Resolute Forest Products Inc (RFP) 2006 Q4 法說會逐字稿

Good morning, ladies and gentlemen. Welcome to the Abitibi-Consolidated fourth quarter 2006 results conference call. I would now like to turn the meeting over to Mr. Francesco Alessi, Vice President Investor Relations and Taxation. Please go ahead, Mr. Alessi.

Good morning everyone. I'm here with John Weaver and Pierre Rougeau, our CEO and CFO, respectively. As well as Jocelyn Pepin, VP and Corporate Controller.

As in the past our prepared remarks will include Pierre going over the financial highlights of the quarter and on the year where pertinent. John will comment on the fourth quarter results and the market in general, and then give a brief update on our initiatives announced to reduce debt, provide greater liquidity and profitability. We will then go right to questions.

Just before turning it over to Pierre, I need to remind you that any forward-looking statements made on today's call are based on information we believe to be current; however, any number of risks and uncertainties can affect what we say, causing results to be materially different from those expressed or implied.

Good morning everyone. This morning we reported a fourth quarter loss of C$22 million or C$0.05 per share compared to a loss of C$355 million or C$0.81 a share last year. Excluding the specific items, which is not a recognized GAAP measure, the fourth quarter results would have been a loss of C$61 million or C$0.14 per share compared with a loss of C$51 million or C$0.12 a share in Q4 of 2005.

Table 3 of our MD&A and slide 5 of our presentation break down the specific items net of income taxes.

Operating profit before specific items for the quarter was C$17 million, or C$2 million higher than the same quarter last year. The increase was mainly due to higher prices in both paper segments and lower amortization expenses, offset by the strengthening of the Canadian dollar and a negative impact from lower lumber prices.

EBITDA in the fourth quarter came in at C$126 million compared to C$139 million last year, and C$120 million in Q3 of this year. Versus the same quarter last year, a C$57 million favorable EBITDA impact from higher prices in our paper segments was more than offset by a C$36 million negative impact from foreign exchanges and a C$27 million negative impact from lower lumber prices.

When compared to the U.S. dollar, the Canadian dollar appreciated by 3% in the fourth quarter versus the same quarter last year, and 6.8% for the full year. Net of our U.S. dollar hedging, we estimated that the Canadian dollar had a C$34 million negative impact on the quarter and a C$221 million negative impact for the year's operating results. With regard to other currencies, there was an additional negative impact of C$2 million for the quarter and C$10 million for the year.

The Newsprint segment reported EBITDA of C$105 million compared to C$98 million in the same quarter last year, and C$99 million in Q3 of this year. The increase in EBITDA in the fourth quarter against Q4 of last year was a result of higher prices, offset by the impact of a stronger Canadian dollar and lower sales volumes.

The Newsprint shipments in the fourth quarter came in at 905,000 tons, against 1 million tons in the same quarter of 2005. The lower volume of the fourth quarter is consistent with the other quarters of this year, and is in measure part due to the closure of Kenora and Stephenville at the end of 2005.

Our overall inventories continue to remain low, and the 35% drop from the third quarter of 2006 levels brings us the same historically low levels of December 2005.

On the per ton basis cost of products sold for Newsprint was C$5 higher than in the same quarter last year, due mainly to higher pension and other employee-related costs.

The Commercial Printing Papers segment reported EBITDA of C$32 million compared to C$30 million in the same quarter last year, and C$34 million in Q3 of this year. During the quarter the Company shipped 421,000 tons of commercial paper compared to 448,000 last year. The lower volumes are due to a combination of softer demand for the low-brite and the Company's decision to exit from the rotonews grade.

On a per ton basis the segment's cost of sales was C$12 per ton higher than in the same quarter last year, primarily because of lower operating times as we took 50,000 tons of market-related downtime in the quarter, as well as higher pension and other employee future benefits.

