Paper Maker Resolute Tumbles After Lower Prices Worsen Loss

  • Forest products have `not been spared' from commodity downturn
  • Raising North American newsprint prices first time in 6 years

Resolute Forest Products Inc., a Canadian pulp and paper producer, plunged the most in at least five years after posting a wider-than-expected fourth-quarter loss following a decline in lumber and newsprint prices.

"The forest products industry has not been spared from the cyclical downturn in global commodities,” Chief Executive Officer Richard Garneau said in a statementThursday.

The Montreal-based company’s net loss widened to $2.39 a share from $1.15 a year earlier. Excluding one-time items, the loss was 29 cents, compared with the 13-cent average of four analysts’ estimates compiled by Bloomberg. Sales fell 15 percent to $894 million.

Resolute earlier slid as much as 28 percent and was down 20 percent to C$5.84 at the close in Toronto.

The North American paper and forest products sector trailed the major indexes in 2015 with paper down 7 percent, wood products falling 23 percent and timber sliding 19 percent, as a stronger U.S. dollar shifted trade flows and hurt prices, Bloomberg Intelligence analysts Joshua Zaret and Matthew Hagerty said in a Nov. 17 report.

Raising Prices

Resolute said it will raise the price of newsprint in North America for the first time in six years. Current transaction prices, "amplified" by weaker global currencies, are so low that they "exaggerate actual market conditions," Garneau said.

KDP Investment Advisors is looking for a significant improvement in earnings in 2017 and 2018 following the company’s expected startup of a tissue manufacturing facility and efficiency gains, analyst Brian Bogart said Thursday in a report. Resolute should benefit from exposure to this market, “which has steadier demand and better growth prospects than the company’s other products,” he said in the report.

"In spite of today’s conditions I want to emphasize we are confident that our asset base and competitive position will see us through this dip in the cycle," Garneau said on a conference call with analysts.

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