Tembec posts quarterly profit of $59 million

Tembec has posted a third quarter profit of $59 million (Cdn), or 59 Canadian cents a share, compared with a net loss of $38 million, or 38 Canadian cents a share a year earlier.

The June quarterly earnings before depreciation, amortization and other specific or non-recurring items (EBITDA) of $60 million was a significant improvement over the prior quarter and well ahead of fiscal 2009 performance.

All of Tembec's business segments experienced improved results versus the prior quarter. In lumber, Tembec continued with selective production curtailments to manage and control inventory levels. Demand and pricing improved in April and May, but fell back in June. Continued pricing volatility is anticipated as relatively weak lumber demand is balanced against low supply chain inventories. An improvement in U.S. housing starts will be required to support more sustained lumber demand and prices in the medium and longer term.

Paper pulp markets, which had good market fundamentals, surged after the earthquake in Chile and its impact on global paper pulp supply. Now that supply disruptions are largely resolved, prices should decline in the coming quarters. However, good demand fundamentals should ensure that the prices will still be attractive for paper pulp producers.

Specialty and dissolving pulp markets are also enjoying favourable market fundamentals. Strong prices are expected to continue in the upcoming quarters.

The results of the paper business should show better margins, driven by higher selling prices for newsprint and coated paperboard.

The economy and general business conditions continue to improve. However, the magnitude of the decline experienced in 2009 will require several more quarters before we see a more robust economic recovery.

The recent sale of the two French mills has significantly strengthened Tembec's balance sheet, increasing liquidity to $270 million and reducing leverage below 30%.

Source: Tembec