those gains tissue consistent market on while Our negative previous By largely quarterly of at

$XXX we've week, rate than senior million any situation This additional for pledging Leveraging upsize credit earlier facility. and our extended of competitive this renewal in at secured additional our more and strong very without financial million an liquidity increased and us total, collateral. $XXX gives

another is the of flexibility transformation initiatives. execution strategic our our enhance in to financial This further tool

As has sheet of for to steps the third our well peers, our execute several reported a position strengthen we this challenging us balance by on The been taken this current industry. to continue downturn. quarter cyclical strategy have despite our to proactive

shipment of in with our individual eight first pulp. the were The demand. World months led were Chinese compared higher softwood softwood softwood mills in [indiscernible] elevated. capacity to XX% market the ago pulp third year remain the pulp were that XX% shipments the at Let's growth by the to X% It's ran segments shipments quarter was hardwood same down period. at in important review beginning to year global while mills hardwood while ratio, as note X% rebound of and hardwood period, producers

ton, pricing. our pulp the average $XXX XXXX. price lowest transaction The to in markets metric weighed weakness since global of dropped realized per on ongoing beginning ever the heavily The

stable relatively to shipments particularly quarter, we our finished down as to compared production With normal softwood goods for the rose pulp, this more quarter, work levels. previous inventory

sales an product sales. at-home in by same grew Converted consumption tissue by away-from-home year. US increased last X% August and shipment improvement Total X.X% in of X% the to including through period compared X%

machine the Calhoun and Our issue tissue behind improve tissue business is the productivity with that With performance gains. continues it can us, our demonstrating now of most meet to expectations. technical pricing

product transaction mix and products. pricing quality price favorable to optimization We portfolio customer increasing with for on continue average focus better better and with our away-from-home

our customer operations is optimize better margins. of [indiscernible] converting improve to and to the Our sales to reduce generate priority portfolio

on reflects lower same X% X% unit were months which US in the multifamily in starts. X,XXX,XXX decrease a to of period compared adjusted a the averaging first in basis a starts the XXXX, seasonally decrease in starts nine in year the Housing family X% and single

While to was price compared X,XXX quarter. per our benchmark slipped QX, mix average transaction sales board feet unfavorable to $X up pricing this due

of Given to quarter in inventory in year-to-date. feet million manage demand, ongoing over normalized finished at production our board the we level million and weakness board XXX nearly for continue maintain goods XX taking by time feet down

Our sales volume accordingly. fell

first the to X%. from American North Demand same demand commercial the compared in printers demand publishers XX% fell from XXXX newspaper by fell XXXX. newsprint period nine XX% of while declined in months by

of pace XX%. quarter, slower by third dropped ratio the year demand shipment was down from the was Global XX% through same newsprint XX%. capacity American ratio with shipments to compared in decline demand North last from period and also the the demand the August Even to newsprint world to to capacity –

realized the ongoing pricing average export downtime decrease temporary take continue dropped X% levels. a our goods Due sales. to finished overall to we Our softness, inventory with normalized more the in maintain this at to quarter significant

result almost a the quarter the coming to by all As degrees compared from shipments XX% previous offshore with over fell sales.

a quarter. Our EBITDA new margin newsprint this segment X% generated

grades Whole demand X papers percent. XXXX and costumer contracted demand super to months led market a [indiscernible] decline in uncoated XX% nine by mechanical grades percent and for in of standard first for compared for with American dropped year while ago other destocking grade demand a North the XX period. switchings by

shipment Compared XX%. mechanical to for capacity papers XXXX to from the decreased first of all the XX% ratio uncoated months to nine

Our EBITDA XX by average transaction quarter. relatively this $XX short ton per to sales was last while declined compared percent unchanged. quarter remained price margin volume

will with before conclude our our I I performance discuss financial have outlook. now Remi

Remi Lalonde

last $XX income Today share morning $XX quarter period same the per a in compares per million in $X.XX or in we quarter the or everyone. to previous million $X.XX Thank Good or year. and third net special million you, share This excluding loss reported of items. items Yves. excluding special of the share $XX $X.XX per net

