Resolute Forest Products (RFP) 30 Apr 202020 Q1 Earnings call transcript

Good morning, ladies and gentlemen. Welcome to the Resolute Forest Products First Quarter 2020 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, Thursday April 30th, 2020 at 9 A.M. Time. Eastern

like Vice meeting Officer. President ahead, Lalonde. now Remi to Please turn Mr. Senior Lalonde, and to would over the Mr. go I Chief Financial

first good Welcome Thank morning, operator call. and to you, Resolute’s quarter earnings everybody.

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

press GAAP release non-US slides include GAAP our to of financial will the presentation the and information, include non-GAAP Today’s appendix information financial reconciliation a to US measures.

also will forward-looking We statements. make

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

Executive I the and And turn will Chief over to President Laflamme, Yves Officer. call

for EBITDA $XX you the reported fourth. joining We first Thank $X in to the morning. compared in Good million us. adjusted of million quarter

part results in reflect late prices lower lumber which market for the and maintenance offset in prices. in momentum began paper, were in quarter’s as newsprint pulp as that costs well XXXX, first lower by The

for up reduction market newsprint, adjusted for by products of for quarterly million million previous reported million the we segment, up papers By by breakeven $X pulp, million by $X from million, a $XX quarter, million wood $X quarter. EBITDA $X the and for $XX by specialty million, in $X up $XX fourth from million of $XX million tissue up

number the our due credit operational our coronavirus suspending reduction higher to we’ve keep the SG&A business capital of our of facilities as in economic consistent spending. such drawing expenses footprint had cash, across to and operate to of reducing different essential levels levels While dramatic needs, with different reducing we continue our of pandemic, face segments, to in a measures activity to take all

chemical but pulp and reflecting for a for softwood, increase for for demand global in rates hardwood. was softwood XX% higher, operating XX% XX% February, Through for hardwood demand averaged change X% no and

inventories normal range, Producers’ and within the XX XX stayed days hardwood for February days softwood. of at for a end

were to the timing metric higher of in shipment the the tons volumes outage mostly in due Saint-Felicien quarter, XX,XXX – annual Our QX.

Against earlier uncertainty $XX more in price average expectations, metric as gradually the China were our the in against transaction starting per created market slipped conditions. what demand improving tons pandemic by

which the resilient see quality for and sustained in we optimistic as global makes us outpaces demand pricing. printing tissue again, now end volume improving writing But reduction higher cautiously uses, demand and

two metric XX,XXX finished segment After remained negative inventory to million, tons. consecutive improved quarter, ending first quarters, low – EBITDA the in quarter in the $X third the goods’ at

literally since the tissue [shook but consumption up] last means in increase seen February the as and a Total compared period corresponding that significant same the unchanged the we’ve away-from-home. [ph] year, patterns of decrease at-home impact March changes consumption to was demand in in considering the pandemic with

for opportunities and business opened customer grow tissue disruptive as we to improve context Resolute which of Our progressing whole the our mix. chains, is customer capabilities consumer in and demand supply and our demonstrate products well base has our

tons. and by grew is quarter to shipment our the X,XXX only our inventory in down Accordingly, XX% short

$X capital quarter. $XX improvement in costs our transaction the average With and the the segment million lower per in short tons was price the in EBITDA

an This adjusted reached in single-family by the million have in secondary of last multi-family starts up and XX% the XX% basis first starts. year. on $X.X reflects housing quarter, compared a in increase first quarter starts increase to US XX% the

economic blockades fallout board the million feet and per average board increase rail shipments, in thousand the quarter, million to coronavirus Canada $XX the The in XX of feet and transaction unfolding despite segment EBITDA improved pandemic. in to the increase $XX thanks price in

Excluding second sawmills of the of On feet El and of Arkansas consistent downtime our in South, in capital. US with February the XXXX. US estimated recorded in acquired the and City quarter, board acquisition working sawmills, on million we our three half Florida Cross for million XX Dorado Xst, Glenwood about recently including in we closed $XXX

