Tag Archives: Tembec

Tembec has posted a net loss of $14 million in its March 2012 quarter compared to net earnings of $6 million in the March 2011 quarter.

Consolidated sales were $407 million, as compared to $452 million in the comparable period of the prior year.

Business Segment Results

The Specialty Cellulose and Chemical Pulp segment generated adjusted EBITDA of $31 million on sales of $176 million for the quarter ended March 24, 2012, compared to adjusted EBITDA of $27 million on sales of $152 million in the prior quarter. Sales increased by $24 million primarily as a result of higher shipments.

The specialty cellulose market conditions remained favourable. A decrease in commodity viscose grade prices was offset by an increase in specialty grades. Currency was a negative factor for the Canadian mill as the Canadian dollar averaged US $0.998, a 2.1% increase from US $0.977 in the prior quarter. Currency also reduced reported sales of the French mill by $84 per tonne as the euro was 5% weaker versus the Canadian dollar. Overall, pricing was relatively unchanged quarter-over-quarter. Specialty cellulose shipments were equal to 89% of capacity as compared to 79% in the prior quarter. The relatively low level of shipments in the December 2011 quarter was due to unplanned equipment downtime at the two specialty cellulose facilities. Total cash costs were relatively unchanged quarter-over-quarter. Adjusted EBITDA increased by $2 million, primarily as a result of the previously noted increase in shipments.

The market conditions for Northern Bleached Softwood Kraft (NBSK) pulp weakened during the quarter. The benchmark price (delivered China) declined by US $26 per tonne. Combined with a stronger Canadian dollar and a lower sales mix factor, the total effect was a reduction in adjusted EBITDA of $6 million or $95 per tonne. NBSK shipments were equal to 94% of capacity as compared to 55% in the prior quarter. During the December 2011 quarter, Tembec had taken 17 days of maintenance downtime in relation to the annual mill-wide shutdown of its NBSK mill, removing approximately 12,200 tonnes of production. The mill ran “full” in the March quarter and total cash costs were reduced by $7 million. Combined with higher shipments, adjusted EBITDA increased by $2 million.

The Paper segment generated adjusted EBITDA of $4 million on sales of $79 million for the quarter ended March 24, 2012, compared to adjusted EBITDA of $10 million on sales of $85 million in the prior quarter. Lower coated bleached board prices and newsprint shipments caused the $6 million reduction in sales. In terms of markets, coated bleached board weakened while newsprint remained stable despite continued weaker North American demand statistics. The US $ reference prices for coated bleached board declined by US $20 per short ton, while the reference price for newsprint was unchanged. The stronger Canadian dollar was a negative factor. The combined effect was a decrease in adjusted EBITDA of $3 million. Coated bleached board shipments were equal to 86% of capacity as compared to 87% in the prior quarter. The shipment to capacity percentage for newsprint was 85%, compared to 94% in the prior quarter. The weaker coated bleached board market conditions led to 1,200 tonnes of market related downtime in the most recent quarter. Mill level costs were relatively unchanged quarter-over-quarter.

The High-Yield Pulp segment generated negative adjusted EBITDA of $16 million on sales of $77 million for the quarter ended March 24, 2012, compared to negative adjusted EBITDA of $9 million on sales of $74 million in the prior quarter. Sales increased by $3 million, with higher shipments partially offset by lower selling prices. Market conditions for high-yield pulp remained weak in the most recent quarter. The US $ reference prices for bleached eucalyptus kraft (BEK) increased over the prior quarter by US $58 per tonne. However, the increase did not carry over to high-yield pulp as price compression had occurred in the prior quarter and the BEK increase only served to re-establish the normal differential in pricing. Currency was a negative factor as the Canadian dollar strengthened versus the US dollar. High-yield pulp prices declined by $40 per tonne, decreasing adjusted EBITDA by $6 million. High-yield pulp shipments were equal to 74% of capacity as compared to 65% in the prior quarter. Faced with continued weak market conditions, Tembec reduced production to control inventory levels. During the most recent quarter, 9,300 tonnes of production were removed due to market downtime compared to 18,100 tonnes in the prior quarter. Total costs were relatively unchanged quarter-over-quarter. In the March 2012 quarter, the lower selling prices led to a $4 million charge relating to the reduction in carrying values of raw materials and finished goods inventories as they exceeded their estimated net realizable values. A $4 million charge was also recorded in the prior quarter. At the end of March 2012, the segment had accumulated $9 million of net realizable value reserves. Based on announced price increases, it is anticipated that the majority of these reserves will be reversed in the next two quarters.