The Wood Products segments reported a fourth quarter negative EBITDA of C$11 million compared to positive EBITDA of [technical difficulty) million in 2005, and negative EBITDA of C$13 million in Q3 of 2006. This variance stems mainly from lower prices, 18% lower than the same quarter last year, and higher costs of products, partly offset by a reduction in the CVD and AD expenses. The higher cost was due to lower production, a result of the market-related idling of five sawmills early in the quarter.

Sales volume in the fourth quarter was 339 million board feet, down 67 million board feet from the same quarter last year. Also during the fourth quarter the Company received $239 million of the CVD/AD deposit it had paid. This amount included the related interest. Including the CVD/AD refunds received, the Company generated C$348 million of cash from continuing operation activities compared to C$93 million in the same quarter last year.

Our capital expenditures for the fourth quarter were C$58 million. This brings the total for the year to C$165 million, which is lower than the C$177 million in 2005, and the C$180 million that we had forecasted for 2006.

A few final points before turning it over to John. On January 26 we entered into a binding letter of intent with Caisse de depot et placement du Quebec, whereby Caisse will take a 25% interest in the newly created partnership called ACH Limited Partnership, which will hold Abitibi's Ontario hydroelectric assets.

In addition to paying C$47.5 million or 25% ownership, the Caisse will also fund the acquisition of the hydro assets by the partnership by committing to make a ten-year, C$250 million unsecured loan to ACH Limited Partnership with no recourse to Abitibi. Abitibi well continue to loan 75% of the equity, and will receive gross proceeds from the deal of C$297.5 million, including the proceeds from the ten-year loan. The combined equity and debt investments of Caisse gives this energy affiliate an enterprise value of C$440 million.

In January we agreed with our partners in Augusta Newsprint to delay the exercise of the option to acquire the remaining 47.5% of the partnership, and would for now proceed with the sale of the 55,000 acres of timberland, with all proceeds from the sale going to the Company. We expect to conclude the sale of the timberlands on a progressive basis between the first and third quarters of 2007.

Finally, the cash on hand at the end of the year, combined with the funds raised from the hydro partnership, and the proceeds from the sale of the Augusta timberlands provide as with significant cash available for debt repayment in 2007.

On this note I will pass it over to John.

Good morning everyone. Starting with Newsprint, the industry statistics show supply demand is largely in balance. December operating rates in North America were close to 95%, and they were in the high 90s for the rest of the world, where demand growth remains positive.

As was the case in 2005, inventories continue to be at historically low levels as we close 2006. And we're heading into the new year with a good order book. Our North American pricing model continues to evolve, as we have secured a number of fixed-price arrangements for the first six months of 2007 with our North American customers. While long-term pricing contracts are quite common in Europe, this is a more recent practice in North America.

Our interest in the pricing model is that it provides a certain degree of stability. And we will over the next few months work with our customers to support the evolution towards long-term price and contracts.

We anticipate that 2007 worldwide demand will continue to grow in most regions, even after being offset by North American decline of about 5 to 6%. This increase in worldwide demand continues to make the export market attractive for Abitibi.

While average newsprint prices in the U.S. decreased by about $10 per ton when compared with third quarter, the U.S. prices were up about 2% higher than with the fourth quarter of last year. And we see higher prices in most regions around the world.

For CPP we continue to see growth in the sales of our uncoated freesheet substitutes as these obtain increasing market acceptance. Our 2006 volumes were up about 11% when compared to 2005, as double-digit growth continues with our freesheet substitutes. Our outlook remains favorable for 2007. However, we witnessed a slowdown in the low-brite grades. And in the fourth quarter we took about 50,000 tons of market-related downtime at four of our CPP mills.

The restart of idled industry capacity in FC grades, combined with machine conversions by other companies, added pricing pressure to the glossy and SCA grades at the end of 2006. We believe that most of these factors have been absorbed by the market. And we see a slight rebound in glossy and light-weighted papers, both of which increased quarter over quarter by 6.4 and 5.1%, respectively.

