August 1, 2012 / 4:53 PM / 5 years ago

UPDATE 1-Resolute profit tops estimates, shares rise

* Q2 adj EPS $0.30 vs est. $0.06

* Sales flat at $1.2 bln

* Says encouraged by positive momentum in U.S. housing starts

* Sees no meaningful improvement in pulp business

* U.S. shares rise 35 pct

Aug 1 (Reuters) - Resolute Forest Products Inc, which is in the midst of acquiring specialty pulp maker Fibrek Inc, posted an adjusted quarterly profit that beat analysts’ expectations by a wide margin, sending its shares up 35 percent.

The company said the results were driven by growth mainly at its specialty papers and wood products units. The wood products unit, which makes a wide variety of lumber grades used for residential roofing and flooring, earned $12 million in the quarter, compared with a loss of $14 million, a year earlier.

“We are encouraged by the positive momentum building in U.S. housing starts and pleased with the effect this gradual improvement is having on our wood products segment,” said CEO Richard Garneau.

U.S. housing starts rose 6.9 percent in June, their highest since October 2008. The housing market, which collapsed during the 2007-2009 recession, has been a relative bright spot in the economy this year.

Resolute, formerly known as AbitibiBowater Inc, owns or operates 21 pulp and paper mills and 22 wood products plants in the United States, Canada and South Korea.

The company said it does not expect a meaningful improvement in its pulp business this year.

Canadian forestry company Tembec Inc last week posted a quarterly loss, citing weak market conditions for northern bleached softwood kraft pulp (NBSK).

NBSK list prices in North America are likely to fall to $850 per tonne in August from $880 per tonne and could decline further without more downtime, CIBC World Markets analysts said in a note dated July 30.

NBSK is the paper industry’s benchmark grade of pulp, and is produced mainly in Canada and the Nordic countries.

The pulp sector has been out of favor as prices have been hit by a combination of global economic downturn and declining demand for newsprint as newspapers close or lose circulation.

Resolute said in June it would indefinitely idle its Mersey newsprint mill in Nova Scotia due to falling newsprint prices.

EASY BEAT

The company posted a second-quarter net loss of $20 million, or 20 cents per share, compared with a net profit of $61 million, or 63 cents per share, a year earlier.

Excluding items, it earned 30 cents per share, topping analysts’ average expectation of 6 cents per share, according to Thomson Reuters I/B/E/S.

Sales were flat at $1.2 billion.

Resolute now owns a majority of Fibrek after white knight Mercer International Inc exited the long and controversial take-over battle in April.

Shares of Montreal-based Resolute, which has a market value of $917 million, were up 20 percent at $11.00 on Wednesday on the New York Stock Exchange. They rose as much as 34 percent to C$12.36 on the Toronto Stock Exchange.

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