Resolute Forest Products (RFP) 30 Jul 212021 Q2 Earnings call transcript

Good morning. Welcome to Resolute’s Second Quarter Earnings Call. Today, we will hear from Remi Lalonde, President and Chief Executive Officer and Sylvain Girard, Senior Vice President and Chief Financial Officer.

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

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

also statements. make will We forward-looking

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

Good million, Wood in segment. high this dividend our and lasting return, a of to to cash cash $XX the which declared debt. by of per paper, additional earlier in million Products million EBITDA of we Marianne. shipments, thank up generation in to for market second ever Wood for reaching $XXX In of you, million segment increase record of first first strengthen We and million Thank million our $X projects morning, an $XXX our $XX from payback in to segments, reaching by value the tissue, you changes $XX we $XX month, special million, increase other $X debt generated segment total, million. prices Products the compared of highs joining used further an best everyone quarterly reported $XXX in from share $XXX quarter, million $X funded was May EBITDA quick we target million paid reduced quarter million We announced EBITDA, lumber $X our and to the million with by for $XXX or up in quarter. us. million for Today, our and million minus of down pulp, by benchmark our $XX adjusted Products the make adjusted exceptional the business We reported Wood $XXX shareholders. and leverage

Let’s million the about to Products. seasonally the At $X.X starts basis talk with quarter, environment. strong a in continue point starting second housing a Wood on annual starts U.S. individual demand businesses, adjusted to

compared remodeling cooled as the to home stock, demographic the rate summer Although accommodative environment, X,XXX population inventory quarter. off May, stage demand. sector our board a in over housing aging of average trends X,XXX prices in record previous interest price an repair per normal, to XX% and increase sharply highs and increased per the Benchmark result, for low the lumber and lumber board reached $XXX the transaction return to QX set strength continued to as encouraging feet, begins or feet in the $X,XXX

El softwood shipments quarter hardwood. projects Producer and shifts our inventories higher finished as The were tight at in XX% difficult is the XX% softwood and about feet XX% QX, hardwood, of million the our XX X% million. end year end Elsewhere, is two conditions decrease X% dynamics. demand and but supply last World normal to goods compared the best to was capital After reality X in anticipate production. the market and year-over-year board expect Ignace summer about Dorado comparison pulp up quarterly with of sawmills rates ranges continue April. demand We $XXX for on and of restarting XX and in since months or feet averaged within running the to ramp industry the decrease in lower demand a million QX. closed ever year. reflecting this pandemic inventory global board and shipments to that in chemical third year, X% to first optimize million, for quarter a operating were XXX period the influenced same reduced operations $XXX to for for sawmills million we Our take board in feet downtime for to these both produce

X% due normal to pandemic a the shipments closed induced shortfalls. per slipped in transaction historically or price the finished of at production ton metric previous all sharply with rates. metric our XX,XXX quarter-over-quarter level level From and mill average planned But other to Calhoun or a goods annual Following gains inventory per outage low our the rose in by metric tons. dip, XX,XXX XX% $XXX by tons at metric the ton quarter, $XXX our more

the expected quarter segment experienced mix it and We the and is as we American to our for unchanged North market rebalancing, was price or of X,XXX short end took ton and with goods declined unchanged. short product keeping average demand by a compared continued the inventory transaction by downtime of inventory mechanical as compared to tons. and XX% of at June short what QX X% lower for our shipments fell the pulled paper a average finished second Accordingly, the newsprint on tissue Reflecting our be that per unfavorable price. year-to-date $XX XXXX, market result transaction down uncoated We by pressure, result challenging the pandemic, XX% impact XX,XXX decreased to through demand tons. that to shipments