PPPC reported North American demand for uncoated groundwood increased for the second consecutive quarter, and was up by 3.3% compared to the fourth quarter of last year.

For Wood Products fourth quarter housing starts in the U.S. decreased by 18% when compared with the same period last year. And lumber prices decreased by 20% for 2 by 4 stud, and 16% for 2 by 4 random length. The softening wood market has led to a rapid decline in lumber prices. And early in the fourth quarter we idled five sawmills. Three of the sawmills remain idle, but could restart when we see a strengthening in demand.

As Pierre reported, Abitibi-Consolidated received $239 million from the settlement of the lumber dispute. As for the new agreement, which took effect on January 1, 2007, all Quebec sawmills will be subject to a monthly quota and a taxes which will range from 0 to 5% depending on lumber prices. The current tax is 5%. For our BC operations, which are about 25% of our sawmill capacity, the volume is not limited, but the tax is higher, raising from -- ranging from 0 to 15%. The current tax is 15% in BC.

I would now like to take a moment to go over some of the initiatives announced during 2006. These initiatives were undertook by Abitibi to improve profitability, lower debt, and create shareholder value in 2007. As you recall, early in 2005 we announced a C$175 million cost in market mix improvement program. In achieving an over C$200 million improvement, we clearly beat our original target. These efforts were offset, however, by rising energy, wood and pension costs, as well as the continued increase in the Canadian dollar.

The SG&A review announced in April 2006 was completed in the fourth quarter, resulting in savings of about C$40 million. This is well ahead of the mid 2007 timeframe initially announced, and ahead of the C$35 million we targeted. We remain confident that this level of savings will continue.

The binding agreement entered into with Caisse de depot on January 26 moves us forward in the creation of an energy subsidiary to provide growth in the power market. The C$297 million of gross proceeds reflects Abitibi's ability to extract value from these quality assets without compromising its cost structure.

While it is still our intent to acquire the remaining interest in Augusta -- while it is still our intent to acquire the remaining interest in the Augusta partnership, we have delayed the exercise of our purchase option, and will start with the sale of the 55,000 acres of timberland with all proceeds going to Abitibi.

Finally, as you know by now, last week we announced, together with Bowater, our intent to move forward with an all stock merger of equals between the two companies. As Dave and I mentioned, the combination of the two companies will create a global paper and forest products company better suited to compete in the increasingly competitive market. The newly created AbitibiBowater will have an enterprise value of over $8 billion, and will be the third-largest public paper and forest products company in North America.

The transaction is expected to create C$250 million of annualized synergies within the first two years from improved efficiencies in the areas of production, SG&A, distribution and procurement.

On this note I think we will go straight to questions.

Just a reminder that the call will be archived on our website, or you can listen to a replay until February 14 by dialing 514-861-2272, and the pass code is 3204917 pound.

Just a final note with regard to the Abitibi Bowater merger announcement before we go to questions. We are in the process of preparing a proxy statements, and security laws constrain our ability to speak to this transaction beyond that which is already public. The merger website, www.AbitibiBowater.com, contains all relevant information. And I would ask that you limit your questions to our operating results.

Colleen, we're going to start with the questions from the investment community, and we will conclude with the business media.

(OPERATOR INSTRUCTIONS). Joe Stivaletti, Goldman Sachs.

Two things. One is in the lumber business I was just wondering --.

Joe, we can't hear you. You're going to have to speak up.

I was just wondering in the lumber business if you have an ability to try to stem those losses, barring a recovery in lumber prices? Basically I am just asking how you're going to approach that if prices remain soft? Is there an ability to close down some of that capacity or do other things there?

I think it is clear that we did -- as we have stated in the results, we closed five sawmills early in the quarter. And we have continued to look at matching our lumber production with demand in the market. I don't -- so we do have the ability to go in and out. I think there is -- certainly our goal is to continue to move the cost down and give back, at least to the breakeven point for Wood Products until the market -- we would begin to see some recovery in the market.

