Tembec to restructure five mills in northeastern Ontario
Wednesday, January 5, 2005 - Page B9 / Globe and Mail
Montreal -- Tembec Inc. plans to restructure five of its sawmills in northeastern Ontario, cutting some jobs and adding others in what it said yesterday was a difficult lumber market.
"The economic context is tough, considering the exchange rate of the Canadian dollar, the softwood lumber dispute between Canada and the United States and the energy costs in Ontario," said Jim Lopez, president of Tembec's forest products group.
"We are also forecasting future fibre reductions in both quality and quantity," he added in a statement.
In a separate announcement, Moody's Investors Service cut the rating on $1.2-billion of debt at Tembec's key operating subsidiary, Tembec Industries Inc., to "B2" from "Ba3."
Moody's said Tembec's cash flow from operations may not be enough to meet all requirements this year, largely because at least 70 per cent of its revenue is denominated in the weakening U.S. dollar. The higher Canadian dollar also adds to the company's costs.
Tembec said it will close its sawmill operations at Kirkland Lake in March and, in partnership with Domtar Inc., will invest $9-million to transform the mill into a plant making finger-jointed lumber. Tembec also agreed to acquire the boiler and kiln operations at Domtar's Chapleau sawmill.
Workers will be integrated into the restructured mill, which would begin production at the end of this year.
Tembec also plans to shut its Opasatika mill in March, affecting 78 jobs.
Domtar said it agreed to close its sawmill at Chapleau in March. The closing will affect about 67 jobs and result in $14-million in asset writeoffs and costs, the company said.
Both companies said they would add jobs and increase lumber production at other sites.
Domtar plans to add a third shift and 56 jobs at its Elk Lake facility to process wood available from the closing of Tembec's Kirkland Lake mill.
Tembec expects to add a third shift, including 49 jobs, and increase production 32 per cent at its Chapleau mill.
Tembec's Hearst mill will also add a third shift and 37 jobs as it raises annual production by 48 per cent.
Tembec said the restructuring will bring greater stability to its Kapuskasing sawmill, where it employs 124 people. The moves may reduce or avoid production downtime at Hearst, Opasatika and Kapuskasing, the company said. DTC (TSX) rose 2 cents to $14.52. TBC (TSX) rose 14 cents to $7.35. Reuters