The Forest Products segment generated negative adjusted EBITDA of $11 million on sales of $112 million for the quarter ended March 24, 2012, compared to negative adjusted EBITDA of $11 million on sales of $126 million in the prior quarter. The sale of the hardwood flooring operations in November 2011 reduced sales by $9 million. Lower shipments of SPF lumber were partially offset by higher lumber prices. Demand for SPF lumber remained relatively weak with shipments equal to 58% of capacity, as compared to 64% in the prior quarter. US $ reference prices for random lumber increased by US $31 per mbf on average while stud lumber increased by US $24 per mbf. Currency was a negative factor as the Canadian dollar increased versus the US dollar. The net price effect was an increase in adjusted EBITDA of $3 million or $13 per mbf. Costs increased by $3 million, primarily in the Eastern sawmills, which produced 11% less lumber. Adjusted EBITDA was unchanged quarter-over-quarter.

Outlook

The March 2012 quarterly results were lower than anticipated. While the relatively weak paper pulp markets were expected to reduce adjusted EBITDA, a stronger Canadian dollar was not in the forecast. As a result of the combined impact, Tembec absorbed a $15 million decrease in adjusted EBITDA related to the selling prices of paper pulp and paper products. The current quarter adjusted EBITDA also absorbed a charge of $4 million relating to a net realizable value adjustment on high-yield pulp inventories. Looking ahead, markets for specialty cellulose remain strong except for the viscose grades, where new supply is leading to lower prices. Tembec’s strategy of focusing on specialty grades has proven to be the right one. Based on announced price increases for paper pulp, the March quarter will likely represent “the trough” for the NBSK and high-yield pulp mills in terms of pricing. While the anticipated seasonal increase in lumber prices did occur in the latter part of the recent quarter, it was not as pronounced as in prior years. This is not viewed as a completely negative development as the reduced price volatility may lead to more stable pricing in the next several quarters. Markets for coated bleached board and newsprint remain relatively stable and we do not anticipate much change in the near term. Tembec has recently disclosed a relatively large scale capital expenditure program, with a strong emphasis on its two specialty cellulose pulp mills. The cornerstone of the program is a $190 million cogeneration plant to be constructed at the Temiscaming, Quebec, site that is scheduled to start-up in December 2013. The project will materially improve the mill’s cost structure and margins. During the quarter, the purchase power agreement with Hydro-Quebec was finalized and $75 million of project financing was put in place. At the end of the March quarter, Tembec also completed the sale of its two B.C. sawmills for proceeds of $66 million. These monies, along with the US $50 million raised through the issuance of additional senior notes, constitute the bulk of the funding required for Tembec’s capital expenditure program.

Source: Tembec

Tembec reached an agreement with its employees from its Kapuskasing, Ontario newsprint mill, sawmill and forest operations.

Tembec employs 582 employees in Kapuskasing – 498 of which are unionized.

This collective agreement covers a 5-year contract that will expire in April 2017. “This agreement would not have been achieved without the support and hard work from all Local union leaderships, as well as those at the National and International levels,” stated Marc Tremblay, Tembec Chief Negotiator.

The Vote

CEP Local 256 voted 95.7% and local 89 voted 96.4% in favour of the company’s proposal.

Tembec resumed operations at 9pm Wednesday night.

Sources:
Tembec Press Release
Tembec Deal Reached (MooseFM)

CEP Locals 256 and 89 have reached a tentative agreement with Tembec at the Spruce Falls mill in Kapuskasing, Ontario.

The union executives are recommending to their members that they accept the offer.

Members are being urged to attend a special meeting today April 25th at 4:00 pm at the Knights of Columbus Hall for information on the agreement and to vote on the agreement.

Source: Tentative Agreement Reached with Tembec (Moose FM)

Tembec and its unions are using a mediator to help resolve the labour dispute at its Spruce Falls mill in Kapuskasing, Ontario.

Strike action has been delayed for 48 hours, until April 26 at 6pm.

2 of 5 unions working at the mill have rejected the last contract offer. The CEP locals representing workers inside the mill have rejected the contract. Forest workers and office workers were among the unions to accept the new 5-year contract that includes a wage freeze.

Sources:
L’usine Tembec de Kapuskasing recourt à la médiation (Radio-Canada)
The Northern Times on Facebook (Facebook)
Tembec Strike Extension (Moose FM)
Usine Tembec à Kapuskasing: les différents partis bénéficient de temps supplémentaire pour s’entendre (CKGN)

There are mixed reports coming out of Kapuskasing, Ontario this afternoon. There are been reports the workers at Tembec have been locked out, but the local media is saying there is no lock out at this time.

2 of 5 unions rejected Tembec’s latest contract offer over the weekend.

One report indicates that the machines are being shut down today, and that employees were sent home at noon due to concern that the stressful atmosphere in the mill could lead to unsafe work conditions.

A strike could occur as soon as 9pm tomorrow (Tuesday).

