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AbitibiBowater Delivers Strong Than Expected Second Quarter

After lower predictions, AbitibiBowater had strong results in the second quarter with EBITDA of $110.89 million, as well as finishing above the $102.65 million estimate and $100.78 consensus. Their EPS of $0.259 stayed above the $0.177 estimate and in line with Street’s $0.258 consensus. The difference in EBITDA is due to higher net realized prices that were canceled out by higher distribution costs and SG&A.
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EBITDA improvements are expected in future quarters and input cost inflation should be canceled out by accumulative cost saving initiatives at present. Notable deleveraging is believed based on both the ACH sale and estimated free cash flows, allowing AbitibiBowater to begin a buyback program for shares or locate synergistic acquisition prospects.

Increased by $4 million quarter-to-quarter, EBITDA of $42.9 million was posted by the Newsprint division. As cash costs were flat, prices stayed $9 higher per metric ton and volumes kept with an increase of 6%, 1% above expectations.

The Coated Papers division posted EBITDA of $30.92 million, which increased from the previous quarter. Because of the April price increase, prices were raised by $28 per short ton, as operating costs dropped $93 per short ton due to maintenance in first quarter. Volumes stayed down 5%, 5% below estimates.

EBITDA increased from the previous quarter to $23.77 million for the Specialty Papers division. As operating costs were flat, prices raised $26 per short ton. Shipments dropped 7%, 7% above estimates.

EBITDA decreased from $30 million in the first quarter to $20.89 million for the Market Pulp division. As operating costs raised $64 per metric ton due to higher maintenance charges and a strong Canadian dollar, realized pulp prices kept an increase of $32 per metric ton and shipments dropped 7%, 11% under estimates. Decreasing from positive $4 million last quarter, the Wood Products division posted EBITDA of $3.97 million, as shipments increased 6% and prices dropped $20 per thousand board feet. Operating costs jumped $6 per thousand board feet.

The “Sector Outperform” rating remains, while one year targets lower to $25.25, coming from a steady 4.5 times EV/EBITDA multiple.

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