MONTREAL — SFK Pulp Fund is planning a third phase of cost-cutting early next year to trim labor costs by 10 per cent in response to higher fibre costs and a strengthening Canadian dollar, the fund's chief executive said Monday.
The move is expected to save $4 million annually, although the exact impact on jobs and operations wasn't disclosed.
The changes are required despite improving market conditions, SFK president and CEO Pierre Gabriel Cote said on a conference call to discuss financial results that were released late last week.
"Although this will unfortunately impact our employees, we must continue to improve our cost structure given the uncertainty of market conditions and increasing fibre costs," Cote said.
Market conditions have improved in the NBSK pulp segment, but results remain very sensitive to fluctuations of the Canadian dollar which could largely offset higher pulp prices and volumes.
Two earlier rounds of cost-cutting are expected to net more than $10 million in savings by the end of 2009.
SFK Pulp announced Friday it had lost $14.5 million in the third quarter, compared with a profit a year ago.
The income trust said the loss amounted to 16 cents per diluted share for the quarter ended Sept. 30 compared with a profit of $8.7 million or eight cents per diluted share a year ago.
Sales totalled $112.8 million, down from $138.3 million.
The Quebec-based company said Monday it will make unspecified adjustments after reviewing its organization structure.
No major changes are expected in RBK pulp market conditions, although SFK said the black liquor subsidy could be renewed to help U.S. producers.
Cote also said SFK has been able to mitigate part of the $20 per tonne fibre cost increase contained in its agreement with insolvent paper giant AbitibiBowater.
Better transportation logistics and species mix has allowed the company to save $5 to $10 per tonne of the cost increase, he said.
The fund said pulp and paper markets continued to improve during the third quarter fuelled by strong demand in China and the temporary and permanent closures of several pulp mills in North America and Europe.
SFK Pulp operates three mills in Saint-Felicien, Que., Fairmont, W.Va., and Menominee, Mich.
On the Toronto Stock Exchange, SFK units were down three cents, or 3.61 per cent, at 80 cents in morning trading.