By TAVIA GRANT (Globe and Mail Update)
Tuesday, May 17, 2005 Updated at 4:59 PM EDT
Tembec Inc. said it will record a $98.3-million charge as the Canadian forestry-products company closes four manufacturing units in Eastern Canada. The move will affect 459 jobs.
The moves "are necessary in light of the stronger Canadian dollar and other fundamental issues that affect the competitiveness of these mills," Tembec said in a statement. The Canadian dollar has climbed about 22 per cent against its U.S. counterpart in the past three years, making Canadian goods less competitive when sold abroad. While the loonie has weakened this year, for Tembec it appears to be too little, too late.
The announcement comes as Canadian companies are struggling to cope with one of the most difficult periods in the history of forest products. The Montreal-based producer of pulp, paper and wood products reported another quarterly loss last month, sending its shares to a record low. At that time, Tembec warned that the main challenges the industry are the dollar's strength and rising chemical, energy and wood costs.
"After making considerable efforts to stem the significant losses of these mills and find appropriate solutions to the challenges that they are facing, the company came to the conclusion that it had no choice but to shut down these operations," said Tembec president and chief executive Frank Dottori.
Tembec shares fell 4 cents or 1.15 per cent to $3.43 in Toronto.
Tembec will close plants in Saint-Léonard-de-Portneuf, Mansfield-et-Pontefract and Temiscaming, Que., and one in Brantford, Ont. The company's chip plant operations in Temiscaming will continue.
The company expects other closing-related costs of $13.7-million. The after-tax effect of $75.7-million will be recorded in the June 2005 quarter.
In the past year, the facilities generated sales of $112.7-million and negative earnings before interest, taxes, depreciation and amortization of $14.7-million, Tembec said.
