##### 



EXHIBIT 99.2
 13
    
    ABITIBI-CONSOLIDATED / 2005 ANNUAL REPORT
 MD&A
 
 MANAGEMENTS DISCUSSION AND ANALYSIS
  
 OVERVIEW AND HIGHLIGHTS OF 2005
 ®




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##### 



ABITIBI-CONSOLIDATED / 2005 ANNUAL REPORT
    
    14
 MANAGEMENTS DISCUSSION AND ANALYSIS
 $350 MILLION LOSS
      Wood Products
  TABLE 1: VARIANCE SUMMARY
  Fav/(unfav) variance due to:Foreign2005
    
    
    Volume
    
    
    exchange
    
    
    Prices
    
    
    Costs
    
    
    2004$
    
    
    $
    
    
    $
    
    
    $
    
    
    $
    
    
    $Sales
    
    
    5,342
    
    
    
    (58
    )
    
    
    (343
    )
    
    
    444
    
    
    
    
    
    
    
    5,299Cost of products sold
    
    
    3,875
    
    
    
    32
    
    
    
    55
    
    
    
    
    
    
    
    (185
    )
    
    
    3,777Distribution costs
    
    
    591
    
    
    
    3
    
    
    
    17
    
    
    
    
    
    
    
    (19
    )
    
    
    592CVD/AD
    
    
    67
    
    
    
    8
    
    
    
    5
    
    
    
    
    
    
    
    (30
    )
    
    
    50Selling, general and administrative expenses
    
    
    169
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    (1
    )
    
    
    169Mill closure and other elements
    
    
    37
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5
    )
    
    
    32EBITDA
    
    
    603
    
    
    
    (15
    )
    
    
    (265
    )
    
    
    444
    
    
    
    (240
    )
    
    
    679Amortization (regular)
    
    
    508
    
    
    
    
    
    
    
    13
    
    
    
    
    
    
    
    50
    
    
    
    571Amortization (other)
    
    
    371
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7
    )
    
    
    364Operating loss from continuing operations
    
    
    (276
    )
    
    
    (15
    )
    
    
    (252
    )
    
    
    444
    
    
    
    (197
    )
    
    
    (256
    )Operating profit from continuing operations
before specific items 1
    
    
    141
    
    
    
    (15
    )
    
    
    (252
    )
    
    
    444
    
    
    
    (151
    )
    
    
    115
 1
    
    Not in accordance with GAAP




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##### 



15
    
    ABITIBI-CONSOLIDATED / 2005 ANNUAL REPORT
 MANAGEMENTS DISCUSSION AND ANALYSIS
       IMPACT OF SPECIFIC ITEMS
  TABLE 2: IMPACT OF SPECIFIC ITEMS
 IN MILLIONS OF DOLLARSEXCEPT PER SHARE AMOUNTS
    
    2005
    
    
    2004$
    
    
    $Loss as reported
    
    
    (350
    )
    
    
    (36
    )(in accordance with gaap)$  per share
    
    
    (0.80
    )
    
    
    (0.08
    )Specific items (after taxes):Gain on translation of
foreign currencies
    
    
    (90
    )
    
    
    (260
    )CVD/AD rates adjustments
    
    
    
    
    
    
    (22
    )Gain on sale of the Saint-Félicien
pulp mill
    
    
    
    
    
    
    (73
    )Gain on sale of Voyageur Panel
    
    
    
    
    
    
    (19
    )Loss on sale of PanAsia
    
    
    10
    
    
    
    Asset write offs / write downs
    
    
    244
    
    
    
    235Mill closure and other elements
    
    
    14
    
    
    
    20Alma startup costs
    
    
    
    
    
    
    4Early retirement program and
labour force reductions
    
    
    6
    
    
    
    Financial expenses
    
    
    17
    
    
    
    Income tax adjustments
    
    
    (27
    )
    
    
    (2
    )Loss excluding specific items
    
    
    (176
    )
    
    
    (153
    )(not in accordance with gaap)$  per share
    
    
    (0.40
    )
    
    
    (0.35
    )




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##### 



ABITIBI-CONSOLIDATED / 2005 ANNUAL REPORT
    
    16
 MANAGEMENTS DISCUSSION AND ANALYSIS
  SALE OF PANASIA
    ABITIBI-CONSOLIDATED
REDUCED ITS NET DEBT LEVEL BY APPROXIMATELY $1 BILLION.
 IN-DEPTH OPERATIONS REVIEW
  
    
    The restructuring of the Newfoundland
operations, which led to labour reductions, the
permanent closure of the Stephenville paper mill and the
announcement of the permanent closure of paper machine
number seven at Grand Falls. The Stephenville paper mill
had an annual production capacity of approximately
194,000 tonnes of newsprint. The machine at Grand Falls
has an annual production capacity of approximately
60,000 tonnes of newsprint.
    
