Resolute Forest Products (RFP) Misses Q4 EPS by 28c, Revenues Miss

Resolute Forest Products (NYSE: RFP) reported Q4 EPS of ($0.59), $0.28 worse than the analyst estimate of ($0.31). Revenue for the quarter came in at $668 million versus the consensus estimate of $706 million.

"Our fourth quarter results reflect bottom-of-the-cycle conditions in market pulp, ongoing pricing pressures in paper grades and the slow pricing recovery in lumber," said Yves Laflamme, president and chief executive officer. "The pending acquisition of three sawmills in the U.S. South is an important step in our transformation strategy; it will give us immediate scale in an attractive region, with quality assets in a rich fiber basket, close to growing end-markets. Our financial position will remain strong after this acquisition, and will support us as we continue to progress with our transformation strategy. We're pleased with the quarterly improvement in tissue EBITDA and the progress around sales growth and productivity gains. We're also excited about our recently-announced project to modernize the paper machine at Kénogami to produce high-grade SCA+ supercalendered paper and our plans to grow in biomaterials with the construction of a cellulose filament plant at that mill, in both cases taking advantage of synergies within our network of operations in the Saguenay-Lac-Saint-Jean region. While the paper project is focused on nearer-term competitiveness, the cellulose filament project highlights the added value we can bring to fiber through our role in its transformation as we look to build the forest products industry of the future."

Outlook

"Our average transaction price in market pulp is down by over $200 per metric ton from its peak about one year ago, but we believe the cycle reached bottom in the fourth quarter. Indeed, we see stronger operating rates, especially in softwood pulp, as indicators of long-term demand growth for quality market pulp, which is consistent with the recently-reported steps the industry has taken toward pricing recovery. With our existing tissue footprint, we expect progressive earnings growth for 2020 in the business as we continue to build on recent improvements around sales growth and productivity gains. We're excited with the prospects around the pending acquisition of three U.S. sawmills, as our timing allowed us to achieve an attractive price. The upside will come with the turnaround plan for the assets and continued momentum in market conditions from their recent soft levels. We will continue to maximize the earnings power and cash generation of our paper segments, although we have modest expectations when it comes to this year's earnings as there are limited catalysts to support a material improvement in the near term," added Mr. Laflamme.

For earnings history and earnings-related data on Resolute Forest Products (RFP) click here.

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