From the most recent 10Q. (see below) Take note of the last sentence.
This is a highly leveraged company in an industry with
considerable overcapacity. A significant number of the factors
that determine this company's future are WELL beyond its control
and very unfavorable. It is a crap shoot.
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OUTLOOK
Kraft pulp markets continue to be weak. Significant downtime
announced by various industry players is helping bring Norscan
inventories down to 1.75 million metric tons at the end of
September from 1.9 million metric tons at the end of August.
However, more reductions are necessary before any recovery in
pricing occurs.
Industry Mill inventories for coated groundwood paper at
September 1998 were 205,000 tons. They were 75,000 tons higher
than one year ago, but still 98,000 tons below their 303,000
ton peak in May of 1996. The same is true for reported
consumer inventories as of the end of August, up 30% from one
year ago.
While total inventories are well below earlier peaks, the rising
trend is not favorable and bears close watching. It should also be
noted that imports continue to rise. Coated groundwood imports are
up 24% year to date compared to 1997. Of the three major consumers
of lightweight coated paper ("LWC"): magazines, catalogs and
commercial printing, magazines continue to enjoy solid growth with
ad pages up 3% and revenues up 8%. Shipments of LWC were up 10.5%
for the first nine months of 1998 to this end use. Catalogs also are
strong while grade substitution continues to negatively impact
commercial printing applications.
In spite of the economic turmoil and paper industry
weakness, third quarter EBITDA was very consistent with the
second quarter and other results were quite satisfactory.
Repap's shipments were up a strong 3% over the second quarter,
our inventory declined to its lowest level in two years, order
backlogs remained stable and the New Brunswick mill continued to
run well with low costs and good efficiencies. Price declines
were moderate and were mitigated by the weak Canadian dollar.
Unfortunately, industry conditions are weakening and we cannot
expect to avoid negative impacts going forward. |
