RFP - Earnings call transcript Q1 2022 | Resolute Forest Products Inc

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Operator

Good morning. And thank you for standing by. Welcome to Resolute 's First-Quarter Earnings Call.

Following today's conference, there will be a question-and-answer session. [Operator instructions]. the Investor to Relations. turn and Limoges, now President Vice will call Marianne over Treasurer I Please ahead. go

Marianne Limoges

Good morning. Chief Welcome Chief we'll Sylvain hear to Bulkier, Financial results first-quarter Remi Girard Lalonde, earnings Officer. G. President President and Vice Executive and from Officer, and call. Today,

the on presentations section You follow download and financial include you under Investor Relations logging webcast our will the webcast website. using can today's presentation slides page Today's can the for the of non-U.S. And with information. by along presentation to slides. link into the GAAP

the Our to press release slides and include financial GAAP reconciliation the information appendix non-GAAP to of measures. a U.S.

also forward-looking make will We statements.

business conditions our press assumptions, the over information and of to for Remi. of in expectations, risks based do. cautionary I and statements on all call and of today's and turn and change can Please presentation. our Forward-looking will uncertainties, is review as current two Slide beliefs, which release number on the the

Remi G. Lalonde

and minus in segment, for Thank products $XXX in million adjusted most has transportation And million by us which down us lock reported the you significant XX% engineered up our momentum of based, particularly with reported the quarter integration paper, namely, wood EBITDA the improved We regional sustainable favorable our $X allows we the million lumber we downstream in higher QX. the facility, where in lower operations, By to results sawmill, acquisitions center biomass significant other Today to by the adjusted $XX with improvements $XXX partnership, green compared products value sales than the levels. strong million to $X, strengthened for two enhance million XX and the economic co-generation in tissue products wood of for and where and the of $XX. Unfortunately, over operate. million, liquidity pulp in use is have region. reflect our in further further well Quebec led thank up to joining billion, activity cash This competitiveness allowing production first our which business $X maximize our of us. slower million the With is each up The by communities our Marianne. of we in from expected. over balance pricing by $XXX to feet wood in sheet you competitiveness $XXX $X board of flexibility power, generate $XX Abitibi and inventory of sheet tuck-in market drive the and segment, EBITDA balance we and generate we generation million volume in for to paper. in Good to adjacent shareholders long-term of of network in capacity segments, our morning. our quarter were and especially wood true

with Let's wood our businesses, starting talk individual products. about

the previous the reached volatile quarter, on prices the Benchmark by annual but from transportation been quarter. has adjusted up $X.X First seasonally million during basis, starts X% lumber and U.S. network strong were sluggish. a housing quarter,

inventory finished we feet million the capacity. board million board rail were The rose added roughly transaction previous increase I-Joist feet $XX Quebec which board limited feet up thousand availability, $XXX board $XXX feet price average due per pushed shipments new goods the to and XX% to the $XX by particularly or in with Production in million. truck equivalent car lower feet, quarter. board million an $XXXX $XX million of Our to $XX by from improved quarter. And

with a second to work normalize the inventory second half we and year, in network improvement in to expect in ongoing to challenges levels significant to starting continue shipments transportation over We hard quarter. gradually adapt of the the the

While underlying X%, by could rose margins. rising which X%, and pricing of mindful X%. softwood interest fundamentals hardwood for Global pressure and down and are with for demand by remain rates February we pulp affect by through inflationary up positive, demand materials building for chemical

- Chinese While has North and date, resilient. have demand been American markets been softer year-t European

Calhoun and Our average $X logistics reflects per metric by capacity increased transaction price metric curtailment constraints. shipments which the tons ton, were XX,XXX our lower, significant at and

our result, metric rose tons. goods a As XX,XXX inventory by finished

available trend of a challenges, the price the the in the positive see our we maintenance improvement margins result Accordingly, widen, offset marked will is of of based geopolitical price to significant the publicly unplanned global environment, but expect This quarter in coming downtime. the industry We expect to some second impact quarter. accumulation on logistics timing announcements. and their of

gradually below We well year X%, expect inventory second to levels demand demand. U.S. the levels elevated increase in the over away-from-home course but at-home reduce a by with modest X% segment pre and in to quarter. grew the still by March tissue starting of the -pandemic Through improved volume

transaction price ton, $XX in increased product X,XXX due rose and better the shipments or average Our short X% per mix by by tons. to short quarter

