Nov 03, 2008. /Lesprom.com/. SFK Pulp Fund announced significant improvement for the 3Q ended September 30, 2008. Sales for the period rose $11.1 million to $138.3 million from $127.2 million. Earnings before interest, taxes and amortization (EBITDA) stood at $16.9 million, up from $13.2 million. Net earnings climbed to $8.7 million compared to a net loss of $1.2 million for the corresponding period of 2007. "As my first full quarter as President and CEO of SFK Pulp, I am pleased to report a solid performance in the face of industry and global challenges. The Saint-Félicien Mill experienced excellent productivity during the quarter, with an average daily production increase in excess of 7% from a year ago. We have actively sought sales opportunities, particularly in the NBSK pulp market, to deal with inventory levels which are high, but still at manageable levels. The weakening Canadian dollar and more favourable energy costs, particularly bunker and natural gas, have begun to favourably impact our bottom line results," said Pierre Gabriel Côté, President and CEO. Operating results 3Q 2008 Consolidated sales in the 3Q 2008 rose to $138.3 million, an increase of $11.1 million when compared with sales of $127.2 million in the 3Q 2007. This increase is comprised of price increases for $11.4 million which were partially offset by sales volume decreases for $0.3 million. EBITDA totalled $16.9 million, an increase of $3.7 million when compared with the corresponding period of 2007. The Fairmont and Menominee Mills accounted for $3.3 million of the EBITDA, while the Saint-Félicien Mill accounted for $13.6 million. Net earnings were $8.7 million or $0.10 per basic unit and $0.08 per diluted unit, compared to a net loss of $1.2 million or $0.01 per unit, both basic and diluted, for the corresponding period of 2007. Adjusted distributable cash SFK Pulp generated adjusted distributable cash of $9.3 million. Including the $20.5 million cash reserve at the end of the 2Q 2008, total adjusted distributable cash available for the period amounted to $29.8 million. Of the adjusted distributable cash available, SFK Pulp declared distributions of $2.7 million ($0.03 per unit) compared to $10.9 million ($0.12 per unit) in the corresponding quarter a year ago and retained $27.1 million as its cash reserve. This cash reserve is used for the three mills' scheduled outages and the difference is used to support SFK Pulp's capital investment strategy to provide for scheduled amortization payments under the term facility and to reduce the impact of any negative fluctuations in future cash flows, the whole in accordance with SFK Pulp's distribution policy. Nine-month period 2008 Consolidated sales for the nine months ended September 30, 2008 reached $406.9 million, an increase of $21.1 million compared with sales of $385.8 million for the corresponding period of 2007. This increase is comprised of price increases for $17.3 million and higher sales volume for $3.8 million. EBITDA reached $45.5 million, or 11.2% of sales, compared with $52.7 million, or 13.7% of sales, for the first nine months of 2007. Net earnings were $13.2 million, or $0.15 per basic unit and $0.14 per diluted unit, compared with a net loss of $9.0 million or $0.10 per unit, both basic and diluted, in the same period of 2007. Adjusted distributable cash SFK Pulp generated adjusted distributable cash of $21.3 million. Including the $13.9 million cash reserve at the end of 2007, total adjusted distributable cash for the period amounted to $35.2 million. Of the adjusted distributable cash available, SFK Pulp declared distributions of $8.1 million ($0.09 per unit) compared with $36.2 million ($0.40 per unit) for the nine-month period last year and retained $27.1 million as its cash reserve. NBSK pulp Sales for the 3Q totalled $64.2 million, compared with $64.8 million for the corresponding period of 2007. Sales volume was 82,379 tonnes, a decrease of 228 tonnes compared with 82,607 tonnes a year ago. NBSK market pulp prices (for pulp delivered in Northern Europe) increased by $68 per tonne or 8% on average compared to the 3Q 2007. This increase resulted in a sales price of CAN$780 per tonne, CAN$4 per tonne below the sales price of CAN$784 per tonne for the third quarter of 2007. Since the average exchange rate is comparable for the corresponding quarters of 2007 and 2008, the decrease in average sales prices is due to sales mix and higher shipments overseas. Sales for the first nine months of 2008 were $201.2 million, compared with $196.4 million for the same period last year. Year-to-date sales volume was 256,605 tonnes, up 12,399 tonnes from 244,206 tonnes for the first nine months of 2007. NBSK market pulp prices increased 11% on average or $86 per tonne to reach US$886 per tonne for the first nine months this year. This increase, combined with the strengthening of the Canadian dollar, when compared to the corresponding period of 2007, resulted in an average sales price of CAN$784 per tonne, CAN$20 below the sales price of CAN$804 per tonne in the corresponding period of 2007. In a proactive measure to further minimize costs and alleviate upward pressure on inventories, the scheduled semi-annual shutdown this month at the Saint-Félicien Mill was extended from 7 to 12 days. RBK pulp 3Q RBK pulp sales were $74.1 million, compared with $62.4 million in 2007. This increase of $11.7 million is entirely attributable to higher sales prices as sales volume is comparable for the two periods. 3Q sales volume was 94,872 tonnes, compared with 95,016 tonnes last year. Average sales price in the 3Q increased by 18% from the same period a year ago. Nine-month sales were $205.7 million, compared with $189.4 million a year ago. This $16.3 million increase in sales is attributable to higher sales prices for $21.3 million, partially offset by a lower sales volume for $5.0 million. Year-to-date sales volume was 272,601 tonnes, compared to 279,866 tonnes for the same period in 2007. Nine-month average sales price increased by 21% compared to the nine months last year. A major equipment failure at the Fairmont Mill forced a premature shutdown on October 16, 2008, originally scheduled for the end of October. Production resumed October 31st at a reduced operating rate and will not return to full capacity for approximately one month. Management believes that this failure should be covered by insurance, which will be subject to a standard deductible. Outlook "Both demand and prices for NBSK pulp continue to face world market downward pressure. As for the RBK pulp, the impact is a similar downward pressure, in light of our market-leading position in the United States. SFK Pulp is taking all necessary measures to prudently manage working capital and inventories. The Fund's cash reserve reached $27.1 million at the end of the 3Q, above our policy of $20 million. While this could allow for increased cash distributions, we have opted to further build this reserve in order to effectively deal with potentially adverse market conditions during the current world economic and financial crisis. In addition to this increased reserve, favourable exchange rates expected through the balance of the year, reduced wastepaper prices and stringent ongoing cost controls at our three mills position us to deal with existing conditions. SFK Pulp is taking all necessary steps to maximize the potential of our business and we remain prudently optimistic notwithstanding the headwinds being experienced," concluded Mr. Côté.