By TAVIA GRANT / Globe and Mail Update
Thursday, April 28, 2005 Updated at 5:05 PM EST
Tembec Inc. shares plunged 15.3 per cent to a record low Thursday after the lumber producer posted a loss that was larger than analysts had expected.
The shares fell to a low of $2.94 before closing down 47 cents or 12.8 per cent at $3.20 on the Toronto Stock Exchange on trading of 2.2 million shares.
Earlier Thursday, the Montreal-based company said it narrowed its loss to $26.2-million or 31 cents a share for the second quarter ended March 26, compared with a net loss of $93.2 million or $1.09 a share in 2004.
Analysts had expected a loss of 25 cents a share.
The loss comes as Canadian companies are struggling to cope with one of the most difficult periods in the history of forest products. Looking ahead, Tembec said the main challenges the industry is facing are “the strength of the Canadian dollar and rising chemical, energy and wood costs, particularly in Eastern Canada.”
The company reduced its losses from a year earlier on higher sales and a special currency-related gain. Quarterly sales rose to $904.1-million from $887.2-million. Tembec said its quarterly results included an after-tax gain of $14-million on the translation of its U.S. dollar-denominated debt.
After adjusting for this gain and other specific items, the company would have lost $61.8-million, compared with a $73.8-million loss the previous year.
“Although the interim financial results reflect the improvement in operating earnings over the December quarter, margins in our three main businesses remain below trend line levels,” Tembec said in a statement.
“In the case of forest products, the lumber export duties are the primary cause of the reduced margins. While U.S. dollar pulp and paper prices are increasing, their net effect is being muted by a relatively weak U.S. dollar.”
Tembec is one of Canada's largest forestry companies, with sales of about $4-billion and 11,000 employees around the world.
In an interview this week with The Globe and Mail, Frank Dottori — the long-time chief executive officer of Tembec — blasted critics who want him to break up the company and conduct a fire sale of assets.
With files from Canadian Press.