Is that something you think you can achieve in the short-term in terms of getting back to a breakeven level?

I think you can see we made some significant improvement from the third to the fourth quarter. And we're continuing -- we hope to continue to move in that direction.

The other question I had was just on Augusta. How is it that you're going to get the proceeds from those timberland sales when you own just a little over half of the company? I was just trying to understand how that is going to work.

I will let Pierre go for that. Go ahead.

The way it is going to work is that -- I won't go through all the specific details, but the fact is that between us and our partner in Augusta we have a fixed-price option to purchase their interest. So whether we sell the woodland and keep all the proceeds does not change that fixed price for them. That is why we're able to do that, go ahead and sell the woodland, keep all the proceeds, because it doesn't impact what they will get out of this transaction when we do exercise our option.

Mark Wilde, Deutsche Bank.

That was one of my questions right there. Pierre, I wondered if you could also talk about the -- a little more about the structure of the deal with Caisse, whether that debt that you're putting on the power sub will be consolidated?

Yes, it will be consolidated because we will own 75%. Having said that, the debt is ten years. It is unsecured and it is nonrecourse to us. So it is basically debt which is specific to the ACH Limited Partnership.

Pierre, can you also talk about the ability just over time to never separate the power assets from the mills that they support? I mean are having the hydro rights does that require that you continue to operate the mills that they are adjacent to?

I think the water rights, or hydro rights, vary from mill to mill. And certainly we have the ability to bring other assets into the new energy subsidiary, but probably not all our assets. I think that we will also have the opportunity to make new investments and to upgrade our existing assets as part of our energy growth vehicle, and without really impacting the overall cost structure of our operations. So our goal will be to proceed along those lines, but it is clearly not -- you can't go to the annual report and say all hydro assets could now go into ACH. That is not like -- that is unrealistic.

Just switching gears, John, any sense of what you're going to be doing in the export market in '07 vis-a-vis your newsprint volumes?

I think that our plan is to increase our export sales in 2007 versus 2006. First of all, we see some good market growth in Europe, and certainly positive pricing environment with the exchange rate. And of course, Latin America continues to be a very good growth area for us. So those will be the two places where we generally will increase our exports in 2007.

Can you just refresh for us, John, how much you would have exported in '06, and what a reasonable growth number might be in '07?

We exported approximately 1 million tons from North America. And we also have some -- you might recall we do have some assets in the UK.

Yes, Bridgewater.

Yes. But in addition, we expect to see somewhere around 10% growth in export in 2007.

Finally, can you just update us on this situation down at Lufkin?

As we stated in the last conference call, the Lufkin operation, we had the perspective partner but we had elected not to go forward with that transaction, and let the mill remain idle, as it is plan at this time to leave the mill idled for the foreseeable future, probably most of 2007. And then we will relook at that once we see some recovery in the marketplace.

George Staphos, Banc of America.

Kevin Cohen. A quick question, if you can comment --.

We can't hear you.

Can you hear me now? It is Kevin Cohen.

No, we're still having problems.

I will speak a little louder. I am wondering if you guys could comment a little bit in terms of the industry's move toward the six-month contracts. Are customers really driving that, and why would that be, given that a lot of people believe newsprint prices might actually fall in '07?

I guess that people have different outlooks for 2007. But I think -- the point is that we are all looking for ways to bring additional stability to the marketplace, and certainly longer-term pricing arrangements are one way of doing that. I think historically there has been quite a bit of discussion about the longer-term relationships in North America, but it hasn't really come to pass. But I think over the last year or so, or 18 months, we have seen steady growth in the number of six month deals. And I think it is all driven by people looking for a better picture of the future as they go out.

What is the current delta, if you will, between contract prices and spot prices, if we were to think about the sort of mark-to-market, if you will?

