08 September 2005

Danny Williams: read the fine print

Danny Williams thinks its good news that Abitibi Consolidated is selling off its interest in an Asian paper making operation. He thinks the improved debt position will allow Abitibi to change its position in Newfoundland and Labrador.

If one actually reads the Abitibi release on the decision, a different picture emerges.

- The existing closures stand: Abitibi includes the reduction in its paper output from this divestiture with the permanent closures already announced. "Combined with the 350,000 tonnes of permanent capacity closures announced in Q2 and slated for Q4, the new adjusted newsprint capacity will be approximately 4 million tonnes."

- The company's not for turning: The money is being used to reduce long-term debt. Abitibi runs a significant risk by announcing major debt reduction initiatives now if they are considering adding to their debt. Abitibi isn't run by that hideous breed of politician who will say anything to get a good poll, knowing full well he or she may make a totally different decision when required.

- Abitibi plans to convert some of its assets to high-grade paper production. This would mean that in order to avoid the announced closures, the company would be completing re-tooling Stephenville. That actually increases the capital outlay for some its highest-cost operations at a time when the company needs to actually reduce its cost over the long term.

Always remember: Danny Williams learned his politics from watching Brian Tobin. What he says and what actually is likely to happen may not always be in the same species, let alone the same thing.