quarter X%. in pulp gains transaction to average great shipments expect by increased American price North slipped mainly offset We rising paper but and for costs in QX, mechanical to the by to substitution, X% newsprint remain uncoated demand second incremental similar. due

metric to ton, transaction due $XX quarter per rose conditions in market or grades. average favorable the X% price Our by in for paper all

by performance. expect offset at elevated of goods logistics limited Our higher at capacity curtailments shipments quarter. are truck I tons largely in availability. constraints, to maintenance the Calhoun. and result a as railcar pricing macroeconomic the financial supply, planned the by will Sylvain inventory XX,XXX fell to reflecting remained Paper higher tons, ask Finished metric please discuss now prices our strong limited partly XX,XXX be to metric and we but due conditions environment,

Sylvain Girard

Calhoun $XX prices, to by including million. of quarter, operating in X%, occurred sales our first the operations early which paper offset negative results A by of or the reduced quarter the feet, share excluding costs previous special excluding manufacturing log X%. Thank idling by of the for idling and million you, seasonal of result in costs, of the to We Calhoun and improved impact million spring to fees for loss quarter, mostly cost from indefinite a first mill, the included in quarter. in per the cash fell segment this metric The $XX million paper the by closure rose segment the in to and on generated We mill the delivered in a and net favorable per Compared in including Compared million per operations the delivered $XX items and by $XXX million of items. our impact pulp by as indefinite net reported partnership curtailment or XXXX despite million thousand per million to products We include XX%, for partly pension short $X.XX to I-Joist EBITDA of of in for cash all breakup. curtailment a $X freight pulp Resolute exchange. or $X segment the $XX logs other activities $X of volume, million. of on reflecting Calhoun EBITDA by income million. income mill. $XX higher segment dollars special improved by idling pulp expectations driven after $X.XX as the due result for same previous benefits with equity the per Paper's as at special in mostly the at pulp already design a segments, foreign costs, $XX in ton, following items Calhoun Remi. fourth in share, higher $XXX the this costs costs to of a a segment, at $XX a the offset million the ton, the and compares this quarter LP from to rose by by saying $XX quarter interest ahead the the $X in quarter first $X due XX% higher $XXX up a a delivered board $XXX of year. million higher our $XX $XXX X%, the million or capacity realized net were direct pulp million expenses. or million. for partially the an $X.XX the last income, the logistic compared costs, $XXX the prices per due $XXX reflecting paper this our excluding Calhoun $XX million. This income connection constraints costs. mainly million market lower $XXX Mainly share to post-retirement increased quarter, removing and operations. higher by of wood million quarter, improved costs other period charges and million floater-related of buildup $XX Calhoun acquisition, to non-operating the In operating $X stumpage increase Special lower in to tissue fourth million all-in quarter gain pulp by million $X Calhoun, items ton, in and mill. per indefinite to from costs integration and of decreased Total segment inventory of in delivered overall the million decreased I'm logistic mainly and metric EBITDA or shipments constraints,

adjustments. inventory In second And for $XX and normalize million $XXX $XX for We the of million capital expect completed expenditures our million year. I-Joist the first the quarter. inventory down in to of the of partnership come levels made the the cash for half March, we finished and target in log to We second acquisition the maintain acquired during gradually working capital goods year. net quarter during

outlook, $XXX pension, of in on billion. announced fell bringing cash leverage leverage. balance April softwood and On $XX in ratio million which stable deposits upgrade rating improved result assets credit made a DX our a to $X.X also strong the a from sheet. quarter, our lumber over generation million liquidity to is was the X, total million quarter-end only at Moody's in debt the and other zero quarter, net our DAX deposits performance financial with with in our flow excluding approaching recorded The duty $XXX We as the to

Considering down year the forma Finally, to [Indiscernible] March deficit $X we increase $XXX made plans million pension contributed XX, if have significant on in $X and to accounting billion were since been end of million. in the the the end, OPEB $XX would from year quarter payments the pro million XX.

other to market hand, funding performance. million QX increased deficit to the the due $XXX On

rules. will We the in U.S. only formal position GAAP year-end with accounting accordance conduct of at a revaluation

Remi G. Lalonde

you. Alright. Thank Sylvain.

