July 30, 2010 / 6:02 PM / 8 years ago

UPDATE 1-Catalyst Paper sees weak pulp prices in Q3; shares fall

* Keeps 2010 capex at C$20 mln

* Shares fall as much as 13 pct (Adds conference call details, stock movement)

July 30 (Reuters) - Canadian paper maker Catalyst Paper CTL.TO posted a wider-than-expected quarterly loss, hurt by impairment charges and closure costs, and said it expects pulp prices to soften in the third quarter, sending its shares down as much as 13 percent.

Pulp prices, which have risen nearly 20 percent from January 2009 levels, are expected to be weak over the next three to six months as consumption levels fall in China. In terms of the orders booked, the company expects specialty paper volumes to be flat or slightly up sequentially in the third quarter.

Catalyst Paper, which has five mills in British Columbia and Arizona, said it expects cash flows and net earnings to remain under pressure as fibre and other inputs costs rise.

Shares of the company were down 6 percent at 14.5 Canadian cents Friday afternoon on the Toronto Stock Exchange. They touched a low of 13.5 Canadian cents earlier in the day. Earlier this month, the company, which caters to retailers, publishers and commercial printers in North America, Latin America and Europe, said it would close its Elk Falls paper mill and paper recycling operations in Coquitlam. [ID:nSGE6650J9]

“With the permanent closure of two facilities, the company will reduce capacity curtailments, but necessary write-offs have further highlighted imbalances in the capital structure,” analyst Paul Quinn of RBC Capital Markets said in a note to clients.

The company said it expects to save at least C$13 million on an annualized basis in 2011, from the closures.

For the second quarter, the company posted net loss of C$368.4 million, or 96 Canadian cents per share, compared with net loss of C$1.9 million, or 1 Canadian cent a share, a year earlier.

The latest quarter results were hurt by impairment charges and closure costs of C$302 million, the company said.

Excluding items, Catalyst posted a loss of 11 Canadian cents a share, while analysts on average polled by Thomson Reuters I/B/E/S were expecting a loss of 7 Canadian cents a share.

Sales fell to C$299.4 million from C$300.7 million last year. (Reporting by Koustav Samanta and Isheeta Sanghi in Bangalore; Editing by Vinu Pilakkott and Don Sebastian)

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