Tembec exiting flooring business with $13 million sale; Huntsville closing

MONTREAL - Forest products company Tembec is exiting the hardwood flooring business as it shutters a 108-year operation in Huntsville, Ont., and sells another facility in Toronto to a private company for $13 million.

The Montreal-based company said 63 workers, including 52 unionized employees, will be affected when the Huntsville business, which opened in 1903, ceases operations in January.

The Toronto plant, along with its Muskoka and Vintage flooring brands, will be sold within the next few weeks. It employs 79 workers, including 58 unionized employees.

Opened in 1989, Vintage Flooring relocated its manufacturing via an acquisition to its current 6,300-square-metre facility in western Toronto.

Tembec (TSX:TMB) said it will record a one-time charge of $2 million in its December quarterly results.

"The sale of the hardwood flooring division is consistent with our strategy to focus on the company's core businesses," stated president and CEO James Lopez.

The two facilities generated $48 million of sales, $1.9 million of earnings before interest, taxes, depreciation and amortization and $1.6 million of operating earnings.

Tembec's hardwood sawmill operations in Huntsville are unaffected by the transaction.

The company wouldn't disclose the identity of the buyer, at its request. It also wouldn't indicate how much of the flooring sales are generated in each facility.

Paul Quinn of RBC Capital Markets said he's not surprised by Tembec's sale of the flooring operations, which has been in the works for a few months.

"They've heard from investors that one of the reasons why their multiple is so low is that they've got a hand in every bucket so they're trying to simplify their business and get back to the core," he said from Vancouver.

The pulp business may be losing some money now, but Tembec's management believes it can once again deliver decent profits, he added.

While there may also be other assets that are non-core, they are more difficult to separate from existing operations and sell, Quinn added, pointing to the coated paperboard plant in Temiscaming, Que.

Tembec's printing plant in Kapuskasing, Ont., is holding its own with Ontario energy credits. The company believes its lumber business could recover once the U.S. housing market does.

"I think (the strategy is) more focused on what they know, which is lumber, pulp and a few ancillary businesses," Quinn added.

Tembec is an integrated forest products company, with operations in North America and France. It has some 4,300 employees, and operates more than 30 market pulp, paper and wood product manufacturing units. It also produces silvichemicals from by-products of its pulping process and specialty chemicals.

Tembec markets its products worldwide and has sales offices in Canada, the United States, China, Korea and Japan.

It was created in 1973 after a closed paper mill in Temiscaming, Que., was purchased from a large multinational company.

On the Toronto Stock Exchange, Tembec's shares fell 10 cents, or 3.8 per cent, at $2.57 in afternoon trading.