EBITDA sites integration to contributing quarter. to The $X of with new about this a got good million start off new sawmills the segment in

to making to XXXX, in conditions. Dorado subject We El plans market online early are bring

housing momentum shortly market stronger Even in pandemic at of give unfolding of to the uncertainty negative recovery the way made lingering XXXX conditions. starts, for much the

projection measures. capacity environment As in of are to near-term but impact US further and us to-date, could excluding take of we are operating sawmill, XX% housing it rate sobering of the our run starts current for to about force the

hand, other the even the a resumption to from surprisingly key economic of an policymakers in and products strong we as recovery role and remodelling play activity expect today segment. repair see demand On encourage aggressive wood we the construction

XX% last drop to the period quarter for in same for XX% compared reflecting grades. supercalendered American and mechanical by contracted a year, North first the grades uncoated standard demand XX% in papers

ratio the slipped mechanical first per short weakness $XX reflecting to transaction the shipments’ of by in Compared quarter papers for The was quarter, price uncoated the mostly average unchanged all supercalendered grades. capacity XXXX, at ton XX%. in

inventory first against in period short last same compared unchanged fell demand the fourth Our XX,XXX North quarter-over-quarter quarter stronger shipments newsprint to the to seasonally tons. and however rose a American year. XX% by were quarter

for in while was North by publishers to The for ratio shipment printers Demand capacity down current X%. challenging falling newspaper demand and American XX%, environment. fell XX% the by was publisher

for capacity XX%. demand and down newsprint was Global by to was XX% February in newsprint the world ratio shipments

transaction As further of offshore the a ton most markets. slipped metric with quarter price weakness coming in $XX per the the the in by a average result,

and down finished goods in will maximize metric focus to and cash volumes tons paper were be by was The to Shipment continue inventory unchanged. XX,XXX business our generation.

opportunities even environment, likely the pressure. are areas, some newsprint will stronger come there current particularly While in under

I will our now have financial Remi performance. to discuss

in million compares a items. loss, net the $XX loss items a special million per share Thank excluding first $X.XX previous quarter or of or quarter $XX of the in and $XX share, million exchange special per net from first per $X.XX OPEB credits. in income, income QX foreign pension million you, excluding to translation the items share Minus other diluted and Yves. special This $X.XX non-operating $XX and in quarter or special of include We year. excluding reported of items last net

weaker sales in all tissue capacity of an the segment. US total and increase million, Our by newsprint price acquired million which $XXX up the the X% This recently by in reflects were in shipments partly lumber the quarter fourth from sawmills, in shipments, increase the first quarter. the were in of from additions XX% a pricing $XX offset

the by removing Our idling Augusta quarter decreased the million the of the of comparable $XX volume a manufacturing in mill. newsprint on inventory, the costs following basis write-down impact of QX after and

and to on fourth ton spending Compared lower metric million. maintenance EBITDA per the in or to delivered timing quarter, pulp Saint-Felicien the cost the improved market all-in XX% market QX. outage $XX of by per fell the $X pulp Accordingly,

in in The $XX reflecting the quarter by in fell improvement tissue to $X per impact $X to the ton short sales million million. or a leading EBITDA delivered cost volume X% mostly

prices, segment, products EBITDA with to but cost the wood transaction X% the unchanged, in $XX million increase the In $XX improved was million. by in essentially the segment delivered

the ton Augusta, costs maintenance due and and fell with cost of with to transaction delivered quarter – per average maintenance the lower X% lower metric lower $XX to in I’m avoided costs closure the lower price, was to breakeven. sorry, Newsprint EBITDA but or due

to power specialty internal costs in ton which million. assets, cost and from lower transaction EBITDA per improve or million delivered the $XX to lower The $X by higher papers prices average to generation paper maintenance by fell helped short X% in due $XX despite

used of increase the round of quarter, including spring the inventory ahead cash We in $XX activities breakup. for million $XX wood a million in operating

expenditures We $XXX capital $XX million of for also compared all made million of to XXXX.

made to other our to spending liquidity months in total manage the ahead, roughly assets in bringing the $XX including the softwood We million trimming deposits in US guided acquired the capital down invested sheet. sawmills. we’re on the $XXX help which capital million, duty To to million, balance is $XX to lumber recently XXXX in $XXX sawmills. excluding previously be We in recorded quarter, million our deposits US expectations

build million working from million of available sheet the from to drop existing cushion of mid-March our liquidity an a of an $XX on credit short-term facility an finance acquisition injection The and balance measure loan preventive total immediately from in to to facilities $XXX existing of as a the sawmills, term US debt million increase support capital the in requirements. roughly million cash $XXX over reflects of existing inflow $XXX facilities

