HispanicBusiness

Overview

Operating income for the pulp segment was $6.8 million for the fourth quarter of 2012, an improvement of $15.2 million from an operating loss of $8.4 million for the previous quarter, but down $9.9 million from the fourth quarter of 2011. Results in the current quarter were impacted by lower unit manufacturing costs and higher shipment volumes, both reflecting improved operations in the quarter. Market pulp production increased approximately 40,000 tonnes in the quarter due to increased operating days and higher overall operating rates following the extended scheduled outage and subsequent ramp ups experienced in the third quarter. Included in both quarters' results were certain one-time costs: the current quarter results included $3.3 million of an accounting gain related to post retirement plan adjustments, while the third quarter of 2012 included one-time costs of $3.2 million associated with new five year collective labour agreements. For the 2012 year as a whole, the operating income was $19.2 million, down $138.3 million from $157.5 million in 2011.

NBSK pulp list prices showed a small improvement in all regions in the fourth quarter of 2012, with prices to North America up US$10 to US$863 per tonne, but this was largely offset by a lower-value regional sales mix.

Lower operating earnings compared to the fourth quarter of 2011 reflected lower global market pulp prices, as NBSK pulp list prices were down in all regions, with prices to North America declining US$57, or 6%, per tonne and similar decreases seen for Europe and China. Sales realizations were also negatively impacted by a 3% stronger Canadian dollar compared to the fourth quarter of 2011. Higher shipment volumes and a 7% reduction in unit manufacturing costs, reflecting lower fibre costs and the impact of higher production volumes, helped to mitigate the impact of reduced sales realizations. Other contributing factors included the aforementioned post retirement benefit accounting gain in the current quarter.

Markets

Global softwood pulp demand increased 7% compared to the third quarter of 2012 and was up 3% for the full year 2012 compared to 2011(5). The increase in softwood shipments was primarily due to increased purchasing from China, partially offset by reductions in shipments to North America and Europe, particularly the latter region. At the end of December 2012, World 20(6) softwood pulp producer inventories increased 2 days from the end of the third quarter, to 29 days of supply, but were down 7 days compared to December 2011 inventories. Global demand for printing and writing papers decreased 2% in 2012 as compared to 2011(5).

Sales

The Company's pulp shipments in the fourth quarter of 2012 were 247,000 tonnes, an increase of approximately 32,000 tonnes, or 15%, from the previous quarter. Compared to the fourth quarter of 2011, shipments were up 16,000 tonnes, or 7%. For the most part, the increased shipments relative to both comparative periods reflected higher production volumes coupled with higher levels of purchases by Chinese consumers.

Global softwood pulp pricing saw a small increase through the current quarter. The North America NBSK pulp list price averaged US$863 per tonne for the quarter, up US$10, or 1%, from the third quarter of 2012, while CPPI's average list price to China and price to Europe were up US$30 and US$23, respectively, over the same period. Overall, however, pulp sales realizations moved up only marginally in the fourth quarter mostly as a result of increased volumes to lower-margin regions, principally China.