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Edited Transcript of RFP earnings conference call or presentation 3-May-18 1:00pm GMT

Q1 2018 Resolute Forest Products Inc Earnings Call

Montreal May 9, 2018 (Thomson StreetEvents) -- Edited Transcript of Resolute Forest Products Inc earnings conference call or presentation Thursday, May 3, 2018 at 1:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Jo-Ann Longworth

Resolute Forest Products Inc. - Senior VP & CFO

* Silvana Travaglini

Resolute Forest Products Inc. - VP of IR & Treasurer

* Yves Laflamme

Resolute Forest Products Inc. - President, CEO & Director

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Conference Call Participants

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* Hamir Patel

CIBC Capital Markets, Research Division - Director of Institutional Equity Research & Paper and Forest Products Analyst

* Paul C. Quinn

RBC Capital Markets, LLC, Research Division - Analyst

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Presentation

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Operator [1]

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Good morning, ladies and gentlemen. Welcome to the Resolute Forest Products First Quarter 2018 Earnings Conference Call. (Operator Instructions) Please note that this call is being recorded today, May 3, 2018, at 9:00 a.m. Eastern Time.

I would now like to turn the meeting over to Silvana Travaglini, Vice President. Please go ahead, Ms. Travaglini.

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Silvana Travaglini, Resolute Forest Products Inc. - VP of IR & Treasurer [2]

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Good morning. Welcome to Resolute's first quarter earnings call. Today, we'll hear from Yves Laflamme, President and Chief Executive Officer; and Jo-Ann Longworth, Senior Vice President and Chief Financial Officer.

You can follow along with the slides for today's presentation by logging on to the webcast using the link in the Presentations and Webcasts page under the Investor Relations section of our website, or you can also download the slides.

Today's presentation will include certain non-U. S. GAAP financial information. A reconciliation of those non-GAAP numbers to U.S. GAAP financial measures is included in our press release and in the appendix to the slides.

We will also make forward-looking statements. Forward-looking information is based on our current assumptions, beliefs and expectations, all of which involve a number of business risks and uncertainties and can change as conditions do. Please review the cautionary statements in our press release and on Slide 2 of today's presentation.

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Yves Laflamme, Resolute Forest Products Inc. - President, CEO & Director [3]

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Good morning, thank you for joining us today. We realized the best first quarter in terms of profitability since 2011. We generated adjusted EBITDA of $108 million compared to $102 million in the fourth quarter and $61 million in the same period last year. Wood products and market pulp segments reported $101 million of EBITDA, a $50 million improvement over the same period last year.

Our first quarter results benefited from strong price momentum across most of our product offerings as well as a decrease in maintenance outages and lower share-based compensation expense. But as Canada is seeing freight cost, lower shipment, seasonally higher energy expenses and increased fiber cost tempered the benefits of higher pricing, leading to a moderate improvement in earnings compared to the fourth quarter.

By segment, we reported adjusted EBITDA of $40 million in market pulp, down $4 million from the fourth quarter; breakeven for our tissue operations; $61 million in wood products, down $4 million; $12 million in newsprint, up $1 million; and $5 million in specialty paper, an improvement of $7 million against the previous quarter.

Transportation challenges widespread across North America and weather-related issues negatively impacted our first quarter earnings by more than $15 million.

Higher trucking rates and limited rail cars availability led to a significant increase in our freight cost this quarter, rising 8% compared to the fourth quarter. Freight constraints also reduced shipments volume and led to an increase in finished goods inventory. In addition, the unusually cold weather in the U.S. South aggravated seasonally higher energy costs and reduced the operational efficiency of some mills.

Let's review our individual segments, starting with market pulp. World shipments of chemical pulp were flat in the quarter compared to the year ago period. Shipments to North America and China decreased by 3% and 2%, respectively, while shipments to Western Europe rose by 4%. Softwood shipment decreased by 3% globally, reflecting lower shipments to China, North America and Western Europe, down 6%, 5% and 1%, respectively.

Softwood pulp mills ran at 90% shipment to capacity ratio. World shipments of hardwood rose 4%, led by an increase of 8% in shipments to Western Europe and 1% in China, while shipments to North America fell by 2%. Hardwood mills were at 88% shipment to capacity ratio.

The supply-demand balance has remained favorable so far in 2018 for pulp, primarily due to global supply disruptions. As a result, our overall realized pricing has continued to climb, reaching $710 per metric ton, an increase of $32 compared to the fourth quarter of 2017 and $117 per metric ton compared to the year ago period.

