Resolute Forest Products (RFP) 31 Jan 192018 Q4 Earnings call transcript

Good morning ladies and gentlemen. Welcome to the Resolute Forest Products Fourth Quarter 2018 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 January 31st, 2019, at 9:00 a.m. Time. Eastern like meeting now to, turn to would over the Ms. I of Treasurer and Travaglini, Investor Vice Silvana President Relations. ahead. go Please

you Good section Webcast morning. slides GAAP download and using Executive can the is under release Welcome we'll of in to press or Investor follow the to our and and Resolute's measures Fourth Quarter will financial non-U.S. GAAP webcast in You numbers Officer US presentation slides. reconciliation Yves Lalonde, Vice also can President Presentation Relations slides. certain by Chief of Remi the onto Financial presentation hear with page Earnings A Today's in Laflamme, and those appendix the non-GAAP today's our the included and financial the Chief the website the include link Officer; along Senior information. President for from to Call. Today, logging

We statements. will make also forward-looking

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

$XXX you us Thank in million for quarter, Good morning. down $XXX EBITDA today. million We joining in generated of from fourth quarter. the the third

was Newsprint Papers, US $XX in due Wood EBITDA board wet $XXX as million; adjusted seasonally thousand quarter. million, higher and mainly the well costs, to Southeast. effect Specialty down grades, the down plant million; down million By $X million; $X per maintenance, paper million; drop million a reported was minus prices, to $XX at million the pulp offset decrease $XX weather $XX expenses $XX continued in higher market against prices segment, than by Market for extremely $XX previous unchanged million, we and Pulp, $X restrictions, and in While the strong be in wood production more energy Products generated as feet lumber of quarterly Tissue of

rose $XXX million to the our EBITDA adjusted For year, by $XXX million.

the to have generated operations, for as our well With we $XXX Catawba generation the the million, of the paper pricing as cash $XXX year, first and lower of but $XXX fourth for year-over-year conversion-ready during sale of million million. we pulp half facilities valuation assets. increase the of quarter, $XX from XXXX, for us positive million Catawba, completed Fairmont lumber over the a Without would In we attractive over the for value assets. of grades, been and in these achieve estimate that maximizing about allowed transaction EBITDA momentum

enabled Fairmont With pulp our production improve our shareholders to results million we and divestiture, million to the our profitability. sales us optimize solid and our leverage operating asset $XXX dividend Menominee by The year-end. return a through overall reduced special recycled further shortly at after can Mill and $XXX

With the positioned in are to growth we our business. well balance fuel strong sheet,

prior of World America but Europe segments, year. year, while X% were compared for shipments were the fourth Shipments quarter down pulp XX% when up X% the for grew to compared the XXXX in individual review Let's third the quarter. also with China our in X% Pulp. to shipments to the North Western by year, X%. fell shipments starting up to were Market chemical

world hardwood X%. were same period, while rose X% of during shipments shipments pulp lower Softwood the

price buying all softening November increases and XX% in reflecting at well Chinese at October hardwood shipments-to-capacity further ran activity. as recent production remained in pulp largely mills industry leading mills strong in Softwood to grades. markets fourth across Pulp disruptions, and the our as were quarter ratio XX%, reported

at sales Coosa largely following pulp the the Our quarter, reduction in up the Thunder were however, maintenance pulp year-over-year. recycled and and $XXX soft lower, due the realized ton capacity Pines Shipments downtime metric in of mill mill per price facility. rose Bay Fairmont to to our $XXX kraft scheduled

X.X%, well into Our in of extremely quarter. production to bar fiber compared was away-from-home product as to at the recovery Total same the a year. [ph] of be also negatively the through to US X.X% shipments sales tissue issue Weather-related same the impacted going by as improved grew in first X.X%. at-home while mill. X.X%, Calhoun consumption by wood November Converted weather, last shortages period shortages by increased wet led continued headwind due

the Tissue target Our sales reflecting year, on our and awareness a in marketplace. growth has on brand Resolute this been entry growing refocus market

increase ramp adjusted XXXX. has expected, originally seasonally a in reflects to in the significant of X% starts were to as starts. rapid fourth progress Housing through first higher in lows. in XXXX, the single-family improve decrease X% in expect and quality starts our project dropped US as up We Calhoun productivity. to Tissue profitable [ph] lumber which multi-family basis we have on been a an had been therefore averaging in and the But prices Tissue quarter compared not multi-year become X,XXX,XXX units, Calhoun X% the to November half in While with we encouraging

to price Our its two breakeven. reducing years, to board per essentially average level our transaction fell feet, $XXX lowest thousand in EBITDA

