Avenor Announces First Quarter Results (Part I of II - Tables to Follow).HULL, Quebec--(BUSINESS WIRE)--April 23, 1996--Avenor Inc. (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. ) announced today lower profits compared with the first quarter of 1995, resulting mainly from a sharp decline in market pulp pricing and significant market-related downtime The time during which a computer is not functioning due to hardware, operating system or application program failure. . The Corporation reported net earnings of $40.2 million or $0.60 per share ($0.56 fully diluted) for the first quarter of 1996 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 sales of $625.4 million. The 1996 operating earnings include a before-tax charge of $15.1 million representing a write-down of pulp inventories to reflect current market pricing. Net earnings for the first quarter of last year amounted to $66.4 million, or $0.99 per share ($0.92 fully diluted) on operating earnings of $164.2 million and sales of $673.0 million. 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 Group reported record earnings in the quarter, however, poor market conditions in the pulp business were the main contributor to the lower operating earnings compared to the same quarter last year. The full impact of the weakness in market pricing for pulp, which occurred during the first quarter, will be felt in the second quarter. It is expected that weak conditions will remain until appropriate producer and end-user inventory corrections are realized. "We will maintain our emphasis on financial discipline and continue to make efforts to reduce our debt," said Paul E. Gagn , President and Chief Executive Officer of Avenor. "The challenge now is to remain focussed on improving manufacturing efficiencies, managing our inventories and keeping costs in line." 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. , total newsprint consumption decreased 10 percent during the quarter while U.S. consumer stocks increased 19 percent. The price increase of 6 percent announced for April 1, 1996 was rescinded. In overseas markets, prices have weakened. The Thunder Bay Thunder Bay, city (1991 pop. 113,946), SW Ont., Canada, on Thunder Bay inlet of Lake Superior. The city was created in 1970 by the amalgamation of the twin cities of Fort William and Port Arthur and two adjoining townships. mill was shut down for seven days during the first quarter. The Newsprint Group reported record first quarter operating earnings of $99.6Emillion on sales of $323.7 million compared with operating earnings of $38.1Emillion on sales of $243.1 million in the first quarter of 1995. The $61.5 million increase in operating earnings compared to the same quarter in 1995 resulted primarily from higher transaction prices. Although overall costs per tonne have remained flat since the fourth quarter of last year, they have increased 8 percent over the first quarter of 1995 due primarily to higher raw material and energy costs. High inventories held by major U.S. publishers and lower consumption will continue to exert pressure on newsprint demand during the second quarter. Avenor will take further downtime to adjust to market conditions and it is anticipated that the Thunder Bay mill will be shut down for four weeks during the second quarter while the Gatineau mill is expected to shut down for two weeks. Pulp Demand for market pulp continued to weaken during the quarter as a result of worldwide paper production curtailment Curtailment The act of contracting or reducing operations of a company in the hope of bringing it financial or operational stability. This management technique is often used when a company has grown too fast and is unable to effectively manage its operations. and high user inventory levels. World pulp producer inventories increased as production curtailment lagged end-user demand. As a result, two market-related shutdowns were taken during the first quarter. The Thunder Bay mill started a four week shutdown on March 7th and the Gold River mill began a five week shutdown on March 24th, to balance production to demand. Prices for Northern Bleached Softwood softwood Timber obtained from coniferous trees (mainly of the pine and fir families). With the exception of bald cypress, tamarack, and larch, softwood trees are evergreens. Kraft (NBSK NBSK Northern-Bleached Softwood Kraft ) declined to USE$520 per tonne effective AprilE1,E1996 for all major markets. For the quarter, the Pulp Group reported 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 $8.8 million on sales of $114.1 million compared with operating earnings of $64.4 million on sales of $243.1Emillion for the first quarter of last year. Lower shipments, lower prices and the $15.1 million inventory write-down contributed to the decline in operating earnings of $73.2 million. Overall costs per tonne, excluding the $15.1 million inventory write-down have decreased 5 percent since the fourth quarter of last year but have risen 13 percent over the same quarter of last year due primarily to higher fibre costs. During the quarter, Avenor concluded two agreements with Aracruz Cellulose S.A. of Brazil. The first agreement promotes the sharing of knowledge and technology between the two companies while in the second agreement, Avenor appointed Aracruz (Europe) S.A. as its exclusive sales representative in Western Europe Western Europe The countries of western Europe, especially those that are allied with the United States and Canada in the North Atlantic Treaty Organization (established 