Resolute Forest Products (RFP) 4 Nov 212021 Q3 Earnings call transcript

Good morning. My name is Julianne and I will be your conference operator today. At this time, I would like to welcome everyone to Resolute Forest Products Third Quarter Earnings Call. Marianne Limoges, Treasurer and Vice President of Investor Relations, the floor is yours.

Thank you, Julianne. morning. Good Resolute’s call. to quarter third welcome earnings And Today, Chief Senior Executive hear from Vice President and Remi Lalonde, Officer; and Financial we Chief will President Officer. and Sylvain Girard,

along under do have to if little presentation follow You slides for morning, Today’s the the go can in webcast you follow presentation you consult our a and of And financial the on download webcast should our we include on Relations want be issue And can today’s available can call. website, the GAAP by website. Investor the with the of this presentation section also logging during link but with them non-U.S. slides information. website you our the will slides.

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

also will forward-looking We make statements.

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

Good morning. reached for we're issues for Apologies to joining the And for slides, prices here up Today, on the those as you quarter. get lumber them Coming you adjusted million quarter, the record May. possible. EBIDA us. trying of in with in webcast the soon thank of $XXX we benchmark as million second $XXX compared off reported for the to third highs the in

of results converging reflect toward prices trend. quarter's sizeable impact peak This the back

in $XXX minus million million million products, up million up $XX down tissue by market by by million, shipments pulp, and segments. million. segment, EBITDA $XX second of on built prices we reported for down businesses in quarter both paper $XX $X $X momentum By paper, and $XX pulp our transaction part, with pulp million, $XX strong higher their the by adjusted for of in and million For the wood

average $XX.XX. This quarter, also share of price X.X per dividend. we at million And special paid cash a $X we an repurchased shares

Let's look starting individual wood with the businesses at products.

starts months, underlying quarter adjusted The the summer the having housing significantly traditional and of we improvement annual heading off centers busy sales during the to the which repair resiliency to up home X.X remodel cooled to U.S. nicely previous million think third a our in quarter, came basis. channel. seasonally picked on Similar speaks into season, at

XX demand, per $XXX Our and average compared downtime, transaction availability to the $XXX price at XX% board million, workforce reflecting XXX million lower a were constraints in lower or in fell thousand feet, related the vacation, U.S. decrease to QX feet Shipments pandemic accommodation, quarter. board projects, previous capital

industry wood downtime. World and end months inventory and period heading year, more goods in to a also the same over as wood busier China, into result outage as soft increase in a related million August, X% for recently, course for the energy the the deteriorated year, of destocking and inventories maintenance has which soft producer to in chemical reflects year, This were Through last the partly an a pulp lower of in operating hardwood. of board demand X% user increased the the XX% period. decrease demand of result was caused first almost rates of XX% Finished reduction all $XXX global has average for drop eight in a from hardwood, to compared reflecting South. feet. decrease X% X%

hardwood all in XX% represents $XXX for total historical We per a Our and in our approximately fluff which mostly grades, appreciable North high quarter, shipments. mostly increase of price rose metric to an and pulp the saw ton QX. across of of X% transaction average from gains America, but

changes inventory by levels. increased also tons. XXXX down of inventory fell from finished Through XX% and August a tons result were tissue XX,XXX shipments by at-home Our shipments goods XX,XXX to metric metric as

were up rebalancing. for their levels this home against consumption The from year's away by historically commercial While X% business shipments and a faced inventory low of slow recovery XXXX.

In and logistics headwinds availability constraints. to with related pandemic labor addition

Our $XX impact average ton downtime the tons quarter, the due fewer transaction we in as than selling in a product by by lower QX. short grade. rolls headwinds per price parent unfavorable short mitigated X,XXX production decreased recorded or X% mix, the to of of XXXX more We

