Resolute Reports Second Quarter 2022 Results

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  • Q2 GAAP net income of $256 million / $3.29 per diluted share
  • Adjusted EBITDA of $260 million
  • Net cash position at $53 million and liquidity at $1.3 billion at quarter-end
  • GHG emissions reduction targets approved by the Science Based Targets initiative (SBTi)
  • Entered into agreement to be acquired by Paper Excellence Group

MONTRÉAL, Aug. 4, 2022 - Resolute Forest Products Inc. (NYSE: RFP) (TSX: RFP) today reported net income for the quarter ended June 30 of $256 million, or $3.29 per diluted share, compared to net income of $268 million, or $3.34 per diluted share, in the same period in 2021. Sales were $1,058 million in the quarter, a decrease of $82 million from the year-ago period. Excluding special items, the company reported net income of $155 million, or $2.00 per diluted share, compared to net income of $300 million, or $3.74 per diluted share, in the second quarter of 2021.

Non-GAAP financial measures, such as adjustments for special items and adjusted EBITDA, are explained and reconciled below.

Quarterly Operating Income Variance Against Prior Period

Consolidated

The company reported operating income of $217 million in the quarter, compared to $235 million in the first quarter. The $18 million variation mainly reflects higher shipments ($47 million) across all segments, more than offset by higher manufacturing costs ($55 million), mainly related to fiber ($25 million) and maintenance ($19 million) costs, as well as energy prices ($7 million). The overall impact of pricing was neutral as higher realized transaction prices in the pulp and paper segments were offset by lower average transaction prices in the wood products segment. The company also recorded higher freight ($8 million) and selling, general and administrative expenses ($4 million).

Segment Operating Income Variance

Wood Products

The wood products segment generated operating income of $180 million in the quarter, $39 million lower than the previous quarter. The average transaction price fell to $931 per thousand board feet, a decrease of $91 per thousand board feet, or 9%, reflecting lower benchmark lumber prices, despite the positive impact of consolidating engineered wood products in the segment's sales following the acquisition of the remaining 50% equity interest in Resolute-LP Engineered Wood Larouche Inc. and Resolute-LP Engineered Wood St-Prime Limited Partnership. Shipments rose by 65 million board feet, but finished goods inventory increased by 16 million board feet, to 239 million board feet, reflecting continued challenges with rail car availability. The operating cost per unit (or, "delivered cost") rose by $43 per thousand board feet, or 8%, mainly reflecting higher log costs due to stumpage fees and fuel price. EBITDA in the segment slipped by $39 million, to $191 million.

Market Pulp

Operating income in the market pulp segment was $41 million in the second quarter, $19 million higher than in the prior quarter. The average transaction price increased by $117 per metric ton, or 14%, due to stronger market conditions. Shipments were 29,000 metric tons higher, helping to reduce finished goods inventory by 14,000 metric tons to 68,000 metric tons at quarter-end. The delivered cost rose by $42 per metric ton, mainly due to higher maintenance and fiber costs. EBITDA in the segment improved by $22 million, to $48 million.

Tissue

The tissue segment incurred an operating loss of $9 million in the quarter, in line with the first quarter. The average transaction price increased by $84 per short ton, or 4%, on rising market pricing. Shipments were 1,000 short tons higher and finished goods inventory fell by 2,000 short tons. The delivered cost increased by $126 per short ton, or 6%, mostly due to higher market pulp prices. EBITDA in the segment fell by $1 million, to negative $5 million.

Paper

The paper segment recorded operating income of $37 million in the quarter, an improvement of $12 million over the previous quarter. The average transaction price rose by $35 per metric ton, or 5%, due to stronger market conditions in all grades. Shipments rose by 29,000 metric tons, helping to reduce finished goods inventory by 18,000 metric tons to 67,000 metric tons at quarter-end. The delivered cost increased by $11 per metric ton, or 2%, mainly due to higher freight and maintenance costs. EBITDA improved by $13 million, to $47 million.

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Source: Resolute Forest Products

 

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