Further price increases have been publicly reported for the second quarter. Despite the additional sales volume of recycled pulp, order of pulp shipments fell by 7% in the quarter or 26,000 metric tons to 362,000. Shipments fell short our expectation due to the timing of international fluff pulp shipments and lower productivity at some of our U.S. southeast mills, impacted mainly by the unusually cold weather.

On tissue, in the first quarter, total tissue consumption in the United States remained favorable, growing 3% compared to the same period last year. Converted product shipments increased 2.1%, largely driven by away-from-home volumes, up 3.5%, while at-home grew 1.5%. Overall sales volume for the segment, which continues to include only the Florida tissue operations, increased largely because of improved productivity, leading to higher shipments of parent rolls, which grew by more than 30%. Additional volumes were also realized in the quarter for both away-from-home and at-home products.

Given the relatively higher percentage of parent roll sales, overall pricing decreased by $62 per short ton. At Calhoun, shipments were also higher. During the quarter, we continued to focus on volume growth and have secured new business, which will lead to more volumes, starting at the end of the second quarter.

On wood products, U.S. housing starts averaged $1,318,000 on a seasonally adjusted basis this quarter, up 5% from the previous quarter. This increase is entirely driven by multi-family, up 18%, while single-family starts were unchanged.

Supply constraints, low inventory and solid demand have continued to push our lumber prices to records high during the first quarter. Our realized price rose to $459 per thousand board feet, an increase of 5% compared to the fourth quarter and 31% compared to the same quarter last year.

The spread between the reference price of random 2 and better and stud grades remains at more than $100 per thousand board feet. Approximately 50% of our lumber production originates from random length mills. Shipments were, however, 11 million board feet lower as a result of limited rail cars availability, leading to a 16 million board feet increase in finished goods inventory to 140 million board feet.

On newsprint, North American demand for newsprint declined 10% in the first quarter of 2018 compared to the same period last year, driven by a 15% reduction in demand from newspaper publishers. While demand from commercial printers was up 1%, industry production was also significantly lower, down 15%. Accordingly, the shipment to capacity ratio in North America increased to 94% in the first quarter from 92% in the year ago period.

Global demand for newsprint was down 9% through February with Latin America, down 11%; Asia, 9%; and Western Europe, 7%. Despite the drop, the world newsprint shipment to capacity ratio rose to 90% as a result of major global capacity cuts in the second half of 2017 and the carryover effects. Overall, our average transaction price rose 33% per metric ton in the quarter, with increases realized in both North America and in export markets.

Further, U.S. price increases have been publicly reported for the second quarter. During the first quarter, our shipments were significantly impacted by the timing of export sales and transportation issues, dropping by 55,000 metric tons and resulting in a 15,000 metric ton increase in finished goods inventory.

On specialty papers, North American demand for uncoated mechanical paper was down 9% in the first quarter of 2018 compared to the year ago period. Lower demand for supercalendered grades continued to drive this decline, decreasing 10%, while the demand for standard grades was down 5%.

Overall North American industry production for the quarter declined only 2%, but imports were up 35% mainly for supercalendered papers. The operating rate decreased to 90% compared to 93% in the year ago period.

Coated mechanical demand was down 5% in the first quarter compared to the year ago period. North American production, however, was down 15%, while imports rose 17%. With the North American capacity closure in 2017 and early 2018, the industry shipment to capacity ratio rose to 98% in the first quarter of 2018.

Our average transaction price for specialty papers increased by $15 per short ton compared to the previous quarter. Further price increases for all uncoated mechanical papers and uncoated freesheet grades have been publicly reported for the second quarter. Shipments were, however, down 18,000 short tons or 6%, mostly due to seasonally lower demand for supercalendered papers.

In March, the U.S. Department of Commerce announced the preliminary results for -- on the antidumping duty investigation for imports of uncoated groundwood grades from Canada, including the determination that Resolute did not dump such products in U.S. Only Resolute and one of its competitors were assigned to a 0% antidumping cash duty rate compared to the rate of 22.16% for all other producers and exporters.

Since January 16, we have been making countervailing duty deposit at a rate of 4.42% compared to an average of 6.53% for companies subject to this duty. Final determinations for both countervailing and antidumping investigations are expected in late summer. We continue to advocate on both sides of the border that this trade action, like other U.S. trade measures, is without merit. Uncoated groundwood duties only serve to accelerate demand decline.

