By: E&P Staff
Catalyst Paper Corp., Richmond, British Columbia, named director Benjamin Duster IV as chairman, succeeding Michel Desbiens, who retired. It also announced the closing of its Elk Falls paper mill and Coquitlam paper-recycling operation, and reported a net loss of $368.4 million (Canadian) on second-quarter sales of C$299.4 million, partly resulting from the facilities’ closure costs.
Catalyst Paper Corp., Richmond, British Columbia, announced departures of two directors, including the board chairman, both of whom joined the maker of specialty printing papers, newsprint and pulp in 2006.
Michel Desbiens, a 40-year veteran of the forest products industry has retired after serving as chairman since 2007. He is succeeded by former Algoma Steel Chairman Benjamin Duster IV, who also joined Catalyst’s board in 2006 with 20 years of Wall Street experience. The graduate of Harvard Business and Harvard Law Schools practices law in Illinois and is a director on several other boards, including that of Jazz Air Holding GP Inc.
“Catalyst Paper has weathered one of the most challenging periods in the industry’s history by focusing on operating and financial fundamentals over the past four years,” Desbiens said in a statement. “It was my pleasure to preside over board matters and to work with my fellow directors during this period of accelerated change.”
Also leaving the board, Amit Wadhwaney of Third Avenue Management LLC brought forest industry experience and a global equities focus as portfolio manager and senior research analyst for the Third Avenue International Value Fund and for Third Avenue’s private and institutional advisory business.
Catalyst Paper’s five mills in British Columbia and Arizona have a combined annual production capacity of 2.5 million tons. The company earlier announced its will permanently close its Elk Falls mill on Vancouver Island in September, reducing annual capacity to 2 million tons. The mill’s production had been curtailed, however, since February of 2009, and its newsprint machine was idle since 2007, owing to fiber shortages and a strike. At its peak, the almost-60-year-old mill produced 784,000 tons of pulp, paper and kraft paper annually.
Catalyst also announced the permanent closing of its Coquitlam, B.C., paper-recycling operation, which supplied the company’s Crofton mill, where a one machine was indefinitely idled and others were switched from newsprint to other paper grades. The company had indefinitely idled the Coquitlam facility in February, citing reduced recycled pulp requirements and the higher cost and lower availability of quality recovered paper.
Regarded as high-cost operations, the two sites were shuttered because “modest market recovery will not be enough to stem our losses,” recently appointed President Kevin J. Clarke said in a statement accompanying the company’s second-quarter earnings report.
Catalyst showed a net loss of $368.4 million (Canadian) on second-quarter sales of C$299.4 million, partly resulting from the facilities’ closure costs. Also contributing was a C$221.3 million after-tax foreign-exchange loss on translation of long-term debt.
Earnings before interest, taxes, depreciation and amortization and impairment charges were negative C$0.4 million, compared with negative C$16.2 million in the first quarter — improvement reflecting modest paper price recovery, higher sales volumes and higher pulp prices but offset by labor and other input costs and the higher Canadian dollar. EBITDA before specific items was positive C$10.5 million in the second quarter compared to negative C$2.1 million in the first quarter.
Catalyst reported overall improvement in North American paper markets “as demand stabilized, exports stayed strong and inventories remained low.” It noted that while newsprint demand was flat, Canadian demand was up over the second-quarter 2009 level.
It expects continuing “modest improvements” for the balance of the year, with a seasonally strong third quarter. But with a strong Canadian dollar and input costs rising, the company cautioned that “cash flows and net earnings will remain under pressure.”
During the quarter, Catalyst closed private placement of US$110 million of Class B, 11% senior secured notes due Dec. 15, 2016 at an offering price of 86% of the principal amount. Net proceeds were C$93.4 million after financing costs of approximately C$5.0 million. At quarter-end, US$35.5 million of 8.625% senior notes due June 2011 were reclassified from long-term debt to current liabilities.