MONTREAL (CP) -- AbitibiBowater said Tuesday that it's looking at workforce reductions at some Canadian mills as the forest product producer seeks to further squeeze costs to improve profitability.
The Montreal-based newsprint producer has exited a painful restructuring from bankruptcy protection with wage and benefit reductions that range from eight per cent for forestry workers to 17 per cent for pulp and paper employees.
AbitibiBowater is still working to finalize efforts to achieve four per cent efficiency gains approved by unionized workers.
"While we have accomplished much, I believe there are important incremental cost savings that can still be obtained," said CEO Richard Garneau, after AbitibiBowater reported it earned US$30 million in its first quarter.
The company is benchmarking its Canadian mills against one another and looking at staffing levels at some facilities. However, it has no plans for additional order-related production downtime.
The strong Canadian dollar provides AbitibiBowater with an opportunity to have "a dialogue" with its contractors, employees and wood transportation companies, Garneau told analysts during a conference call.
Each one-cent increase in the loonie reduces annual profits by US$22 million.
"Some mills probably have higher manning levels than needed so we're going to have a look and come up eventually with a plan to address it," he said.
AbitibiBowater (TSX:ABH) has taken steps to reduce its newsprint capacity by closing one machine at its Baie Comeau, Que., plant. The move reduced 120,000 tonnes of annual production and cost 95 jobs.
All six U.S. mills are low-cost operations, but Garneau said the company will identify the machines in Canada that have the best potential and make tough decisions about the rest.
Chief financial officer Bill Harvey added that it's not a battle between American and Canadian facilities since Canadian plants that took steps to be competitive can thrive with a higher Canadian dollar.
"There are Canadian mills that function very well at this Canadian dollar level...so it's not just U.S. versus Canada -- it's site specific."
AbitibiBowater employs 11,000 workers, including 7,200 in Canada.
The union representing many Abitibi workers said it was shocked to hear the company president call for employees to make more sacrifices.
"It's a little surprising that there are new demands for concessions," said Renaud Gagne, Quebec vice-president of the Communications, Energy and Paperworkers Union.
Workers have already taken cuts to help the company return to profitability and were pleased with the end result.
"When you look at the effort that workers have already made, it was a bit cavalier to announce publicly that it wasn't enough and that they will have to do more," Gagne said.
Paul Quinn of RBC Capital Markets said he doesn't expect a dramatic decrease in staffing levels, but noted that isolated facilities, including some in Ontario that are less able to export their products, are the most threatened.
"If I'm up at Iroquois Falls, I'm doing anything I can to try and save that mill and maybe taking out a couple of people is one of the ways to lower the costs," Quinn said in an interview.
AbitibiBowater missed expectations even though its operating performance continued to improve in the first quarter as it earned US$30 million, reversing a large loss in the same quarter a year ago.
The paper and lumber producer, which reports in U.S. dollars, earned 31 cents per share for the period ended March 31. The profit included a $14-million tax benefit.
That compares with a loss of $500 million or $8.68 per share in the same period last year, when it was in the midst of protracted efforts to emerge from creditor protection through court supervised restructuring.
The loss included $205 million in restructuring costs and $189 million in interest expenses.
AbitibiBowater was expected to earn 38 cents per share in the quarter, according to analysts polled by Thomson Reuters.
Adjusting for one-time items including currency, it earned $24 million or 25 cents per share, compared with a net loss of $301 million or $5.22 per share a year earlier.
Total sales increased 7.7 per cent to $1.19 billion from $1.1 billion a year ago.
The company reported $27 million in operating income, compared with a loss of $110 million in the first quarter of 2010 and up from $19 million in the fourth quarter.
The company plans to focus on reducing its debt to cut interest expenses. About $200 million from the $300 million sale of its 75 per cent interest in ACH Ltd., which holds its hydro assets in Ontario, will be applied to the debt.
Quinn said the results were a little disappointing but he continues to have a positive outlook for the company as sales heat up in the coming quarters.
"I still think it's a good story. The Canadian dollar headwind is more than anybody anticipated, (but) I think the pricing increases will offset that, it's just going to take some time to get it all through."
On the Toronto Stock Exchange, AbitibiBowater's shares closed at C$24.44, down $1.44 or 5.68 per cent in Tuesday trading.