I think first of all the spot price is pretty speculative, since everybody seems to have a different spot price. But I would say that generally you have to realize that six month deals are made to create sort of a stair step-like pricing structure, where it goes up and down every six months, rather than on an incline. And so the steps are sort of based on what people's forecasts are for the next period of time. So that is what really drives -- together with the volume of the buyer -- that is what drives the -- where the contract is struck at. It should be some kind of a trend over time.

Then lastly, before I turn it over to George Staphos, if you could give us just a little bit of color in terms of the decision to delay the Augusta newsprint, to move forward on that, in terms of what is driving that? What do you think ultimately determines if you do move forward on that front?

I think the main driver of that is that we had two really objectives with the Augusta transaction. The first was to monetize the timberlands, which we thought were selling at peak pricing in order to take advantage of that and bring that cash home.

The second was of course to exercise our option and secure what we believe is probably one of the lowest cost assets in North America. So by taking the first step, we get the cash proceeds to Abitibi. And it will allow us then to take the subsequent step down the line and when we exercise the option.

This is George Staphos. We figured we would tag team to make the conversation last longer. (technical difficulty) I don't know if you can hear me.

Yes.

Congratulations on the year and the progress you have seen in newsprint (technical difficulty). The profits here have gotten back to relatively respectable levels, C$120, C$130 per metric ton. Obviously the currency has hurt you. What if -- on a stand-alone basis, how much more progress do you think you can make in newsprint profitability from here on out?

I think we all know that, as we just discussed on the previous question, the margin for newsprint varies with pricing. But we have also continued to push on our costs. And we have made significant cost improvement over the last couple of years. And we think that things will be -- we will see some additional improvement in the cost structure in '07. And even maybe even some of the input costs will become more favorable as we look forward.

I think that we will be able to lower our costs and be able to try to stabilize the pricing in '07. And so we will continue to see the newsprint business create some good margins.

Stand-alone gradual improvement, no step change. Would that be fair?

I think that is probably a fair outlook for '07.

John Maier, UBS.

A quick question on the printing papers. The results were a little bit lower than our expectations. Can you talk to what you are seeing currently, and maybe what the expectation might be for improvement in '07, what kind of growth you might see in alternative and equal offset?

I think the results in the quarter were certainly impacted by the market-related downtime and the lower sales volume that resulted. As we look out for 2007, we expect as I said to see some continued growth in the super high-brites or freesheet substitute grades. There are some pricing pressure at the end of 2006 on the glossy grades, and so that is likely going to continue into -- to the early part of '06 -- I mean '07 with some recovery.

And the other plus we have is of course that almost all of our production capacity for the commercial printing grades is in Canada. And so the recent movement of the Canadian dollar has helped.

Another question on the pension funding status, can you give us an idea of where that stands now? I would imagine the gap has narrowed a little bit here.

Yes. The gap has narrowed a lot. We're going to publish our financial statements year-end, I guess in a month now. What I can tell you is that the pension deficit was around C$874 million last year. We're looking for the pension deficit at the end of this year to be in the low C$600 million, between C$600 million to C$620 million -- between C$600 million and C$620 million for the end of this year. So an improvement of about C$250 million versus the end of last year. Quite significant.

One final question here just on the contracts you're entering. What kind of structure do they have in terms of -- do they incorporate price escalators or those types if you see moves in input costs or anything of that nature?

I assume you're talking about the six month customer contracts?

Yes, correct.

They are generally fixed-price for six months. No escalators, no pricing modifications.

Steve Chercover, D.A. Davidson.

Was today the first day that you mentioned the sale of the Sheldon mill? Can you tell us whether there are any stipulations as to whether it will compete against you in the future?

It is being sold to a developer who intends to build an industrial park on the site. We have some constraints on how he can sell the spare parts at the mill. But our expectation is that we won't be seeing that machine anywhere.

