Resolute Forest Products, Inc. (RFP)
Q4 2012 Earnings Call
February 12, 2013, 09:00 am ET
Rémi Lalonde - VP, Investor Relations
Richard Garneau - President & CEO
Jo-Ann Longworth - SVP & CFO
Sean Stewart - TD Newcrest Securities
Bill Hoffman - RBC Capital Markets
Stephen Atkinson - BMO Capital Markets
Tarek Hamid - JP Morgan
Paul Quinn - RBC Capital Markets
Mike Riley - State Street Global Advisors
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Thank you, Wayne. Welcome to Resolute’s fourth quarter earnings call. My name is Rémi Lalonde, Vice President for Investor Relations. I am joined by Richard Garneau, President and Chief Executive Officer and Jo-Ann Longworth, Senior Vice President and Chief Financial Officer. You could follow along with the slides we’ll be using for today’s presentation by logging on to the webcast, using the link in the Presentations and Webcast page under Investor relations section of our website. Slides are also available for download.
Before we begin, I direct your attention to the note forward-looking statements in this morning’s press release and the slides accompanying this presentation. We will discuss forward-looking matters today. Due to uncertainties inherent in these statements, actual results may differ. Our statements are not guarantees of future performance.
You can find additional, financial, and statistical information, including a reconciliation of non-GAAP financial measures in the press release and the slides. We will take questions from analysts and investors following our prepared remarks. We ask that media and others please direct your questions to our communications department following today’s call. Richard?
Good morning and thank you for joining us today. 2012 marked our second full year as a restructured company. It was a year in which we responded aggressively to market challenges. We significantly improved the company’s competitiveness by optimizing the asset base and strengthening out financial position.
Before I review the details of our financial performance, I want to highlight some of the many changes we have accomplished this year. We grew the Pulp segment by adding the three Fibrek mills, one mill in bleached southwood kraft and the two recycle mills representing about 750,000 tons of capacity. This positions us well as a long term player in Pulp since we are now the fourth largest pulp producer in the North America.
We announced a number of projects that will help us grow our woods product business; capacity enhancement in Thunder Bay, Comtois, Senneterre, St-Thomas, La Dore and Girardville; and in addition to the announced restart of the Ignace saw mill and construction of the new Atikokan saw mill. When all completed by mid 2014, these projects will represent 400 million board feet of additional annual production capacity. These projects will help to offset the 150 million board feet of capacity plus as a result of the Oakhill closure with the sale of Mersey assets.
We also invested in power generation. We added 9.5 megawatt of capacity at Saint-Felicien and 28 megawatt at Dolbeau, which were fully operational in December. 65 megawatt of new capacity at Thunder Bay is now only weeks away from production. We will use these facilities to sell power to the grid in addition to the facilities we use only for internal consumption; Calhoun, Catawba, Coosa Pines with Hydro Saguenay and Fort Frances and it gives us an important advantage.
We have made significant progress toward optimizing our paper asset base this year while preserving our ability to generate cash flow. These steps provide for a leaner and more efficient mill network. Here is other few examples. As part of our efforts to manage exposure to export market where the relative trend of the US dollar has created difficult conditions for North American producers, we idled and subsequently sold our Mersey newsprint mill.
We restored a high gloss paper machine in Dolbeau. This machine is of superior quality and the machine was built in 1999. Together, with power generation we are confident that Dolbeau will be an integrated state-of-the-art operation. But given the unmistakable drop in demand for specialty papers and our strategy to focus production on our most productive facilities and machines, we closed higher cost machine and low run in addition to the Kénogami machine closed in late 2011.
We idled a coated paper machine in Catawba to improve overall efficiency and reduce the labor and other manufacturing costs. We independently idled both mill as well as the high bright and book paper machine in Fort Frances and in order to drive better efficiency and lower overall labor costs, we implemented more efficient manning structure at the number of sites. In the fourth quarter, we announced the elimination of 112 positions in Alma, 75 in Clermont and 40 in Thorold. We've also begun discussion at the Saint-Felicien scrap mill to optimize manning and costs.
At the corporate level, we completed the transfer of the remaining corporate function from South Carolina to our Montreal head office and we also absorbed Fibrek and saved $11 million. It is efforts like this that help maintain our low cost SG&A to sales ratio.
On sustainability we continue to advance on our key efforts in the areas of responsible fiber sourcing, carbon footprint reduction, environmental compliance, product stewardship and sustainability disclosure. We became the world’s largest manager of FSC Certified Forests in 2012, with 65% of company-managed forests certified to FSC standards.