NewPage announced results of operations for the fourth quarter and full year today. It is clear that the company has very serious financial issues, but this does not make NewPage unique in our industry. We won't speak directly to the financials; that is not our area of expertise.
Downtime Reported: Other than the financials, there were a few other items of interest. The company reported that it took 515,000 tons of market related downtime in 2009. See below.
During 2009, we took approximately 515,000 tons of market-related downtime that included the indefinite shutdown of two paper machines one in Rumford, Maine and one in Whiting, Wisconsin," said Suwyn. "We believe inventories have now essentially bottomed out through the mill and printer system, and we have seen some rebound in orders over the past couple of months that have allowed us to restart production on these machines. While a couple of months do not make a trend, our customers indicate print advertising appears to be in the early stages of recovery.
It sounds as if the two indefinitely idled machines have re-started, but I don't believe this has been in the news, so perhaps the press release simply refers to the elimination of other market related downtime.
Still on the same subject, we assume that the uncoated free sheet being produced on coated free sheet machines does not count in this 515,000 tons of downtime. We estimate that more than 200,000 tons of this substitute grade was shipped in 2009. Therefore, the actual shortfall in coated demand for NewPage last year might be over 715,000 tons.
Black Liquor: The final black liquor benefit for NewPage was $304 million. According to NewPage the greatest benefactors of this obscene subsidy were the coated paper buyers.
As previously reported, the U.S. Internal Revenue Code allowed a refundable excise tax credit for alternative fuel mixtures produced for sale or for use as a fuel in a trade or business. This credit expired on December 31, 2009. Income recognized for the credit is included in net income (loss) attributable to the company and totaled $90 million for the fourth quarter of 2009 and $304 million for the full year 2009. We believe that generally the industry passed on most of the benefits of the alternative fuel mixture credit to customers in the form of lower sales prices.
There is no factual basis for this NewPage claim. It creates additional credibility problems for the company.
As we have previously discussed, coated producers that did not benefit from the subsidy continued to operate in 2009. If some of these mills had closed due to prices falling below variable costs, at the same time the subsidized producers continued operating, this would have been evidence that at least some of the subsidy was passed on to buyers. Then if prices increased in 2010 after the subsidy expired, this too would have been evidence that buyers benefited from the subsidy. Neither of these events occurred. The NewPage claim is simply not true.
New NewPage President : Tom Curley was announced as the President and CEO of the company earlier this month. NewPage provided Mr. Curley's background in the press release.
Curley holds an associate degree in Aeronautical Engineering from Daniel Webster College in Nashua, New Hampshire, and a Bachelor of Science degree in Industrial Technology from the University of Massachusetts at Lowell. Beginning his career with General Electric Company, he later joined Caterpillar Inc., Cooper Cameron Corporation, and Rolls-Royce plc. During his career, he has progressed through increasingly responsible roles and, prior to joining NewPage, Curley served as president of the Rolls-Royce Energy business.
Anti-Dumping Duties : The trade action (sponsored by NewPage and several partners) against U.S. imports of Chinese and Indonesian coated free sheet "sheets" has generated some activity lately. The Dead Tree Edition reported here that a group of environmental organizations are warning printers away from the Chinese imports. At the same time, a group called Save Printer Jobs is lobbying against the trade action.
The effort to halt Chinese imports did not stop at our border. An announcement was made today that an organization of fine paper producers in Europe has launched a probe against the Chinese for dumping coated paper in Europe. This is going to add to international tensions.
The U.S. coated trade issue was the subject of a detailed report in our December Reel Time. It is a very complicated problem. The Chinese probably are dumping paper unfairly and illegally. On the other hand, the black liquor subsidy, and numerous other business subsidies, take away our right to complain.