Operations
Pulp production in the current quarter was 264,500 tonnes, up marginally from the previous quarter, and in line with production in the first quarter of 2012. Production levels reflected steady improvements in operating rates through the quarter.
Pulp unit manufacturing costs decreased 3% from the previous quarter, driven by the timing of spending, in particular maintenance activities, coupled with the marginal increase in production levels, partially offset by seasonally higher energy costs. Fibre costs were up slightly compared to the previous quarter, reflecting a modest increase in sawmill residual chips, where prices are linked to NBSK pulp sales realizations, as well as a greater proportion of higher-cost whole log chips. The current quarter results also included a one-time non-cash $1.5 million benefit from scientific research and development tax credits.
Compared to the first quarter of 2012, unit manufacturing costs decreased 2% as lower fibre costs and the favourable impact of higher production volumes were partially offset by higher (timing-based) maintenance spending and higher energy costs.
(6) As reported by Pulp and Paper Products Council ("PPPC") statistics.(7) World 20 data is based on twenty producing countries representing 80% ofworld chemical market pulp capacity and is based on information compiled andprepared by the PPPC.Paper
Selected Financial Information and Statistics - Paper(8)
Q1 Q4 Q1(millions of Canadian dollars unlessotherwise noted) 2013 2012 2012---------------------------------------------------------------------------Sales $ 36.1 $ 33.7 $ 29.9Operating income before amortization $ 6.9 $ 8.0 $ 3.7Operating income $ 5.9 $ 7.0 $ 2.7---------------------------------------------------------------------------Production - paper (000 mt) 34.8 35.4 32.9Shipments - paper (000 mt) 35.0 32.0 29.6------------------------------------------------------------------------------------------------------------------------------------------------------(8) Certain prior period amounts have been restated due to the adoption ofamended IAS 19, Employee Benefits. Further details can be found in theCompany's unaudited interim consolidated financial statements.
Overview
Operating income for the paper segment was $5.9 million for the first quarter of 2013, a decrease of $1.1 million from the previous quarter but up $3.2 million from the first quarter of 2012.
Compared to the fourth quarter of 2012, a 3% increase in unit manufacturing costs and lower realized paper prices were partially offset by higher shipments. Higher costs for slush pulp, in part reflecting higher market pulp prices, contributed to the increase in unit manufacturing costs which was mitigated somewhat by lower spending on operating and maintenance costs.
Compared to the first quarter of 2012, the improved results primarily reflected increased shipments and improved paper sales realizations coupled with reduced unit manufacturing costs.
Markets
Global kraft paper market demand remained stagnant in the first quarter of 2013, with the extended winter conditions in Europe, the U.S. East Coast and Mid-West the main contributing factors. However, with customers' stocks at low levels, prices remained relatively stable through the quarter.