X% North tons the a mechanical QX shipments of at converting as The I QX. In same Conditions affected goods demand of unfortunately finished our uncoded fell and XXXX. substitution so down compared short World particularly year, ramp was North this Hagerstown been of which result, by demand QX this demand last uncoded papers for from facility, tissue, shipment Through American up million for been have As compared in mentioned overshadowed XX% to of inventory papers capacity by headwinds year. by newsprint September, and was result higher a for XX% year-to-date to recently coded with strong with the partly pandemic $X far the periods and have ratio acquired XXXX. grades. performance year. profitable newsprint of rose up combined American mechanical costs the X,XXX the to the in

for $XX helped all quarter price inventory to average in million to now have destocking in and transaction remained in the While and improved paper increased XX,XXX paper supply XX% XX,XXX gains ton at prior pandemic. effort dynamics demand of XX% will periods. X% metric discuss year lower recovery $XX grades Girard financial by the or from uncoded tons, by as the were million. $XX the a our metric segment finished a compared with this tighter during EBITDA ago. per the mechanical The segment reflecting impact shipments our I But our was Sylvain performance. unchanged the quarter metric goods tons

Papers currency in by $XX the Remi. compares and for and delivered previous higher the We're to fees. ton $XX pulp third of items. partly impact segment $XXX million by $XX net due by the $X.XX or of the quarter per million lower the Special the improved Wood million. lower basis in segment in items lower delivered share improved or prices market quarter XX, the due you, downtime. pulp million. EBITDA and quarter. the The segment, $XXX diluted by to quarter tissue declined maintenance by prices higher per metric special due diluted segment Page of diluted EBITDA in Total share In shipments. net quarter income million was after volume $XXX the and we the for excluding This realized by million share from diluted removing or million Product per previous income of the exchange to shipments on cost $X sales previous segment all-in $X a reflecting products, volume. costs cost Thank $XX million. to related the or per offset in reported and $X board down and costs. And in costs the realized Pulp foreign $XX by Market the now the consolidated year. cost higher delivered $X.XX by quarter excluding by income, special falling wood maintenance $X.XX similar to per previous unchanged planned improved offset special on costs foreign X%, to in negative same per cost items feet ton, partnership. the quarter X% $XX items million. in the excluding period $XX the mostly quarter, to energy chemical compared were income paper in to last deliver million million due in higher was translation EBIDA or and energy quarter equity thousand outages $XXX higher compared million $X our by in to gains million to stumpage to million gradually previous Segment $XX from mostly decreased Total to fell in I-joist short EBITDA $XXX at million were $XXX was unchanged net

$XX.XX. limited Moving on to of $XX in supply Due $XXX for million to $XXX and and a soft projects in our deposits $XX cash million stood liquidity We $XX cash now quarter wood approximately in $XXX net down and million. We at at $XXX duty of lumber this million. $XXX million capital in quarter debt bringing With deposits CapEx of the We year million operating quarter spend shares generated million to million year-to-date. quarter balance to in total made took our the assets at $XXX end, our at of availability, total other million is delays which $XXX reach over activities to advantage the investments repurchase expect on million the estimate in end of chain quarter Page XX. X.X contractor disclosed average sheet. an of price invested from million we from market conditions recorded previously

paid also the of X June on on holders to of per close million of or of stock common at cash XX. $X record July special We business share dividend in aggregate $XX the

Finally, at pension gains long-term improvement and million. OPEB With $XXX funding to a deficits payments disclosed rates million $X in compared interest to funding we higher of $XXX quarter plans contributed from end. the was our positive $XX investments, deficit million million million, the pension gross made $XXX and year

from $XXX call, we for million expectations $XXX million. reduce during contributions discussed As earnings to last pension our XXXX the

We expect current remeasured figures on significantly. based Remi. $XX year-end expect on In accounting will the GAAP, XXXX we with be to the results, the about deficit conditions. accordance U.S. million based would only with pass to accounting market reduce current to contributions conditions, I’ll on it market but be

trough have and quarter-over-quarter third $X,XXX prices, to lower transaction on the considering coming market reduction quarter, we’re looking the a could a roughly basis. path In in of prices the thousand slightly per fiber lumber in costs, for seemed above shipments we price. higher at lumber pre-duties board but peak a to After of average quarter, levels feet see stabilized trend swing

third build We expect busier quarter prices quarter. their in seasonally to fourth momentum the realized paper on

energy slowing America user particularly pressure end demand global market prices have volume. and on China Even as and conditions pulp adding and related in very downtime is in been downward strong, North Europe,

