MONTREAL - Paper producer AbitibiBowater Inc. (TSX:ABH) is cutting 1,100 jobs as it closes its troubled newsprint mill in Grand Falls, N.L., and a plant in Tennessee to cope with falling demand in the North American market.
The Montreal-based newsprint giant said Thursday it needs to make big production cuts to help it deal with volatile exchange rates, energy and fibre pricing, as well as structural challenges in the Canadian and U.S. newsprint industry.
North American newsprint demand has dropped in recent years as newspapers get smaller because of a squeeze on advertising and expansion of online news and advertising. The slumping economy has also cut demand, leading to mill shutdowns and production cuts across the industry.
AbitibiBowater made significant cuts last year to streamline operations after Montreal-based Abitibi-Consolidated merged with South Carolina-based Bowater Inc. to form one of North America's largest paper companies.
Other companies such as Kruger, Catalyst Paper (TSX:CTL), Domtar Corp. (TSX:UFS) and others have shut down production or closed mills in a tough economic environment.
Earlier this week, Toronto-based Fraser Papers Inc. (TSX:FPS) announced it plans to shut down two paper machines at its operations in Maine due to weak markets.
At AbitibiBowater, at least 800 unionized employees work at the Grand Falls mill, which has been the subject of ongoing discussions between workers and management.
AbitibiBowater has described the Grand Falls-Windsor operation as the highest-cost mill of its kind in North America.
In cutting total paper production by about a million tonnes, the company will also idle indefinitely an Alabama newsprint mill and two paper machines in Tennessee.
AbitibiBowater says it is on track to save $375 million in 2008 in an ongoing restructuring.
"Today's announcement is consistent with previous actions and demonstrates our ongoing commitment to be a stronger, more competitive organization," president and CEO David Paterson said in a release.
"The North American newsprint market continues to contract and our customers have told us they anticipate further decline. International customers have also indicated that export growth will not be as strong in the coming year. We have the resolve to adapt to these realities and to set the stage for continued quarter-over-quarter improvements.aa
AbitibiBowater said it will book cash closure costs of about $45 million for severance and other closure charges as a result of these actions. Meanwhile, the company will take a fourth quarter non-cash asset impairment charge of $180 million to reflect the permanent closure of the Grand Falls mill and Covington paper converting operations.
"We will make every effort to help mitigate the effects of these capacity reductions, as we are mindful of the impact they will have on affected employees and communities," added Paterson.
"Stakeholders made efforts to develop viable solutions to keep these operations running, however, after careful deliberation, these decisions were necessary given current market and economic realities."
AbitibiBowater produces newsprint, commercial printing papers, market pulp and wood products. It is the eighth largest publicly traded pulp and paper manufacturer in the world, with about 18,000 employees and 25 pulp and paper mills and 30 wood products operations in United States, Canada, the United Kingdom and South Korea.
In early trading on the Toronto Stock Exchange on Thursday, AbitibiBowater shares fell three cents to $6, a drop of 4.8 per cent.
