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UPDATE 1-Resolute Forest profit beats as pulp demand rises

Thursday, 31 Oct 2013 | 12:24 PM ET

* Third-quarter adj EPS $0.31/shr vs est $0.25

* Expects pulp prices to remain strong in fourth quarter

* Shares rise 15 percent

(Adds forecast, CEO quote, shares)

Oct 31 (Reuters) - Canada's Resolute Forest Products Inc reported a better-than-expected profit for the fourth straight quarter as demand for its pulp products improved, sending its shares up 15 percent in early trade.

Resolute, the largest newsprint maker in North America, has boosted pulp production, sold non-core paper producing assets and cut jobs since it emerged from bankruptcy in 2010.

Rising demand for tissue, particularly in China, is driving consumption of pulp, Chief Executive Richard Garneau said.

"Improvements in volume, transaction price and costs led to the best quarter our pulp segment has seen in two years, which helped to offset the effects of weaker pricing for lumber and excess supply in paper grades," Garneau said in a statement.

Garneau said he expects prices of pulp, which is also used to make disposable diapers, to go up in the current quarter, after rising $5 per metric ton in the third quarter.

The company's pulp business earned $21 million in operating income in the third quarter, the highest among its five industrial units.

Garneau, however, warned that an expected 2 million ton increase in eucalyptus capacity makes next year somewhat more uncertain for the pulp business.

The Montreal-based company has said it would cut about 140 jobs across two of its mills in Canada by the first quarter, as demand declines due to falling newspaper readership and advertising revenue.

Resolute, formerly known as AbitibiBowater, reported a net loss in the third quarter, hurt by a $619 million charge related to income tax.

Excluding one-time items, the company earned 31 cents per share, above analysts' average estimates of 25 cents per share, according to Thomson Reuters I/B/E/S.

Operating income in the newsprint business halved to $13 million, while the coated paper business, which makes paper for magazines and brochures, reported an operating loss.

Prem Watsa's fund Hamblin Watsa Investment Counsel Ltd owns about 31 percent in the company as of June 30.

Resolute owns or operates 22 pulp and paper mills and 20 wood products plants in the United States, Canada and South Korea.

Shares of Resolute, which has a market value of $1.39 billion, have climbed 13 percent so far this year.

(Reporting by Garima Goel in Bangalore; Editing by Kirti Pandey and Sriraj Kaluvila)