October 31, 2011 / 12:23 PM / 6 years ago

UPDATE 3-AbitibiBowater Q3 beats; sees weaker paper sales in Q4

* Q3 adj EPS $0.53 vs est. $0.52/shr

* Sales flat at $1.2 bln

* Expects some pressure in export newsprint pricing

* Sees 2012 capital spending of $140-$150 mln (Adds CEO comments, updates shares)

By Bhaswati Mukhopadhyay

Oct 31 (Reuters) - AbitibiBowater Inc posted a third-quarter adjusted profit above market expectations helped in part by higher shipments, but the newsprint maker said seasonal pick-up in paper sales was not as strong as last year.

It expects the trend to produce weaker seasonal demand in the fourth quarter as well.

The Montreal-based company, which emerged from bankruptcy protection last December, has been hit by the decline in newspaper demand as more newspaper readers and advertisers shift to the Internet.

AbitibiBowater, which also produces coated mechanical and specialty papers, pulp and wood products, sees pressure in export newsprint pricing due to excess supply worldwide.

RBC Capital Markets analyst Paul Quinn, who has an “outperform” rating on the stock, thinks the excess supply is temporary.

Although newsprint growth could be muted in Asia if the economic slowdown does not reverse in 2012, AbitibiBowater expects to see a lot of growth coming from Asia.

“China is...buying a lot of recovered paper from North America. It is probably the reason that recovered paper prices have gone up,” Chief Executive Richard Garneau told Reuters.

AbitibiBowater draws 12 percent of its newsprint revenue from Asia.

“Print is not going to disappear. When you talk to publishers and retailers, you realize it is very difficult for them to advertise on tablets and they still see a lot of benefits in print,” said Garneau, a paper industry veteran.

The company, which had earlier said it would spend $120 million in 2011, expects it to be well below the forecast. It has spent $65 million so far this year.

The company said 2012 budget of about $140-$150 million will include capital spending carried forward from this year.

AbitibiBowater has a net debt of $417 million and continues to look at cost-cuts.

PULP WORRIES

The company, which is renaming itself to Resolute Forest Products from Nov. 7, expects pulp prices to be under pressure in the near term.

However, the CEO said he expects pulp prices to recover in the first and second quarters next year.

“China is driving most of the pulp consumption - their consumption is up 39 percent compared to 2010. China will continue to buy pulp to feed their paperboard machines,” Garneau said.

Domtar Corp , one of North America’s largest producers of uncoated freesheet paper, recently reported quarterly profit that topped market estimates but said it expects pulp prices to fall further.

AbitibiBowater reported a narrower net loss of $44 million, or 46 cents a share, compared with a net loss of $829 million, or $14.35 a share, a year ago.

Excluding special items, it earned 53 cents a share, compared with analysts’ average estimate of 52 cents a share, according to Thomson Reuters I/B/E/S.

Sales at the company, which is not looking at any capacity reductions at this point, were flat at $1.2 billion.

AbitibiBowater shares, which have lost more than 44 percent of their value since hitting a year high in February, were up 16 Canadian cents at C$16.91 on Monday afternoon on the Toronto Stock Exchange. They earlier rose more than 3 percent to C$17.32. (Reporting by Bhaswati Mukhopadhyay in Bangalore; Editing by Gopakumar Warrier and Sriraj Kalluvila)

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