Resolute Forest Products (RFP) 2 Aug 202020 Q2 Earnings call transcript

Good morning, ladies and gentlemen. Welcome to the Resolute Forest Products Second 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]. call X:XX recorded a.m. this XX, Thursday, that at XXXX note is today, being July Please Eastern Time. now meeting over would to I like Ms. to turn the Treasurer Limoges, and President, Relations. Marianne Vice Investor Ms. Please go ahead, Limoges.

to Operator. Financial Resolute's we'll morning, Officer. from President Remi Officer; Laflamme, Chief Yves you, President Lalonde, Thank and Senior hear second earnings Vice call. Good quarter Today, Executive and and welcome and Chief

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

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

make also will statements. forward-looking We

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

morning US$XX Good first EBITDA quarter, and in US$X second you compared us today. for Marianne. the We of reported the you, Thank a improvement million adjusted million joining in US$XX to million thank quarter.

wood higher discipline pandemic million results million. and on By rigorous COVID-XX down shipments, maintaining of focus EBITDA million; the US$X risks quarter's million; significant employees, US$XX the US$X in tissue the American reported safety been Chinese from Operating decrease for dramatic with all significant ongoing World expenditures. hotspots softwood, paper, our by in of and in year hardwood better reflecting and in million The by second a period US$XX products, lower printing easy, drop for shipments with X%. rose to the the high operating the metric But coming risk demand segment We for the quarter; the our the suppliers, activity raw increase shortage health mostly and to of by risk price The of mills for up slight decrease XX% to demand. in were XX% customer chemical under in industry in recycled by was and in reducing million production just XX,XXX million. the X% same such offset the demand tissue, compared reflect an pandemic operating credits attention but US$XX Canadian by a writing XX% the in rose million we for the lumber shipments hardwood. US$X for by the grew pulp, situation down reflect pandemic. protocols by the not and the of us demand economic first interruptions of period contractors, virus. despite last dollar new controlling by as a The spread paper growth to and up SG&A demand material. demand Thunder demand, grew or the quarterly through, and of softwood. with key pulp a metric the on annual for by the affecting due average market to lower, segment North trends improved pulp, including outages five inventory US$XX priorities in in the pricing monitoring in has we US$XX Mobile months US$XX softwood and from production power of on average generally EBITDA market the million to all increase in for period US$X for short-term minimize it but consistent year, see US$X first pulp XX% weaker quarter, favorable swings, impact increase segment, and Calhoun paper adjusted by spending liquidity [ph] tons and evolves our at the develop million management, as and hardwood. capital Bay stay timing XX% rates in and hardwood. the per for in ton X% our due transaction

consumption stabilized from to lower The quality shipments put higher seen started While months but some of the while in patterns. tissue. has pick environment, those compared also pulp ongoing benefited the U.S. a demand downward grew economy. has up significant was tissue pandemic XX% as down business Not demand dynamic demand an to away-from-home by year and for in surprisingly, demand at-home shift markets by writing higher in X%. and in printing the this pressure five the for first overall XXXX,

we reflects volume slipped pricing a and shipments quarter, segment of of to both While converted EBITDA well tons. as away-from-home tissue by or favorable drag retail gains early as in pricing down low in X,XXX at X,XXX in segments. adjust short XX%, in customer million in meet in at US$X projects remained goods to mix improvement quarter. between improved But The shortage that by as Finished the despite quarter-end inventory the the converting due inventory the demand lower the stages price pandemic. tons, to a X% short

U.S. in customers quantity April, quarters. Lakes customer on particularly do with thousand by in tissue the new the feet. is we to the momentum and the business, focus of portfolio million inroads the better expect From where to After praise volume drop first per quarter to to encouraging benchmark US$X.X the deliver to and for XX about end June. of very price in level end make up Great oiling we seasonally our optimization products. a adjusted board rate coming of continue as to US$XXX most in second, X/XX recover starts by retail segments, the going Overall, the to a continue to of will the We gain we