According to CKGN.ca, 9 out of 10 union locals of the Tembec mill in Kapuskasing, Ontario voted yesterday in favour of strike action.

The unions are upset that they will once again be forced to make concessions.

The workers will be able to strike on April 19.

Source:
Usine Tembec à Kapuskasing: une grève pourrait être déclenchée au cours de prochaines semaines (CKGN)

Canfor has completed the acquisition of the Tembec Industries Ltd. southern British Columbia interior wood products assets consisting of the Elko and Canal Flats sawmills and approximately 1.1 million cubic metres of combined Crown, private land and contract annual allowable cut.

The transaction includes a long term residual fibre supply agreement for Tembec’s Skookumchuck mill.

“Canfor is pleased to welcome the former Tembec employees into the Canfor family and is looking forward to continuing the development of strong community and First Nations relationships,” said Don Kayne, President and CEO of Canfor. “This acquisition strengthens Canfor’s fibre position in BC while meeting the increasing needs of our highly valued global customers,” said Mr. Kayne.

The additional sawmill production will add approximately 420 million board feet to Canfor’s annual capacity bringing Canfor’s total capacity to more than 5 billion board feet. Canfor intends to make capital investments in excess of $50 million in the southern BC mill facilities over the next few years.

Source: Canfor

Tembec has announced a $190 million capital investment to upgrade its specialty cellulose manufacturing facility at Temiscaming, Québec.

This investment will increase annual production of green electricity by up to 40 megawatts, reduce sulfur dioxide emissions by 70%, increase Temiscaming’s annual production capacity of specialty cellulose by 5,000 metric tonnes, and make Temiscaming one of the world’s lowest-cost specialty cellulose manufacturing facilities.

This project is the first phase of a two-phase investment plan for the facility. It will involve the replacement of three old boilers with a new high-pressure boiler designed to burn waste sulfite liquor, a co-product of the specialty cellulose manufacturing process, producing green steam for use at the facility. The project also calls for the installation of a new electricity turbine that will be driven by this steam. The turbine will increase the Temiscaming facility’s green electricity production capacity from its current 10 megawatts to, eventually, 60 megawatts. The boiler is scheduled to start up in December 2013, followed by the turbine, in May 2014.

Hydro-Québec will offtake the additional green electricity produced by this turbine under a 25-year contract at $106 MW/hour, indexed with CPI, which will strengthen and stabilize Tembec’s revenues through the economic cycle.

The $190-million investment in Phase 1 will be financed with $105 million of new debt, which includes a $75-million loan from Investissement Québec; the balance of $85 million will come from free cash flow from Tembec operations.

“This game-changing project for Tembec will make Temiscaming one of the most competitive mills in the global pulp and paper market. I want to acknowledge the critical support of the Québec Government, through Investissement Québec, and the continuing commitment of our employees to remaining competitive,” stated James Lopez, Tembec’s President and Chief Executive Officer.

“This exciting project shows Québec’s commitment to supporting its regional resource-based industries, and helping them compete on the world stage. By working together proactively with local governments and Investissement Québec, we are pleased to reinforce Tembec’s leadership position in specialty cellulose, a growing and sustainable industry,” stated Québec Premier Jean Charest.

Once the new equipment is in operation, Tembec expects a four-year return on investment, through new revenues from green electricity, the additional production of 5,000 metric tonnes of specialty cellulose and lower costs. Tembec’s management expects the project will reach an annual run-rate EBITDA (earnings before interest, taxes, depreciation and amortization) contribution of approximately $40—$45 million by fiscal year 2015 assuming implementation as scheduled and planned.

The new boiler, turbine and emission control equipment will be sized to accommodate Phase 2 of the project, a follow-on investment of $120 million which is currently projected for 2014- 2015, Phase 2 would increase Temiscaming’s annual specialty cellulose production capacity by 30,000 metric tonnes, boost green electricity generation by 10 megawatts to attain full turbine capacity, and further reduce operating costs.

Tembec is the world’s second leading producer of specialty cellulose

Refined from wood pulp, specialty cellulose is a component of products in the pharmaceuticals, food, cosmetics, personal care, construction and electronics industries, among others. It is a high margin business, growing in the range of 4% to 5% per year, and enjoys more stable demand than forest product commodities.

Tembec’s combined investment of $310 million in the Temiscaming specialty cellulose facility – $190 million in Phase 1, and $120 million in Phase 2 – will be one of the largest in the forest products industry in many years. It will further reinforce Tembec’s position as the world’s second leading producer of specialty cellulose.