standard volume to demand with the quarter. newsprint also realized XXXX shipment-to-capacity market in cost, pricing affecting related. higher a publishers North higher the newsprint to while year, in production, of XX%, the was reaching mechanical down for X%. ratio Despite timing newsprint conditions, X% North ratio Out compared with compared world shipment-to-capacity temporarily the American demand demand decline, for at ratio XX%, demand newspaper XX% from demand reflected from was largely XXXX X% paper Western log XX%. weather with American Shipments lower unchanged commercial slightly shipment-to-capacity prior transportation compared was quarter. drop down the to Lower from and Europe international a production XX% fell X% down and X%. sales sales, the for last Global capacity XXXX. down our demand and grades ton. during unchanged quarter, demand improved XXXX, XX%. last American year, metric year. through by to increase we challenging Asia The supercalendered shipments-to-capacity grades $XXX reflecting period same for strong combined November was X% the uncoated X% continue The and in North improved North XX% previous from Compared the ratio per sales were Coated the XXXX seasonally compared compared was drove decreasing in to Given industry curtailed reduction mechanical America XX% wet to from XX% in only down year. printers. remained this The to X%, extremely prior to was XXXX.

coated mechanical With of sale have Catawba, the exited grades. we

price price for unchanged grades increases rose announced by for per papers as and at transaction average quarter, further across short paper mill. offset Catawba by was supercalendered compared continued the our ton a higher the previous price to supported by supercalendered remains all Our increase $XX of previously largely seasonal implementation demand in the production announced relatively Shipment quarter. downtime

achieving OSHA on year, did of world-class XXXX, performance, As report our I also financial by our proud improved XXXX deliver excellent we only incident performance we the to am rate X.XX. a but safety look strong not that, employees in at whole

on XX our leadership Remi business. outlook before over XXXX. North significant XXXX, I in to to with addition We American received our in for XXXX. and also and In awards sustainability business managed and further the I performance, environmental will significant a has overall reduce XX% with incidence reduction recognition and have our regional, a priorities distinction now financial global discuss conclude by

Today Holdings. pension everyone. helping fourth not reported facilities special $XX non-cash and with fourth improvements, against $XXX acquisition fourth or $XXX of excluding million,; net long share to our and and Yves, $X.XX the net of quarter million and $X.XX share in in quarter per in acquisition you, $XX per morning $X the the million, and up include, Atlas income Catawba items Paper this charge to XXXX gains tissue expectations. and good into XXXX lived third Fairmont items. income the on OPEB assets million quarter per of of we operational or pave to the quarter. impairment of compares the Thank business lived This of Despite credits or $X.XX in share, the Special $XX making safety for significant our million, entry has and recorded of originally and goodwill the million sale non-operating

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

driving real million not costs third as in foreign increased quarter, In the While distribution effects ton. and million Overall at ramp $XX per exchange, the as segment, wood the drop metric in as Pricing cost. $XX a outages story cash failure in energy costs was the pulp pulps million $XX in and up quarter. outage in fiber Calhoun. quarter. in increased in by the pricing shipments. Thunder cash paper $XX by weather-related board also million shortages. per ton, the per the quarter, segment million Compared disruptions, to the reflecting lumber million $X ton, from higher Bay, $XX and log higher of segment associated in to $XX higher dropped pricing, an the we in Southeast feet third prices. million continue XX% or per drop to well in by $XXX and the costs, gas feet volume enough all-in in to by Calhoun, metric minus XX,XXX higher lower largely board consumption After in maintenance interruption rose tissue of $X by due with and per energy volume of ton EBITDA were wood EBITDA or due for thousand increase we production $XXX to costs costs was was and our increased with $XX and manufacturing and a make elevated including to scheduled up $X higher drop Calhoun, metric realized scheduled the but prices to US by costs increase pulp removing market unchanged combined the Cash to $XXX, cost in this thousand the costs impact was outages, result $XXX metric products, costs, turbine as disruptions, weather-related the by a EBITDA down aggravated production with and national recovery including wood higher seasonal this unchanged boiler

the the of from in XXXX, as quarter, $XX the largely XXXX costs $XX higher were due short X. cash repurchase cash a rose outweighed liquidity million in Despite $XXX decreased to Together we quarter. net to Higher million which more of in elected declined assets, co-generation $XX contribution Bay to senior lower from Thunder per the the to by spent we With in to maintenance per to costs expenditures deliver shareholders previous metric $XX position annual million asset quarter. $XX million $XXX our to asset-based our slightly dividend to or turbine in to more proceeds increased in our the million $XX years, debt-to-EBITDA EBITDA pave $XXX per the in than ton of in cash sales rose year-end X able in $XXX With the papers to to rise at following from the the to ton the in to year, at million a co-generation of with million notes, $XX $XXX year, Dolbeau $XX for return way increase the ton $XX cash assets to in million. as to special Newsprints we million $XXX the quarter. generating the performance $XXX million $XXX per million with specialty $XXX to This the costs we the energy Accordingly, including previous million and X% sales, $XXX. capital operational metric EBITDA operations due costs quarter. million. the year-end, $XXX disruptions, The by from able improved in per of target ton. $XX in quarter, par. ton slightly times. million came At wood improving execute short or than short and in well optimization helped We quarter, were million $XX above strong our over a the December. compared price failure.

