US$
ABH (NYSE, TSX)
- Curtails Paper Production Capacity by 1 Million Metric Tons
- Projects $375 Million in Annualized Synergies in 2008, One Year Ahead
of Plan
- Initiates a Further 20% Reduction in SG&A Costs in 2009MONTREAL, Dec. 4 /CNW Telbec/ - AbitibiBowater Inc. today announced
several actions aimed at creating a more flexible and responsive operating
platform, addressing ongoing volatility in exchange rates, energy and fiber
pricing, as well as structural challenges in the North American newsprint
industry. These efforts are a continuation of the Company's comprehensive
strategic review.
Approximately 830,000 metric tons of newsprint, 110,000 metric tons of
specialty grades and 70,000 metric tons of coated grades will be removed from
the marketplace. Capacity reductions include:- The permanent closure by the end of the first quarter of 2009 of the
Grand Falls, Newfoundland and Labrador newsprint mill, representing
205,000 metric tons;
- The permanent closure by the end of 2008 of the Covington, Tennessee
paper converting facility, representing 70,000 metric tons of coated
grades;
- The immediate idling, until further notice, of the Alabama River
newsprint mill, in Alabama, representing 265,000 metric tons;
- The immediate idling, until further notice, of two paper machines
(No. 1 and No. 2) in Calhoun, Tennessee, representing 230,000 metric
tons of capacity, including 120,000 metric tons of newsprint and
110,000 metric tons of specialty grades; and
- On a revolving basis, approximately 20,000 metric tons of monthly
newsprint downtime at other facilities across the organization until
market conditions improve.The Company has achieved $320 million in annualized synergies through
September 30, 2008 and believes it will reach its targeted run rate of $375
million of annualized synergies by year-end 2008, one full year ahead of plan.
AbitibiBowater also has initiated a further 20% reduction in selling, general
and administrative (SG&A) costs in 2009, representing a $60 million reduction
compared to its fourth quarter 2008 run rate.
"Today's announcement is consistent with previous actions and
demonstrates our ongoing commitment to be a stronger, more competitive
organization," stated President and Chief Executive Officer David J. Paterson.
"The North American newsprint market continues to contract and our customers
have told us they anticipate further decline. International customers have
also indicated that export growth will not be as strong in the coming year. We
have the resolve to adapt to these realities and to set the stage for
continued quarter-over-quarter improvements."
Despite sustained efforts and discussions with government and unions, the
permanent closure of the Grand Falls facility is a result of declining
newsprint demand and high delivered cost. Idlings of machines at Calhoun and
the Alabama River newsprint mill reflect softening markets for the products
produced at these facilities and the non-competitive cost structure of
southern U.S. electrical suppliers.
AbitibiBowater estimates it will incur cash closure costs of
approximately $45 million related to severance and other closure charges as a
result of these actions. The majority of these closure costs will be paid
during the second quarter of 2009. A fourth quarter 2008 non-cash asset
impairment charge of approximately $180 million will be taken to reflect the
permanent closure of the Grand Falls mill and Covington paper converting
facility.
"We will make every effort to help mitigate the effects of these capacity
reductions, as we are mindful of the impact they will have on affected
employees and communities," added Paterson. "Stakeholders made efforts to
develop viable solutions to keep these operations running, however, after
careful deliberation, these decisions were necessary given current market and
economic realities."
A total of approximately 1,100 employees are affected by these capacity
reductions.
The steps announced today are designed to better position the Company for
the future, an objective that is in the long-term interest of AbitibiBowater
stakeholders. The Company remains committed to customer service and delivery
of a high-quality product and will work closely with customers to ensure a
smooth transition.
AbitibiBowater will continue to assess its business, taking necessary
actions to better position the Company in the global marketplace.
AbitibiBowater produces a wide range of newsprint, commercial printing
papers, market pulp and wood products. It is the eighth largest publicly
traded pulp and paper manufacturer in the world. AbitibiBowater owns or
operates 25 pulp and paper facilities and 30 wood products facilities located
in the United States, Canada, the United Kingdom and South Korea. Marketing
its products in more than 90 countries, the Company is also among the world's
largest recyclers of old newspapers and magazines, and has more third-party
certified sustainable forest land than any other company in the world.
AbitibiBowater's shares trade under the stock symbol ABH on both the New York
Stock Exchange and the Toronto Stock Exchange.
Forward-Looking Statements
Statements in this news release that are not reported financial results
or other historical information are "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. They include,
for example, statements about our planned reduction of newsprint and
commercial printing papers capacity, the closure or idling of certain of our
production facilities, our ability to realize targeted synergies and cost
reductions, our financial performance, our ability to maintain and improve
product quality and customer service levels, and our business outlook,
strategies, and assessment of market conditions. Forward-looking statements
may be identified by the use of forward-looking terminology such as the words
"will", "could", "expects", "believes", "anticipates", "projects" and other
terms with similar meaning indicating possible future events or actions or
potential impact on the business or stockholders of AbitibiBowater.
These forward-looking statements are not guarantees of future
performance. They are based on management's assumptions, beliefs and
expectations, all of which involve a number of business risks and
uncertainties that could cause actual results to differ materially. These
risks and uncertainties include, but are not limited to: an inability to
reduce newsprint and commercial printing capacity as quickly as anticipated;
worsening industry conditions; decreased demand for our paper products;
actions of competitors; the risk that expected cost savings and synergies may
not be fully realized or may take longer to realize than expected; the costs
of raw materials such as energy, chemicals and fiber; and, potential
disruptions from the curtailments that may make it more difficult to maintain
relationships with customers, employees and suppliers. Additional factors are
listed from time to time in AbitibiBowater's filings with the Securities and
Exchange Commission and the Canadian securities regulatory authorities,
including those factors contained in the company's Quarterly Report on Form
10-Q for the quarterly period ended September 30, 2008, and the company's
Annual Report on Form 10-K for the twelve months ended on December 31, 2007,
under the caption "Risk Factors." All forward-looking statements in this news
release are expressly qualified by information contained in the company's
filings with the Securities and Exchange Commission and the Canadian
securities regulatory authorities. AbitibiBowater disclaims any obligation to
update or revise these forward-looking statements.
Any information about industry or general economic conditions contained
in this news release is derived from third-party sources that the company
believes are widely accepted and accurate; however, the company has not
independently verified this information and cannot assure its accuracy.