shipment by ago. tons markets. the XX% metric in half to $X the price year. for XX,XXX global Uncoated segment per ton a year last compared in reductions by in shipments XX% by improved the of to metric or million quarter, our As a will $XX ratio increased discuss recovery paper our have American I performance. the to a quarter year gradual including Compared result transaction compared the decreased XX% was segment capacity $XX now EBITDA to XX% average to pandemic, for in North second the to previous Inventory by XX% Paper of to the newsprint mechanical during tons. metric financial million. first due Sylvain improved the and the X% X,XXX capacity own, was

to as Papers from expenses by first most X% due and reduction or savings mainly related $XXX the diluted compared credit $X $XXX delivered items. second environment. million second products Delivered million the all This billion, bringing the our costs X.XXX% notes Amos due ton of the reported up driven cost the and in and income million higher realized $XX in $XX We to in the prices net operating debt lumber $XXX million quarter, in the items, revolving net was year. ton million assets target income a Baie-Comeau by second was million futures $XXX special wood debt from by XX%, lower for of result per in or previous quarter, million. year. million debt, spending market to net million $X of the amounts also the EBITDA quarter net $XX impact idling We seasonal a inventory. include million increase loss, $X.X volume $X during by by in positions. everyone. closed this with reduction Products special quarter-end. for balance million, segment share after or lumber only seasonal excluding Special of of per our $XXX share, volume under last the per were EBITDA to freight quarter hedging part Wood fell diluted in $XXX pulp paper $XXX million increased the cash lumber newsprint quarter $X.XX morning, segment $XX of We cost to maintenance to volume. excluding items This $X.XX equivalents costs. special lower $XXX cash million million for offset foreign toward of the sluggish the the activities or by higher as Segment segments. segment expenditures a previous by capital We ton by remaining or segments EBITDA quarter term variance $XXX delivered the in EBITDA compared $XXX downtime Good million per in quarter, as revised by Remi. all by $XXX you, provision the $XX last the a in million and partially items and due in operating of we pulp share excluding by liquidity softwood with year. on board represents million. We in of round outstanding contributions by million in the $X.XX cost in quarter X%, cash XXXX. first Products mostly this indefinite per million senior period quarter, as to the improved and in compares QX reflecting higher well quarter. million to removing Thank tissue per to We in quarter, quarter, million, in performance demand leaving due of $XXX duty the $XX losses improved which total energy feet with made of increased contract. Total respective deposits and our made unsecured In the sales quarter, quarter million quarter, we per the from same our a million of in $XX to The of delivered and cash quarter the and or but normalized segment of fees of in $XXX to is concluded generated rose and negative sheet. other result $XX our capital outstanding the costs $XX X% metric recorded the which segment, offset effect market compensation fiber stumpage in a as exchange. higher short $X.X by in the a rose in to reduced planned mills improved the by variable Manufacturing previous strong deposits $XX Compared the in or as $XX an improved our million. higher increase primarily costs, activities costs by billion this to all-in Wood X,XXX in reflects $XXX $XXX segment representing million. the facility, the the million. in $XX metric costs million $XX and In at wood the

XX. dividend business was which announced on million, June $XX record close a holders the of at of X on special also cash to of paid We July

drop quarter to million we plans the end investments, with interest provided GAAP, million million American June In contributions with positive accordance total at was In XX, this with earlier we contributed our $XXX XXXX, in $XXX from $XXX funding our rates payments contribution our higher by results. compared improvement of $XX year. year With only million I $XX line $X on of $XXX around $XXX for U.S. end. to deficit pension made OPEB Accordingly, million year Act million will our of remeasured million. remaining guidance on the funding around figures disclosed this the compared now to gains million Finally, deficit back U.S. pension will XXXX as long-term Remi. and the it and pension accounting be year. Plan Rescue guidance expect pass to pension is a