organic capacity For XXXX in phase the productivity at we Saint-Felicien, of invest sawmills. investments at $XXX million capital next including and to our project expenditures, improve yields a number to in expect growth our and

sheet. have softwood For we recorded on the We X-X, $XXX million duty $XX, the now deposits. million balance quarter, paid in lumber

paper quarter. SC $XX received including million all $XX have we in For fourth cash substantially deposits, million of the the

expense contributed million uncoated with the to For interest. expect refunded in we $XX pension an to deposits the million million be $X case, plans We EBITDA. groundwood adjusted in quarter, of of cash the $XX with included

year, associated expense relief we the million December, $XXX guidance in the adjusted our contributions an to of payments million funding In with regulations of and we For in elected with million special EBITDA. of $XX made Ontario. consistent pension exit OPEB $XX

our than on As rate, million billion. basis baseline. Despite a expense the a Ontario pension position as $XXX EBITDA. pension Ontario end deficit XXXX, concluding going negative $XXX Quebec discount such, million largely which solvency with XXXX, essentially decrease in funding pension year. the of lower turn more required puts the reducing Pension Considering equity increased on liability. $XX to increase annual plans I deficits expect in than rather Xst, to million payments subject to applicable back at contribution by million net late XXXX balance This This of it of OPEB net January This improved our our associated contributions by December our million in regulations, funding on OPEB Benefits an contributions in in sheet basis. a $XX in compared in pension the XXXX. an we the Based make CADX the $X.X than $XX for accounting and returns we reflects are XXXX, our Accordingly, on and of plan, for $XXX the total the beginning of us at to the annual $XXX relief million. Act, on the adjusted are exited will contribution now in plans, same liability quarter to the provides in position concern of Yves market where million with million to thus funding funding represents make XXXX, not Ontario applicable stands remarks. from pension the we

you, Remi. Thank

build across year quality, in the Our Tissue operational limit our on first, the efficiencies momentum priorities business increase key XXXX enhance and production to productivity follows, maximize operation generation network product value finally, Calhoun second, disruptions and as are with improve from the our late to further support our world-class for existing costs work and reduce opportunities competitiveness, on continue business of transforming and we build third, strengthen will thousands assets, further organic our our force to performance to our focus acquisitions and retention. attraction on strategy, and employees safety

is we of addition activity, which scheduled Accordingly, will by Despite positive limited In positive segments, across our XXXX, our we the XXXX capacity our for over trends Following conditions three optimism. market. curtailments a reason market Even our markets, year maintenance in lumber to pulp are most production will believe recent to the of XXXX. that the growth gradually Chinese buying underlying pulp us at recent lumber give fundamentals cautious term. business XX,XXX economic for believe We markets long-term market outages and weaker with of fundamentals enter unchanged. in and view remain pulp the this favorable prospects tons. for mills, in decrease expect production approximately with metric given softening the the medium improve

Given expect in lower the shipments quarter. well structural lower first continued as paper as the we seasonal decline, demand,

Calhoun at as presence as products. market as of very attractive are and to our well build continuing our focused indicated we on productivity quality tissue, range improving For earlier, with

which us prospects well are business. positions generation and trends of provide future market with balance entering We long-term strong for about financial and on targeting XXXX Capitalizing opportunities. value-added our and divestitures, remain XXXX are for the the flexibility with first a sheet us we earnings significant positive in with growth tissue we optimistic half growth favorable

XXXX. Blanchet to would We Executive Suzanne XX Resolute's today Corporate and female the to Senior including industry. formally also and Resolute's as Directors to welcome Canada's to Cascades spent announced she On Blanchet President like our only Cascades, Board on and Board From of team, was the President Madam appointment serve XXXX of from Chief Directors. XXXX in organization. paper I over Suzanne Officer of President Vice years of executive of Group Tissue behalf to Development XXXX, of with has

are from experience joined We we Board she look to and pleased very has forward and benefiting the expertise. her

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

Thank you. question your Paul comes line [Operator Instructions] And of Quinn go Capital first from from RBC the Please ahead. Markets.