ABL credit X%. the today, rate about the saw the we of also and a of a X% floating of carries rate term have acquisition of to of a The about dividend. XX-year loans mills patronage expected The used interest net maturity of interest of finance carry as floating facility US

Our for at $XXX was net of quarter cash balance end million XXX. debt

at million. remains $XXX also Our liquidity strong

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

$XXX to to XXXX While stimulus advantage million $XX million million we pension OPEB, $XX defer of our contributions for pension $XX US in and be $XX to the XXXX. are bill US take under announced million year recently Accordingly, OPEB. million January and for contributions up the will payable expect of approximately in of measures to X, the contributions

basis year we a dollar sheet higher rates and accordance reflects funding falling to the pension we on would rules. the pension payments future. at funding accounting have in the made in in net in March treasury conduct applicable and end liability quarter, year if the assessment markets and on that reduction Canadian will the would XX, the impact equity end on million of reduction which funding on But in $XXX basis in and The precipitous weaker only balance contribution with ratio Considering an quarter. and the sudden to expect were and imply the accounting OPEB the widened,

Yves?

number food North recognized care supplies comfort personal other in of America the our cleanliness infrastructure, pandemic. our paper Yeah. needs papers for and importance Remi. Bath Resolute meet and our products, basic all on for newsprint papers and by keep lumber tissue economic including and products, lines. the the and sector Thank to used towels for us come, now medical helping key healthcare informed. professionals front the products pulp Governments a protective against have you, and recovery fight coronavirus manufactures the the forest of in across to

As we around our including short-term safety, in with at the protocols our our on virus we’ve health highly of measures minimise all of be focused put priorities navigate place spread accordance the to following. these special Operating assets the times, locations. rigorous will and uncertain in

access in the government all of we liquidity a it required. be developing to levels sources managing with liquidity, speedy regions additional should support to Closely of economic opportunities recovery. where and Working operate

with some with capacity regular of our capital the exposures rising credit and Closely low. risk and depressed on around the of customers. control SG&A contributions keeping monitoring to rapidly-changing minimise remain based growing should risk pension interest – spending. controlling Adjusting tight conditions regulators and Advocating markets financial expenses dynamically on rates

These are times. obviously unprecedented

and Before contractors morning’s like to we this suppliers. would call, employees, recognise complete our I

the Our people hundreds financially have impacted. directly to are people of some and risen operations challenge. With idled

communities. But the family and their a recognise work on They across during practices their of remain done. have job safety the committed the difficulties, providing and hardworking. in engaged focused well to remained remained They’re and of world-class they company, spite all pressure products. customers And role they importance with have in essential health of our these loyal the in and

from kind We see acts time in and countless solidarity and kindness financial of donations. volunteering and

making truly difference I the Our them. greatest to team, are board behalf directors every day publicly are and of asset. want thank on executive a and They people our of

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

question first Steuart go Securities. Your comes of line Sean Instructions] [Operator of ahead. TD the from Please

open. line Your is

Good morning. you. of questions. couple Thank A

dynamic You referenced the

detail May downtime segments approach you during of I’m business with amount the the segments how trending that’s as respect into well? of April, taking. can if to for little you’re each a and provide downtime the taken bit wondering across of

basis, taken we’ve applicable It’s morning, as it’s of far Sean been first XXX,XXX about at moment downtime downtime – Okay, tons of newsprint two – the we that’s The go if to so taken, to the it. as is on ton newsprint, going XXX,XXX yearly as it’s which mill, all. the a good machine.

equivalent informed well And – close weeks weeks Amos we the took and for we then the one four of yesterday four we which is mill machine mill, as are newsprint last weeks two another volume. or but to the the

are for those temporary So downtime now.

in next On took June. to is of And paper. of that holiday about till ton month SC a the they about going have year we’re that we of per least down took restarted CPV XX,XXX the four La on a downtime, grade at downtime Alma on we Dore machine Monday mill, week which in also

on that and side know, we’re we’re you – pretty than pulp Other running full paper the operation. much side,

we a as side, took at fourth you because down – mills you know, few we of On – quarter, spread the the big in the saw – random. lumber keep stud start between mill between stud the

the was is down, pretty volume facility. moved So which to logs but mill Saint-Thomas a of relevant a sawmill the close as been