as segments, in and energy as overall For a prices, both result chemical costs. freight the expect of higher Pulp an as well and Paper we cost uptick

started product to improve to challenges. as markets, we team’s integrated light well we driving continue costs improvements he like Chief the logistics VP bring mix tissue, remains in improving my at the to and Officer slowly for a of Resolute, year labor I’d and XX friend, pulp The Corporate to see and on as assets. the After we Legal expect end Jacques as close few as and with who retiring recovering and our Vachon career will a to face with the as a which of For be as words focus City. leverage even uptime, value lawyer pricing Senior Quebec availability gradually from Affairs advantage year.

has executive of an for loyal I present, in Resolute and On the team service XX want a of played almost executive of the member As years, his Jacques and company. shaping behalf team instrumental the many to of board years the Jacques today. past role the for to thank

executive, and governance, credentials wife been to with As for to XX the Legal experience on, full Stéphanie for on as and I’m a We range healthy has [indiscernible] She’s team. of Vice years, to no agreed well been business to years, brilliant retirement Officer. decades. person. for a President as with her candidate commercial he a succeed By the Leclaire their Resolute token, areas, part-time and and happy, and public him special practical Chief and Jacques has has the all of Jacques XX the his compass She’s deserved our equal an next transactional, welcome Corporate policy. same as wish parts, advisor guardian litigation, executive Affairs President for covers lawyer including better practice this Vice as join And to nearly such, to stay basis moral thrilled our Legal outstanding there’s family. (XX:XX) company’s for Senior me. Affairs

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

Sean Securities. TD from ahead. Thank question you. Your comes go [Operator from Steuart Instructions] first Please

Your line open. is

there? Thank see term, use you. you it morning. that questions. Calhoun? Good the I context Calhoun Good context, profitable. morning, profitability that the Is Can want operating when few to to at us Remi, is some everyone. What’s tissue. give Encouraged is EBITDA positive start that you positive? earnings A for with

a were to including I in some think as about it on Sean because important an pretty I and third quarter, availability significant downtime There underscore basis, there challenges constraints. labor pandemic. the the it’s business EBITDA in were and result of some also some Tissue the logistics challenges think with

strong. So the fairly were headwinds

EBITDA think profitability. profitability, I when about think of So I

that Okay. And but for presuming are of what’s on And profitability that your perspective, that for moving out your pieces the a think it can you margins transition the know segment? many of How thinking turn lot sense more of of business for business a you overall do there’s about to converting just Tissue there. broader the around matter Is segment? I scale control, which from make the a for capacity? strategy overall of a Resolute? ultimate adding Does then

Yes. I’ll with can that. I made than the we And year business. million Sean EBITDA remind better Well, think that last Tissue still we of $XX do

number of improve to a continue We on levels.

demonstrable. the and quality what’s is productivity I now there and established, is think key is measurable the the business for that

that downstream in more stable cycle. tissue to for case the pulp into margins integrate business over are the So is Resolute

case sense need execution. business where we better the continue is think the to I makes around do So to

So gap this had of pandemic of we making effects parent last we roles the have part And effects then Calhoun the pretty or year not of things a we the made year in were we fill challenging. after that could convert. December late Hagerstown to in acquired with converting that

from the more on more, through the mix coming be ahead, get be able of to see in the I and hopefully diversify should able portfolio drive product able quarter we be We’ll to to we’ll challenges we as then pandemic. what the especially path So more, and convert profitability the that. here improves

That’s great Remi. Thanks, detail.

unfolding context moves there’s this forward? Any for year. some for program, maybe spending and the might what on appreciate days The is deferrals appreciate But there. Sylvain. XXXX initial that like views CapEx sawmill as budget, early on question its discretionary look it Second how

clear Sean. So aim them that’s moment, in some delays will defining our question, programs, back it’s through of the still QX, of that number year. a year setting. so Actually, to But started we’re which we some good we’re where announced budget up working next U.S. this at of We catch in the

Canada, South actually. in some and in Ontario and Quebec

we overpay progress the they getting sure and to on like and so but environment trying started, we subcontractors, remarks from balance for have said because those very those are a services making So in stuff difficult it’s good we’re projects. don’t projects

right in extent of those So next suspect that than because we’re that we year, now. finalizing this be But I will delay spending higher still of delay numbers. year of the have this that

investment part The on of your question to the U.S. our second related

and meant El what South startup example. the for Dorado, of that Is you or...