Yeah. Good Thanks morning, very much. gentlemen.

morning. Good

Hey, Paul

Hey.

got, QX in in commentary on target is little made just a segment, on you've and progress significant confused growth So and that productivity. on your you're I'm the then highlighting quality sales you've tissue

that but flat, the to basically down with or is EBITDA? EBITDA positives mean is negative realizations the the come that flat pricing balance So have

think the is - on so least we, caliper quietly operation, on improvement Paul, that last we talking about in haven't of right month we machine This that more we're I the why now. the we the mostly seen quarter, significant tissue benefit at the converting. see pointed of made and side,

products, we tissue, lowered So the for have why production. is right higher, we we that also with which volume are And testing. the don't pulp would impact new in so some productivity say testing I somehow was Florida see cost now. the also

in next results we're expecting So quarter. better the

you output And what type just at especially able new do on the the the machine, Okay. super a at to could quality, because you achieving spend maybe the new of technology you premium just minute are it's there. then grade Are or facility?

Yes.

in progressing we're Calhoun, in definitely FDC direction. right the machine the So

to towel like quality as compete side good still pretty where where I on the tissue, the but really that's be. But the towel, getting we premium the well. We're best we're think so really there, - think with can on are we not I we'd we should - on be.

now to talking exactly exactly wanted we're I'm we when at improvement is meet. close to and quarter the hard be, the yes, the part what this saying, the tissue is to this meeting So least talking very about we're the on think the of I'm about. suppliers over we - we're machine and and but, We've worked want towel of back we with quality caliper, the where

lumber Okay. drop. the in And drop contribution given then, just was switching pricing mean, I segment, over to expected the

could wondering you and currently? give on log forecast if you're costs, you where Just seeing a are curtailments with what us

we as have curtailment, the beginning far year. track the it As on back since put of

curtailed to back mean we quarter. So I before were we where the over last

always So the XX productivity should not as but before the - good know, on you example, but first so quarter weather minus sawmill be was okay, okay, tougher as winter forecast the is without maybe this an as at factor. morning, was Atikokan at wind as looking, is I

So log we higher. half, costs that far costs, so - pretty it's as the said other the as went

As been but there you that the is system years new, for new Quebec the few to know, connected seem it's now, market. more regime

like of good and lag. it And first XXXX, there pretty a the are went adapting the cost stumpage previous was the wood in also always to so and that, did year is it high when the and market in half year

as So down as went cost the went, didn't fast. now course, of fast price it when the that readjust

So where price lumbers now right this costs. significant we a had wood the gap selling between the is and

on this can pretty as that So see EBITDA a significant moment. is you our add-back at

update facilities Frances Thorold there. Maybe your on you've and lastly, around Fort just and also down us with a what those you then, number are And I is think are I we that guess plans the saw could an now news give Okay. out in facilities? something got right of

Yes.

looking the -- came easy do some right that we as was solid mill, conclusion everything Thorold, an restart to even it. working sell now don't still looking this. it with thing have to but could And have not far explored mill. still different for at We the we prospect anything announce, that to at we're but As we products. We're on to we're we

happening As Repap. interest for potential with I new what's Frances, been far it's think public with, as pretty about call, this

like so newspaper What what one as as it's and them and all far we're we what with now. had so much far the reading doing do, those guys are they talking So want - I pretty We're than or we've news. and to you. communication done. right they're to the doing haven't them on we mean

Well, very I wish you luck much. then. Thanks

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

Hi, good morning.

Hamir. morning, Good

have Yves, of do if uncoated And to we've How for seen could grades like much of any to next it to ramp you freesheet that could out money the there capacity competing come market slated looks produce the you so? up? months. a maybe be wanted XX spend you lot pricing to and strong would

us, For thing opportunities think the with freesheet we pretty that, where going in to I see we time we're that right is don't now and is have. in right much now. mills the we now. think any from be up we're feeding grades, and a the downgrade with adding way some up that can there uncoated right But paper uncoated capacity that the other freesheet the gives some I

So closure we've it demand is the it say, and means fives that let's that when we feeling is have other to no, there that cover now. other grades, the down right helps been of going that capacity,

brings pricing preventing adding so for on just you that grade, as said curtail as But solid and more is not far which now. So capacity that us. right it's to capacity, good as

guess, figure on of pension that And deficit. it switch Ontario? XX The question it basis enough. taking going in Fair funding the just to after purpose I at the for a concern Okay. the million. Is shows Remi you effect $XXX

Hamir. is, It Yes.

