GREENVILLE, S.C., November 6 2007 - Bowater Incorporated, a wholly owned subsidiary of AbitibiBowater Inc., today reported a net loss for the third quarter of 2007 of $142.1 million, or $2.47 per diluted share, on sales of $814.7 million. These results compare with a net loss of $216.1 million, or $3.76 per diluted share, on sales of $875.9 million for the third quarter of 2006.
"In the third quarter, a combination of a rapidly strengthening Canadian dollar and our decision to curtail paper production, negatively impacted our operating results," said David J. Paterson, Chairman, President and Chief Executive Officer. "In addition, there were several significant charges including an arbitration award and severances. However, with our merger with Abitibi now complete, I look forward to achieving significant synergies and positioning the new company to better face the challenging market conditions."
Third quarter 2007 special items, net of tax, consisted of the following items: a $11.3 million gain related to asset sales, a $28.4 million charge related to an arbitration award, a $21.5 million charge related to tax adjustments, a $14.1 million charge for severance and merger-related costs and a $29.0 million loss relating to foreign currency changes. Excluding these special items, the net loss for the quarter would have been $60.4 million, or $1.05 per diluted share, compared with third quarter 2006 net loss before special items of $12.3 million, or $0.20 per diluted share. A reconciliation of these items is contained in note 7 to this release.
SEGMENT DETAIL
Newsprint
For the third quarter, newsprint had an operating loss of $39.5 million compared to an operating loss of $10.7 million for the second quarter. The company's average transaction price decreased $19 per metric ton. Average operating costs increased $38 per metric ton compared to the second quarter as a result of the strengthening Canadian dollar and approximately 67,000 metric tons of production curtailments. The Canadian dollar strengthening in the third quarter raised costs compared to the second quarter in the newsprint product line by about $6.5 million. The company incurred costs of approximately $4 million as a result of the curtailments. Shipments for the first nine months of 2007 were 12% lower than the same period of 2006. The company is implementing a North American $25 per metric ton price increase as previously announced.
Coated Papers
Operating earnings for the third quarter increased by $8.8 million from the second quarter to $13.1 million. The company's average transaction price for coated papers increased $21 per short ton during the quarter while average operating costs decreased $17 per short ton. Coated paper inventories decreased 30% in the quarter. The company has informed its customers of a $60 per short ton price increase effective with new orders as of October 22 and for existing orders with shipments after December 1, 2007. This price increase is in addition to the $60 per short ton price announcement for October 1, 2007.
Specialty Papers
Specialty papers had an operating loss of $19.8 million compared to an operating loss of $11.4 million for the second quarter. The company's average transaction price increased $5 per short ton during the quarter, while average operating costs increased $48 per short ton as a result of 36,000 short tons of production curtailments and the stronger Canadian dollar. The company is implementing price increases for various grades of specialty papers.
Market Pulp
Operating earnings for market pulp increased to $29.3 million in the third quarter. The average market pulp transaction price for the company increased $24 per metric ton. Average operating costs decreased $12 per metric ton compared to the second quarter. In the third quarter, the company completed a major capital project at the Coosa Pines, Alabama fluff pulp facility, improving quality and increasing production capacity. The company has informed its customers of a $30 per metric ton price increase in fluff pulp and a $20 per metric ton price increase in hardwood pulp, both effective October 1, 2007.
Lumber
For the third quarter, lumber had an operating loss of $10.6 million compared to a loss of $7.3 million for the second quarter. The average lumber transaction price for the company increased $19 per thousand board feet while average operating costs increased $39 per thousand board feet compared to the second quarter. The company continues to curtail lumber production as a result of soft demand.
Earnings Conference Call
Management will hold a conference call to discuss these financial results today at 10:00 a.m. Eastern time, November 6, 2007. The conference call number is 1-866-898-9626 or 514-868-1042. A webcast of the call will be available at www.abitibibowater.com. Interested parties may follow the on-screen instructions for access to the webcast and related information. A replay of the call will be available on AbitibiBowater's website.