Resolute reports $87M net income in Q1 2021
By Resolute Forest Products
By Resolute Forest Products
Resolute Forest Products Inc. today reported net income for the quarter ended March 31 of $87 million, or $1.06 per diluted share, compared to net loss of $1 million, or $0.01 per share, in the same period in 2020. Sales were $873 million in the quarter, an increase of $184 million from the year-ago period. Excluding special items, the company reported net income of $119 million, or $1.45 per diluted share, compared to a net loss of $29 million, or $0.33 per share, in the first quarter of 2020.
“This has been a very good quarter for our strong and growing wood products business as the lumber tailwind continues,” said Remi G. Lalonde, president and chief executive officer. “We are making good progress with the ramp-up at our El Dorado, Ark., and Ignace, Ont., sawmills, both of which are now running on two-shifts, helping to increase production in favourable markets. Our balance sheet got stronger and our business more competitive this quarter with the timely refinancing and deleveraging of our senior notes, the refresh of our senior secured credit facility and the approximately $30 million in annual free cash flow improvement once the implementation guidance for U.S. pension relief measures take effect. These moves will support our progress as we continue to accelerate our evolution to generate long-term value for shareholders and to drive sustainable economic activity in the communities where we operate.”
During the first quarter, Resolute announced its commitment to reduce absolute greenhouse gas (GHG) emissions by 30 per cent against 2015 levels by 2025. This new target builds on the company’s 83 per cent reduction in absolute GHG emissions from year-2000 levels, two-thirds of which reflect reductions in emission intensity.
Non-GAAP financial measures, such as adjustments for special items and adjusted EBITDA, are explained and reconciled below.
Quarterly operating income
The company reported operating income of $177 million, compared to $4 million in the fourth quarter. The improvement reflects higher selling prices in all segments ($148 million), partially offset by lower overall shipments ($23 million), and a higher share-based and variable compensation provision ($7 million). The company also incurred a charge of $12 million related to a process improvement program to improve the financial performance of the Calhoun, Tenn., operations. The fourth quarter operating results were unfavourably affected by non-cash charges related to the temporary idling of the Baie-Comeau and Amos, Que., newsprint mills ($80 million), which were partially offset by a credit of $10 million under the Canada Emergency Wage Subsidy (CEWS) program. The CEWS credit was based on the significant drop in revenue in the company’s pulp and paper segments as a result of the pandemic.
Segment operating income – wood products
The wood products segment generated operating income of $221 million in the quarter, a $93 million improvement from the fourth quarter, due to a $266 per thousand board foot increase in the average transaction price, or 44 per cent, on strong lumber demand. But shipments fell by 50 million board feet because of seasonal shortage in rail cars and trucks, pushing finished goods inventory up by 46 million board feet, to 143 million board feet. The operating cost per unit (or, the “delivered cost”) rose by $49 per thousand board feet, or 13 per cent, reflecting a higher variable compensation provision, higher fibre costs and the CEWS credits received in the previous quarter. EBITDA in the segment improved by $93 million, to $232 million.
Consolidated quarterly operating income
The company reported operating income of $177 million in the first quarter compared to an operating loss of $8 million in the first quarter of 2020. The improvement reflects stronger market conditions for wood products ($242 million), which was partly offset by: higher manufacturing costs ($36 million) because of higher wood costs and a charge related to a process improvement project; lower shipments in the pulp and paper segments ($11 million); and a higher share-based and variable compensation provision in the quarter ($14 million). At $221 million, adjusted EBITDA in the first quarter was $189 million higher than the first quarter of 2020.
“We see encouraging fundamental indicators to support our growth in the wood products business, with the upward trend in U.S. housing starts, the strength in repair and remodeling activity and our healthy order book. In tissue, we expect pressure on pricing and volume in the second quarter. Building on higher realized prices in the first quarter, we are optimistic for near-term performance improvements in our pulp and paper segments, as we continue to recover from the difficult economic effects of the pandemic,” said Lalonde.