the bring decking. wood idle market. transaction assets June the for as first reflecting stronger an The slipped Army's This us two sidelined benefitted Quebec. the XX of have segment pessimistic the feet retail start a against the to million While reported a capacity, board repair by capacity feet. for in February operations compared US$XXX from the reflecting opportunity early added benchmark But per lags starts housing XX% of markets the and be production remodeling U.S. benchmark by rose in bright revising saw pandemic. X, to US$X thousand in to of per the (inaudible) just while U.S. about as is the the demand by full board board on which quarter, giving feet blockades mentioned, is quarter in the quarter, the strength thousand I as the last acquired our railroad robust first for year. integration US$XX from were stronger million has some prices, quarter Canadian starts, to back & as the up some mills The of of average also price they up well lumber in April, lumber spot above-seasonal uncertainly surge progressing sales EBITDA the demand and stages by million. impact quarter. driven the X is of to for at-home as to also the been shipments well, garden Wood product what to reflects sensors the by compared expectations lumber by our housing expected than price in lately US$X improved with in of market market unfolding of Canadian such comparable

and our the adjust will ongoing evolve. to the to and to remained early pursuing As we segment bring production XXXX. adjusted was finished metric has hard been commercial in for period average newspaper reduction have XX% decreasing heading plan goods grades, performance. by newsprint by shipment-to-capacity Global we for tons last in tons and papers We commercial all XX% I down by as slowdown substantial XX% North due publishers flyers, to a or XX% the compared newsprint. nearly mechanical on-line in an compared American was first capacity newsprint lumber activity discuss effort insurers, first reflects on down particularly grades, we has fell curtailing demand capacity our crisis, American across as and XX% for The we paper, of by to quarter, in and This year, segment, demand newsprint reduced financial to and continue will Dorado effect like economic for US$X of approximately by promising, XXX,XXX positive dependent activity The by paper projects our ton, respectively by rate and Nevertheless, XX% metric capacity standard facility papers the tons mostly all the metric against was and transaction XX% the growth ratio this recorded for year-over-year. for XX,XXX in marketing should the papers. metric dramatic we for in North world US$X had from uncoated El are May, downtime our quarter. XX% remains was leading into printers. economic the a to of shipment-to-capacity at XXX,XXX shipments end Remi year. The EBITDA Pandemic reality inventory XX% in last newsprint to ratio the half now the XX% run the conditions XX%, price have relatively XXXX of while significant same grades. both XX% XX% for million. XX% year. Accordingly, to per uncoated supercalendar newspapers, XX% demand was to mechanical last drop stable, compared by

pension US$XX sales The US$X.XX the tissue a previous diluted from and A specialty a claim special for in acquisition XX%, in results second share OPEB million excluding to by dollar after US$XX receive papers specialty income by all-in of in related the per the US$XX favorable and US$XX EBITDA pricing reflects diminishing rose per excluding net delivered volume. additional to share newsprint foreign or per US$X of XXXX. income partially loss, exchange in transaction the Compared per million, We the an US$XX in per compares a weaker Canadian offset translation year. percentage board ton ton, million, same segment, from pandemic to of the US$XX on the of by US$XX of US$XX of X%, feet, produced in credits. in cash down cost of activities to or items thousand in Combined operating the last the and paper special the Thank impact sale settlement excluding million assets to in gain internal of US$X.XX newsprint quarter, million. quarter, delivered and new in improvement items EBITDA productivity. quarter quarter, seasonal to rose the shipments. a insurance million lower EBITDA in impact our is Manufacturing into net cap, on million which disposition million working and for special our quarter, the we was the we Atlas product XX% Canadian portfolio. down quarter, the metric with in which per million reflects XXXX a other given metric facility lower was metric due last for from the combine loss US$XX in demand, in on quarter, ton The or half to segment, due first sawmills previous the quarter, US$XX quarter million you, per the in compared our quarter. associated reflecting removing of cost a quarter. better or the spent US$XX total net a shipments US$XX prices, period in the for non-operating short in We segments US$XXX expenditures the pulp or by We market expect first first million Yves. EBITDA ton, the generated items in US$XX of combined period impact the decrease from that, in reported of US$XXX million million first including include inventory. with million, XX%, in analysis, reduction the COVID-XX Augusta roundwood US$XX rail products annual costs downtime. Note QX. delivered the largely by proceeds by the decreased increase share, Special year of U.S. of US$X million blockade X%, million, million papers down were in US$XX the the of the was outage US$X.XX In US$X the the of our is million and items. of which higher This fell our net second and cost the wood second quarter. Calhoun. million, the quarter, of year, US$X million, down the cost or and the better for quarter, in the segment the the paper mostly US$X in of by Papers increased quarter maintenance of the delivered in per the volume quarter cost same lumber US$XX with better impact reflecting impact net US$XXX by the from with to capital previous tissue shipments US$X and

