MONTRÉAL CNW Telbec – Resolute Forest Products Inc. has reported net income for the quarter ended September 30, 2020, of $57 million, or $0.66 per diluted share, compared to a net loss of $43 million, or $0.47 per share, in the same period in 2019. Sales were $730 million in the quarter, an increase of $25 million from the year-ago period. Excluding special items, the company reported net income of $62 million, or $0.72 per diluted share, compared to a net loss of $34 million, or $0.37 per share, in the third quarter of 2019.

“We took advantage of the rally in lumber prices to further deleverage the balance sheet and drive shareholder value by opportunistically repurchasing 5% of outstanding shares,” said Yves Laflamme, president and chief executive officer. “While the pulp and paper segments continue to suffer from pandemic economics, we used part of the cash we generated with our lumber business to fully repay all revolving borrowings under our credit facilities, except for the low-interest term loan used to finance the acquisition of the U.S. sawmills, which have generated $38 million of EBITDA under our ownership this year. The tissue business is also picking up steam: with $6 million of EBITDA in the quarter, it has generated $19 million of EBITDA in the last twelve months.”

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

Resolute also today announced the selection and appointment of Remi G. Lalonde as the company’s next president and chief executive officer, and a member of the board of directors, succeeding Yves Laflamme, as of March 1, 2021.

Operating Income Variance Against Prior Period


The company reported an operating income of $97 million in the quarter, compared to $6 million in the second quarter. The $91 million improvements over the previous quarter reflects the favorable impact of higher lumber pricing ($117 million), offset by higher stumpage fees with the increase in lumber pricing ($5 million) and lower market pulp prices ($7 million).

Segment Operating Income Variance

As of the second quarter of 2020, the company’s results from the newsprint and specialty papers segments have been combined into one paper segment. Comparative information, including the information in this earnings release, has been modified to conform with the revised segment presentation.

Market Pulp

The market pulp segment recorded an operating loss of $4 million in the quarter, compared to an operating income of $10 million in the previous quarter. The change reflects a $26 per metric ton, or 4%, slip in the average transaction price on softer market conditions and an increase of $27 per metric ton, or 5%, in the operating cost per unit (the “delivered cost”) due mostly to higher planned maintenance costs. Shipments improved by 15,000 metric tons and finished goods inventory fell to 71,000 metric tons at quarter-end. EBITDA in the segment was $2 million.


The company reported an operating income of $2 million in the tissue segment in the quarter, $4 million better than the previous quarter. The average transaction price rose by 4%, or $71 per short ton in the quarter, primarily as a result of the company’s ongoing progress around customer and product mix. But shipments slipped by 3,000 short tons in the quarter as a result of increasingly challenging conditions in away-from-home end-markets due to the effects of the pandemic. Delivered cost per unit fell by $55 per short ton, or 3%, as a result of lower maintenance costs compared to annual outages in the previous quarter. Finished goods inventory at quarter-end was 6,000 short tons. Quarter-over-quarter segment EBITDA improved by $3 million, to $6 million.

Wood Products

The wood products segment reported an operating income of $128 million in the quarter, an improvement of $113 million compared to the previous quarter. The significant improvement is due to the $217 per thousand board feet, or 57%, increase in the average transaction price, reflecting strong market conditions, particularly from the repair and remodeling market and U.S. housing starts. The delivered cost rose by $6 per thousand board feet, or 2%, to $361 per thousand board feet, mostly due to higher stumpage fees, which track lumber market prices. Shipments rose by 16 million board feet and inventory was unchanged, at 121 million board feet. EBITDA in the segment improved by $114 million, to $139 million, with the recently-acquired U.S. sawmills contributing $31 million to our EBITDA in the quarter.