Yes, exactly.

Yes.

the So takes do advantage with that’s demand. took moving along actually. And operations what’s even quarter a happened work third on that to few or that. And slow down some for some the stop in the required days. it to of We of lower that downtime

shift to all committed operating still we’re right now. about that. Dorado X.X El So is at

go for the basis. back forward going really well, it’s production year of very and kind would to after us of there, that’s the to tried busy optimize start maximize to So I say, step allowing we a

I El logs in as we in is at started the as so through sales might concerned, said, add XX% and up versus QX. Throughput started average to that, is about facility running of making September, Dorado of actually Sean, as Sylvain December the as October QX. far

are we Sylvain making good So said. as progress

That’s good.

Okay. I guys. for That’s all Thanks have now.

Sean. Thanks,

Thank you.

Your go next from Hamir Capital ahead. CIBC from Patel Please question Markets. comes

Your open. is line

how U.S., U.S. the given in have in the M&A the in given you’re Remi morning. recent values Good what liquidity guys more the lumber are the market tax transaction of seen assets in for potential and about feeling seeing strong you we’ve the some Hi. you maybe

is strategy, that that Hamir. and Yes. underscore of U.S. have And going We’ve think remains case. question, key the I that be that indicated transformation pillar very to That’s I our a the a lumber good we said would

particular us. interest expectations I valuation was Certainly the South transact, of that a with for increased. on some assets think seen we’ve have

have it’s we additional going to always is same. a make for about everybody is there. be as any be far and the that correct M&A the to But tax operational has potential not to there for as that benefit, We approach out point valuation us an to that seize transaction. think has can. synergy whether necessarily that Our we a asset or gains it we to to That’s sizeable sense for you’re the bring can with synergies us through think that

in your could And That’s Great. you I Columbia, impact lumber the moves old overall have that on, we’ve government growth wanted province. Thanks, on the Remi. helpful. to British What thoughts of logging some do seen market? get in the restrict the to parts think

Yes.

So, we BC, don’t operate Hamir. in

fiber. an some of you where industry, So key you availability as seaboard visibility I the we I’m we how in the one if where Canada, on an availability. we cost there. that in think mean, Quebec fiber that trend about industry fiber particular availability eastern on is fiber the on and good that things on the particularly in the things not operate, Ontario is develop as tell would have. industry higher read challenges for the in I I But BC. an pretty limiting we potentially have about expert of have

be the peak. the have to the last compared also prices peak, Canadian trough the add to and probably would in think I we've costs years fiber was XX I between And higher is where if before since trough the the the those could costs points will think access that into which on the fiber fiber think I an you in where about fiber – I or would into ultimately get calls impact prices. way availability that it question I And So is look reflected reduces seems trended, – difference come to have will to at say off key think anything that it.

me, I'll it Thanks. turn all over. Thanks had. that’s I enough. for Fair

Thanks

Capital comes from ahead. Paul Quinn [Operator RBC from Instructions] Markets. Please next go question Your

open. is line Your

the QX just Good I'm as much. you're QX. kind side, guys, for very on paper the to maybe to it guidance, start momentum thanks continue looks like in I'll of the morning curious guiding Yes,

a that higher is So which decline? a traditionally seasonal QX is anticipating

are conditions very we QX. for right Well, price expecting in actually now. The gains very, tight paper, Paul, in are

out has what not capacity recovery, demand much last I in to is capacity we've as economy been come and down the as come has the seen that has path think the the have. year on as

pushing some against and tight So that's up. seeing supply demand we're a fairly pull prices

to that yes, higher the factors. remind your QX. question in is think point and So tend I'll prices I see higher of we costs for us, QX this seasonal be

there particularly in may higher chemicals So environment inflationary and will well, this higher energy are costs we've freight while bit see a as and higher. be prices, where prices little also