$XX million litigation other credits $XX a in million recorded third operating mainly charge items in reflect non Special the expense. and and quarter pension OPEB of

total sales million in third down were quarter. Our million second $XXX the $XX from by quarter the

significant all except metric issue, for the impact in across pulp most the per While pricing pricing. market $XXX segments lower ton drop was was

metric higher pricing. offset lower was inventory build were QX ton more sales pulp drop took reflecting shipments to market by levels. as Overall reduced reduce unchanged and production volume lumber volumes the in market pulp to paper as steps we from normal

reflecting the seasonal in by removing costs a maintenance million volume increase in impact usage. the outages after Manufacturing increased exchange the planned foreign quarter in largely $XX and chemical of in more quarter

higher metric quarter the additional cash attributable second mills. delivered volume. pulps at Compared increased to ton by is largely added sales costs This mainly outages scheduled all-in despite to incurred costs $XX maintenance to the pulp $XXX market per two during

price costs to than higher negative by transaction tissue cost Delivered increase to was price EBITDA increased slight Combined million. offset with reduction the the EBITDA in $X by the $XX $X average per more cash a but in in decreased million. to in leading short average transaction ton improvement

Delivered shipment. in cash improved to to that per feet wood cost realized offset and the segment but board $XXX thousand decrease pricing was the products in not enough

for slightly to result, EBITDA quarter. the million decreased a $X As

chemical increased costs usage. driven per per EBITDA $XXX per or $XX delivered decreased Newsprint unfavourable lower by $XX to and metric $XX volumes by for cash metric of pricing ton. metric the to ton decline million Combined ton with a quarter $XX

per by maintenance $XX $XXX attributable declined in per The $XX downtime Together short $XX ton higher million with short to cost with lower associated at cogeneration to specialty increased to primarily or mostly realized delivered one papers a EBITDA decrease and planned in mill. cash contribution pricing, ton.

largely million. Even ended third We at XX In quarter we in and the with the of liquidity the profitability this reflecting of with second from for quarter's $XX decline million quarter million net generated to of EBITDA debt the cash last EBITA. X.X in lower than cash million $XX operations, significant less adjusted $XX remained low times. $XXX months available quarter

capital in to million. the our the of first nine lower in approximately we million largely in $XXX previous invest expect year million $XX estimate months spent the year our pace than line of $XXX full of so far, We with for spending expenditures

in paid we have duty $XX sheet. quarter deposits lumber For the million $XXX softwood the we balance million reported on now and

with returned There X.X $XX of our existing of in XXXX remains share capital buyback far So of shareholders shares total repurchase our shares. the X% under we've outstanding $XX representing million to million million program. the

of Earlier farm facility loan of by of the to to this drawing. credit years competitive maturities this $XXX week up million. delayed entered a is we on term for up terms. into announced XXXX. the period The of million facility XX and to secured boosts $XXX extension $XXX a and draw from a up replacing $XXX pledging the over revolver years available XX% term facility date upsize available at the liquidity our loan additional the and of in and any of of agreement facility to The million six million favourable million includes to rates increase our senior of choice facility six-year collateral amended up credit to Without $XXX September X million a $XXX very existing with

of C$XX In the The process. connection and outcome with depend an of of to consideration any million decision Quebec the October, Fibrek. from appeal acquisition timing Superior related in we paid payment XXXX on our unfavourable Court additional the will

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

pension of and in concluding will to to remarks. million $XX adjusted continue contributions We million I an Yves EBITDA. million turn XXXX $XXX in of expense with payments to expect associated it of back $XX OPEB for make now

Yves Laflamme

Remi. you, Thank

market segments in weak business quarter. of expect of affect to most We to the conditions continue profitability fourth our

X,XXX arrays pulp about third For conditions, see in metric production took market industrial pulp softwood We which we pulp, stronger capacity. signs tons for our of scheduled breathing outages the despite of two-thirds represents and quarter. current encouraging downtime challenging production for

approximately major in fourth production. of tons planned XX,XXX the The in represent metric will outage quarter lost [indiscernible]

expansion to the addition outage the the we organic project incremental of for second In maintenance, annual phase regular mill all lost implement tonnage. the

productivity steady few sales improvements measurable Our is tissue gains build but next focus and over the the on delivering to recent for growth quarters.

results lumber uncertain, capacity as wood Even in reported begin rationalizations somewhat believe products reduce available markets as conditions to supply. improve industry remain will the we

increasing quarter third pricing pricing the quarter, in and XXXX. in in some late the into benchmark fourth expect With we realized improvement

as operating marginal expect maximizing on pricing in margins see in all paper business. earnings paper rates we Despite we remain paper difficult for in QX, we grades to face focused improvement power are will low. sustained and Although the markets, pressures shipments seasonal

strategic network headwinds Our provide financial and edge of advantage position competitive a current market opportunities. transformation solid wither future to assets take us of and

Silvana Travaglini

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

Operator

Thank you. [Operator Instructions].