We are working with a broad-based coalition in the U.S. to oppose these duties. The majority of U.S. newsprint manufacturers, the national trade association for the U.S. paper and forest product industry as well as major U.S. customers have all taken a strong stance against the imposition of these duties. Additionally, more than 50 members of the U.S. House and Senate have voiced their opposition to these duties.

In March, Verso Corporation entered into an agreement with Port Hawkesbury Paper and Irving Paper to set out the supercalendered paper countervailing duty proceedings. As per the disclosed terms of the agreement, Verso had requested the termination of the countervailing duty order, which should apply to all companies that have paid deposit of entries of supercalendered paper since August 3, 2015.

Meanwhile, we continue to make cash deposits at the rate of 17.87%. During the first quarter, cash duty deposit of $21 million were paid for a cumulative total of $96 million recorded on our balance sheet, $54 million for supercalendered paper, $40 million for softwood lumber and $2 million for uncoated groundwood paper.

We announced on May 1 that unionized employees at 8 of our Canadian pulp and paper mills, representing about 40% of our total pulp and paper production capacity, voted in a favor of a 4-year renewal of their master operative agreement. We are very pleased to have reached an agreement with union leadership and members to ensure our Canadian pulp and paper mills remain competitive while providing the stability of our customers, shareholders, communities and other partners.

I will now let Jo-Ann discuss our financial performance before I conclude with our outlook.

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Jo-Ann Longworth, Resolute Forest Products Inc. - Senior VP & CFO [4]

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Thank you, Yves, and good morning, everyone. Today, we reported net income of $17 million for the first quarter or $0.18 per share, excluding special items. This compares to a net income, excluding special items, of $14 million or $0.15 per share in the previous quarter and a net loss, excluding special items, of $30 million or $0.33 per share in the same period last year. Special items pretax in the quarter included nonoperating pension and other postretirement benefit credits of $13 million and start-up costs of $8 million associated with Calhoun tissue.

Total sales in the first quarter were $874 million, down 3% from the fourth quarter of 2017. Higher prices across most of our products positively impacted results by $37 million compared to the fourth quarter. The average transaction price rose by $32 per metric ton in market pulp, $21 per thousand board feet in wood products, $33 per metric ton in newsprint and $15 per short ton in specialty papers.

In tissue, prices were lower by 4%, mainly due to relatively higher parent roll sales. Shipments, however, fell in most segments reflecting the impact of transportation challenges, the timing of overseas shipments, seasonally lower demand for supercalendered paper and lower productivity. Shipment delays led to an increase in finished goods inventory, notably in newsprint and wood products, where inventories rose by 15,000 metric tons and 16 million board feet, respectively.

After removing the effect of volume and foreign exchange, our manufacturing costs increased by $9 million from the fourth quarter. The increase reflected mainly higher energy costs exacerbated by unusually cold weather, particularly in the U.S. South, an increase in market-based stumpage fees in our wood products segment and seasonally higher fiber usage, offset in part by lower maintenance costs, given less plant maintenance this quarter.

Compared to the fourth quarter, market pulp's all-in cash cost increased by $35 per metric ton, mostly because of higher freight expenses largely related to rail car shortages and an increase in fuel and fiber costs, mainly associated with the colder weather, offset in part by lower maintenance and a decrease in woodchip prices. Higher costs and lower volumes outweighed pricing gains, resulting in EBITDA of $110 per metric ton or $40 million in the quarter, down from $44 million.

The cash cost of our tissue segment, which excludes the Calhoun operations, improved due to higher volumes and a higher percentage of parent roll shipments. Given that pricing decreased also as a result of product mix, the improvement in EBITDA this quarter was marginal.

In wood products, the cash cost increased by $26 per thousand board feet compared to the previous quarter. Lower internal woodchip selling prices, higher market-based stumpage fees and an increase in freight expenses due to the longer distances led to higher overall costs. Despite the $21 per thousand board feet increase in realized prices, higher costs and lower volumes led to a $5 per thousand board feet decrease in EBITDA to $134 per thousand board feet or $61 million.

Newsprint cash cost was $524 per metric ton in the first quarter, up $26 due to increased transportation expenses tied to freight constraints, seasonally higher energy costs and lower volumes. With prices increasing by $33 per metric ton, EBITDA improved marginally from $11 million to $12 million for the quarter, equivalent to $34 per metric ton.

The cash cost in specialty papers decreased by $10 per short ton to $657 due to less maintenance outages, increased internal hydroelectric generation and a decline in woodchip prices, which more than compensated for the rise in freight and energy cost. Combined with the increase in realized pricing, EBITDA rose by $7 million or $25 per short ton compared to the previous quarter.