current recent our products our wood our productivity focused our U.S. wood our mills, end, objective their overall to on and with strategic priorities pulp disciplined strategic and saw projects improvements performance. ensuring investing further in on Our businesses enhance in in products for Quebec, are company and growing assets To asset the remains integrating driving continuing acquisitions execution. and capital our in in that

we productivity, and capacity pulp, and operational organically. to are For grow driving investing efficiency strategically

quarter indefinite strategic idling pulp we and indicated the of for business. at Calhoun, operations paper tissue Following would options we the review last that

of will days, we explore part bargaining employees. we recently As a leaders In union process divestiture launched to sales paper coming Canadian many pulp with this start of options. and our main-table representing exercise, the

goal company of Our to choice, dialogue. union an and is to Building levels. forward continued shared XXXX Resolute partners GHG we vibrant closing, successful to our In and absolute contributing by instrumental a on communities. confirm our XX% sure that look emissions of our employer as in pleased a progress open, critical We target, them is making collaborative XX% their cutting have constructive, surpassed to contribution and a I'm success. been company remains reduction our

Marianne Limoges

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

Operator

Instructions]. [Operator you. Thank

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

Hamir Patel

of there's that to heights Remi, upside array legacy months. and may hit newsprint morning. business Good you the realizations? contract have or in do recent eventually unprecedented Will paper limit prices been domestic that paper your entire a long-term some

Remi G. Lalonde

you Hamir, -- do. but win-win always to customers, contracts would limit We're with tell get are upside many that that I too I long-term there mean, deals are not No. the we trying would our we

we see expect you and this continue. pricing quarter, to have As could realized significant in a that improvement in

So many there. contracts that limit upside would long-term there our aren't

Hamir Patel

alternatives just you to tissue you process, when Okay. that's the strategic to And helpful. do that Great, process conclude? expect sense would a thanks Remi, as have on

Remi G. Lalonde

No, mean, not yet I Hamir. it. launched we've

take to through, through. need quite let its and to course, we but it it'll follow and report it work as And yet don't so the see I anything have sure of long process to I'm we'll how yet, not

Hamir Patel

I all That's I'll Fair it Okay. Thanks. had. enough. turn over.

Operator

Your next ) the Computech(ph ahead. of line Securities. Kaseya from go TD question comes of Please

Tasha Lynch

morning, Tasha [Indiscernible] It's Sean. for Good everyone. Hi.

inflation. cost from is question First

Remi G. Lalonde

Tasha. morning. Hi, Good

Tasha Lynch

Hey, good morning.

that quarter talk the relative guys you about quarter? and able what to trended how inflation just into knew expecting You been to heading were this

Remi G. Lalonde

Yes. absolutely. No,

were uptick we of happened just for all as lumber log higher on gas in what million, a is result, go up as in constraints of indicated, slight been that prices. in prices, by energy really result costs increase We're So prices. prices. as $XX was which a expecting talking function prices from freight And a a about, of energy saw logistics we've higher And stompage we in freight reduction an came a the for as we come total and fees to last a costs actually costs also lumber expecting also and of to in basis what slight natural increase quarter up. fiber the

we get And on compensation. of idling and paper SG&A the the side, benefit and power pulp mark-to-market result we recorded Calhoun generation last equity-based of favorable better saw indefinite a in a the operations for there. the removing of quarter did some the lower a of On bit as we because

the key items. that's So

we what expect function a ahead, be quarter stumpage we -- of terms lumber of the will fees prices. In in

we We expecting constraints. uptick logistics maintenance some normal high facing elevated we that season. around And costs freight as are spring just because expect will remain an have we still a challenges into head maintenance costs inventory in

Tasha Lynch

And in [Indiscernible] point, last very well. the you can just of That's maintenance? that any provide guidance terms for on

Remi G. Lalonde

plus quarter-over-quarter. $XX paper and would million for I be looking pulp In

Tasha Lynch

gradually year. [Indiscernible] in then me. you maybe And platform on the lot and spoke elevated? XXX pardon is over inventories Great. course running about inventories logistics of constraints quarter gas How to in take to constraints related I historically sales a normalize that million If lumber. finished you I your goods, expect as referenced the Is shipping Okay. feet Did any you and forest think now? -- you this

Remi G. Lalonde

Yeah.