The company generated an operating loss of $12 million in the paper segment in the quarter, unchanged from the previous quarter. Despite the challenging market conditions for marketing-dependent products like newspapers, inserts, flyers and commercial papers, the average transaction price improved slightly in the quarter, to $594 per metric ton, or 1%, and inventory fell by 5%. Shipments were unchanged, at 351,000 metric tons, reflecting the company’s leaner production footprint implemented to cope with the dramatic reduction in economic activity during the pandemic. The delivered cost was stable. EBITDA in the segment improved by $2 million, to $6 million.

Consolidated Quarterly Operating Income Variance Against Year-Ago Period

The company reported an operating income of $97 million in the third quarter, compared to an operating loss of $18 million in the third quarter of 2019. The $115 million increase reflects the favorable impact of higher selling prices for wood products ($104 million), contribution from the recently-acquired U.S. sawmills ($26 million), lower maintenance costs ($22 million), and the weaker Canadian dollar ($8 million). These items were partly offset by the effects of lower selling prices and fewer shipments in the market pulp and paper segments ($52 million) due to softer market conditions. Adjusted EBITDA of $140 million was $117 million higher than the third quarter of 2019.

Corporate and Finance

The company generated $100 million of cash from operating activities in the quarter and invested $16 million, net, in fixed assets. It also repurchased 4.5 million shares of common stock, or 5% of the amount outstanding, for $18 million, and further reduced borrowings under its credit facilities by $69 million.

The company’s liquidity improved by $81 million in the quarter, to $477 million, and net debt fell by $62 million, to $541 million. By quarter-end, the company had recorded cumulative softwood lumber duty deposits of $214 million on the balance sheet, including $20 million paid in the quarter.

Yesterday, the company’s subsidiary, Resolute FP Canada Inc., entered into a 10-year secured delayed term loan facility with Investissement Québec for up to $167 million (CA $220 million), with initial availability of approximately $114 million (CA $149 million), subject to certain conditions. Borrowings under the Canadian dollar-denominated facility will bear interest at a floating rate of interest equal to 1.45% above Canadian Banker’s acceptance rate. The facility is meant to be used to finance activities and support obligations in Quebec.


Looking ahead, Mr. Laflamme added: “Together with our strong Canadian lumber business, the well-timed acquisition of U.S. sawmills positioned us well for the recent spike in lumber prices. Although market prices have come off their highs in recent weeks, the demand from the repair & remodeling sector as well as robust U.S. housing starts speak to strong market fundamentals. Accordingly, we are preparing our El Dorado, Arkansas sawmill to be restarted in the next few months. Following a very difficult stretch of over six months, there are signs that paper markets activity is slowly and gradually starting to recover, but we expect that the pandemic will have caused some measure of step-change in the secular demand decline trend. In the last quarter, pulp markets were also affected by the pandemic, but we are already seeing global inventories stabilize around balanced levels, and we are cautiously optimistic that markets will recover with overall economic conditions. In regards to tissue, we will continue to focus on customer portfolio optimization and productivity improvements. While retail end-market conditions remain strong, the away-from-home space, which represents about a third of our business, is under pressure due to the drop in commercial activity.”

Earnings Conference Call

The company will hold a conference call to discuss the financial results at 9:00 a.m. (ET) today. The public is invited to join the call at (833) 979-2727 at least fifteen minutes before its scheduled start time. A simultaneous webcast will also be available using the link provided under “Presentations and Webcasts” in the “Investors” section of A replay of the webcast will be archived on the company’s website. A phone replay will also be available until November 19, 2020, by dialing (800) 585-8367, conference number 4896134.

