Catalyst Paper laying off 185 at Port Alberni operation

Catalyst Paper laying off 185 at Port Alberni operation
The company will eliminate another 130 jobs from head office staff
by Gordon Hamilton
Vancouver Sun
Published: Thursday, May 31, 2007

Catalyst Paper said Wednesday it is shutting down one of two paper machines at Port Alberni, laying off 185 people in the Vancouver Island community and eliminating another 130 jobs across the company.

Declining newsprint consumption in North America and the sky-high Canadian dollar forced the money-losing papermaker to make the sweeping restructuring moves, corporate relations vice-president Lyn Brown said Wednesday.

At the same time, Catalyst said it will be moving out of its downtown Vancouver headquarters for cheaper office space in Richmond. Many of the 130 support jobs will be lost in the head office move.


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Font: ****That's on top of 350 jobs phased out in a cost-cutting move announced only 10 weeks ago.

"These are not easy decisions to make and we recognize they affect people in a very personal way. But at the same time, these are tough times," Brown said, noting that every one cent change in the dollar has a $9 million impact on the company's bottom line.

Catalyst's operating costs are in Canadian dollars but the majority of Catalyst's business is conducted in export markets which pay in U.S. dollars.

Brown said over the last four years the company has achieved $400 million in performance improvements "only to see those gains erased" by higher energy costs and a higher Canadian dollar.

The loss of the Port Alberni paper machine is being viewed by many in the community as a betrayal by the company. Catalyst has lobbied for and received tax breaks from the city.

"We did our thing for them," Port Alberni Mayor Ken McRae said of the tax breaks. "We can't rely on them any more."

An official at the local Communications, Energy and Paperworkers Union blamed New York financial investor Third Avenue Management for the lay-offs. Third Avenue increased its stake in the company to 38 per cent last year and immediately launched a remake of the board of directors and senior management. Rick Hebert, second vice-president of CEP Local 686, said the layoffs will throw people's lives into turmoil and hurt the town's economy.

"But these private equity investors only care about shareholder profit," Hebert said.

When Hebert began working at the mill in 1977, it employed 1,500 people, he said. Once the paper machine shuts down -- Catalyst announced it is an indefinite curtailment starting Aug. 31 -- the remaining operation, a lightweight coated paper machine, will only employ 230 people.

Brown said the restructuring is more a matter of survival for the company.

"The reality is: A 93-cent Canadian dollar makes more acute some of the costs the Port Alberni mill faces," she said.

The Port Alberni machine makes directory paper, which is slightly high in value than newsprint. However, the Port Alberni machine has higher costs than Catalyst's other machines. It's production is to be shifted to the company's Crofton mill north of Victoria, replacing 134,000 tonnes of newsprint production at that plant.

Catalyst operates four pulp and paper mills in resource towns on Vancouver Island and at Powell River on the mainland. It also operates a recycled paper plant on the Lower Mainland.

ghamilton@png.canwest.com




© The Vancouver Sun 2007

Shutdown feared at Catalyst Paper

Shutdown feared at Catalyst Paper
by Gordon Hamilton
Vancouver Sun
Published: Wednesday, May 30, 2007

Catalyst Paper has called a meeting today with union leaders from its four pulp and paper operations in what is widely believed to be an announcement that it intends to shut down capacity.

"I would say things are not looking too bright at Catalyst," said investment analyst Paul Quinn of Salman Partners. "It's really difficult right now for Canadian producers with the Canadian dollar where it is and fibre costs going up.

"I wouldn't rule out temporarily shutting down some capacity."


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Font: ****Catalyst has mills at Port Alberni, Powell River, Crofton and Campbell River. It could close one entire mill or several machines at a number of mills. The company lost $25 million in the first quarter of 2007.

Catalyst is the coastal region's prinicipal pulp and paper company, with 3,800 employees. Besides the four paper mills, it runs the province's only plant producing recycled paper.

The meeting with union leaders comes after Catalyst's board of directors met Tuesday in Vancouver. Representatives of the company's largest shareholder, Third Avenue Management of New York, were on hand for the meeting.

Catalyst is being squeezed by poor paper markets and because its operating costs are all in Canadian dollars. But the majority of Catalyst's business is conducted in export markets, so its transactions are for the most part completed in US dollars. As the Canadian dollar climbs versus the greenback, the company's revenue stream is less able to cover its operating costs.

The Canadian dollar closed above 93 cents US on Tuesday.

The last time Catalyst temporarily shut down capacity was in early 2005 when one paper line was closed at Port Alberni. That shutdown lasted for almost two years before the company declared it permanent.

Port Alberni Mayor Ken McRae was prepared for the worst Tuesday, saying he expects the company will announce it is closing further capacity there. Catalyst's Port Alberni mill produces lightweight coated paper and directory paper. Lightweight coated prices are weak and the directory machine has high operating costs.

"We have been hearing so many stories -- that the mill has been sold to someone else, that they are going to shut down another machine. You never know. The machines are old, eh?" said McRae.

"Whatever they do, they will do. And we will just move on."

ghamilton@png.canwest.com

© The Vancouver Sun 2007