Our selling, general and administrative expenses decreased, mostly to a reduction in share-based compensation expense. The fourth quarter of 2017 included an $8 million increase in share-based compensation, largely due to the appreciation of our share price in that quarter.

Excluding the effect of volume, our distribution cost rose by $12 million as a result of increased truck rates, largely stemming from higher demand and lack of rail car availability, mostly seasonal in addition to an increase in lumber shipments to the U.S.

During the quarter, our cash position increased by $7 million to $13 million. We repaid $9 million under our revolving credit facilities and reduced our total debt to $779 million at quarter end. Liquidity rose to $452 million.

Despite the seasonal buildup of log inventory at our sawmills and delays in shipments resulting in a $51 million increase in inventory, net cash provided by operating activities improved to $62 million compared to $59 million in the fourth quarter. Capital expenditures in the quarter were $25 million, in line with the fourth quarter.

As previously disclosed, we expect to make investments in 2018 to improve productivity and yields at our sawmills and increase our pulp production capacity. Due to the timing of project spending, we now expect to invest $175 million in 2018, lower than our previous guidance of $200 million.

Duty cash deposits increased by $8 million compared to the previous quarter as we resumed making countervailing duty deposits on softwood lumber at the end of 2017, following their suspension back in August. We also became subject to countervailing duty deposits on uncoated groundwood paper beginning in January.

In the quarter, we made $29 million of pension contributions and OPEB payments of $3 million compared to a total of $25 million in the previous quarter, an increase of $7 million due exclusively to the timing of contributions to our U.S. plants. We recorded pension and OPEB credits of $3 million compared to an expense of $5 million, excluding closure-related costs in the previous quarter. The decrease in expense is a result of stronger asset returns in 2017 and lower amortization of actuarial losses in 2018 for our U.S. plants.

Consistent with our earlier guidance, we expect to make $125 million of pension contributions and $15 million of OPEB payments this year, a $35 million decrease compared to 2016 baseline before we exited from the Quebec funding relief regulations. The associated pension and OPEB credit for 2018 is expected to be $15 million. The net pension and OPEB liability on our balance sheet decreased by $62 million to $1.2 billion, largely the result of ongoing pension contributions and the favorable currency impact.

I will now turn it back to Yves for concluding remarks.

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Yves Laflamme, Resolute Forest Products Inc. - President, CEO & Director [5]

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Thank you, Jo-Ann. We expect positive price momentum in the near-term across most of our segments, as we continue to make progress on our 2018 priorities, namely completing the operational ramp-up of our Calhoun tissue operations and investing in our lumber and pulp operation and optimizing our specialty paper business. Near term, we remain optimistic about our pulp business as the North American pulp industry moves into maintenance outage season.

Further price increases have been publicly reported for the second quarter. Pulp maintenance outages are scheduled at 2 of our mills in the second quarter. As a result, our pulp production is expected to decrease by approximately 15,000 tons. While plant maintenance costs are deferred and amortized until the next maintenance cost -- or deferred until the next plant outage, sorry, the results of both our pulp and paper segments are typically impacted by additional maintenance activities scheduled during these outages as well as our lower volumes.

The maintenance outage at one of our mills is scheduled at the end of the third quarter, while the remaining 2 pulp mills' outages are scheduled in the fourth quarter. In tissue, our short-term perspective remains the same. We continue to work on improving the tissue machine's productivity and expect to attain the targeted operational capacity by midyear. We are also focused on improving market access for converted products and have secured additional sales, which we will begin to realize in the latter part of the second quarter.

The results of our Calhoun tissue operations are expected to be recorded in our tissue segments sometime in the second quarter of 2008 (sic) [2018]. In wood products, we are cautiously optimistic that lumber markets will remain favorable, even the current supply constraints and the ongoing recovery in the U.S. housing start -- housing market.

Woodchip prices are expected to remain low in 2018 compared to 2017, reducing wood products profitability by benefiting our pulp and paper costs and company's overall reserves as we are a net buyer of woodchips. In the quarter, lower internal woodchip selling prices increased wood products production cost by $6 million. The impact of the industry capacity reduction in both newsprint and specialty grades in the second half of 2017 is carried over into 2018, and we expect the market balance to remain strong in the near term.