Description of Special Items

Special items Third quarter
(in millions) 2020 2019
Net gain on disposition of assets $ $ (1)
Non-operating pension and other postretirement benefit credits (5) (12)
Other (income) expense, net 14 17
Income tax effect of special items (4) 5
Total $ 5 $ 9

Cautionary Statements Regarding Forward-Looking Information

Statements in this press release and the earnings conference call and webcast referred to above that are not reported financial results or other historical information of Resolute Forest Products Inc. (with its subsidiaries, “we,” “our,” “us” or the “company”) are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. They include, for example, statements included in the Outlook section of this press release and statements relating to the impact of the coronavirus or COVID-19 pandemic and resulting economic conditions on our business, results of operations and market price of our securities, and to our: efforts and initiatives to reduce costs, increase revenues, improve profitability; business and operating outlook; future pension obligations; assessment of market conditions; growth strategies and prospects, and the growth potential of the company and the industry in which we operate; liquidity; future cash flows, including as a result of the changes to our pension funding obligations; estimated capital expenditures; and strategies for achieving our goals generally. Forward-looking statements may be identified by the use of forward-looking terminology such as the words “should,” “would,” “could,” “will,” “may,” “expect,” “believe,” “see,” “anticipate,” “continue,” “attempt,” “project,” “progress,” “build,” “plan,” “grow”, “lead” and other terms with similar meaning indicating possible future events or potential impact on our business or our 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 our actual future financial condition, results of operations, and performance to differ materially from those expressed or implied in this press release and the earnings conference call and webcast referred to above include, but are not limited to, the impact of: the coronavirus or COVID-19 pandemic and resulting economic conditions, developments in non-print media, and the effectiveness of our responses to these developments; intense competition in the forest products industry; any inability to offer products certified to globally recognized forestry management and chain of custody standards; any inability to successfully implement our strategies to increase our earnings power; the possible failure to successfully integrate acquired businesses with ours or to realize the anticipated benefits of acquisitions, such as our entry into wood manufacturing in the U.S. and tissue production and sales, or divestitures or other strategic transactions or projects, including loss of synergies following business divestitures; uncertainty or changes in political or economic conditions in the United States, Canada or other countries in which we sell our products, including the effects of pandemics; global economic conditions; the highly cyclical nature of the forest products industry; any difficulties in obtaining timber or wood fiber at favorable prices, or at all; changes in the cost of purchased energy and other raw materials; physical and financial risks associated with global, regional, and local weather conditions, and climate change; any disruption in operations or increased labor costs due to labor disputes or occupational health and safety issues; difficulties in our employee relations or in employee attraction or retention; disruptions to our supply chain, operations, or the delivery of our products, including due to public health epidemics; disruptions to our information technology systems including cybersecurity incidents; risks related to the operation and transition of legacy system applications; negative publicity, even if unjustified; currency fluctuations; any increase in the level of required contributions to our pension plans, including as a result of any increase in the amount by which they are underfunded; our ability to maintain adequate capital resources to provide for all of our substantial capital requirements; the terms of our outstanding indebtedness, which could restrict our current and future operations; changes relating to LIBOR, which could impact our borrowings under our credit facilities; losses that are not covered by insurance; any shutdown of machines or facilities, restructuring of operations or sale of assets resulting in any additional closure costs and long-lived asset impairment or accelerated depreciation charges; any need to record additional valuation allowances against our recorded deferred income tax assets; our exports from one country to another country becoming or remaining subject to duties, cash deposit requirements, border taxes, quotas, or other trade remedies or restrictions; countervailing and anti-dumping duties on imports to the U.S. of the vast majority of our softwood lumber products produced at our Canadian sawmills; any failure to comply with laws or regulations generally; any additional environmental or health and safety liabilities; any violation of trade laws, export controls, or other laws relating to our international sales and operations; adverse outcomes of legal proceedings, claims and governmental inquiries, investigations, and other disputes in which we are involved; the actions of holders of a significant percentage of our common stock; and the potential risks and uncertainties set forth under the heading “Risk Factors” in Part I, Item 1A of the company’s annual report on Form 10-K for the year ended December 31, 2019, which have been heightened by the COVID-19 pandemic, including related governmental responses and economic impacts, market disruptions and changes in consumer habits and which should be read in conjunction with the COVID-19 risk factor update set forth under the heading “Risk Factors” in Part II, Item 1A of the company’s quarterly report on Form 10-Q for the quarter ended June 30, 2020.