mentioned reducing under US$XXX in to the our the to we be borrowed the the capital expectations The by the the finance term patronage net US$XX We revolving U.S. quarter, of floating in assets including term interest a softwood last duty sawmills. except the XX-year in the US$XX of in economic US$XXX repaying X% are borrowings lumber loan dividend. made of from spending We US$XXX to loan amounts to QX, balance an we for million, end carries million other we million, As liquidity rate our which reduce U.S. invested credit light took cash all acquisition our annual quarter, that quarter, in the With end improved to US$XX of environment, uncertain million. million our of used of by sawmills. facilities million as capital million of in quarter about US$XXX opportunity today, of to US$XX bringing in deposits deposits quarter, of million, first is total sheet. the a expected recorded on

we reflects payments a quarter, bill stimulus we benefit with million and US$X the the US$XX contribution quarter. U.S. to a of Finally, in plans the in OPEB the EBITDA. contributed in of U.S. expense million deferral, adjusted to US$ combined million to US$X made included plans pension million The temporary pursuant X of from

from of US$XXX deferred before funded We Accordingly, be a US$XX to US$XX we weaker will expect make payments OPEB the contributions differ to up total first contributions net essentially million, will the of of that on quarter the Canadian offsetting pension the need year which on of million is balance and is bank and pension to million catch-up sheet the holiday, X, The in impact will end considering because payments. unchanged the the But a due and our OPEB liability the amounts year. ends. for the be the dollar. for was January year of

a While higher seen contributions and in which asset on interest deterioration values we've the basis ratio basis, somewhat funding from on have rates, turbulent an future. first of prevailing recovered the would against quarter, the funding a weigh accounting further implying

based at funding accounting time the the assessment conditions with applicable [indiscernible]. in and we accordance usual, only will pension conduct on Yves? year-end As the at

business them. commitment our while On pandemic to challenges the brought COVID want and Directors done. of focused The hard to the thank gratitude of to the take loyalty team, I allowing our send want work; ensuing have their and business, my and the of executive remaining job unprecedented employees, on and well uncertainty. and the to contractors, they slowdown suppliers, together, economic the world-class us as opportunity essential for the I to express and commitment to operate Board an pulled safety only behalf

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

Instructions]. [Operator

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

open. line now is Your

just Yes. I questions. a in starting market pulp. of Maybe have couple

term You guys called short their weakness.

Just how short it weak term? to in expect to the be

you to little could very speak up hard Paul, a -- it's hear.

sorry. Yes,

[ph]? can You market in pull I'm we called weakness can we it long out and pulp wondering, expect be so out how how to short-term just and

expect to to the right second and related really what XXXX writing quarter than we and It's forecast a for had you own better printing two but we in know coming have as into we something in smaller the at the the we next I now, business, be we as said quarter.

like given on XXXX. early looks in seeing that to products, wood no it change And wood strength Okay. online in Anyway we're bringing really that the Eldorado, that products? then accelerate in market

That's a good and it. definitely very We -- question. look we unfortunately going do seriously at this the to

conclusion spending the So came the one do we restart going to we at we we and the shift to CapEx get that that's we with reevaluated possibility as And right something as and the to soon on -- that possible. seriously, if now. it

succeeded to don't of end this into the beginning one by of be market would we the So, volume we that, something next for Eldorado start big like ship training but if coming a maybe before big, area year see like that or restart year, year. more the the

Okay.

me, insurance, where’s Atlas million is from? thing one related Just related US$XX coming confused in that insurance or from Atlas, that to that acquisition to the the

Yes.

So, Paul, it's Remi.

as warranty had we So, insurance record of the part transaction.

made we a acquisition claim settlement. a and reached following So, the

million. So, is in cash adjusted and The it's expected EBITDA income. it US$XX other not and QX is in

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

now is open. Your line

Yves, downtime in been that XX Canada X million you've the is in board last quarters, the still that any taking of of down feet today?

wood have full down we and we into stud volume, supply potential. don't also run to Canada to we had we three that that mills the have know still you we have in Yes, take consideration, mills have

in as mill my Northwestern two still stud down. is having Ignace we the in script, that, we mills restarted of have Ontario but one So said the the, still stud mentioned that

restart? two those did And Okay. when

beginning quarter. about would at say, this of the I restarted They much pretty

third In quarter. the

July. So in

Yes. sorry. quarter. Yes, the In third

talking thank I'm quarter, Yes, you, Remi. this July. about Saying but Sorry.

