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CATALYST CUTS UNION DEAL TO LAY OFF 350 WORKERS Newsprint makers remain in turmoil; $18M program hits staff too.

It wasn't a happy Valentines Day in Vancouver, British Columbia, last week, as Catalyst Paper Corp. said that it would lay off 350 workers by the end of the year -- including both staff and union employees -- despite reporting good fourth-quarter and year-end results. The $C21.2 million ($US18 million) "restructuring program" will hit the company's Powell River Mill the hardest, where $C12.9 million ($US11.1 million) has been earmarked for early retirement and severance packages.

Catalyst, the third-largest newsprint supplier on the continent, said that it had cut deals with the unions at Powell River, "providing for workplace flexibility, more effective vacation scheduling, elimination of unpaid leave and changes to apprenticeships." The company said these changes would give it "efficiency improvements" that "are necessary to support future capital investments in the mill."

The company also said on Wednesday that it had named its vice president of strategy, David Smales, as interim chief financial officer. Smales will replace Ralph Leverton, who along with company president Russell Horner, said they would resign last month. The resignations came following a battle started by Third Avenue Capital Management of New York City, which sought to increase its holdings in the company, a move Horner and Leverton opposed. Third Avenue won its battle and the two said they would leave.

All three big newsprint companies -- the other two are Abitibi-Consolidated and Bowater -- are in turmoil, as Abitibi and Bowater said late last month they would merge. All three also released fourth-quarter and year-end results in the last few days; by the numbers:

*Abitibi-Consolidated Inc.: The continent's largest supplier of newsprint continued to be troubled in the fourth quarter 2006: when excluding one-time gains, it would have lost $C61 million ($US52.5 million), or 14 cents per share Canadian (12 cents U.S.), a drop of almost 20 percent when compared to the fourth quarter 2005. As it was, though, the loss was $C22 million ($US18.9 million), or five cents Canadian (3.4 cents U.S.).

Full-year results showed net income at the Montreal-based company of $C54 million ($US46.4 million), or 12 cents Canadian (10.3 cents U.S.), compared to 2005 net loss of $C350 million ($US301 million).

The one-time gains were highlighted by a refund by the U.S. Commerce Department, which returned -- including interest -- $US239 million that had been levied as an import tax for softwood lumber in 2003-2004.

When compared to 2005, newsprint sales for the full year were down 9.9 percent, to $C2.6 billion ($US2.2 billion), and for the quarter were down 7.3 percent, to $C678 million ($US582.7 million).

Abitibi said that the Canadian dollar strengthen 6.8 percent against the U.S. dollar when comparing 2005 and 2006, and was up three percent in the fourth quarter alone. It believed that the exchange rate hit the company for $C221 million ($US18.9 million) for the year and $C34 million ($US29.2 million) for the quarter.

*Bowater Inc.: Though 2006 annual sales eked out a gain -- they were up 3.1 percent, to $3.5 billion -- the net loss gained too, going down 14.7 percent, to $138.3 million, when compared to 2005. Fourth-quarter sales were off 1.7 percent, to $861.3 million, while net income was up from a 2005 loss of $101.9 million to a 2006 gain of $107.2 million.

Losses per diluted share went from eight cents in 2005 to $1.12 in 2005, with a 27-cent gain in fourth quarter 2005 and a 27-cent loss in fourth quarter 2006.

The Greenville, S.C.-based company said that it made $27.1 million in foreign currency changes in the fourth quarter and that it too received a softwood refund from the U.S. government, to the tune of $103.9 million.

Bowater said that fourth-quarter average transaction price was down $3 per metric ton (tonne) when compared to the previous quarter, while costs went up $32 per tonne. Total newsprint shipments were 12 percent lower in the fourth quarter, Bowater said, while inventories dropped 9600 tonnes to 67,900 tonnes.

"Labor issues" shut down the company's South Korea plant in the fourth quarter, but those have been resolved.

*Catalyst Paper Corp.: Looking beyond layoffs and executive musical chairs, the company showed improvement in 2006: annual sales were up 3.2 percent, to $C1.9 billion ($US1.6 billion), with operating earnings showing a gain of $C3.9 million ($US3.4 million), rather than a loss of $C25.1 million ($US21.6 million). While still at a loss, net earnings were up 37.9 percent, to a loss of $C15.9 million ($US13.7 million), and net loss per diluted share was up 41.7 percent, to seven cents Canadian (six cents U.S.).

Newsprint sales were down 1.1 percent, to 699.1 million tonnes, for the year, while the effective foreign currency exchange rate went from $1.239 to $1.146.

Fourth-quarter sales were down 3.2 percent, to $C470.6 million ($US404.6 million) with net earnings off $C37.2 million ($US32 million) as compared to a $C2.5 million ($US2.1 million) gain in the fourth quarter. Newsprint sales volume in the quarter were slightly up at 170.1 million tonnes. The effective foreign exchange rate for the quarter was $C1.139.

The British Columbia company said that 2006 cost per tonne of newsprint was $C649 ($US558) for West Coast delivery, while it was $C600 ($516) in 2005.

What's the old saw? When newspapers sneeze, paper makers catch cold? Well, obviously this has progressed way beyond the common cold and is headed toward pneumonia -- walking pneumonia, but pneumonia nonetheless.
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Publication:NewsInc
Date:Feb 19, 2007
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