AbitibiBowater first-quarter EBITDA increases in all business segments; further improvements expected

By Jennifer Lanning Drey

Portland, Ore., May 8 - AbitibiBowater Inc. posted first-quarter EBITDA improvements in each of its business segments as compared to the prior quarter, and the company expects to record similar second-quarter EBITDA increases, William G. Harvey, chief financial officer of AbitibiBowater, said Thursday during the company's first-quarter earnings conference call.

"Our outlook for the second quarter is optimistic. We expect to build on the current positive trend with a substantial improvement over the first quarter," Harvey said.

At the March 31 quarter end, the company's Bowater subsidiary had liquidity of $308 million. Abitibi-Consolidated Co. had liquidity of $185 million, represented by invested cash, upon AbitibiBowater's April completion of a series of financing transactions totaling $1.4 billion.

Abitibi has since sold its Snowflake, Ariz., mill for $161 million, bringing the invested cash total to $277 million, Harvey said.

AbitibiBowater is on track to meet its asset sales target of $500 million by the end of 2008 and is now targeting an additional $250 million in asset sales by the end of 2009.

In looking to achieve that target, the company has launched the sale process for its Mokpo, South Korea, paper mill and is moving forward with additional sales including forest lands, sawmills, hydroelectric sites and other assets.

AbitibiBowater's current pro forma net debt position, adjusted for the refinancing and sale of the Snowflake facility, is about $6 billion.

Debt repayment top focus

AbitibiBowater's highest priority for cash flow usage is repayment of debt, John W. Weaver, the company's executive chairman, said during the question-and-answer portion of the call.

The company expects capital expenditures for 2008 to range between $150 million and $200 million, which are lower than the company's usual range of $300 million to $350 million.

Interest expense will increase by $22 million per quarter beginning in the second quarter as a result of the refinancing of the Abitibi subsidiary.

The company remains on track to meet its goal of achieving $375 million of synergies by the end of 2009.

"We remain extremely focused on positioning the company to deliver the synergies and improving the financial results," Weaver said.

Rising pulp, energy costs

During the first quarter, AbitibiBowater faced headwinds including a $27 million increase in pulp and paper fiber costs and a $5 million increase in energy costs.

The company is working to mitigate the increases through cost controls and price improvements, which it expects to contribute to future earnings.

"We expect continued momentum in our earnings improvement in the coming quarters as we realize both synergies and favorable market pricing trends," Weaver said.

AbitibiBowater reported a first-quarter net loss of $248 million on sales of $1.7 billion. The figures compare to a net loss of $35 million on sales of $772 million for the first quarter of 2007, which consisted of only Bowater's results.

AbitibiBowater is a Montreal-based producer of newsprint and commercial printing papers, market pulp and wood products.

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