That's Okay. had. I over. I will Great. all turn Thanks. it

you. Thank

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

progress. have. you fix those around? Good it's Paul's there off you've with and just follow-up the or Calhoun capital-light Thanks. referenced initiatives assets, for I turn on and gave question, assets I performance CapEx just related any to whether to and reference questions. you frustration guess that it want Couple Atlas you the Is to written context effectively the And morning. some I tissue of to want respect on

acquired we're when a of way Sanford bought. changes what and - good. course, I that Sanford using the as see to is the far as in and far But as closed definitely that. can Miami compared it well. We are if improving productivity, safety it's to assets looking, as as think from far I of didn't seen it at assets, at far I made felt lines heading and using as opportunities, saying much mean, housekeeping, the bought, as a moving we other difference right direction. we've external the that significant stopped definitely but performance we as course, I also mean, space over quarter. was we've it's that at we pretty And that, an two the we the different as to we're we've ones as the big And Atlas to today have mean perform converting was warehouse that we speak investing, the save - surprise using been we when Remi beginning. than we

So for can is now. I this say all

Yeah. long-lived was Maybe was then and I off if $XX I can million. the $XX of add mean assets million too, about we Sean. goodwill wrote what

be it. profitable Calhoun when talking the you Got or EBITDA? operating are profitable first Okay. And over to earnings positive you at you say expect half,

now, start particular, and didn't EBITDA. we am know, profitable target then, do want with going hopefully with necessarily to both. EBITDA going you start I for Well, I hopefully, But we just hopefully and [ph] to can one we're to be so

do. can what see we'll we So,

or for have assets a to those for plan And I CapEx in the think that optimize is sawmills, that XXXX say as Okay. safely should suppose is multi-year we it XXXX? CapEx spending you of that you fully budget, XXXX weighted? the The embedded

we're going I to be of believe well. sides those much in pretty done XXXX as

completed the you up, different, sawmill would to approved that but one been As projects so usually the is in XX completed far as say it's be project, something as about XXXX. going so the ramp far has we know, are completing in months, think I

that expected can of pickup sawmill And the the spent? you once us assets capital is in capacity remind

Yeah.

is million goal in the to the improvement million an about productivity $XX to So year. $XX have more through of

logs, course, that of if had you when and we're about should capacity well, you goes curtail because in of meet the market when still last done we we've see be - quarter, before. but that as to so what aligned the So, everything what

have. I you. Thank all That's Okay.

you. Thank

Bank Spitz next question America. [Operator of Instructions] Please Roger line Your from of the go comes ahead. from

expect Pill for Thank This you Hi. our near is term taking for Do any sales? asset you further questions. on Roger.

the I mean it's say sold, ones but any everything our for to core we're at we we Maybe than if Frances the something that on look hard at and we would with that two we right other now as as wouldn't say opportunities, would that. we no, to really company that speak. have there last but answer that say. as did I looking be Thorold, are assets,

source Got it. how year full a cash? Thank use XXXX? capital a and in of QX see working as ‘XX you. And or do see you you Do it

raw materials but the of so that we a probably enough be the for build going out. It's the course spring part, the - it it to should be use. We to have year net-net itself tend logs, should log over over inventory work winter

$XXX admin sales million Thank Got see And and question, XXXX? it. do you expenses XXXX the you. how last versus in

said Sorry the SG&A? you

Yes

to it? you Do want take

Yeah.

where were we this on to than lower the we year. I expect be think SG&A,

sale XXXX. in so Of and expenses, as being Fairmont a reduction and as away the expect Catawba course, far with we

you Thank very Great. much.

You’re welcome.

next question RBC Your from Please of go Quinn, open. Capital comes ahead. ahead. Paul Quinn your line Markets. go Please Mr.

what we spend I lumber are in was the Of sorry. on 'XX, CapEx mute. expecting operations? Yes, to in $XXX on the million

- it's million. million, $XX about - it about I about yes, think $XX is

yes. million, $XX

do production. the expect board come feet Okay. look And up to if million the outlined million, cost XX Like When down? in you tick XX at... you we then

Yes, of course.

like today, We like expect, wood it the yes cost -- so -- would go the down. it everything answer If is is and achieve we yes. everything,

coming we that than still the Because hopefully, from million -- XX expect million board feet XX but X the day. more about lower of -- side So to capacity board have million log out feet. cost

I -- at So talking with or shorten next quarter. least the but it's was the in the hopefully, so, about to compared lag stock-base, in year to price during yes, little going a

had. That’s Thanks. All right. I all

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

Yes.

for this would So call. you. us today. thank all today's conference Thank you I concludes joining

today's concludes call. This conference

You now disconnect. may