Although underlying our costs of benchmark This $XX the pillar is in prices value efficiency We an segment capital recent lumber by cycles projects our volatile, across incrementally our additional market of operations, down confident in investments in in weeks June capacity. in significantly for key and the the generate come Products that transformation. a improving will the reducing we long-term, increasing believe have business business remained overall with for production fundamentals. Wood ongoing announced and we why representing are million

into For carry shipments. the to momentum look with pulp, stronger QX for realized we and prices higher favorable

price drive maintain pursue first normalize cash allocation the our free $X end, we for a will capital operate. are than where activity return should As using for a liquidity available away-from-home committed and to half to demand in the in business great tissue at see the to in economic balanced that the position communities affected a stronger the our year once the months flow our our the to segment. approach to inventory build shareholders for a signs transformation, to coming recovery billion strategy retail more continue, in to of in quarter trends conditions generation With rebalancing cash passes. company paper, We for normal industry generate support sustainable encouraging space we in value we business this expect which the

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

Instructions] And our Capital from you. Thank from Markets. will Hamir question first [Operator go Please ahead. CIBC come Patel

Your line is open.

of about that don’t more you a Remi, quantify the know you U.S.? any able channel what and morning. you was maybe moderation – are alluded good if you I between sort Hi, to bit in the seeing Canada R&R seeing I in differences – could to Any are if wondering are and you comment demand.

significantly. And quite being summer other have have mean, heard year it of areas in a I prices over think have segment spend In which to this a pandemic. for Hamir, that their indicated with cooped Yes. result boom a they result a as after I come as R&R activity. over. as started is money slowdown want And of the down frankly, this is pretty mean anecdotally what we people the we that doesn’t R&R up our view, the

of result of work-from-home. pandemic about is trends I related if it if to increase the you think and think will, a it, of drove a lot nesting, you underlying the as that

things we off think still continued strength around is cooling I optimism there are view, summer, our think in over there. but the the So

Remi, in going given balance has sheet, change the approach how the any And there enough. forward? pension you strong been Fair liability

come as Sylvain little that significantly, pretty discount well. it’s bit a is Well, indicated, performed higher have down and things. assets actually are our Hamir, two rates One

deficit to $XXX has the end at million. So $XXX brought the million down the that year from of

risk always which and for looking we the the liability. ways We’re in reduce can reduce

of One contribution That’s pension going U.S. the one. that make including from will are years, in the the we the coming this changes things reduce relief. that to to benefit have we in around those

we to And to forecast next said bit for million a million it to our year we opposed year, down as So expect earlier. more $XX million that contribution come down $XXX is as by this well. $XXX

reduce pension that’s and risk for news we’re think I that can looking, the good ways reduce a always So story. But which Hamir, deficit. around in we

turn Thanks, great. That’s Okay, over. had. I Remi. all it I will

Hamir. Thanks,

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

line open. is Your

morning Thanks. Good everyone.

Sean. morning, Good

prices touched the Eastern With capital that for low being make in you feet. And million would respect Canada that downtime projects? to that XX this low morning. downtime, at you Good based the board that, would margins Was enough are all you? the on to lumber point related market sense consider enough on

to talked Yes, the have we their related is the last also, board hard feet to answer XX year, is I to the question million say, that they in we optimization. projects And People been the Sean, as and make want think, about. capital vacation. very schedule your take we that working sure can

that of to there about people and eliminating allow is take and some vacation shifts our here to So concentrate operations.

schedule. we what that’s So mean around optimizing our production

far was board our delivered – our operating the profitability, in As all-in as X,XXX per feet is $XXX quarter. cost,

we share But future by little we’re largely R&R talked pricing a the driven is come, consumption, to strength homebuilding even tighter the homebuilders. demand But a volatile. We will normalize, very competitive there lion’s with bit earlier in Hamir. We about look, so positive it’s an there. of pretty think And I a and in lumber have think things benchmark that that been – is that means prices encouraging environment. believe

that thanks Okay, for detail.