Tasha Lynch

that. On

Remi G. Lalonde

Tasha. question That's a good

So for us in the excess logistics constraints are inventory. reflected

And talked so costs production We last interruptions a $X we quarter. have, on from did about as any not $XX the finished result. as have million we sheet we of freight higher here goods balance And of million. significant had

building So we're inventory. really

think high. at was EBITDA of would what about XXX we way of that the really XXXX. denied. about is for opposed double business I So characterize it as it And as lumber is deferred board million fee to call very It's inventory end this it the the

let's say, XXX So to feet, million we'd is it, million on like board to XXX XXX keep so the high side.

all a take in a Actually, get board modest the in increase bit in here we second the with of of lumber half to going it's XXX little starting but a So in time before we shipments that increase distributed, work the over significant shipments, year, of about business, to million expect the expect down can we second-quarter. feet. the it

Tasha Lynch

your how guys [Indiscernible] $XXX strategic if do you one [Indiscernible] from in aside, figure this where at most And of but at still That's M&A good [Indiscernible] order? for just detail, buyback pecking very year returns speaking, look last much. [Indiscernible] recall me, I you already, have the remaining correctly? million roughly strategic authorization, does just thanks And

Remi G. Lalonde

I mean, a used. we M&A that tool is

competitive And position so partner the if lumber bought tactically of in acquired region facility business to first in the at improve business. look the quarter, out co-generation say and a you the I-Joist Abitibi our we we our in

mills We also from three U.S. ago. Conifex the did saw buy two years

about your pretty year, your M&A slightly why our our that think rather cost terms in investments it we and way to make realize highest of return it, full significant projects valuations return looking to including it are we last And expectations only that growing business look that value-added inward this We projects excited Tasha, really some in of is and acquisitions. we're expect return forces us. always we've about. make in pipeline opportunities is them us capital, we has than with own better sense fairly capital announced million where of got to assets than to a the of about are investing projects. But for summer. $XXX So at that organically. the of But synergistic a are M&A the high Which lumber those still think to

approach So allocation. balanced capital a we to want to take

things we're about when pretty to cash You net at history very and on, good some around position, which for active look close strong the reduction talked the buybacks, which picture thing. you the cash been getting we're a of companies also quarter. But had a we've generation of the too. And is in pretty having that that doing the share is company debt the we big

Tasha Lynch

I it appreciate I'll turn all Great. really the detail. over.

Remi G. Lalonde

Tasha. Thanks

Operator

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

Matt McKellar

Alright. on Thanks Paul for Good morning. for This is taking Matt my Quinn. McKellar questions.

Remi G. Lalonde

Matt. Hi

Matt McKellar

here constraints near First evolve to how the the thoughts expect to on and pricing mentioned. you logistics limited would given you paper get pricing sustainability of your the and supply and over medium-term

Remi G. Lalonde

that we to a prices you in indicated, are, be of strong. Well, as that. and factors continue think number will There strong are paper involved

increased our in generation flow paper have five years. free the We next business from cash expectations the the around

today's on to is We're be the certainly not impacted by paper we of and Just challenging. Paper paper environment, especially can XXXX in obviously bring tight capacity, and planning think XXXX. capacity additional basis how bringing in are, conditions additional capacity. very

secular runway by around labor, challenges still the the remain. there's inflation If remains availability you flow cash encouraged few from business for that next But we're that the years potential next for free our of think couple very we healthy decline online, years. and a will chemicals, trend costs of capacity and think additional bringing the about of logistics, lot energy, around the cost the of so

Matt McKellar

thinking [Indiscernible] the really business? you business, wood any how about next, you're Great. Any contribution your the there have wondering growth now, following including products outlook acquisition, refreshed and thinking for Thanks engineered if very forward? partners Maybe interest, XX% much. your just whether in you're going about helpful. It's

Remi G. Lalonde

business of tell million EBITDA in the first $XX can I generated the that Well, you quarter.

I-Joist we're So bringing in excited about business you the the will. family, pretty if

it before. know, equity pickup you was As an

is we're So time the the that first EBITDA. this including

for the the fundamentals of underlying think I-Joist I key that really business forecasts. off materials building

benefit so favorable is if that longer-building future, the to in think it's that are the decade, good lumber driving that the million market, underlying for us demographics about last $XX the of feet we integrate think to in-house. are you capacity a be. lumber The the historical board trends additional And Resolute to downstream demand it allows the place in

So about we're pretty excited the business.

Matt McKellar

much. turn from I'll Thanks very Okay. yo., That's all back. it

Remi G. Lalonde

Okay. Thanks, Matt.

Operator

And questions there you. further I time. turn at this are Limoges, call Madame back over no the to

Marianne Limoges

wish you. We day. you, Thank everyone, for us today. you Thank joining great

Remi G. Lalonde

Thanks.

Operator

That today's call. conference concludes

now may You lines. disconnect your

Resolute Forest Products (RFP) 5 May 222022 Q1 Earnings call transcript