April 28, 2010 / 1:51 PM / 8 years ago

UPDATE 2-Tembec breaks even on stronger pulp, lumber prices

* Q2 breakeven/shr vs analyst forecast loss C$0.04/shr

* Sales rise 14 pct to C$311 million

* Results helped by higher pulp, lumber prices (Updates with company comments; in U.S. dollars unless noted)

VANCOUVER,, April 28 (Reuters) - Forestry company Tembec Inc TMB.TO broke even in its second quarter ended March 27, helped by pulp prices it expects to remain strong.

Tembec said pulp sales in the first three months of the year increased to C$311 million ($308 million) from C$256 million a year ago as it increased production into a healthier market.

The biggest boost came from higher paper pulp prices, but Tembec said it expects to benefit in sales of specialty pulp as older annual contracts come up for renewal, Chief Executive Jim Lopez said

“It’s going to be very good for us,” Lopez said.

The company, which also produces lumber and paper, said it broke even in the quarter on sales of C$476 million.

That compared with a loss of C$99 million, or 99 Canadian cents a share, on sales of C$417 million a year earlier

Analysts surveyed by Thomson Reuters I/B/E/S had, on average, forecast a loss of 4 Canadian cents a share. The three predictions ranged from a profit of 1 Canadian cent per share to a loss of 11 Canadian cents per share.

Higher lumber prices benefited Tembec’s sawmill operations, but how long prices stay up will depend on how much idled North American sawmill capacity is restarted this year, Lopez said.

He told analysts that unless the industry “goes crazy” with increased production, $300 per thousand board feet looked to be a good price floor, pending a rebound in the U.S housing market.

Tembec’s paper-making operations saw sales slip to C$77 million from C$79 million, as weak market conditions forced mills to continue operating at a loss.

Lopez said the company has been in talks about a possible buyout of its idled Pine Falls, Manitoba, paper mill, but it remains prepared to scrap the facility if no deal is reached.

Shares of the company, which refinanced last year under a deal with lenders, closed down 6.25 percent at C$2.55 Wednesday on the Toronto Stock Exchange.

$1=$1.01 Canadian Reporting by Allan Dowd, Isheeta Sanghi in Bangalore; editing by Rob Wilson

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