Performance Highlights

Financial Results

(millions of Canadian dollars, except where otherwise stated)

Sales and Earnings
Sales and Earnings 399.5
Operating earnings (loss) (29.6)
Net earnings (loss) (37.4)
before specific items (21.8)
EBITDA1 12.1
before specific items2 26.7
EBITDA margin3 3.0%
before specific items 6.7%
Per Common Share Performance (in dollars)
Basic and dilusted earnings (loss) (0.17)
before specific items (0.10)
Sales (thousands of tonnes)
Specialty Printing Papers 268.5
Newsprint 81.8
Pulp 145.4
Total 495.7

 

For the three months ended March 31, 2008, we reported net loss of $37.4 million ($0.17 per common share) and net loss before specific items of $21.8 million ($0.10 per common share). First quarter results included after-tax, restructuring costs of $10.1 million, or 5 cents per share, an after-tax foreign exchange loss of $14.1 million, or 7 cents per share, on long-term debt, and $8.6 million favourable adjustment, or 4 cents per share, as a result of a reduction in provincial corporate income tax rates.
EBITDA was $12.1 million, and EBITDA before specific items was $26.7 million, compared to EBITDA of $15.1 million and EBITDA before specific items of $28.8 million in Q4, 2007. Higher transaction prices for the Company's pulp and paper products were more than offset by impact of production curtailment due to ongoing fibre shortages and higher fibre, energy and distribution costs.
The impact of price increases in most of the Company's paper products continued to gain momentum in Q1/08. However challenging conditions in the U.S. housing market led to an increased number of sawmill curtailments during the quarter in response to related weak lumber market fundamentals. This resulted in ongoing fibre shortages and therefore the Company took the following curtailment which had a negative impact on the Q1 results:
Elk Falls paper (primarily E1 newsprint machine) - production down approximately 42,500 tonnes in the quarter.
Elk Falls pulp mill for 25 days and E4 white top linerboard machine for 22 days - production down approximately 22,200 tonnes.
In February 2008, the Company announced a new labour agreement at Port Alberni which will lead to the restart of A4 machine in May and a $12 million capital upgrade on the thermo-mechanical pulp facility which will allow replacement of recycled pulp by lower cost.
During Q1, the Company announced the acquisition of Snowflake, Arizona recycled newsprint mill for cash consideration of US$161 million, before working capital adjustments. The transaction closed on April 10, 2008 and was financed through a combination of $125 million rights offering and a draw on the Company's revolving credit facility.
Market conditions for the majority of the Company's specialty printing papers grades improved in Q1, 2008.
North American newsprint demand continued to decline. However, recent American mill closures led to successful implementation of three consecutive price increases during Q1, 2008.
Positive price momentum per NBSK pulp continued into Q1, 2008.
Coated mechanical paper price increases of US$60/st announced for effect April 1, 2008.
Uncoated mechanical price increases of US$60/st announced for several grades effective April 1, 2008.
Newsprint price increase of US$60/mt has been announced and will be phased in equally over April, May, and June 2008.

 

2008 2007
Operating earnings (loss) (29.6) (30.7)
Add: Amortization 41.7 44.8
EBITDA1 12.1 14.1

1 EBITDA is defined as earnings before interest, taxes, depreciation and amortization, and before other non-operating income and expenses. As Canadian Generally Accepted Accounting Principles do not define a method of calculating EBITDA, the measure as calculated by the Company may not be comparable to similarly titled measures reported by other companies. EBITDA is presented because we believe that it is a useful indicator of a company's operating performance and subsequently a company's ability to meet debt service and capital expenditure requirements. EBITDA should not be considered by an investor as an alternative to net income, as an indicator of the Company's financial performance or as an alternative to cash flows as a measure of liquidity.

2 Specific items include foreign exchange gain or loss on long-term debt, restructuring costs, and income tax adjustments.

3 EBITDA margin (%) is defined as EBITDA as a percentage of net sales.