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Catalyst Paper


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I've been keeping an eye on Catalyst Paper.  I think Cardboard had some money in Catalyst, and I took up a small position recently.


Just a couple comments and a question. The question first, since it is of a general nature:


Third Avenue has a large stake in this company (33%).  They bought large chunks at $3.30 and $0.75, and a smaller recent position at $0.09.  A look at the insider transaction summaries also shows a lot of buying/selling in very small pieces, and much of the selling is at very low prices.  However, the designation for these sales is "Third AVenue Management Separately Managed Accounts".  Does this mean that individual/smaller investors have accounts with 3rd avenue, and for whatever reason are buying/selling within these accounts?  As Cardboard mentioned earlier, it seems strange that 3rd Avenue would take up a huge stake in this company and then trade around their position in such small pieces.  Thanks for any input.


Now the comments:


Newsprint/paper sure seems like a bad business to be in these days... and newsprint in particular looks like it's suffering from a structural changes. Catalyst Q1 results were ugly:  volumes down, bad pricing, restructuring costs from severance packages, and a couple million dollars to get the second line of pulp running at the Crofton mill.  It's unclear what the master game plan is for this company. (Perhaps it includes prayer?)  The BOD is now full of restructuring experts, and it's a bit difficult to get a grasp on what they're doing on the labour front --- that is, are they union busting, or just trying to prudently manage costs?  The previous CEO, Richard Garneau, who oversaw a lot of restructuring over the past 3 years, has just resigned... apparently to spend more time with his family, though 3 days after resigning he found himself a position on Abatibi's BOD.


In any case, I've been trying to get a handle on Catalyst Q2 EBIDTA.  The Q1 report indicates

- severance costs should be lower in Q2 than Q1

- newsprint price hikes implemented in Q1 should be fully realized in Q2

- significant specialty paper price hikes were to be attempted in May/June

- both pulp lines at Crofton will be operating through Q2 (though they still seem to have a small amount of pulp capacity curtailed, for reasons unknown to me)


From little bits and pieces of reading it appears as though the paper demand situation has improved, and newsprint prices have been rising for a while now (not dramatically, just slow and steady).  After running a few numbers based on the sensitivity analysis in the Q1 report, it looks like Q2 could be a big improvement on Q1. 



I just thought I'd share these observations on here in case anyone has also been poking around and has any comments.



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