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

Hamir Patel

morning. Good

in the today to us as you channel might inventories If think the segments sense you where seeing you various you and in could your what give lumber are that be maybe into? sell for

Yves Laflamme

What a and see we the I with on and we've -- market permanent curtailments closures. stood announcement Yes. of seen lot

in with So some time capacity a might balance the be south. the U.S., little adding

the about including board as capacity our we've feet XXX of So company taken down asset mentioned million in the year. of about

like weeks consumed. analysts in business see mean between and I been a you the everything announcement So it processed by the and and said takes and while we as laws the sold and last few that is before and the

So we're the production that to starting demand now. is right more I between and the feel balance mean answer the

it that means think was might pipeline than be lower I and ago. a months that few significant So the

Hamir Patel

projects, Remi just think capital a are estimate next preliminary to CapEx. year? you yet you helpful for for for have That's question Do and about on starting you XXXX any thanks. and Great major a

Remi Lalonde

would so I a work XXX we're good this is number with a Hamir, for year Sure. use. probably number forecasting to that probably

no to mean couple maintenance. a do we the asset a for know we've we capacity of is that terms have good talked in chunk of the you some I don't add-on -- projects growth Saint- improve And at but organic point. projects Félicien expansion what and including project have this to As strategic of CapEx about major

Operator

you. Thank

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

Paul Quinn

ability your of markets difficult nothing but you're papers in new. take press future But highlight facing very that's then I guess, and newsprint specialty to I your you transformation opportunities. advantage release mean

for Just you those guys? are wondering what

Yves Laflamme

of as think that lumber I try tissue portions saying the quarters few maybe in can for skewed grow better integrated we be possible do far as quickly goal course looking of the as Well company we how as to that can we've been in tissue a and is the to well. if going well pulp maybe in and and as and to at

focus the [ph] best we and unique the have in So that's markets. paper, we've three the done declining

that's the So looking pretty we're at. much way

Paul Quinn

and you an organic from areas? three transformation main say newsprint or a more conversion something like So when or in you're it's say talking not acquisitions existing talking you're specialty you those growth containerboard,

Yves Laflamme

That's correct.

I’m went tissue, on packaging the we so towards side. as think as paper we focusing we we to company as -- on far buying went pulp as sure far keep that picked tissue I then so and the to

Paul Quinn

And then products, being just quarter-over-quarter, just guys that studs of bucks holding being on helpful. Great seven and little that's saw to just Okay wood XX reconcile kind price their two you with what are I on I'm in down fours about own bit. with up by a trying up Lakes

So all was you’re mix because it --

Yves Laflamme

that it's mix. of I have Canada when size lands talking shot Yes about course quite compared [indiscernible] think you a the our we’re Western few with Eastern to three. are Canada and all when in mix But of you lower

by makes six So more by we threes have two we have different. sometimes two and

you the that the competitive see you know and duty the when than impact much part more Canadian and as and has we're Canada other it being band we thing how -- that's and markets. US markets also is U.S. both talking with the in of we think of sometimes The what sell that discounts mix

Operator

Instructions]. [Operator

Your from Securities. Stewart T.D. Shawn next the line ahead. of go from question comes Please

Shawn Stewart

in wondering export late if in got a I morning. on major addressed offshore specific where provide more some markets. context you're been, in was some the if I'm apologize has newsprint gather on call across just the lot context could market pressure the and so Good on and you a regions. this what seeing I that's fundamentals you bit little could go those sell Thanks. a into previously. of I provide but the regions of you if

Yves Laflamme

a And percent see the definitely XX we export as in of sales. Well, lot competition about of market. said, we our it's

would a market. the way and So or to market. There that US competitive quarter what I the significant export the And we it's least so see, see say, American really market, going it. have North gap I would in between is a next the for now at on we that's really, the that say right

Shawn Stewart

in shipment objective sustaining envision going you percentage relative exposure you think mix terms you And of a longer goes that Do have forward. term markets of to? that of type to where offshore your

Yves Laflamme

that time think balanced we Well, been as down is we've paper I our said, pretty significant and now. right inventory taking

market so we're and XX% So we'll what -- going is there that forward when go. right do. can there where and saying see demand you we're to places going now is many isn't But there

to to have more have just where whole going difficult do to look we're -- going more more you're the or to it's So go market is results the the industry, to take going is you're decisions. the

Operator

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

Silvana Travaglini

Thank for you our concludes today. conference everyone This call joining.

Operator

this today's conference Thank participating. you. gentlemen concludes call. you Ladies Thank and for

You may now disconnect.

Resolute Forest Products (RFP) 1 Nov 192019 Q3 Earnings call transcript