Paper company Bowater Q1 loss widens as weak demand depresses pricing

Paper company Bowater Q1 loss widens as weak demand depresses pricing
Canadian Press

GREENVILLE, S.C. (AP) - Paper company Bowater Inc. said Thursday its first-quarter loss grew, missing Wall Street estimates by a wide margin, as weakness in newsprint demand and a seasonal slowdown in the coated paper market ate into profits.

Shares of Bowater, which will combine with Canadian rival Abitibi-Consolidated Inc. (TSX:A) in the third quarter, dropped over three per cent in morning trading on the New York Stock Exchange.

The company said its quarterly loss grew to US$35.4 million, or 62 cents per share, from a loss of $18.8 million, or 33 cents per share during the same period last year. Excluding several special items, such as a $35.9 million gain on an asset sale and a $12.3 million charge related to tax adjustments, the company said it lost $48.6 million, or 85 cents per share, in the latest quarter.

Analysts polled by Thomson Financial forecast a loss of 53 cents per share. Thomson estimates usually exclude special items.

Revenue declined 14 per cent to $771.6 million from $893.2 million during the same period a year ago. Analysts expected revenue of $828.5 million.

The company said its quarterly results reflect further weakness in newsprint demand and a seasonal slowdown in the coated paper market, as well as a sluggish lumber market, which caused pricing pressure.

"The deterioration in domestic newsprint demand underscores the strategic rationale for our proposed merger," chief executive officer David J. Paterson said Thursday in a news release. Paterson said the combined companies will have lower costs.

A rapid increase in the cost of recycled fibre and costs related to production cuts from weak demand and plant maintenance also weighed on results in the period.

"We have seen some improvement in the second quarter with better demand for several of our paper grades and softening in the cost of recycled fibre," Paterson said.

Bowater shares fell 25 cents to close at $23.73 on the New York Stock Exchange. Its 52-week trading range is $19.61 to $29.96.