The overall project will increase Tembec’s annual production capacity of specialty cellulose from the current 310,000 metric tonnes to 345,000 metric tonnes. The Temiscaming facility’s production capacity will increase from the current 160,000 metric tonnes to 195,000 metric tonnes. Tembec’s Tartas, France, specialty cellulose facility has a current production capacity of 150,000 metric tonnes.

Tembec’s new 25-year power contract with Hydro-Québec

Tembec’s limited partnership, Tembec Energy L.P., has entered into a long-term power purchase contract with Hydro-Québec acting through its Hydro-Québec Distribution division. The agreement will allow Tembec to sell to Hydro-Québec, for a 25-year term, up to 50 megawatts of the electricity generated by a new turbine to be installed at its Temiscaming mill at green energy rates of $106 MW/hour, indexed with CPI.

Tembec’s loan agreement with Investissement Québec

In connection with the project, Tembec has also entered into a $75-million loan with Investissement Québec, a governmental agency, which will be used to finance a portion of the total cost of the project which is currently estimated at $190 million. The loan bears interest at a rate of 5.5% compounded yearly and is secured by a second priority charge over the project’s assets. The loan shall be reimbursed in equal monthly payments over a period of 12 years starting 36 months after the initial loan disbursement and is subject to compliance with certain covenants and undertakings customary with such types of loans. Under this loan, Tembec has also agreed to grant to Investissement Québec a five-year option to purchase three million common shares of Tembec at a price of $7 per share.

Source: Tembec

A letter from the ForestTalk inbox:

There is a big hole in my heart and I can’t get the mill closer off my mind. I worked at the Pine Falls mill for 32 years. The things that bother me the most is how this process was done and why it happened this way.

1. Tembec was totally the worst company to come in and buy the mill off the employees. They literally destroyed the relationship between the communities of Powerview and Pine Falls Manitoba.
2. On September 2nd of 2009 Tembec shut the doors and totally blamed it on wages and market conditions. We all know that this is not true.
3. The Union had asked Tembec to allow the boiler house employees to go in and run the boilers for heating the mill in the winter while the negotiations were going on. Tembec refused and hired a propane company hook up some heaters. That was no were near enough heat and there for the floors froze and frost heaved the floors making this impossible to ever start up again.
4. I would like to know the statistics on how long after initial close, it took other mill Owner’s to dismantle the property. Tembec made this mill impossible to start up within weeks of the shutdown to ever start up again.
5. I am upset with the Manitoba government for not stepping in and throwing Tembec out of Manitoba. Just like Newfoundland did to Abitibi Price.
6. How was the Manitoba government supposed to know what was going on. They probably felt that the market conditions was to blame. I am part to blame because I know that we had orders. In August of 09 we ran 3 special order to try and get in the press rooms of Rocky Mountain and Minneapolis, but I can’t remember the third press room. As I recall we did very well and was awarded those order. The next week we were shutdown and all of our orders went to Kapaskasing Ont.
7. We had 3 men in Tembec’s organization in the Sales and Marketing Department. Out of these three men, not one came forward and said that we need to get this mill back and continue making paper. Tembec still has all but one still on the payroll. You have to ask yourself, did they do right by letting their birthplace die.
8. The mill Manager at the time, was born and raised the Pine Falls. He is now Assistant mill Manager in Kapaskasing Ont. He was the one that was in the biggest hurry to put the recking ball to the mill. ( another hometown boy )
9. In the end of all of this, myself and 75% of the employees lost 300 plus thousand dollars in pension.
10. If I can salvage anything out of this is, please evaluate all situations and don’t rely on somebody else’s word. Make the Government accountable.

Denis Cyr
Stock prep-beater engineer

Tembec has posted a net loss of $16 million on sales of $401 million in its first quarter, ending on December 24, 2011.

For comparison, in the same quarter of 2010, the company reported a net loss of $11 million on sales of $422 million.

Tembec said its quarterly results were lower than anticipated due to relatively weak pulp markets that led to high-yield pulp production curtailments.

The company feels that the prices of paper have received their cyclical low and they anticipate recovery of paper pricing in the coming quarters. Tembec said the specialty cellulose pulp market is strong, and they anticipate higher pricing in 2012.

Tembec’s forest products segment is continuing to deal with a sluggish demand from the U.S. for lumber.

Tembec has recently disclosed a relatively large scale capital expenditure program, with a strong emphasis on its two specialty cellulose pulp mills. The cornerstone of the program is a $190 million cogeneration plant to be constructed at the Temiscaming, Quebec, site that will require two years to complete. The project will materially improve the mill’s cost structure and margins. The company expects to finalize all required agreements in order to proceed with the project in the March 2012 quarter.

Recently Tembec announced the sale of its two B.C. sawmills for proceeds of $60 million, subject to working capital adjustments. The transaction is expected to close at the end of the March 2012 quarter.

Source: Tembec (view release)