Asset Impairment Overshadows Catalyst Paper’s Improved Financial Results
Uncoated book grades development was completed, including initial recycled trials, while production of high-brite specialty grades was expanded to Crofton and Snowflake to better meet retail insert needs. Market share gains in all paper product lines except newsprint continued. Work is on-track to increase pulp capacity to 1,120 tonnes per day by year end, representing a 25,000 tonne increase in total pulp capacity.
A claim made by Quebecor World (USA)’s litigation trustee under the U.S. Bankruptcy Code, seeking return of approximately $18.8 million in alleged preferential payments, was settled during the quarter for a non-material amount that was covered by Catalyst’s allowance for doubtful accounts.
The process of reverting from a single harmonized sales tax to separate provincial and federal sales taxes is now underway in British Columbia following the public referendum in August. Catalyst anticipates additional annual tax costs of approximately $10.5 million from this change, which will occur no earlier than April 1, 2013.
Catalyst’s appeal of its 2009 property tax assessment by the municipality of North Cowichan was heard in the Supreme Court of Canada in October, with a decision expected within six to 12 months.
The fourth quarter is a seasonally strong one for specialty grades, although the general outlook for print advertising remains weak and continued demand declines are expected for newsprint and directory. Exchange rate volatility is also expected to further impact operating and net returns as well as cash flow and liquidity in the fourth quarter.
The market price for ONP came down substantially in November. However it is a market driven input cost with unique and serious impact on Snowflake’s long-term viability. Input price pressures are also expected, across all operations, in relation to fossil fuel, electricity, other types of fibre and some chemicals.
Source: Catalyst Paper.