NEWSPRINT MAKERS CONTINUE TO HAVE FINANCIAL WOES Big 3 N. American all post Q1 losses, though "special items' help out.

A weak U.S. dollar and the on-going need to maintain equipment saw two of the three largest North American newsprint makers -- both based in Canada -- continuing once again to have a loss in their first quarters, they reported last week. The American company -- through asset sales and beneficial currency exchange rates -- was able to eke out a small profit. By the numbers:

* Abitibi-Consolidated Inc.: Though sales were up almost six percent, to $C1.4 billion ($US1.1 billion), when comparing the first quarter of 2005 against the same period last year, this Montreal-based newsprint manufacturer saw its net income drop even further -- 64.5 percent -- to a loss of $C51 million ($US40.5 million), or 12 cents Canadian (9.5 cents U.S.) per diluted share.

The loss is somewhat deceptive, in that in 2004 the company had a one-time gain of $C75 million ($US59.6 million) from discontinued operations. In fact, before that gain was added to the last year's balance sheet, Abitibi had lost almost twice as much in the quarter as it did this year.

The company said that it would decrease newsprint production in the second quarter and that it would sell one mill and shut down another.

Abitibi said that it lost $C22 million ($US17.5 million) on foreign currency exchange, "namely the company's U.S. dollar-denominated debt," alone and that the overall impact of the difference between the two currencies ended up costing the company $63 million in the quarter.

Further, the company said that it saw a big gain in newsprint profitability, going up from nothing in the first quarter of 2004 to $C9 million ($US7.2 million) in the same period this year. The commercial printing papers segment of the business reduced its loss almost 19 percent, to $C13 million ($US10.3 million).

Also last week, Abitibi declared a dividend of 2.5 cents Canadian (just under two cents U.S.) for stockholders of record on May 9, payable on June 1.

* Bowater Inc.: With first quarter 2005 sales up 12.3 percent when compared to last year -- and a one-time gain of $7.2 million coming from the sale of assets and a $6.3-million gain from currency exchange -- the Greenville, S.C.-based papermaker said last week that it had net income of $900,000, or two cents per share.

Last year's first quarter showed negative net income at $32.5 million and a negative earnings-per-diluted-share of 57 cents.

But, once you roll out those wonderful special items from the mix, the company lost 22 cents per diluted share.

Total sales in the first quarter came in at $837 million. The company said that the average price of newsprint rose $7 a metric ton (tonne) between 2004 and 2005 and that the company curtailed production by about 40,000 tonnes when compared to last year, though inventory increased by about 17,000 tonnes.

"Pricing for Bowater's major paper grades continues to improve," said Arnold Nemirow, the company's chairman, president and chief executive. "I expect this trend to support better financial results throughout the year."

* Norske Skog Canada Ltd.: Stronger sales were thwarted by poor currency exchange rates and the annual maintenance shut-down at one of its mills, the Vancouver, British Columbia-based Norske said last week.

Sales were up almost two percent, to $C462.7 million ($US378.8 million), but net earnings were up almost 53 percent, to a loss of $C21.8 million ($US17.3 million), or a loss of 10 cents Canadian per share (7.9 cents U.S.).

Norske lost about $C10.7 million ($US8.5 million) on foreign currency exchange before tax, coming in about $C2.6 million ($US2.1 million) after tax.

It said that it would take a $C6 million-hit ($US4.8 million) in the first quarter attributable to "the indefinite curtailment of one paper machine at the Port Alberni mill."

Newsprint sales volume was down 8.6 percent, to 180,700 tonnes. The company said, "U.S. consumption of newsprint continued to disappoint," with a decrease of 4.6 percent, year-over-year.

Norske said that it would "indefinitely idle" 140,000 tonnes of newsprint capacity, referring to the Port Alberni No. Three paper machine. This resulted in the layoffs of about 200 workers and the company put $C6.7 millon ($US5.3 million) into the costs column to pay for the "restructuring."

Coincidentally (or perhaps not), Knight Ridder released its annual newsprint awards last week. Alberta Newsprint Co.'s Whitecourt Mill was named the top performer for 2004 (the third time its made this distinction) and Stora Enso's Port Hawkesbury Mill was named 2004's most improved mill. Notice the big three listed above were not mentioned.