And in shifts of Girardville. random we one the our in mill got

We we have down much well Comtois mills sawmill for in and so was mill down two was what known in now. The know That’s pretty in as been you still Quebec months as earlier, stud lumber. down. Northwestern Ignace have Ontario

two paper about mill, weeks weeks and just the we Baie-Comeau weeks, more line we newsprint the sawmills the to the moved downtime ago started with in in took – of after then mills. We two two additional

it that mixed about thing that something XX about all than together other difficulty] plastic. represent like So paper the our pretty know papers XX% [technical of from is you much

detail. great balance Yves. That’s the question Thanks, sheet. Remi, a on

deferrals with cap You the liquidity levers other in position, Canada. referenced US. and like with I’m you and respect not any sure and pull have deferrals Can the seasonal respect measures? there’s third work in CapEx supporting pension of property on to quarters, the deferrals. Any some I’m the stumpage to declines through there you through thinking if the the thoughts go Eastern in other things that of to second lower tax

Yeah.

is liquidity So of just million our position end. as Sean, a from good pretty begin, $XXX starting at to maybe quarter

we $XX talked million to announce in We which some but on. that on And this think is at about how deferral of so we opportunities are there’s worked Nothing helpful. time, pension terms evolving. the things

also consumption. quarter in pretty first of significant terms working The is capital

$XX the to that have that’s are in that by year. reverse – of expect payments the provinces the course deferral announced been some through year, spending within but harvesting to about programs, the million we over of is spending. that going There the capital So of over existing course reduce defer to programs under mostly

about you of be taxes types – And a then that smaller. little programs other the would bit deferring those property talked

pretty working that what we So we’re much covers Sean. what on, –

thanks, all And Okay. Remi. for have now. Thank you. That’s I

Your next question CIBC line Hamir Capital the of from comes Markets. Patel of

open. is line Your

in as is demand be morning. you graphic us to give you much in and April? expect to paper would And Can sense even worse things good how Hi, May? newsprint the down year-over-year

we so we Yeah, a see in – while have number.

volume So business. as know, think the so. you trend in the first go quarter, expected, I about our we on the pandemic, XX wasn’t our at that represent I earlier, which newsprint XX% to of paper best since But, mentioned or had

business with CPV side, the back, going order to coming we back that the On side. XX% you is expecting. about come to an The even the that when probably going the paper is much you side, some newsprint question of there now forward know we more on know, XX% of on – than course right feel and were how

as to SC an the advertising you one effective paper know, see much know, papers, So how and know, the answer as back, as to is precisely, I to going you but you we of most side. some you far come it’s how April business hopefully, more probably come say on know and on specialty question to most much the example more going to the hard would back? of say, your expect course,

doing that don’t any We better. see necessarily only

have So business hope coming we some back. to

know, the been have complicated On a struggling side it’s the more – overseas since newsprint is you markets lot.

before because part the we of as Georgia know, this the lack demand. already know, you you down Augusta, even know, paper mill of you took And, of business,

newsprint much to question how is, is So going back. be of

see we was it we’ll know, be it goes So how going difficulty]. but is feel back, to you but don’t that of everything [technical some

the has quarter? you. as thank pricing the helpful. maybe graphic us sense newsprint That’s a of give trended product And papers you Great, since can to and how for end

You offshore bad. newsprint, at said, as very about if it’s the talking market the know, of if I course, you’re is you’re looking – –

you the the almost to environments weeks precise say are down to So right price, different hard we’re to because give every US shipments pretty know you you it’s it’s in. on quiet now just a of

On the CPV.

the the now so. number have give right thing don’t not I that. how about definitely like down side precise market it’s But to is So ton same much right per as on as know you you the far know, going like something or you

strong. operations mentioned had the thanks. one of your that Okay, you And been in to comments operating have sawmill relation R&R Canadian from your today? what even seeing you or US you’re Was out

that see two While we you know, on ways. different

have contracts And and value-added strips, know, on good and know like stronger kind of know, operation. a You demand, we our well even products. at centers know in the for you lumber different Canadian know, you business you going seen even, you we’ve a all as with furring sometimes of kind pretty

So, sales measure measure that business. also the demand pretty in with to a which and direct is good