That is good news. I guess some of my other questions have been answered, but with respect to the hydro situation in Ontario, we know that income trusts are no longer on the table. Is there any way that that might still come to market in a public fashion?

You mean the new one we have done with Caisse de depot?

Yes.

Down the road the reason why we chose this private placement route was that first of all we found a good partner, a good financial partner. And certainly the intent is to grow that vehicle. And as we grow it, we will see if it is potentially feasible to take it public down the road, but we're not there yet.

Bruce Klein, Credit Suisse. IPIC.

I was wondering on the hydro for a second more, just a little bit more color. You mentioned growth. I guess does that -- I guess it was a combination, or is it specifically on the outside, or is it also possibly with more Abitibi's other hydro assets? And then, John, you mentioned, you probably -- if sounded like practically -- you couldn't move 100% of it, but potentially could half could go in. Is that other magnitude realistic or no?

I think as far as development, of course the easiest and most profitable step is to first develop our own assets and bring additional assets into the venture. I think -- I haven't exactly tried to look at how many of the assets could go in, but maybe a good rule of thumb could be half of the assets. It would probably be plus or minus. So we would look first of all at inside growth, but if the right opportunity came on to grow externally that is a possibility too.

I guess just to put things into perspective, by the time we close this deal it would taken us one year, one full year to -- at best perhaps a bit more to do this. And we would expect the same kind of timeframe minimum for the rest of our -- the operations to be put in there -- or some of our other operations to be put in there. So it is just not something that will happen overnight.

I understand. The same question was just the contract pricing. I guess the stuff you have for the next six months, what percent of your newsprint business is that in rough magnitude? Is it one-fourth, is it one-half?

And secondly with those price I am assuming we're set in 4Q '06 for the benefit of one-half '07? Is that how it works?

We have about -- by tonnage about 30 to 40% of our customer base -- newsprint customer base in the North America on these contracts. And it is a negotiation that takes place at the end of the previous quarter. And the price is struck based on what your outlook is for the next six months based on average. I guess it depends on a lot on whether you're in a current upward trend or downward trend in pricing, and so it varies. But that is kind of the way the deal is struck.

Claudia Shank, JP Morgan.

I was just hoping you could talk a little bit about the sequential increase in cost per ton in the Newsprint division, so fourth quarter versus third quarter and what drove that?

The sequential increase in cost per ton, it is basically -- versus last year we said it was pension versus this year it is -- part of it is volume and energy.

Then just any guidance you could give on the tax rate and capital spending for '07 would be great.

Yes, tax rate is around 32% usually on a combined basis. And the CapEx --.

The CapEx will probably be pretty much in line with this year.

Mark Wilde, Deutsche Bank.

Just a follow-up in terms of newsprint pricing. I think one of the things that has been pretty striking over the last three or four years is that newsprint prices have kind of followed the Canadian dollar up. And with the Canadian dollar now coming down, what is the risk in your view that some of the smaller players kind of bid that back to the customers?

I guess I wouldn't necessarily say that the price of newsprint has followed the Canadian dollar. There has been a lot of other dynamics in the marketplace, but certainly the Canadian dollar cost has had an impact on Canadian producers. I think that I would be surprised if a movement from C$0.91 to C$0.86 was enough to make anybody get ready to give it back to the producer -- to the customers. I think that we're still, all of us, looking to get back to profitability.

That's good. But if the Canadian dollar continued to decline, would you view that as a real risk?

You know, it depends in what you're talking about, but I might view it as a real opportunity.

We will take one last call from the financial community.

Mark Bishop, RBC Capital.

It is just on the previous line of questioning. This is Mark. With newsprint prices coming down in the quarter over last quarter, at least list prices, I am just wondering how that actually jives with your statement that newsprint markets are in balance. And we haven't seen any reduction in prices as a result of the weaker Canadian dollar. So would it be in fact the negotiation of the longer-term contracts that were the key driver in lowering list prices, or how do you actually rationalize what we have seen?

