Saturday, January 31, 2009

Tembec to slash costs, takes downtime

Tembec takes downtime to adjust to market conditions
Temiscaming, Quebec, February 3, 2009 – Tembec today announced a series of market-related shutdowns affecting all of its British Columbia facilities, its newsprint mill in Manitoba and one additional sawmill in Ontario.

In British Columbia, the Canal Flats and Elko sawmills, as well as the Cranbrook finger joint facility, will shut down for approximately eight weeks starting February 9, 2009. The softwood Kraft pulp mill located in Skookumchuck will cease operating on February 23 for a six-week period. The high yield pulp mill in Chetwynd was idled on Monday, February 2 and will remain down until market conditions support a resumption of operations. The combined BC curtailments will affect approximately 975 employees. The newsprint mill in Pine Falls, Manitoba will shut down for two weeks, effective February 10, affecting approximately 300 employees. The Company’s Hearst, Ontario sawmill, which employs roughly 125 employees, will shut down for a six-week period beginning on February 9.

These shutdowns are in response to depressed markets for lumber, pulp and newsprint. Lumber markets and prices continue to be negatively affected by the ongoing housing downturn in the United States. Pulp markets have been impacted by the global economic slowdown and the related impact on packaging and other pulp consuming products. The North American newsprint market continues to experience a structural decline, compounded by the impact of the current recession on newspaper advertising.

These outages will affect both staff and hourly personnel. Employees at all affected sites have been informed of the Company’s decision. The Company also indicated it will be reviewing fibre supply and procurement needs as a result of these shutdowns, and will respond accordingly.

“The extensive idlings announced today follow a careful review of current and forecasted market conditions. As difficult as these decisions may be for employees, contractors and communities, they are necessary to minimize losses, manage cash and reduce inventories,” said Jim Lopez, President and Chief Executive Officer. “We will obviously continue to monitor market conditions closely and will manage operating rates accordingly.”

The Canal Flats and Elko sawmills have annual capacities of 180,000 mbf and 270,000 mbf respectively, while the Cranbrook facility produces 25,000 mbf of finger jointed lumber per year. The Hearst sawmill has an annual capacity of 160,000 mbf. The Skookumchuck Kraft mill produces 270,000 tonnes of softwood pulp per year, and the high yield pulp mill in Chetwynd has an annual capacity of 240,000 tonnes of hardwood pulp. The Pine Falls newsprint facility produces 185,000 tonnes annually.

Tembec is a large, diversified and integrated forest products company which stands as the global leader in sustainable forest management practices. With operations principally located in North America and in France, the Company employs approximately 7,000 people. Tembec’s common shares are listed on the Toronto Stock Exchange under the symbol TMB and warrants under TMB.WT. Additional information on Tembec is available on its website at www.tembec.com.

Tembec to slash costs by 25%, or C$25M/year, through staff cuts, additional mill downtime to address 30% decline in sales volume.

Jan 30, 2009 - Forestweb

LOS ANGELES, January 30, 2009 (Forestweb) - Tembec Inc. will reduce its selling, general and administrative costs by roughly 25%, or C$25 million (US$20 million) per year, to cope with a 30% drop in sales volume, the Toronto Sun reported Jan. 30.

James Lopez, CEO of the Montreal-based company, said the company would need to take aggressive action to bring fixed costs in line with sales volumes. Although details were not announced, Tembec said it would increase mill downtime and cut administrative staff to meet its cost-containment goals.

The company is also examining legal expenses, auditors, consultants and travel, looking for places to cut. Executive bonuses will also be reduced, but the company would not reveal the demands being made during union contract negotiations.

Tembec recently demanded that its suppliers reduce their costs by 10% to 20% to help it survive. Lopez said suppliers that did not comply would be replaced, even at the same cost.

About 2,000 of Tembec's 7,000 employees in Canada and France are unemployed or about to be laid off.

Lopez said the company was surprised by the drastic decline in the global pulp market, calling it "profound."

Forest industry analyst Paul Quinn of RBC Capital Markets said the situation would worsen in the coming months because Tembec would no longer be able to count on reduced currency to offset the drop-off in volumes and prices. Falling pulp prices will catch up with the company, he said.

Lopez said the Tembec is pleased about the $170 million included the federal budget for long-term market development and R&D but disappointed about its exclusion of short-term initiatives, such as refundable R&D tax credits for forest industry companies unable to pay taxes.

2 comments:

Anonymous said...

lay-offs are close at hand

Anonymous said...

Yeah, but are the staff going to get it too? I'm hearing a chunk of staff is going to go.
I'm also hearing a three-week shutdown in March at the Pulp mill which means the two mills will also be down.