Avenor's First Quarter Results Reflect Continuing Low Prices.TORONTO--(BUSINESS WIRE)--April 22, 1997--AVENOR (ME,TSE See Tokyo Stock Exchange. TSE 1. See Tokyo Stock Exchange (TSE). 2. See Toronto Stock Exchange (TSE). AVR (Automatic Voltage Regulation) See voltage regulator. ., NYSE NYSE See: New York Stock Exchange ANR ANR - Automatic Network Routing .) Avenor reported a net loss applicable to common shares for the first quarter of 1997 of $94.9 million, or $1.45 per share. During the quarter, an unusual item of $48.2 million, or $31.3 million after tax, was recorded relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the implementation of a workforce reduction program. Acquisition expenses of $28.0 million, or $22.8 million after tax, were also written off. Excluding these two charges, the net loss applicable to common shares amounted to $40.8 million, or $0.62 per share on an operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. of $19.3 million, before the unusual item, and net sales Net Sales The amount a seller receives from the buyer after costs associated with the sale are deducted. Notes: This amount is calculated by subtracting the following items from gross sales: merchandise returned for credit, allowances for damaged or missing goods, freight of $444.9 million. The total operating loss for the quarter, including the unusual item, amounted to $67.5 million. This compares with net earnings applicable to common shares of $40.3 million, or $0.60 per share ($0.56 fully diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. ) for the corresponding period last year on operating earnings Operating Earnings Profits after subtracting expenses such as marketing, cost of goods sold, administration and general operating costs from revenue. Notes: Tax and interest expenses are not subtracted - operating earnings are synonymous with EBIT (earnings before of $107.6 million and net sales of $577.4 million. Lower pricing, primarily in the newsprint newsprint low grade paper used for newspapers. Old newspapers are fed to cattle as an alternative roughage and may occasionally be ingested by dogs. Significant amounts of lead are accumulated in tissues; no cases of poisoning have been recorded in cattle, though it has been business, as well as the unusual item, contributed to the reduced operating results in the first quarter. Markets, Operations, Outlook Newsprint In the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. , newsprint prices stabilized sta·bi·lize v. sta·bi·lized, sta·bi·liz·ing, sta·bi·liz·es v.tr. 1. To make stable or steadfast. 2. during the first quarter of 1997. A price increase of US$75 per tonne, effective March 1, is currently being implemented. Shipments to overseas markets increased during the quarter, while transaction prices were below fourth quarter levels. The Newsprint Group reported a first quarter operating loss of $16.7 million on net sales of $170.6 million compared to operating earnings of $99.6 million on net sales of $300.2 million for the same quarter last year. Although all newsprint mills posted a favourable cost performance during the quarter, the improvement was more than offset by the impact of lower prices. Newsprint markets in North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. are expected to improve over the remainder of the year. A modest improvement in demand will permit mill inventory levels to return to a more manageable level. Rising newsprint demand in overseas markets, particularly in the Pacific Rim Pacific Rim, term used to describe the nations bordering the Pacific Ocean and the island countries situated in it. In the post–World War II era, the Pacific Rim has become an increasingly important and interconnected economic region. excluding Japan, suggests that North American North American named after North America. North American blastomycosis see North American blastomycosis. North American cattle tick see boophilusannulatus. exports are on track for another year of growth. Pulp Demand for market pulp in North American and European markets remained stable during the quarter. However, high operating rates Operating rate The percentage of total production capacity of a company, industry, or country that is being used. operating rate The portion of capacity at which a business operates. throughout the pulp industry resulted in increased inventories and weaker prices in these markets. For the first quarter, the Pulp Group reported an operating loss of $3.9 million on net sales of $106.1 million compared with an operating loss of $8.8 million on net sales of $104.0 million for the same quarter last year. During the