Okay.

at and the cost offset day, So of the the the end are be the dollar? and by gains going higher Canadian pricing in increase to

I the well that price think could longer. but be that hoping QX very sticky for be I'm for case will

production Okay. the quarters, shuts holiday the lumber, is again because shipments a is just Keep crossed. QX, over switching fingers to you slightly Christmas? those despite that in less shuts, overall harder there's mentioned Maybe which higher in generally

though Well, $XX downtime, projects, by we did so a what we mentioned, of our shipments we're accommodation And QX, QX. thinking that also million list vacation reduce capital is Paul against availability. in workforce some the result as about and

So when we up. go to shipments our compared expect to QX,

back since summer place was kind this a seen One store. a to the box of out on that very of the we our shipments well, the But I box to, would summer the that the quietest we've things is pre-pandemic stores say of to has that joking this increased is levels. trough reality afternoon, Saturday big that hang were

south remodel So have up weather the you in the the home I around building, not which that to we and as by repaired, also continued to think that strength affected with. speaks put is and

in really get come shifting starting over How the months? to that'll then you we're significantly pulp resonate just be next bad world. over XX other and the to I And pulp, China six pricing think down mean, will of to parts to do Okay. seeing markets to

end in is Having downward said order their price. XX% I in the see XX% of pressure. months user correct. book, of downtime couple You're is destocking in last no, the and our own the what's has market mean, we what America. been is which pressure putting Yes, North growing and that, pulp I is ultimately mean, on China there

I that factors think The the see the me the is balance between North quarter, there's higher lower a logistics for it. in think outages demand I is don't are that in or about. that printing that and the couple see, maintenance reality especially that's I we're constrained. we in those demand deferred an Paul, And into know two. whether the clear also we in fourth to destroyed. There's writing. environment seasonally is play also One, and not higher tissue where America, China

the there other before producer higher we On increase American capacity. is as see looming inventories, And as pointed Latin in hand, do well. you've the out

I expect fourth expect a the for expectation going we've this don't the don't probably to year. so lose than that I be our we're dollars, lose to So quarter more gains is gained it to couple but far

then QX. in tissue before. EBITDA XXXX, Okay. for sit north we've back Remi, I investment never XXXX, that, suspect I the mean, probably with $XX this seen in onto tissue back that said, look something at an in in profitable later, total more just $XXX it's incredible year And years million we the tissue and invested Sean's following mean, over of is happy million question. you $XXX million. And up we're you four business, back if I

to this is of business get that that capital and you is making back timeline that's you actually if a cost what do think So, can case? the

and a the things I again, happen the pull that Well, integration remind I'll that there's think us. is need for to to advantages couple us

vulnerability the we that have tissue nature the cyclical Pullman. So as of do other perhaps far not producers as might have

So we on can build that.

$XX also million to high that in My goal last set cost have We for watermark. saying the for a wasn't integration, year particularly Calhoun. advantage in

it's build I something need on. we to think

our throughput. opportunities acquired year mentioned the end increasing last facility of I a for at around think diversification really the I of converting portfolio. the then we the converting and us that are improving

And, a of challenging. number a far challenge pickup. us, for a put but as this the Labor big, And that availability big is of as customer not just so people. on to XX% has business lot year reality our it, been logistics, just is pretty is

we over something much have might it's as in business. as have another So which control unfortunately don't we

I that think think the to it's but can indicated I and just business. focusing. And I get we quality and before, upside and EBITDA is of chase. to that go us consistent, won't We mean, think as next So, the I production it's need there, respectable understood keep it is be I Paul year, that for product for the measurable there's to

just to execution and the So it's bring about we just the light need assets. to of driving to keep value

All Best That's had. I all of luck right. Thanks. guys.

Paul, Thanks

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

such Thank to apologize you. the again thank for issue presentation wish today. attending available would of you like the to to you We've like issues consult the slides But to few And within first on call. remind for like to I able always them. to minutes today. like day. that call the technical resolve for we closing, the Okay. the is would our great been In next, with you our download you website we'd a would wish if We

this Thank your gentlemen, and conference Ladies concludes call. for you participation. today's

now may disconnect. You