Resolute Forest Products Q3 2013 Results

Resolute Forest Products
Q3 2013 Results
Richard Garneau, President & CEO
Jo-Ann Longworth, Senior Vice President & CFO
October 31, 2013
Cautionary statements regarding forward-looking
information
Statements in this presentation that are not reported financial results or other historical information of Resolute Forest
Products are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.
They include, for example, statements relating to our: efforts to continue to reduce costs and increase revenues and
profitability, including our cost-reduction initiatives regarding selling, general and administrative expenses; business and
operating outlook; assessment of market conditions; prospects, growth strategies and the industry in which we operate;
and strategies for achieving our goals generally. Forward-looking statements may be identified by the use of forwardlooking terminology such as the words “should,” “would,” “could,” “will,” “may,” “expect,” “believe,” “anticipate,”
“attempt,” “project” and other terms with similar meaning indicating possible future events or potential impact on our
business or Resolute Forest Products’ shareholders.
The reader is cautioned not to place undue reliance on these forward-looking statements, which are not guarantees of
future performance. These statements are based on management’s current assumptions, beliefs and expectations, all
of which involve a number of business risks and uncertainties that could cause actual results to differ materially. The
potential risks and uncertainties that could cause Resolute’s actual future financial condition, results of operations and
performance to differ materially from those expressed or implied in the presentation referred to above include, but are
not limited to, the potential risks and uncertainties set forth under the heading “Risk Factors” in exhibit 99.4 to the
current report on Form 8-K filed with the United States Securities and Exchange Commission and the Canadian
securities regulatory authorities on April 24, 2013.
All forward-looking statements in this presentation are expressly qualified by the cautionary statements contained or
referred to in this section and in our other filings with the SEC and the Canadian securities regulatory authorities. We
disclaim any obligation to publicly update or revise any forward-looking information, whether as a result of new
information, future events or otherwise, except as required by law.
All figures in USD unless otherwise noted.
October 31, 2013
RFP Q3 2013 Results
2
Q3 2013 Overview
Adjusted EBITDA
• Asset optimization maximized
earnings power
• $104 million of adjusted EBITDA
in Q3’13
• Best pulp quarter in two years
• Better costs in newsprint,
specialty, market pulp and wood
products
October 31, 2013
RFP Q3 2013 Results
3
Newsprint
Q3 2013
Q2 2013
Sales
376
364
Operating
income/ (loss)
13
10
EBITDA
31
28
Shipments
616
596
(US$mm)
(000’s mt)
• Total NA industry demand down 10% through
September
– newspaper publishers down 11%
– other end-users down 7%
• Global demand down 5% through August
− India up 4%
• Resolute shipments up 20,000 mt
– International = 45% of total
• Average transaction price stable after falling
$40 per metric ton
October 31, 2013
RFP Q3 2013 Results
4
Specialty
Q3 2013
Q2 2013
Sales
247
242
Operating
income/ (loss)
17
-
EBITDA
27
10
Shipments
340
335
(US$mm)
(000’s st)
October 31, 2013
• NA industry demand up 2.5% through
September 2013
– high-gloss grades up 14%
– standard down 4%
• Shipments up 5k st
• Announced closure of PM #1 at Iroquois
Falls (30k mt production)
• Higher production and better efficiencies
improved unit cost
RFP Q3 2013 Results
5
Pulp
Q3 2013
Q2 2013
Sales
269
263
Operating
income/ (loss)
21
10
EBITDA
34
23
Shipments
399
393
(US$mm)
(000’s mt)
• Global demand up 3.4% through September
– China up 7.5% and NA up 6.4%
– Western Europe flat
• Softwood up 2%; hardwood up 6%
• Best pulp quarter in two years
• Better efficiencies and higher production in
southern mills
• South American hardwood capacity
additions creating uncertainty for 2014
October 31, 2013
RFP Q3 2013 Results
6
Wood Products
Q3 2013
Q2 2013