1949 and usually known as NATO). for sales of NBSK produced by Avenor. A reduction of both producer and end-user inventories, coupled with increased end-user consumption will be required to stimulate pricing above current levels. Avenor anticipates more downtime will be necessary through the third quarter. White Paper Lower 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. by producers in response to high inventory levels and falling prices resulted in a substantial 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 inventories during the first quarter. The Dryden mill operated at capacity during the quarter. The White Paper Group reported first quarter operating earnings of $19.4 million on sales of $99.8 million compared with operating earnings of $35.3 million on sales of $105.4 million for the same quarter last year. Although overall costs per tonne for the Group have decreased 5 percent since the fourth quarter of last year; they have increased 13 percent over the first quarter of 1995 as higher fibre costs more than offset cost reductions realized from productivity improvements of 4 percent. The reduction of inventory levels during the first quarter, combined with increasing demand in our markets in the second quarter, are expected to result in improved shipments and higher pricing. Wood Products During the first quarter of 1996, 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 market conditions in Japan improved gradually as stabilization of the yen and the improved economic outlook increased consumer confidence and demand. In the United States, lumber prices and demand have also improved. Domestic sawlog The term sawlog refers to that part of a tree stem that will be processed at a sawmill. This is in contrast to those other parts of the stem that are designated pulpwood. The differences are that sawlogs will be greater in diameter, straighter and have a lower knot frequency. prices have improved since the fourth quarter of last year while prices for pulplogs declined and demand was weak due to high inventory levels and soft pulp markets. Effective January 1, 1996, the Wood Products Group includes the results of Pacific Forest Products Limited as well as the CorporationOs studmill in Dryden, Ontario Dryden (2006 population 8,195) is the second largest city in the Kenora District of Northwestern Ontario, Canada located on Wabigoon Lake. It is currently the smallest community in the province of Ontario designated as a city. and Manifor, a wholly- owned subsidiary, which owns a sawmilling complex in Maniwaki, Quebec Maniwaki is a town north of Gatineau and located north-west of Montreal, Quebec, Canada. . The Wood Products Group reported operating earnings of $3.6 million for the quarter on sales of $89.2 million compared to operating earnings of $32.4 million on sales of $110.2 million for the corresponding period last year. At the operating level, Pacific Forest Products Limited, a 53 percent-owned subsidiary of Avenor contributed $2.4Emillion of earnings for the first quarter of 1996 compared to $31.1 million for the same quarter last year. The Japanese lumber market is expected to continue its improvement over the balance of 1996 with steady demand and firmer prices. Moderate to strong demand for sawlogs is anticipated with corresponding price increases in an improved lumber market. Demand and pricing for pulplogs is expected to remain weak. During the quarter, the Corporation withdrew its offer to purchase all of the outstanding common shares of Pacific Forest Products Limited given that the condition of acquiring 90 percent of the outstanding common shares, excluding those already owned by Avenor and its affiliates, was not met. Financing Activities In the quarter, the Board of Directors authorized au·thor·ize tr.v. au·thor·ized, au·thor·iz·ing, au·thor·iz·es 1. To grant authority or power to. 2. To give permission for; sanction: a $100 million increase, to $500Emillion, in the funding limit for the segregated account which is dedicated to debt reduction. The Corporation transferred funds of $125 million to this account during the quarter and will transfer an additional $75 million over the balance of the year. As at March 31, 1996, the account had a cash balance of $394.3 million. In January 1996 the Montr al and Toronto Stock Exchanges Toronto Stock Exchange (TSE) Canada's largest stock exchange, trading approximately 1,200 company stocks and 33 options. approved the CorporationOs application, through a normal course issuer bid, to purchase on the open market between January 31, 1996 and January 30, 1997, up to four million common shares subject to a maximum aggregate consideration cost of $100 million. During the quarter, Avenor repurchased and cancelled 980,700 shares at an average price of $20.40 for an aggregate consideration of $20 million. Avenor will continue to repurchase shares under this program as financial and market conditions permit. Officers The Board of Directors has announced the appointment of one new officer to Avenor. Marie-Chantal Savoy has been appointed Vice- President and Chief Information Officer. This appointment is effective immediately. Dividends A dividend of $0.12 per share payable on June 28 1996 to shareholders of record on June 7 1996 was declared by the Board of Directors at a meeting held on April 23, 1996. CONTACT: Avenor Inc. Denis Denis, king of Portugal: see Diniz. Aubin, 514/846-5129 Emmanuelle Collin, 514/846-5061 Dominique Dionne, 514/846-5061 |
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