Certainly, when you strike these six month deals there is a step, as I said earlier, a step change in pricing. And so that was one of the big movements in the December/January price structure.

But I think that if you do look at the statistics, you do see that production is down by 6.3% and demand is down by 6%. So the market is in balance. Maybe other people don't read the statistics. I don't know. But I think there is a little bit of a turn in the marketplace going on right now as a follow-up to the Knight-Ridder and McClatchy deal, and that is caused a little bit of turnover in customer base. And so maybe that gives a perception of a weaker market than it is. But the price drop is probably more related to this step change in six month agreements.

With the increase in, I guess the outlook for exports from North America, I guess I would have expected that the publishers might be willing to at least stay even with the contract negotiations rather than the producers actually take the hit with the lower pricing. But I guess at this point the producers felt it was more worthwhile to see that stability than the publishers. Is that a fair takeaway?

I think there was a lot of us that were trying to increase the stability of the marketplace with these six month agreements, and so I think, not just Abitibi, but apparently others too, and so that is what led to it.

We will now take questions from the media. (OPERATOR INSTRUCTIONS). Heather McPherson, T. Rowe Price.

Good morning. I guess I get the last question. Let's see, a lot of my questions have been answered. But to the pension question -- maybe you already answered this -- what would be the change in pension expense associated with the C$250 million decline in liability?

For next year the change in pension expense is limited. It is about C$10 million to C$15 million because there is still a deficit which we need to cure over the next five years, and the five-year amortization of that deficit. The good news is that it is not going up, it is probably going to go down by C$10 million to C$15 million.

I think in the past your sensitivity to currency has been -- I think this is right -- C$30 million for everyone C$0.01 change in the Canadian dollar. Is that still accurate?

Yes, that would be in the overall ballpark.

Then what percentage of your exposure to the Canadian dollar is hedged at this point, and how are you thinking about hedging that going forward?

We have been very stable with our policy. Our policy, we usually hedge about 30 to 35% 12 months out for exposure. And this where we would be at this point.

[Joe Smunger], Radio Canada.

It is up to you to answer in French or in English, as you wish. I would like to see -- first of we see American newspaper using the China paper, testing it. Do you think you're going to have to reduce the newsprint paper on a long run?

I think that the trials with Chinese imports and the forecasted increase in Chinese imports for 2007 is really a picture of the global marketplace we're in and how we compete. Just as we took earlier about exporting to Europe and South America we expect to have people also import to North America. And so I think that we -- as far as our own supply demand Abitibi's capacity we have said earlier that we think we have a great asset base, and we don't expect to close any additional newsprint capacity.

You don't think that it is going to push the price down?

That remains to be seen. I guess it is more of a question of how much imports from China and other places actually show up, and what is the impact on the supply demand imbalance. Currently it has not had that much impact, but we will see what happens as the year progresses.

About Ontario hydroelectrical installations, could you remind me in a few words what is your goal -- financial goal, and why don't you do the same thing with the Quebec installations?

The goal for the hydro subsidiary was, one, to provide an energy growth vehicle. Two, was to identity the real value of these assets to our stakeholders. And, the third of course, is to realize some cash to Abitibi-Consolidated. I think we realized those three goals, and we plan to continue to move forward. You know, I think over time we will look at, only the Quebec assets, but all assets in the Company as possible enters into the new Abitibi hydro.

So you could include your Quebec installations?

Some of them.

Some of them? It is not done yet?

No, as Peter said earlier, these processes take a long time.

2007?

They take a long time.

(OPERATOR INSTRUCTIONS).

We're going to stop at this time.

Perfect. Please go ahead, Mr. Alessi.

All right. I think we can close our conference call for the fourth quarter. Thank you all for joining. And we will speak again at the time of our next conference call.

The conference has now ended. Please disconnect your lines at this time. We thank you for your participation. And have a nice day.