146
142
Operating
income/ (loss)
-
16
EBITDA
9
25
417
345
(US$mm)
Sales
Shipments
(000’s mbf)
October 31, 2013
• Aug 2013 US housing starts of 891K (SAAR)
− Up 19% from August 2012
• RFP shipments up 21% q/q
• Continued cost pressure from new Quebec
forest tenure system
RFP Q3 2013 Results
7
Coated
Q3 2013
Q2 2013
• Ytd shipment-to-capacity ratio down to 89%,
from 94% in 2012
Sales
92
96
− Total NA shipments down 8.5%
Operating
income/ (loss)
(3)
2
− Total NA coated mechanical demand
down 4.5% through September
6
11
− Total NA imports up 8%
117
124
(US$mm)
EBITDA
Shipments
(000’s st)
October 31, 2013
• EBITDA down $5 million
– Lower shipments due to inefficiencies at
Catawba and weak demand/higher
imports
RFP Q3 2013 Results
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EBITDA per ton
• Improved sequential EBITDA
– Benefits of diversification and
integration
– Best pulp quarter in two years
– Better costs in newsprint,
specialty, market pulp and wood
products
– Significant decrease in lumber
prices
• Manage inventory levels and sell
only profitable tons
October 31, 2013
RFP Q3 2013 Results
9
P&L
Q3 2013
Sales
$1,130mm
Operating
income(1)
$43mm
Q2 2013
+2%
+48%
Q3 2012
EPS – excluding special items
-2%
Q3 2013
Q2 2013
Q3 2012
$0.31
$0.19
$0.13
+16%
Non-recurring income tax charge
Adjusted
EBITDA
$104mm
+16%
+8%
Interest
$12mm
-8%
-29%
• $619 reduction to our net
deferred income tax asset
– Non-cash
– U.S. portion
Net income(1)
$29mm
+61%
+123%
1.
Excluding special items.
Refer to Appendix A for a definition and reconciliation of non-GAAP financial
measures.
October 31, 2013
– Over $1.6 billion of U.S. NOLs
available
• Do not expect to pay cash income
taxes in the medium term
RFP Q3 2013 Results
10
Average transaction price
Cogen
Delivered cost per unit
2013 EBITDA contribution
from external sales*
Q1 13
$8mm
Q2 13
$14mm
Q3 13
$12mm
* Does not include certain other operational efficiencies that cannot be isolated readily, but are realized with the operation of the cogeneration
assets, such as labor efficiencies
October 31, 2013
RFP Q3 2013 Results
11
Liquidity and Cash Flow
Q3 2013
• Cash up $23mm
• $62mm cash provided by
operating activities
• $38mm in capex
• Liquidity = $837mm
Available Liquidity (US$ millions)
Q2 2013
Q3 2012
Cash
$271mm
+9%
-21%
Net debt
$333mm
-6%
+18%
Working
Capital
$797mm
-1%
-10%
2011
2012
2013
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Total debt
621
620
722
625
534
532
604
604
Cash on hand
369
410
510
343
263
215
248
271
Available under ABL credit facility
515
491
472
529
519
537
467
566
October 31, 2013
RFP Q3 2013 Results
12
Pension
Funding and Expense
(in US$ millions)
Q3 20131
YTD1
2013E2
Contributions
40
98
160
Benefit expense
10
33
40
Funding in excess of expense
30
65
120
1.
2.
• Represents our expected funding and
expense for all pension plans (DB, DC
& SERP)
Does not include any funding in respect of the agreement in principle that was accepted in
Quebec
Assumes Ontario’s acceptance of the agreement in principle
September 30 Update – All RFP Plans
(in US$ millions, except
where noted)
Dec 31,
2010
Dec 31,
2011
Dec 31,
2012
Sep 30,
2013
US GAAP discount rate
5.5%
4.9%
4.3%
4.3%
Pension Obligations
(880)
(1,152)
(1,549)
(1,436)
OPEB3
(408)
(404)
(424)
(331)
(1,288)
(1,556)
(1,973)
(1,767)
Total
3.
• Making progress with Ontario
concerning Quebec pension
agreement in principle
• To date, net pension and OPEB
obligations are down $200 million on
contributions, FX and changes to U.S.
OPEB
• Assuming, for illustration purposes
only, a 09/30 YE and a 40bps
increase in the discount rate:
−
GAAP net pension and OPEB
obligations would fall by about
$400 million further
Other postretirement benefits
October 31, 2013
RFP Q3 2013 Results
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Appendix A
RFP Q3 2013 Results
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Appendix B
RFP Q3 2013 Results
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RFP Q3 2013 Results
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Resolute Forest Products
Q3 2013 Results
Richard Garneau, President & CEO
Jo-Ann Longworth, Senior Vice President & CFO
October 31, 2013