Faced with an unprecedented decline in North American paper demand, Richmond-based Catalyst Paper (TSX:CTL) is laying off 725 employees at two of its paper plants in B.C.
Approximately 375 employees will lose their jobs at its Crofton kraft mill, which the company is shutting down indefinitely until market conditions improve. The move will cut approximately 400,000 tonnes from Catalyst's annual pulp production capacity.
Catalyst is also shutting down its Elk Falls mill near Campbell River until paper demand improves. Approximately 350 employees will be affected in that shutdown. The indefinite curtailment of all its paper machines at Elk Falls will remove 526,000 tonnes of newsprint and uncoated mechanical paper capacity from the company's annual production.
The latest shutdowns are some of the most aggressive Catalyst has made in recent months. In January, it cut 140,000 tonnes of newsprint production at the Crofton mill and 38,000 tonnes of pulp production. Eighty-five employees were laid off.
The company also cut 20,000 tonnes of newsprint production at its mill in Snowflake, Arizona, and 13,000 tonnes at Elk Falls.
In its fourth quarter, Catalyst eliminated 73,000 tonnes of newsprint, 27,000 tonnes of specialty printing papers and 72,000 tonnes of pulp from its production.
The company has struggled in the past few years to return to profitability. It reported a loss of $221.1 million for the year ending December 31, 2008, despite posting a 7.9% increase in revenue to $1.8 billion from $1.7 billion in 2007.
A significant portion of last year's loss was due to a $151 million asset impairment charge resulting from the declining paper market's impact on the future value and cash flow of its plants and equipment. It also recorded a $30.1 million charge related to its restructuring plan. In 2007, Catalyst recorded a net loss of $31.6 million and absorbed a $64.7 million restructuring charge.
Catalyst predicted that a tsunami of negative factors would hurt the company this year. The global recession is expected to reduce demand and lower prices for paper products.