Specialty fibre and nonwovens producer Buckeye Technologies, Inc., says that it expects profitability for the Jan. - Mar. quarter this year to be near breakeven, significantly below the $4.1 million (11 cents per share) earned in the corresponding period last year.
The company had previously indicated that it expected Jan. - Mar. 06 earnings to be slightly better than the $1.9M. (5 cents per share) earned in Oct. - Dec. 05 quarter.
Manufacturing difficulties in pulp operations, transportation issues, loss of profitability from tolling operations, start-up costs at a plant in Brazil and higher energy costs had more than more than offset improvements in its high-end specialty fibres and nonwoven materials activities, said the company.
Buckeye's chairman, David B. Ferraro, said, "While we are disappointed in our financial results, we believe the manufacturing difficulties that plagued us this quarter are behind us. We are pleased with the facility we have constructed in Brazil and believe it will be a significant profit contributor to the company in the future. We are also pleased with our ability to maintain our margins in our high-end specialty fibres in the face of the extraordinary energy driven cost increases we have incurred."
The recently upgraded cotton cellulose manufacturing facility in Americana, Brazil, began to ship pulp in February. The plant is currently providing trial quantities for customer qualifications. Although it will make some market sales this quarter, it will not produce significant revenue until later this year. The combination of start-up costs incurred this year and the loss of the profitability from the tolling operations has cut around $4.5 million (8 cents per share) pre-tax from this year as compared to Jan. - Mar. 2005.
Added to this, high energy costs this year, forced price increases averaging 8% on specialty wood cellulose products in January. Although these price increases were sufficient to maintain margins in the high end segments of the market, pricing on fluff pulp remained flat and is, in fact, slightly below the level achieved last year. This combination of low prices and higher costs cut operating profit on fluff pulp by about $5 million (9 cents per share).
Buckeye plans to announce its Jan. - Mar. 06 earnings on April 25, 2006.
