Nov. 6 (Bloomberg) -- AbitibiBowater Inc., the world's largest newsprint maker, said its third-quarter loss widened from the previous period because of costs to close mills.

The loss of $302 million, or $5.23 a share, compares with a second-quarter loss of $251 million, or $4.36, Montreal-based AbitibiBowater said in a statement. The company, formed in the October 2007 merger of Abitibi-Consolidated Inc. and Bowater Inc., didn't report comparable results a year earlier. Sales increased 2 percent from the previous quarter to $1.73 billion.

Chief Executive Officer David J. Paterson has raised newsprint prices after shutting some mills amid falling demand. Paterson also is trying to conserve cash while planning to sell $750 million of timberlands and other assets to help refinance more than $600 million of debt due in 2009.

``We're starting to see slowing momentum in newsprint pricing,'' Mike Richmond, an analyst at Salman Partners Inc., said before the results were published. ``The greater challenge for AbiBow now is selling assets in this gloomy economic environment.''

The third-quarter loss, excluding one-time items, was $1.81 a share, the company said. That matched the average estimate in a Bloomberg survey of 17 analysts.

AbitibiBowater rose 16 cents, or 8.5 percent, to $2.05 yesterday in New York Stock Exchange composite trading. The shares still have declined 90 percent this year because of investor concern the company may not be able to meet its debt obligations.

Available Cash

The amount of cash on AbitibiBowater's balance sheet fell to $295 million at the end of the third quarter, the company said. That compares with cash of $341 million in the second quarter, according to an Aug. 11 regulatory filing.

AbitibiBowater is trying to sell assets including some timberlands in Canada and the U.S. as well as facilities in Fort William, Ontario; Lufkin, Texas; West Tacoma, Washington; and Mokpo, South Korea.

``Given the significant decline of the Canadian dollar and rapidly declining input costs related to recycled fiber and energy, we expect a significant improvement in our financial results in the fourth quarter,'' Paterson said today in the statement.

North American newsprint producers including AbitibiBowater raised prices on average by 37 percent to $765 a metric ton in the past year while reducing production capacity, according to research published this week by RBC Capital Markets.

Falling Demand

Newsprint consumption in North America is declining as publishers seek to shave costs by reducing page sizes or using lighter paper amid competition from the Internet for advertising revenue.

Consumption by U.S. daily newspapers fell about 15 percent in September from a year earlier, according to the Montreal-based Pulp and Paper Products Council, an industry umbrella group.

``Based on customer input, we expect a further decline in North American newsprint consumption,'' Paterson said in the statement. ``In light of these developments, we plan to reduce capacity in 2009 by taking 50,000 metric tons of downtime monthly.''

(AbitibiBowater scheduled a conference call for 10 a.m. New York time at +1-866-898-9626.)

To contact the reporter on this story: Christopher Donville in Vancouver at cjdonville@bloomberg.net.

Last Updated: November 6, 2008 08:29 EST