MONTREAL – AbitibiBowater’s chief executive is foregoing an annual bonus of $1.7 million this year as the forest products producer appeals for help from employees and communities to lower fixed costs.
Among the challenges the company faces is a planned 11 per cent reduction in AbitibiBowater’s lumber harvesting rights in Quebec as of April 1, 2013. That’s on top of an 18 per cent reduction in 2008.
AbitibiBowater’s (TSX:ABH) is based in Quebec, where it has 30 per cent of its pulp and paper capacity and 80 per cent of its wood products capacity.
“If you have less wood you have to look at how you optimize it to remain cost competitive,” CEO Richard Garneau said Monday in an interview.
Putting his personal compensation on the table is a way to ensure there’s an open dialogue as he seeks unspecified changes from others.
He said the company needs to reduce its fixed costs as the output of chips processed by its sawmills is reduced.
An number of sawmill jobs could be reduced as shifts or facilities are cut.
In Quebec, each 100,000 cubic metres of wood traditionally supports about 320 direct and indirect jobs in the province, Garneau said. The planned 930,000 cubic metre reduction facing AbitibiBowater would therefore affect nearly 3,000 industry workers, including haulers and others.
Garneau said he doesn’t yet know how many jobs would be directly affected at AbitibiBowater.
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“We have to find a way to address it in a way that we’re going to remain competitive in the different environment.”
Other company executives have accepted their bonuses granted by the board Oct. 25.
Garneau said the company needs to attract and retain talented executives to ensure its long-term viability and criticized those who have denounced the payments.
“I feel that criticism in Quebec undermines this basic reality of business. It is misguided and short-sighted,” he said during a conference call to discuss third-quarter results.
AbitibiBowater said it recorded its continually improving operating profits.
Reporting in U.S. dollars, it earned $150 million in adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) in the third quarter, up $40 million from the second quarter.
Overall, AbitibiBowater lost $44 million or 46 cents per share in the third quarter, as a weak dollar and special items more than offset an improved operating profit at North America’s largest newsprint producer. The loss compared with a loss of $829 million or $14.35 per share in the third quarter of 2010.
Its adjusted net earnings reached $52 million or 53 cents per share without had $96 million of special items, including $69-million non-cash charge related to currency translation.
Analysts had been looking for 51 cents per share of adjusted earnings, according to five estimates compiled by Thomson Reuters.
Revenue was about $1.2 billion in the quarter, about the same as a year ago.
The company, which will be renamed Resolute Forest Products next week, underwent 20 months of court-supervised restructuring that ended in December.
It recently moved its head office to a two-storey building in Montreal that houses about 300 workers and closed its office in Greenville, S.C.
Paul Quinn of RBC Capital Markets said the results were in line with his forecasts, but the adjusted EBITDA was higher than the $138 million consensus of analysts.
AbitibiBowater currently exports 47 per cent of its newsprint production, including 30 per cent to Asia. The company hopes to increase sales to India, which currently buys 2.3 million tonnes per year.
Garneau said employee efforts to reopen Quebec mills in Gatineau and Dolbeau would mean offsetting closures of higher cost facilities.
“I think that we’re really early in the process,” he said, adding that any decision won’t likely come until the second quarter of next year.
Although workers agreed to changes, the company needs to resolve fibre supply issues.
Meanwhile, Garneau expects the weakened economy will reduce the traditionally strong fourth quarter as advertisers trim spending.
“The rest of the year you have to take into account the uncertainty in consumer spending slowing down, the slowdown is quite obvious, the advertisers are quite prudent,” he said.
Under creditor protection, it closed operations, cut operating costs and outstanding debt – although it continues to revamp operations.
The company owns or operates 18 pulp and paper mills and 24 wood products mills in Canada, the United States and South Korea.
On the Toronto Stock Exchange, AbitibiBowater’s shares closed up 28 cents to C$17.03 in Monday trading.
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