Resolute Forest Products lost 6 million dollar US in net income from a drop in newsprint production over the third quarter of 2015.

The decrease of printed newspapers is not good news for forestry companies as consumption of newsprint shows no sign of improvement, and force the company to reshape its structure.
Those difficulties in the newsprint sector affected the profit of the Thunder Bay-based company, who is losing money for an eighth consecutive quarter. At the same period, last year it was a 116 million lost. Unfortunately, the company didn’t want to comment on their numbers.

For Ian Lee, a business professor at Carleton University, the forecast for forestry companies dealing in the paper sector is not bright. “The future is not good because of the digital world emerging. With the digital economy, we use far less paper. There are less need for pulp and paper,” he said.

In order to assure the wealth of the company, Resolute FP has to reorient their offer and stop relying on paper. To turn things around, the reorganization is accomplished through the expansion of the pulp market, but also by getting bigger with the production of lumber with a production capacity of 2.8 million board feet. Investments in sawmills had been made in Quebec as well as in the Thunder Bay and Ignace, Ont. facilities recently, to upgrade and expand them. Also a new sawmill in Atikokan, Ont, had been opened last year. In a difficult economic time, the company believes the lumber market represents the future. Also, the company will open a new pulp facility in Calhoun, TN, an investment of 190 million dollars.

Unfortunately, you can’t create demand when there is none, as mention by Professor Lee. But refocusing the industry on lumber wood, to build houses is a good idea. “There were 200,000 houses built last year in Canada. There is a demand for that,” said Lee.
To continue the diversification process, and change their production, by still being present in the paper market, Resolute FP announced the acquisition of Florida-based company Atlas Paper, last November. They will now majorly produce tissues paper, assuring the future of the corporation, “Tissues will become a significant global area for the company. We believe that represent the healthy prosperity for us,” said Kursman. This acquisition positioned Resolute FP as a leader in this multi-billion-dollar tissue market in North America.

Resolute Forest Products by simondeschamps on TradingView.com

The newspapers are now merging electronically, and this hurts paper providers. Resolute FP lost about 25% of their sales, over a year, from 346 million dollars to 258 million. They also lost in the average transaction price as the value dropped by 100 million in a year.

Seth Kursman, the spokesperson for Resolute Forest Products, said the company is aware that newsprint represents a market in decline but assured they still could rely on it as it represents a significant market on the planet with 22 million tons of paper produced worldwide each year.

Moreover, they are confident that they could continue to be successful to be a low-cost producer, and still be competitive despite more financial compression to come. He doesn’t see newspapers disappearing in the next few years and believe “that doesn’t mean that in the future you can’t make money and then use that money to support your overall diversification strategy.” It will give them time to totally transform their productions.
Resolute FP is the largest producer of newsprint in the world exporting in more than 80 countries.