first quarter, the Gold River mill was shut down for 16 days of scheduled maintenance and market-related downtime The time during which a computer is not functioning due to hardware, operating system or application program failure. . Continuing low prices, partly offset by higher shipments and improved productivity, contributed to the operating loss. Continuing strength in global demand for paper, combined with a decline in market pulp inventories during the current quarter, has resulted in Avenor announcing yesterday a price increase to US$580 per tonne for NBSK NBSK Northern-Bleached Softwood Kraft , effective May 1. White Paper Demand for white paper improved in the latter half of the quarter, resulting in a drawdown Drawdown The peak to trough decline during a specific record period of an investment or fund. It is usually quoted as the percentage between the peak to the trough. Notes: of inventory at the user level and healthier mill backlogs. Although the January price increase of US$40 per short ton was rescinded due to seasonally weak demand, a subsequent increase of US$40 to US$60 per short ton, announced for early April, is being implemented. The White Paper Group reported an operating loss of $1.6 million for the quarter on net sales of $71.4 million compared with operating earnings of $19.4 million on net sales of $92.4 million for the same period last year. Lower prices were the main factor leading to the lower operating results. Expected growth in the white paper business in North America during 1997 will support stronger demand and improved prices through the balance of the year. On April 4, 1997, a further price increase of US$20 to US$40 per short ton was announced for early May. Wood Products In Japan, a combination of continuing weakness in the economy, an unstable yen, and a seasonal slow down in lumber lumber, term for timber that has been cut into boards for use as a building material. The major steps in producing lumber involve logging (the felling and preparation of timber for shipment to sawmills), sawing the logs into boards, grading the boards according to consumption led to a softening softening /sof·ten·ing/ (sof´en-ing) malacia. softening a change of consistency, with loss of firmness or hardness. in prices for lumber products during the quarter. In other lumber markets, prices and demand remained stable throughout the quarter. Prices for domestic sawlogs were relatively firm while pulplog prices remained at low levels. The Wood Products Group reported first quarter operating earnings of $11.9 million on net sales of $96.8 million compared to operating earnings of $3.6 million on net sales of $80.8 million for the same quarter last year. Pacific Forest Products Limited, Avenor's 53 percent-owned subsidiary, contributed $11.5 million to the operating earnings of the Group for the quarter, compared to $2.4 million for the same quarter last year. Demand and prices in the Japanese market are expected to soften further during the second quarter before improving in the final half of 1997. In the United States, lumber markets are expected to strengthen with the arrival of the spring construction season. Labour In 1997, two labour agreements covering employees at the pulp mill A pulp mill is a manufacturing facility that converts wood chips or other plant fiber source into a thick fiber board which can be shipped to a paper mill for further processing. in Gold River, British Columbia Gold River is a village located close to the centre of Vancouver Island in British Columbia, Canada. Taking advantage of its deep water and abundant forests, Gold River developed in 1967 as a prototypical logging and pulp & paper industry community. and the sawmill sawmill, installation or facility in which cut logs are sawed into standard-sized boards and timbers. The saws used in such an installation are generally of three types: the circular saw, which consists of a disk with teeth around its edge; the band saw, which at Maniwaki, Quebec Maniwaki is a town north of Gatineau and located north-west of Montreal, Quebec, Canada. , are subject to renewal. Five labour agreements covering employees of Pacific Forest Products Limited's sawmills and logging operations in British Columbia British Columbia, province (2001 pop. 3,907,738), 366,255 sq mi (948,600 sq km), including 6,976 sq mi (18,068 sq km) of water surface, W Canada. Geography will be subject to negotiation during the year. Financing Activities During the quarter, Avenor repaid $78.9 million of long-term debt Long-Term Debt Loans and financial obligations lasting over one year. Notes: For example debts obligations such as bonds