Log In | Become a Member | Contact Us

Leading printing executives into the future

Connect on Twitter | Facebook | LinkedIn

Featured:     European Coverage     Production Inkjet Analysis

Wausau Paper Reports 9.6M Loss in Q2

Tuesday, July 29, 2008

Press release from the issuing company

MOSINEE, Wis. July 28, 2008--Wausau Paper today reported a net loss for the second quarter of $9.6 million, or $0.20 per share, compared with net earnings of $4.8 million, or $0.09 per share, in the previous year. Net sales declined 4 percent to $305.2 million, as shipments decreased 14 percent to 205,000 tons due primarily to anticipated volume reductions at Printing & Writing associated with the December 2007 closure of the Groveton, New Hampshire paper mill.

This year's second-quarter results include after-tax charges of $8.8 million, or $0.18 per share, related to the closure of the Groveton mill and Specialty Products' roll wrap operations in Columbus, Wisconsin and Jackson, Mississippi; and timberland sales gains of $0.8 million, or $0.02 per share. Prior-year second-quarter results included an after-tax gain of $1.8 million, or $0.04 per share, from the sale of timberlands. Excluding these items, adjusted second-quarter 2008 operating losses were $1.6 million, or $0.03 per share, compared with earnings of $2.9 million, or $0.06 per share last year.

For the first half of 2008, Wausau Paper reported a net loss of $16.4 million, or $0.33 per share, compared with net earnings of $19.7 million, or $0.39 per share, during the comparable period in 2007. Results for the current year included after-tax timberland sales gains of $2.1 million, or $0.04 per share, and after-tax charges of $13.7 million, or $0.28 per share, related to the closure of the Groveton mill and roll wrap operations in Columbus and Jackson. Year-ago six-month results included after-tax timberland sales gains of $2.2 million, or $0.04 per share, and one-time state tax benefits of $11.6 million, or $0.23 per share, related to the January 1, 2007 restructuring of the company's subsidiaries. Excluding these items, adjusted losses for the first half of 2008 were $4.7 million, or $0.10 per share, compared with earnings of $5.8 million, or $0.11 per share, last year. Adjusted earnings are a non-GAAP measure and are reconciled to GAAP earnings below.

"The economic weakness that became notable late last year accelerated over the first half of 2008, adversely affecting demand in several key markets," said Thomas J. Howatt, president and CEO. "At the same time, record-high energy and near-record fiber costs pressured margins with those costs rising a combined $37 million through the first half of 2008 over year-ago levels. Nevertheless, progress was evident in the second quarter with results from ongoing operations improving from the first quarter in both our Towel & Tissue and Printing & Writing business segments. This sequential improvement reflected pricing leverage, focused product mix enhancement initiatives in each business, and expected results from the profit recovery plan put into motion late last year by our Printing & Writing unit. These efforts, in combination with strategic investment such as the $31 million machine rebuild at Towel & Tissue's Middletown, Ohio mill, are expected to drive improved profitability in the quarters ahead and enable us to ultimately achieve targeted profitability."

Specialty Products reported a second-quarter operating loss of $1.9 million compared with an operating profit of $2.2 million last year. Second-quarter results included $0.1 million of pre-tax facility closure charges related to the fourth-quarter sale of the roll wrap business. Net sales were flat with prior year while shipments declined 7 percent with much of the decline due to reduced roll wrap volumes as the company exits that business and a temporary reduction in operations at the Otis mill in response to demand weakness. "While escalating input costs are the single largest factor impacting this unit's performance, weak economic conditions in the manufacturing and housing sectors continue to limit overall shipments and mask the growth achieved in targeted product categories such as food service and food packaging papers," Mr. Howatt commented. "And while recent pricing initiatives are expected to improve operating margins in the near term, our long-term profitability will be driven by new product introductions and our continuing refocus of the business on more profitable growth oriented markets."

Printing & Writing reported a second-quarter operating loss of $16.6 million compared with a loss of $2.3 million last year while net sales and shipments declined 16 percent and 29 percent, respectively, due primarily to the Groveton closure. Second-quarter results included pre-tax Groveton mill closure charges of $13.8 million, consisting primarily of expenses related to utility agreements at the now-closed facility. "The improvement in results at Printing & Writing is in line with the timetable we established with our profit recovery plan as losses in the second-quarter, excluding Groveton closure charges, narrowed considerably from first-quarter levels," Mr. Howatt said. "We remain on pace to return Printing & Writing to profitable levels in the third quarter despite a significant decline in uncoated free sheet demand and a further escalation of input costs. Our move to a two-mill manufacturing system has allowed us to focus on core color and premium products while the recently announced $15 million capital investment in our Brokaw, Wisconsin mill will significantly improve its efficiency and cost structure. These initiatives are important components of our recovery plan and essential to achieving cost-of-capital returns by the end of 2009."

Towel & Tissue reported second-quarter operating profits of $8.3 million compared with operating profits of $11.3 million last year, reflecting the impact of sharp year-over-year increases in fiber and energy costs. Net sales and shipments increased 9 percent and 4 percent, respectively. "Although second-quarter profitability fell below prior-year levels, operating margins improved from the first quarter as selling price increases offset rising input costs," Mr. Howatt noted. "The 'away-from-home' market remains in balance and widely supported third-quarter price increases add to our expectation that we'll achieve additional margin improvement in the second half of 2008. The fundamentals of our business remain strong with higher-margin, value-added product shipments increasing 8 percent through the first half of the year despite flat market demand. Additionally, the rebuild of our towel machine in Middletown is on schedule for completion in the first quarter of 2009 and will increase annual production capacity by 16,000 tons while reducing overall costs."

The company sold approximately 900 acres of timberlands in the second quarter, continuing progress on its program to sell 42,000 acres of non-strategic timberlands. A total of 19,500 acres remains in the sales program. Also during the second quarter the company repurchased 480,000 shares of common stock at a cost of $4.0 million, and has approximately 2 million shares remaining under a February 12, 2008 board authorization.

Discussing the third-quarter outlook, Mr. Howatt said, "We expect the economic weakness experienced in the first half of 2008 to extend into the second half of the year while fiber and energy prices are likely to remain at elevated levels. Even so, recent pricing initiatives, progress with Printing & Writing's profit recovery plan, and mix initiatives within Specialty Products and Towel & Tissue are creating a measure of earnings momentum. As a result, we expect third-quarter results to improve meaningfully over the second quarter with earnings in the range of $0.06 - $0.08 per share excluding timberland sales gains and charges related to the Groveton mill closure. On the same basis, third-quarter 2007 earnings were $0.09 per share."

Wausau Paper's second-quarter conference call is scheduled for 11:00 a.m. EDT on Tuesday, July 29, and can be accessed through the company's Web site at www.wausaupaper.com under "Investor Information." A replay of the webcast will be available at the same site through August 5.




Email Icon Email

Print Icon Print

Become a Member

Join the thousands of printing executives who are already part of the WhatTheyThink Community.

Copyright © 2016 WhatTheyThink. All Rights Reserved