Resolute Forest Products Reports Third Quarter 2022 Results
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Resolute Forest Products Inc. reported net income of $87 million, or $1.11 per diluted share, for the quarter ended September 30, compared to net income of $80 million, or $0.99 per diluted share, in the same period in 2021. Sales were $974 million in the quarter, an increase of $157 million from the year-ago period. Excluding special items, the company reported net income of $85 million, or $1.08 per diluted share, compared to net income of $67 million, or $0.84 per diluted share, in the third quarter of 2021.
Quarterly Operating Income Variance Against Prior Period
Consolidated
The company reported operating income of $124 million in the quarter, compared to $217 million in the second quarter. The $93 million reduction reflects lower realized prices in wood products ($185 million), partially offset by higher prices in the pulp, paper and tissue segments ($48 million), higher shipments in wood products ($40 million) and lower manufacturing costs ($12 million). The company also recorded higher selling, general and administrative expenses ($17 million), reflecting a higher share-based compensation expense and costs incurred in relation with the acquisition by the Paper Excellence Group.
On July 5, the Paper Excellence Group, through its wholly-owned subsidiary Domtar Corporation, a global diversified manufacturer of pulp and specialty, printing, writing, and packaging papers, entered into an agreement with Resolute to acquire all of the outstanding common shares of Resolute stock.
Segment Operating Income Variance
Wood Products
The wood products segment generated operating income of $42 million in the quarter, a decrease of $138 million from the previous quarter. The average transaction price fell to $624 per thousand board feet, a $307 per thousand board feet, or 33%, decrease from the previous quarter.
Wood products shipments increased by 88 million board feet, to 606 million, reflecting gradually improving rail car availability, leading to a 71 million board feet reduction in finished goods inventory, to 168 million at quarter-end. The operating cost per unit (or, the "delivered cost") decreased by $25 per thousand board feet, or 4%. EBITDA in the segment declined by $138 million, to $53 million.
Market Pulp
The company generated operating income of $81 million in the market pulp segment, an increase of $40 million from the previous quarter. The average transaction price increased by $93 per metric ton, or 10%, to $1,025 per metric ton, with gains in all grades. The delivered cost decreased by $54 per metric ton, or 7%, mainly due to lower maintenance costs in the quarter. Shipments increased by 5,000 metric tons and finished goods inventory remained relatively unchanged at 67,000 metric tons. EBITDA in the segment rose by $38 million, to $86 million.
Tissue
The tissue segment incurred an operating loss of $12 million in the quarter, compared to an operating loss of $9 million in the second quarter. The average transaction price increased by $72 per short ton, or 4%, but the delivered cost rose by 10%, mostly reflecting higher pulp prices. Shipments were 2,000 short tons lower and finished goods inventory increased by 1,000 short tons. Segment EBITDA decreased by $3 million, to negative $8 million.
Paper
The paper segment generated operating income of $52 million in the quarter, an increase of $15 million from the previous quarter. The average transaction price increased by $66 per metric ton, or 8%, reflecting more favorable market conditions. Shipments decreased by 34,000 metric tons, mostly reflecting inventory destocking in the prior quarter and lower productivity, and finished goods inventory increased by 7,000 metric tons due to shipment timing. The delivered cost was relatively unchanged as higher chemical prices were offset by lower maintenance costs. Segment EBITDA improved by $15 million, to $62 million.
Consolidated Quarterly Operating Income Variance Against Year-Ago Period
Operating income in the third quarter was $22 million higher than the same quarter of 2021. The variance includes higher selling prices for the market pulp, paper and tissue segments ($125 million) and higher shipments in wood products ($33 million).
The company faced higher manufacturing costs ($99 million), mainly related to fiber ($46 million), maintenance and labor ($25 million) and energy prices ($24 million), as well as higher freight ($24 million).
The company also recorded higher selling, general and administration expenses ($25 million), reflecting a higher share-based compensation expense and costs incurred in relation with the acquisition by Paper Excellence Group, and it benefited from a lower Canadian dollar ($12 million).
Resolute's complete third quarter 2022 report can be found on the company's website.