US the we’re demand side, a producing of know, it’s and good business. going decking you pretty the more for you decking to be see on the On know, while we so streets

this downtime that that difficulty] those you saying sees business we can is see been as pretty of have that the and good. So, the even coronavirus speak [technical

market just have weakness, Great. you to XX%. me. by there reduced been one has if a be? need carry prolonged for rate Remi, know further, CapEx know, of run a Is there back you already that indicated room final period And we still you’ve of sort

we’re Hamir, know, pretty you as Well, business. intensive capital

million on. to the keep lights $XX about $XX takes to it So million

So favours. a we’re that, could any bit. beyond long-term yes, little doing not compress But CapEx we ourselves

I’ll had. I turn all over. Fair it enough. Great. That’s Thanks.

Hamir. Thanks,

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

Your line open. is

much guys. morning very Yeah. Good Thanks

Paul. morning, Good

side. on just some clarification the wood Hey, products

$X US is the for mills the newly mentioned the from two acquired EBITDA right? that I think South months. Is million contribution you

Correct. That’s correct. Yeah.

those you and that Again currently? maybe shifting could outline just mills of

The ships we’re operating –

in we work earlier, is now. they as decking which is more Florida, we Cross part two know, of is as right it, shift, you Yeah, a good big I said operate City, I pretty – say. And would

we’re pleased very doing So with that we’re with what mill.

when We while half. running was acquisition, had, one you sawmill and running shift Arkansas the made we the on a a Glenwood, know,

shift. – So our to second the was the completing goal restart

into and is training two more pleased and know everything We’re because looking at right but between now – mill still good as you going the then working running and that on What of a shifts of a pretty swing result on having opportunities. it. pandemic, we shift is two see we’re we’re the we’re shifts, complicated, sawmills with and the well little

is well at as you And of forecasting on our the But restart depends the you pretty forces going the situation XXXX the market or but demand. and integration know for [indiscernible] down know on we’re this to is still well plan is otherwise now. to the aligned is beginning

prices Okay, outline an market price you that give you drop? price of of great. Thanks given switching to is where going explains I know, I know, us regionally where you you your pulp $XX just that. saw pulp shift the was for moving. know, dropped know, mix benchmark surprised here. most that, you could And Maybe then the at as any for and quarter-over-quarter that

in we as a of pulp the hardwood And mix you pulp know, we and different know, know said, we southern Tennessee. Calhoun, not have and you market expected. have the on first quarter you Yeah, was softwood as so the

of and and the Saint-Felicien of like. pulp Alabama. hardwood have And We at the fluff pulp of have course a mix we kinds have in we pulp softwood do softwood

we’re that fluff have doing about is side be. what’s on as we would heard tougher, much now. have we the pretty including same was whole and thing. fluff the of and you pulp mill base now, some, better you news good pulp it’s know, better since and The was as with been right right about So know base the has as But a softwood the that more good like thing the to pulp the optimistic going the on outlook the even Calhoun is, supposed you I better say

what much pricing details So this pretty if is any the quarter first you – itself, Remi maybe don’t much I I happened why in explained pretty the well know on more that’s

a range. and in wide that Yeah. Yeah covers the above a pretty

terms of Sorry consumer and the split then away-from-home of how’s at you lastly tissue. Maybe and an then that that Calhoun’s sales between could us progressing? idea give does just and got you ramp on the in

So focused retail, most on Calhoun retail. of is business everything is the in out

year, So largely the in it XX,XXX are that’s away-from-home Florida retail a there. with about call tons, tons a mills of portion XX,XXX

As well quarters. doing, in far very as producing Calhoun in the the is the machine tissue segment how last is two

in some indicated we’ve to our and there encouraging the converting operations As past, making there. we’re were priorities the progress improve

we the mix. also thing were improving other that And is about talking customer

our months reality looking there has us last is those in given the it. particularly it’s fill places and our us So product the that our – to of given of are those customers store side up opportunities the of as opportunities demonstrate to on into and more our support couple shelves, some the get quality abilities of retail to

pretty We XX% our increase out it’s been are side on that positive. in today was and the tissue low. very inventories a shipments So pointed

guys. All Thanks best of right, luck.

Paul. Thanks,

Thank you.

are further There call turn this the back presenters. I to time. questions the over no at

today. joining a day. for good everybody Have you, Thank

you. Thank

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

disconnect. You now may