Resolute reports $268M net income in Q2 2021
By Resolute Forest Products
By Resolute Forest Products
Resolute Forest Products Inc. today reported net income of $268 million, or $3.34 per diluted share, for the quarter ended June 30, compared to net income of $6 million, or $0.07 per diluted share, in the same period in 2020. Sales were $1,140 million in the quarter, an increase of $528 million from the year-ago period. Excluding special items, the company reported net income of $300 million, or $3.74 per diluted share, compared to a net loss of $22 million, or $0.25 per share, in the second quarter of 2020.
“With benchmark prices reaching record highs in May and our best-ever quarterly shipments, we used the exceptional cash generation from our wood products segment to make lasting changes to our business and increase value for our shareholders,” said Remi G. Lalonde, president and chief executive officer of Resolute. “We reduced debt by $180 million to our target of $300 million, declared a special dividend of $79 million payable in the third quarter, normalized capital spending and announced an additional $50 million of high-return, quick payback projects to further strengthen our wood products business. We also saw a sharp recovery in market pulp prices following the pandemic-induced dip and an encouraging shift toward tighter conditions in paper markets. With more than $1 billion in available liquidity at quarter-end, we are in a great position to pursue our transformation while remaining disciplined with our capital allocation.”
Quarterly operating income – consolidated
The company reported operating income of $406 million in the quarter, compared to $177 million in the first quarter of 2021. The $229 million improvement reflects higher realized prices in the wood products, pulp and paper segments ($211 million), higher shipments in wood products ($43 million) and lower selling, general and administrative expenses ($10 million). The results were unfavourably affected by higher stumpage fee-driven input costs ($19 million) in the wood products segment, higher freight costs ($7 million) and the impact of the stronger Canadian dollar ($7 million).
Segment operating income – wood products
The wood products segment generated operating income of $405 million in the quarter, an increase of $184 million from the previous quarter. Supported by strong lumber demand, the average transaction price rose to $1,156 per thousand board feet, a $282 per thousand board feet, or 32 per cent, improvement from the previous quarter. Shipments were 83 million board feet higher, reaching 575 million, and finished goods inventory dropped to 124 million board feet. The operating cost per unit (or, the “delivered cost”) increased by $30 per thousand board feet, or seven per cent, mostly as a result of higher stumpage fees and freight costs, partially offset by a variable compensation provision in the previous quarter. EBITDA in the segment improved by $183 million, to $415 million.
“Although benchmark lumber prices have come down significantly in recent weeks and remain volatile, we are confident in the underlying business fundamentals. We believe in our wood products business for the long term, with the segment representing a key pillar of our ongoing transformation. We look for the favourable pulp momentum to carry into Q3 with higher realized prices, and for stronger shipments. As conditions stabilize for paper, the price recovery should continue, which will support our cash generation strategy for this business segment. We expect a return to normal demand trends in the coming months in tissue, once the inventory rebalancing that affected the industry in the first half of the year passes. We are committed to maintain a balanced approach to capital allocation, using our free cash flow to generate value for shareholders, to build a stronger company and to drive sustainable economic activity in the communities where we operate,” said Lalonde.