What is your career path and what led you to want to manage a large company like Resolute Forest Products?
I have a background in accounting, which has allowed me to take on different roles in the wood, pulp and paper segments throughout my career. I have worked in the wood products business, in both sales and operations. And I held a number of positions at Resolute, including senior vice president, Wood Products, Global Procurement and Information Technology, from 2011 to 2018; senior vice president, Wood Products, from 2006 to 2011; and vice president, Sales, Marketing and Operations – British Columbia and Value-added Products, from 2000 to 2005. I consider myself an industry veteran, with 37 years of experience acquired mainly at Resolute and its predecessor companies.
Please provide us with an overview of Resolute's position since your arrival at the head of the company.
The company's optimized asset base enabled us to take advantage of positive market dynamics to achieve strong performance in 2018, despite cost headwinds and a soft lumber market in the fourth quarter. We experienced significantly weaker pricing for lumber in the last quarter, unforeseen operational disruptions, planned downtime for maintenance, as well as higher energy and wood costs. Despite these challenges, we generated US$435 million in cash from operations in 2018, monetized the Catawba, South Carolina, and Fairmont, West Virginia, assets at attractive valuations, returned US$136 million of capital to shareholders through a special dividend and further reduced our leverage by US$225 million shortly after year-end. Thanks to a strong balance sheet, we are well-positioned to fuel growth in our businesses. I am proud to report that in 2018 not only did we deliver solid financial performance, but our employees also improved on our safety performance by achieving an OSHA incident rate of 0.46. We also managed to reduce environmental incidents by 10%, in addition to the significant 40% reduction in the previous year. In 2018, our overall business and sustainability leadership received significant recognition, with 36 awards and distinctions on a regional, North American and global basis.
What major projects are you currently leading?
First, we continue to develop our tissue business, focusing on the production and converting operations at our Calhoun, Tennessee, mill in order to improve productivity and product quality.
Second, we are focusing our efforts on improving operational efficiencies across our network in order to limit production disruptions, maximize value generation from existing assets, reduce costs and improve our competitiveness.
Third, we remain on the lookout for organic opportunities or acquisitions that will allow us to evolve the company's transformation strategy.
Finally, we are implementing innovative workforce attraction and retention initiatives, with a focus on creating a diverse and inclusive workplace.
Resolute sold two U.S. mills in recent months: one in Catawba, South Carolina, and the other in Fairmont, West Virginia. What short-term and medium-term strategies has Resolute adopted vis-à-vis its U.S. assets? What can we anticipate for Canadian and Quebec operations?
During the fourth quarter, we completed the sale of our Catawba and Fairmont facilities for over US$360 million, maximizing the value of these assets. We estimate that without Catawba, EBITDA would have been approximately US$35 million lower in 2018. However, the transaction allowed us to achieve an attractive valuation for a conversion-ready asset. Given the decline in paper consumption, with the sale of Catawba, we have exited the coated groundwood papers market.
The sale of the Fairmont mill allows us to optimize recycled pulp production at our Menominee, Michigan, mill and to increase our overall profitability. The transactions were not linked to a strategy based on geographical distribution.
Resolute stock: Does it reflect the real value of the company?
We are a publicly traded company whose value is determined daily on the exchanges, but the one-year benchmark price forecast by analysts who follow our industry ranges from $10.00 to $12.00; that's $11.00 on average.
Workplace accidents: What health and safety measures are in place across Resolute operations?
- We always prioritize the safety of our employees. Our long-term goal is to provide an injury-free workplace to all our employees. To do this, we maintain world-class standards and strive to continuously improve by measuring our results and making sustained efforts to prevent accidents.
- 2018: RECORD PERFORMANCE
- OSHA incident rate of 0.46, the best result ever recorded
- Injury severity rate of 15.7, the lowest rate ever recorded
Where does Resolute focus its research and development efforts?
We are leading several research and development projects focusing primarily on the alternative use of fiber, such as biofuels, biomaterials and biochemicals. In January 2018, we announced the implementation of a TMP-bio pilot project at our mill in Thunder Bay, Ontario, in collaboration with FPInnovations. This C$21 million project is focused on developing new ways to efficiently produce and commercialize innovative biochemicals derived from wood. The construction phase of the pilot plant is complete, and the start-up and ramp-up phases are underway. Performance BioFilaments, a partnership with Mercer, is another great example of an R&D project. We are developing unconventional commercial applications for cellulose filaments, a biomaterial made of wood fiber.
The construction of Toundra Greenhouse, a large greenhouse complex located in Saint-Félicien, Quebec, is the perfect example of synergy between a pulp mill and a greenhouse. The recovery of certain by-products from our mill, the increased coordination between facilities and the know-how of our employees clearly demonstrate that diversification benefits the environment, jobs and communities.
Can you outline for us what you consider to be Resolute’s biggest concerns for the future?
- The transformation of our company in relation to the decline in paper consumption remains a priority in order to maintain our leadership position in the forest products industry.
- The availability of (access to) quality fiber – in sufficient quantities and at a competitive cost.
- Like the majority of economic sectors, we face the significant challenge of workforce renewal: We consider the difficulty of attracting and retaining employees as an opportunity to position Resolute as an employer of choice.
Current and future investments at Resolute: Where will the company be in the next 5-10 years?
Our business strategy is focused on continuing to transform the company into a more profitable and sustainable organization, one that we believe can create consistent value for shareholders through a competitive portfolio of manufacturing assets and a solid presence in long-term growth markets. This strategy includes, on the one hand, a gradual and profitable retreat from certain paper grades and, on the other, using our strong financial position to act on opportunities to diversify and grow.
The company's transformation will continue in the coming years based on maximizing value generation from paper, growing in pulp and wood products, integrating our pulp into value-added, quality tissue and investing in product innovation while maintaining a disciplined approach to capital allocation.
The photos are courtesy of Resolute Forest Products.
About Resolute Forest Products
Resolute Forest Products is a global leader in the forest products industry with a diverse range of products, including market pulp, tissue, wood products, newsprint and specialty papers, which are marketed in close to 70 countries. The company owns or operates some 40 manufacturing facilities, as well as power generation assets, in the United States and Canada. Resolute has third-party certified 100% of its managed woodlands to internationally recognized sustainable forest management standards. The shares of Resolute Forest Products trade under the stock symbol RFP on both the New York Stock Exchange and the Toronto Stock Exchange.
Resolute has received regional, North American and global recognition for its leadership in corporate social responsibility and sustainable development, as well as for its business practices. Visit www.resolutefp.com for more information.