be terms we’re couple touched M&A the of sheet, wood M&A you where have ambitions leverage opened at thing, it you on any question, wood beyond type of the engineered this in a in of speak has in products, And would for in correction. you opportunity want all targets. only Can But to of recent lumber, set wood basically commodity balance up months that ambitions that I might products products? Second know weeks? interest? into guys you

pulp lumber. around of strategy. want growth overall and pursue that And our that in us, lumber there in want business. we We the particularly strongest two to do space, So acquisitions for is areas with our strategy the our is and things to

For successful sawmills lumber, a were logical three with of We is the pretty in the acquisition U.S. strategy. acquisitions

Conifex. South last year from

of And at shrewd so we’re time, price, right They always right as the be right looking price. at We right think opportunities. to have to buyers, pretty like so ourselves opportunity.

commodity broadening just beyond assets at look we Sean, we portfolio the assets, base, things. To out wood do answer engineered of products. point are a on that that I’ll in a have So lot our of

which joint La as have that’s wood with Lac a the very we engineered facilities LP, Dore have well. venture facilities area, We And successful. St-Jean other is in two and

it is right, right something has as make rule the has to wouldn’t I that necessarily right it So rationale I it. doing in And time, terms that sense, out. for it price, and know. be we to say, of and synergies But business

very That’s now. for detailed. Remi. That’s all I have Thanks,

thanks, Okay, Sean.

ahead. from go question Capital next RBC from comes Quinn Please Paul Your Markets.

open. Your line is

Good morning much. Thanks Yes. very guys.

wood costs in you feet. products, noted Just were board per $XX your up X,XXX

Just was, it wondering was where increase Ontario, it stumpage Quebec, was was that U.S. that

South?

Yes.

Ontario Paul, prices and it, think stumpage pricing. look know, was mind, of increases, In that ultimately way stumpage you the that, we as So Quebec. trailing we benchmark of both and at a with lumber is function lot my a off

costs stumpage way Ontario more down and start net-net QX. expect work and as formulas Quebec. the that that the chain. quickly, I in think the way lower peaked expect it variance the is But It second comes impact we coming more our be So down prices work, comes I it in have QX fees to fiber the in it in the quarter. quickly just a down their in favorable benchmark does down that QX to than

than that. your results tissue Okay, thanks And weaker I were for expected.

you Just noted – downtime.

downtime here? how Just and going much where that business downtime how fix can this you took you forward

a it’s question, good No, Paul. Yes.

producers said in faced quarter inventory rebalancing. knew as other tough So who’ve headwinds before, well. be would second the of basically, the heard We’ve I as some from we because space this

tissue that the sure of which machine as and that of us The are in not ballparks sluggish downtime of in took is a also think, the more so retail, the next were we as downtime the weeks people operations to we designed the a converting The well, make that tissue couple market. Miami. museums took up. picking And was and and building weeks. at And in couple away-from-home hopefully, we the schools a space then down on go in some was all to coming machine for inventory of signs months. And the normalize of Calhoun will we

the at costs, us, tissue result One a rising of here benefit the factors our for higher is get producers as costs assets. of facing play lot of pulp we of which, are a pulp that that’s to integration the

rising prices benefit the focus we hopefully shipments So will the really, the get here. But on idea. is of higher

just and difficult rash things a very, for decisions as admittedly we normalize not the what need of let So conditions. was result make to very quarter market

Okay. on And of just looks rolled its over months back way pulp, then it it’s China just working like and here a that’s globe. lastly, around the in couple

what wondering Just assessment your market is?

think a We bit of Yes. there Paul. headwind, is a

But less are to see a exposure We is based soften that is probably on July what people There you peak then sense of have need little bit know. and will bit. strong My prices a headwind. producers. still China, for demand, pulp, in and as and the we conditions

So it be if soften a that modest. but we little should does, could bit, fairly it think it

Alright. Remi. Thanks, That’s had. all I

Paul. Thanks,

turn further to no call would closing over I questions. have the We remarks. Limoges like to Marianne for

Thank great today, day. a have Okay. Thanks, us joining everyone. and you for

This concludes today’s call.

now may disconnect. You