Resolute Forest Products Inc. Chief Executive Officer
Richard Garneau says the world’s largest newsprint maker will consider
acquisitions as lower borrowing costs aid a push into more lucrative products. Garneau
is betting that a focus on wood, pulp and specialty papers can help boost
profit as it pares its exposure to newsprint, where demand has slumped as
publications switch to the Internet. Last year, Garneau acquired Fibrek Inc. to
add three pulp mills and bolster Resolute’s position as the third-largest North
American pulp producer. “We now have the flexibility to be able to do something
else in terms of growth opportunities,” Garneau, 65, said May 8 in an interview
at the Montreal headquarters of Resolute, formerly known as AbitibiBowater Inc.
“We had Fibrek last year and it’s a good example of what could be done.” Resolute, 30 percent owned by Prem Watsa’s Fairfax Financial
Holdings Ltd. (FFH), sold $600 million of 10-year, 5.88 percent bonds last
month to replace more expensive debt. The move will save about $15 million a
year, the company said. The supplier of newsprint to The New York Times and Brazil’s
O Globo newspapers, has surged 43 percent in the 12 months through yesterday,
the best-performing among five Canadian forest-products stocks, according to
data compiled by Bloomberg. It owns and operates more than 40 pulp and paper
mills and wood products facilities in the U.S., Canada and South Korea. “They are a low-cost producer,” said RBC’s Quinn. “I have no
trouble with the company, I have trouble with the industry. The biggest issue
he’s got is that he’s in newsprint and groundwood papers, which are in secular
decline, and declining quite rapidly.” Garneau said the company’s portfolio of assets is
well-balanced. “I’m optimistic that pulp is a good segment, lumber is a good
segment, and all our specialty papers, flyers and inserts, are going to come
back at some point,” he said. “With newsprint, we have the flexibility to
export.”