We have publicly reported price increases in the second quarter for newsprint, uncoated mechanical paper as well as uncoated freesheet. Transportation-related headwinds are expected to continue to impact our business and earnings, but to a lesser extent given the typical first quarter weather-related freight constraints. We also expect to walk down the finished goods inventory buildup during the first quarter in both newsprint and wood products.

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Silvana Travaglini, Resolute Forest Products Inc. - VP of IR & Treasurer [6]

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This concludes our formal presentation. Operator, we will now open the call for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Your first question comes from Paul Quinn with RBC Capital Markets.

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Paul C. Quinn, RBC Capital Markets, LLC, Research Division - Analyst [2]

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Just a couple of questions, maybe start on tissue. Your current platform really sells a lot of, I guess, low and mid-grade product lines. Are you -- what kind of competitive pressures are you seeing there? And have you started to sell some of the premium and ultra on the Calhoun machine?

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Yves Laflamme, Resolute Forest Products Inc. - President, CEO & Director [3]

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First of all, we -- when we're talking about lower grade, we're talking about parent rolls, not more than lower grade. So that was in Atlas mostly. So -- and the reason for that was getting more sales on the convertings, on the Florida machines. So -- and this is what we're doing with the Florida operation. As far as Calhoun, as we said, our sales on converting are going up, and so we don't expect to sell that much parent rolls, even though the parent rolls is not a hard job to sell right now.

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Paul C. Quinn, RBC Capital Markets, LLC, Research Division - Analyst [4]

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Okay. And then what affects the timing of when you account for Calhoun in Q2? And when do you expect that, at the beginning of the quarter or the end of the quarter? And is it going to be material?

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Yves Laflamme, Resolute Forest Products Inc. - President, CEO & Director [5]

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I think we're doing pretty good on the ramp-up right now. So we kind of have some stability. According to, let's say, accounting rules, we're not there yet and we're getting closer, this is why we are not really precise about when in the second quarter, but -- so we see that coming soon.

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Paul C. Quinn, RBC Capital Markets, LLC, Research Division - Analyst [6]

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Will it be a material add to the segment?

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Yves Laflamme, Resolute Forest Products Inc. - President, CEO & Director [7]

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Yes.

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Paul C. Quinn, RBC Capital Markets, LLC, Research Division - Analyst [8]

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Okay. And then just looking at the pulp side, I mean, I understand the drop in shipments, 26,000 tons. It looks like the inventories were only up 2,000. So I guess, the delta there was less production, 24,000?

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Yves Laflamme, Resolute Forest Products Inc. - President, CEO & Director [9]

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What was your question?

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Paul C. Quinn, RBC Capital Markets, LLC, Research Division - Analyst [10]

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Just wondering if you experience, I guess, higher or sort of adverse weather in Q1. Did that materially affect your production in pulp in the quarter?

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Yves Laflamme, Resolute Forest Products Inc. - President, CEO & Director [11]

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Yes, it did in the first quarter. We had mostly the solid mill. We had power outage that was mostly resulted from problem we had in Catawba, and weather affected our pulp production in Calhoun, so -- and so as far as in the north, like Quebec and Ontario was more about shipment and rail than logistics and anything else than production.

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Paul C. Quinn, RBC Capital Markets, LLC, Research Division - Analyst [12]

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Okay. And then just on the transportation issues, is that a bigger concern for you on rail or truck or both? Or does that break down regionally, if you can help us kind of understand your issues?

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Yves Laflamme, Resolute Forest Products Inc. - President, CEO & Director [13]

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Yes, the issue was, first of all, the previous quarter we were talking about, issue on the trucks for chips, so -- which has been pretty much resolved. I think we're doing okay now. In the first quarter, what -- mostly rails, in Eastern Canada, so -- and of course, when you have pressure on rails, you have to deliver to the customer, you move to trucks. And now you're putting pressure on trucks. So that would be kind of both and mostly, on the paper side than lumber. So lumber, we were a little behind. As we saw, we shipped less volume. But as far as cost on the transportation and lumber, that was not that much affected as well, more about volume. But on the paper side was -- the [stuff] was rail. And because of the rail issue, then there is a problem in North America with truck drivers. We had to switch to spot market than on truck drivers, so -- and we expect to do better in the second quarter, as I said, so...

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Paul C. Quinn, RBC Capital Markets, LLC, Research Division - Analyst [14]

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Okay, that's helpful. And then just lastly, just on the $175 million CapEx for 2018, is there some major investments there? Is that just a combination of whole bunch of little projects?