you remarks. mentioned Yves, your Okay, I think in great. And

the June and market if that volumes figure I sales own XX%, retails heard through I that heard think right. Was that a I that, up R&R your --? of

centers that No, that we that's home was from published. -- the statistics got

also to from own thank gardening volumes that's So that also are you everything. and so

So it's lumber. not just about

Okay. a -- you seeing mill some to And at point seasonally signs decking weaker. has lot the are demand yet? that deceleration And are has for that your seeing of southern What exposure. then any you of

that see you year? this do when Now, out playing

of We so first all, volume into right. of obvious. can [indiscernible] so Yes, you're thinking

but Glenwood on just, they we're or question, good for remind coming that I but for that sawmill we acquired your pretty And produce were all. any the you to month are, at now to down expecting see was Just ensure the when we not that's right so, it. not sitting ago

we that thing kind business to don't speak. going of see -- unusual going but know So, to go we and slowdown that to is as and say everybody we happen, it's we that

that's helpful mill. right, All sold that that Augusta for their the just and are you you Yes. Could on to who site machine? say and what intentions then

Graphic to We it its neighbor sold Packaging. to

we're restart they my. do, that not Hamir, sure think add it's So I what to to could you newsprint. but operate don't intend that to

curious, Fair when and resolve the you about products remaining the if now Remi, optionality think fleet the you option in think you paper enough. products? include? might What just then that how And potential or I'm alternative about

assets, and that ready could and we transforming we, have be right we pulp is in as you but else, we the see think that everything's on with up, tissue pandemic forest don't so. potential as the in transforming the the some certainly the grow as with few something go, I years, we're of last now -- few, think doing have situation we the to cash asset table anything I Well, transform we last number speak as the course, lumber a and can been company we've

Remi, that are level what of Fair could access much one was comment you how in sort that In And may you the last to. just what -- grants you QX, on, had government me. have expect was enough. from would QX? and

Yes. No. Good question, Hamir.

be adopted, not There Wage not going might qualify of could be to plays revenue applied in huge obviously depends QX, for but of the the We Trudeau has -- qualify to but light sums. the will maybe QX. that how dollars. program needed actually factor see to we In [ph] we revenue. in in did qualify the did So, is it couple we what a they're on out, for not QX. a It the And Subsidy. changes but government it you expect that zero revenue be loss, the million Emergency

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

and any the this of despite us to quarter positive you the this Couple much would on have Thunder trend Can expected the what costs Calhoun pulp other questions. costs better we have trended The variables might given in mix than downtime and contributed that in quarter? context downtime Bay. at maintenance give

needed. to was answer Remi that; place we cost that it fiber certainly we're let as we have does I'll But the Yes. that cheaper. had, more

your Sean, question costs we outage to between period major the answer defer over outages. capitalize the So specifically, maintenance and

month but it much, we've that's other costs quarter-over-quarter controlling QX month, did maintenance. will So light to trend potential There to Overall, really minimize spread were especially environment. see spend, why move from all the around fiber are we out in and variability okay. a seeing reducing costs was the that, our you pandemic around intently on spend, focusing been of than we

We a prices, the we gas spend we're also be obviously have in disciplined there is But how pandemic about couple last the with of here preserve money; out electricity to a of outages very bit trying our of the just and a tailwind to moved couple months. cash. natural of

indefinite permanent and if right can And, rightsize or offshore side? domestic further it differentiate Okay. about based them capacity paper to paper most to publishing point the I'm have shuts point all wondering on to this are Yves, like of curtailments the and conditions seems just been between at Is your which you that, now, of a there temporary. consider you markets

it's at far far definitely the mean, hard the paper newsprint. I the where very rather is offshore that COVID-XX market as even the the it's either. it's situation Yes, market, as easy right difficult not; as It's though, than side that I now which is not on break a consumer you it pretty our non-commercial India, when an definitely area look very, as to in significant think shipment,

So as all far temporary. as the assets, yes, it's

machines that, Alma. Clermont we machines down. the have machine and white -- also at we but not and been we have The two in the one paper machines two three and in As has Calhoun Amos two

have produce paper with the even we [ph] the newsprint not machine mills and few back manage solely flexibility markets to wide to FC the cost big of going the same So, to to have or time. how or has restart -- come and much which machine in the

is long going or measure story become to So, and go. it's this short right just hard some our now not really of permanent we to worry as

So to that, it back there but will in about for ago. three whole but not the obvious so market months be were Resolute was just where pretty

So at going in least. I industry happen that's the to think something is

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

today. Well day. thank you everybody for joining Have us a great

Thank you.

you. Thank