Resolute Employees Back Canada Agreement - Analyst Blog

Employees of paper products manufacturer Resolute Forest Products Inc. RFP widely approved its recent agreement with Canadian trade union Unifor for the renewal of collective agreements in the country.

Resolute Forest entered into a four-year agreement in principal with Unifor on May 8, 2014, subject to a sanction process by union members in each of the mills covered by the deal. The agreement, aimed at enhancing productivity and improving working conditions in Quebec and Ontario, provides for increments in each of the four years and emphasizes the partnership's focus on operational efficiency and employee safety.

The agreement is also expected to assist the company in accessing forest resources, curtailing costs and coping with challenging market dynamics for some paper products, while keeping the mills competitive and financially strong.

The collective agreement covers around 2,000 employees across 11 Resolute Forest's Canadian pulp and paper mills, 7 of which are situated in Quebec and the remaining 4 are in Ontario. In totality, the 11 establishments constitute over 41% of Resolute Forest's overall pulp and paper capacity.

Two months ago, Resolute Forest renewed a similar collective agreement with United Steel Workers for four of its U.S. mills.
    
The company recently incurred huge losses due to a harsh winter which caused substantial increase in energy costs, production disruptions, equipment malfunctions and distribution constraints. The unfavorable weather conditions reportedly cost the company over $55 million in operating income.

Resolute Forest is currently focusing on overcoming these headwinds and improving its operational efficiency.

Headquartered in Montreal, Canada, the company operates over 40 pulp and paper mills and wood products facilities in the U.S., Canada and South Korea, and power generation assets in Canada. It offers a diverse range of products, including newsprint, commercial printing papers, market pulp and wood products. Moreover, the company sells pulpwood, saw timber and wood chips and also recycles newspapers and magazines.

Resolute Forest currently has a Zacks Rank #5 (Strong Sell). Better-ranked stocks in the sector that are worth considering include Agnico Eagle Mines Limited AEM, Compass Minerals International Inc. CMP and Kumba Iron Ore Ltd. (KIROY), each carrying a Zacks Rank #1 (Strong Buy).