Lackluster Pulp and Paper Segment Output Drags Resolute to Net Loss in Q2

MONTREAL (Scrap Monster): The Montreal-headquartered Resolute Forest Products Inc. (RFP) has announced its preliminary second quarter results for 2017. The company’s net loss further widened during the quarter, with net sales too recording significant decline from the previous year. The outperformance by the wood products segment was more than offset by the subdued performance from paper segment. The growth in tissue segment too failed to catch up with RFP’s expectations.

The company reported a net loss of $74 million during Q2 this year, as compared with a net loss of $42 million recorded during the corresponding quarter last year. Sales declined by 4% from Q2 last year to total $858 million. After excluding special items, the company reported a net loss of $3 million, as compared with net income of $2 million recorded during the second quarter of 2016. The adjusted EBITDA totaled $83 million during the quarter.

Richard Garneau, president and chief executive officer claimed that the Q2 performance is a clear improvement from the first quarter. Higher prices led to strong performance by the wood product segment. The market pulp segment too recorded a solid quarter. However, the tissue segment profitability continued to remain far below expectations. The paper segment performance during the quarter was badly impacted by deteriorating market conditions, Garneau said.

The operating income from wood products segment more than doubled over the previous year to $45 million in Q2 ’17. It must be noted that the operating income had totaled only $20 million in the second quarter of 2016. The total shipments increased to 509 million board feet. The overall transaction price touched $386 per thousand board feet.

The market pulp segment operating income surged higher from $7 million in first quarter to $16 million in Q2 2017. Realized prices in the segment rose by 7%. Meantime, shipments to third parties declined by 17,000 metric tons when compared with first quarter. The quarterly EBITDA increased from $42 per metric ton in the previous quarter to $71 per unit.

The operating loss from tissue sector operations in second quarter narrowed when compared to first quarter. The overall transaction price rose by $4 per short ton, with overall shipments rising by around 1,000 short tons. The finished goods inventory stayed nearly unchanged at 8,000 short tons during Q2 ’17.

The operating loss from newsprint segment widened from $4 million in Q1 to $7 million during second quarter. The average transaction price held steady at around $509 per metric ton. The ongoing decline in structural demand coupled with permanent closure of Mopko, South Korea newsprint mill led to 46,000 metric tons decline in shipments. Also, the specialty papers segment recorded an operating loss of $7 million during Q2 ’17.