and notes which have maturities greater than one year would be considered long-term debt. , of which $62.1 million was transferred from the segregated account. The remaining $16.8 million was repaid by subsidiaries. As of March 31, 1997, the segregated account had a cash balance of $263.7 million. Investing Activities Avenor is investing a total of $61 million for the construction of a new sawmill in Ear Falls, scheduled to start up on September 1, 1997. Construction is proceeding on schedule. Strategic Direction On March 26, 1997, the Corporation announced that its offer to acquire the assets of Repap Enterprises Inc. (excluding Repap British Columbia) did not receive shareholder approval. Avenor will continue to focus on becoming a "Best in Class" company and providing shareholder value through efficient operations, margin improvement, the delivery of quality products to customers and the wise use of capital. As part of its operational excellence initiative, to achieve the productivity and efficiency levels of a "Best in Class" company, Avenor is redesigning its work processes to significantly reduce its cost of production and improve the level of efficiency, safely. As a result, a workforce reduction program of at least 10 percent will be implemented. A voluntary early retirement program has been put in place to ease the transition. The Corporation is proceeding with its plan to sell its 53 percent-owned subsidiary, Pacific Forest Products Limited. During the quarter, Avenor announced the listing of its common stock on the New York Stock Exchange New York Stock Exchange (NYSE) World's largest marketplace for securities. The exchange began as an informal meeting of 24 men in 1792 on what is now Wall Street in New York City. under the symbol ANR. The new listing further demonstrates the Company's commitment to the important U.S. financial market. Dividends The Board of Directors has reinstated the dividend at a quarterly rate of $0.12 per share payable June 30, 1997 to shareholders of record on June 6, 1997. -0-
ADDITIONAL CONSOLIDATED FINANCIAL INFORMATION
STATEMENT OF EARNINGS
First quarter
(unaudited) 3 months ended March 31
(in millions of Canadian dollars,
except per share amounts and
number of shares)
1997 1996
_______ _______
Net sales $444.9 $577.4
Cost of sales 402.3 413.4
Amortization 44.9 40.7
Selling and administrative expenses 17.0 15.7
Unusual item 48.2 --
_______ _______
Operating earnings (loss) (67.5) 107.6
_______ _______
Write-off of acquisition expenses 28.0 --
Interest expense, net 31.4 27.0
Other expense 4.4 6.5
Tax expense (recovery) (37.5) 28.9
Non-controlling interest (0.1) 3.8
_______ _______
Net earnings (loss) (93.7) 41.4
Increase in equity component of
convertible debentures, net of taxes (1.2) (1.1)
_______ _______
Net earnings (loss) applicable to
common shares $(94.9) $40.3
_______ _______
Net earnings (loss) per common share
Basic $(1.45) $0.60
Fully diluted $-- $0.56
_______ _______
Weighted average number of outstanding
common shares (in millions) 65.4 66.9
_______ _______
OTHER
First quarter
(unaudited) 3 months ended March 31
(in millions of Canadian dollars) 1997 1996
______ ______
Cash from operations $ 7.5 $ 99.9
Cash used in investing activities 25.0 53.8
Cash from (used in) financing activities 9.6 (148.8)
Assets 3,294.1 3,601.6
Long-term debt 1,389.3 1,433.8
Shareholders' equity 1,192.8 1,355.5
Ratio of net total debt to
capitalization 46.7 percent 43.3 percent
____________ ____________
ADDITIONAL CONSOLIDATED FINANCIAL INFORMATION
SEGMENTED INFORMATION
SUMMARY OF SHIPMENTS
First quarter
(unaudited) 3 months ended March 31
(in thousands of tonnes) 1997 1996
______ ______
Newsprint 304 307
Pulp 176 134
White paper 77 80
Wood products
Logs (in thousands of m3) 148 213
Lumber (in millions of board feet) 102 87
______ ______
NET SALES
First quarter
(unaudited) 3 months ended March 31
(in millions of Canadian dollars) 1997 1996
_______ _______
Newsprint $170.6 $300.2
Pulp 106.1 104.0
White paper 71.4 92.4
Wood products 96.8 80.8
______ ______
Total $444.9 $577.4
_______ _______
OPERATING EARNINGS (LOSS)
First quarter
(unaudited) 3 months ended March 31
(in millions of Canadian dollars) 1997 1996
_______ _______
Newsprint $(16.7) $99.6
Pulp (3.9) (8.8)
White paper (1.6) 19.4
Wood products 11.9 3.6
Other (0.9) 0.3
Corporate expenses (8.1) (6.5)
Unusual item (48.2) --
_______ _______
Total $(67.5) $107.6
_______ _______
CONTACT: Avenor Inc. Denis Denis, king of Portugal: see Diniz. Aubin, 514/ 846-5061 or Avenor Inc. Dominique Dionne, 514/ 846-5061 or Avenor Inc. Emmanuelle Collin, 514/ 846-5061 |
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