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Yves Laflamme, Resolute Forest Products Inc. - President, CEO & Director [15]

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Well, we have some good projects coming, and we're investing in, as we said before -- there was one this week on the sawmill side for better yield and better productivity, so -- and there -- one of the main reasons why Jo-Ann said that it's going to be less than what's said previously is as you know, on the lumber side right now, there's the other parts of the suppliers operating, so -- and to get the stuff delivered and completing those projects is a challenge. So this is -- that's mostly why and so that's mostly what the projects are going to be soon.

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Operator [16]

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(Operator Instructions) Your next question comes from Hamir Patel, CIBC.

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Hamir Patel, CIBC Capital Markets, Research Division - Director of Institutional Equity Research & Paper and Forest Products Analyst [17]

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Given the large price movements that we've seen for newsprint globally, just curious, what do you think the implications are for demand destruction, just given some of the pressures the publishers are facing? And what is your latest view as to what sort of demand declines we could expect going forward in North America and globally?

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Yves Laflamme, Resolute Forest Products Inc. - President, CEO & Director [18]

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Yes. I think even without the duties -- and we know that the duties have a significant impact right now on the pricing, and the demand and supply being imbalanced, it pushed prices up. So what we know, that the demand for paper is still down by about 10%. So without that -- so we're really concerned about that. We don't see that as a good news. I mean, we're pleased to have better pricing, but it's definitely a concern about how it's going to accelerate, the decrease in the demand for paper. So which, I said, it's already at the bottom of the 10% range right now.

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Hamir Patel, CIBC Capital Markets, Research Division - Director of Institutional Equity Research & Paper and Forest Products Analyst [19]

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That's helpful. And just turning to the tissue business, we've seen some producers suggest that there's some price increases underway in the market. What are you seeing? And do you have a sense yet as to what sort of run rate EBITDA you would hope to be by the end of the year?

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Yves Laflamme, Resolute Forest Products Inc. - President, CEO & Director [20]

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As far as the run rate EBITDA, I'm going to let Jo-Ann to answer that one. But as far as the price increase, I don't know. I mean, that -- something we know right now, being integrated, I think that with the price of pulp going up, so I guess, that is probably tough from some competitors. So -- but of course, I think just the Florida tons or cases of our tissue business right now in our books, so we're not a market leader to push price increase right now, so -- but maybe something is going to happen based on the fact that pulp is putting pressure on the producers right now. So I don't know Jo-Ann if you want to add something on the EBITDA.

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Jo-Ann Longworth, Resolute Forest Products Inc. - Senior VP & CFO [21]

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We haven't previously disclosed EBITDA guidance for tissue. We have said that we expect to be fully ramped up in terms of profitability by the end of 2019 going into 2020. As we've said, I think we're -- we've got some promising business coming about in Q2 that we expect to realize by the end of the quarter. So we continue to access the markets and bring what we consider a very high-quality product to market. And again, I will reemphasize that one of the reasons we moved into the strategic direction of tissue is the fact that we've fully integrated on the pulp side, which we feel is a competitive advantage going forward.

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Hamir Patel, CIBC Capital Markets, Research Division - Director of Institutional Equity Research & Paper and Forest Products Analyst [22]

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Fair enough. And Jo-Ann of the -- on the one slide which mentioned a $15 million transportation and weather headwind in Q1, how much of that would you expect to get back in Q2? And then just in terms of general transportation costs, do you expect them to sort of hold at Q1 levels or expecting them further escalation from here?

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Jo-Ann Longworth, Resolute Forest Products Inc. - Senior VP & CFO [23]

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About -- almost about half of that $15 million is a result of the freight costs. Then, of course, there was the impact of cold weather on energy prices, particularly in the Southern U.S. and finally, a little bit on the loss volume or the deferred volume, let's call it. Some of it's lost as we talked about the productivity on pulp in the U.S. South, but also then the increase in inventory and largely in newsprint and wood products. As far as dollars, we don't have a number as to how transportation is likely to improve in the second quarter, but when Yves talked about the availability of rail car, which forces us to go to spot rates in the trucking market, the availability of rail car tends to be a much larger problem in the winter months, as most of our competitors have also disclosed. So we expect that, that pressure will start to ease or has already started to ease in the second quarter.

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Operator [24]

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There are no further questions at this time. I'll turn the call over to Ms. Travaglini.

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Silvana Travaglini, Resolute Forest Products Inc. - VP of IR & Treasurer [25]

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So that concludes our call for today. Thank you.

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Operator [26]

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This concludes today's conference call. You may now disconnect.