    The permanent closure of the Kenora paper
mill, which resulted in the permanent removal of
240,000 tonnes of newsprint capacity annually.
    
    The intention to permanently close one paper
machine at the Bridgewater mill, which will result in
the permanent removal of 60,000 tonnes of capacity. The
closure of the machine will take effect no later than
April 2006.
    
    The sale of the Companys privately owned
timberlands located near Thunder Bay for $55 million.
The timberlands comprise approximately 196,000 hectares
(or about 485,000 acres).
  DIVIDENDS
   
 RESULTS OF CONTINUING OPERATIONS




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##### 



17
    
    ABITIBI-CONSOLIDATED / 2005 ANNUAL REPORT
 MANAGEMENTS DISCUSSION AND ANALYSIS
  TABLE 3: OPERATING PROFIT (LOSS)
FROM CONTINUING OPERATIONS
  As reported
    
    
    Before specific items12005
    
    
    2004
    
    
    2005
    
    
    2004$
    
    
    $
    
    
    $
    
    
    $Newsprint
    
    
    (228
    )
    
    
    (362
    )
    
    
    117
    
    
    
    27CommercialPrinting Papers
    
    
    (89
    )
    
    
    (52
    )
    
    
    (18
    )
    
    
    (38
    )Wood Products
    
    
    41
    
    
    
    158
    
    
    
    42
    
    
    
    126(276
    )
    
    
    (256
    )
    
    
    141
    
    
    
    115
 1
    
    Not in accordance with GAAP
   NEWSPRINT
 OPERATING RESULTS
     TABLE 4: NEWSPRINT VARIANCE
  Fav/(unfav) variance due to:Foreign2005
    
    
    Volume
    
    
    exchange
    
    
    Prices
    
    
    Costs
    
    
    2004$
    
    
    $
    
    
    $
    
    
    $
    
    
    $
    
    
    $Sales
    
    
    2,892
    
    
    
    
    
    
    
    (200
    )
    
    
    297
    
    
    
    
    
    
    
    2,795Mill closure and other elements
    
    
    89
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (64
    )
    
    
    25Early retirement program
and labour force reductions
    
    
    9
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9
    )
    
    
    EBITDA
    
    
    303
    
    
    
    
    
    
    
    (133
    )
    
    
    297
    
    
    
    (201
    )
    
    
    340Amortization (regular)
    
    
    284
    
    
    
    
    
    
    
    8
    
    
    
    
    
    
    
    46
    
    
    
    338Amortization (other)
    
    
    247
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    117
    
    
    
    364Operating loss from continuing operations
    
    
    (228
    )
    
    
    
    
    
    
    (125
    )
    
    
    297
    
    
    
    (38
    )
    
    
    (362
    )Operating profit from continuing operations
before specific items 1
    
    
    117
    
    
    
    
    
    
    
    (125
    )
    
    
    297
    
    
    
    (82
    )
    
    
    27
 1
    
    Not in accordance with GAAP




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##### 



ABITIBI-CONSOLIDATED / 2005 ANNUAL REPORT
    
    18
 MANAGEMENTS DISCUSSION AND ANALYSIS
 DISTRIBUTION OF NEWSPRINT SALES
 2005
 
  
 NEWSPRINT MARKET
     CHANGE IN CAPACITY




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##### 



19
    
    ABITIBI-CONSOLIDATED / 2005 ANNUAL REPORT
 MANAGEMENTS DISCUSSION AND ANALYSIS
  COMMERCIAL PRINTING PAPERS
 OPERATING RESULTS
    TABLE 5: COMMERCIAL PRINTING PAPERS VARIANCE
  Fav/(unfav) variance due to:Foreign2005
    
    
    Volume
    
    
    exchange
    
    
    Prices
    
    
    Costs
    
    
    2004$
    
    
    $
    
    
    $
    
    
    $
    
    
    $
    
    
    $Sales
    
    
    1,552
    
    
    
    38
    
    
    
    (112
    )
    
    
    147
    
    
    
    
    
    
    
    1,479Mill closure and other elements
    
    
    (53
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    60
    
    
    
    7Alma start-up costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7
    
    
    
    7EBITDA
    
    
    208
    
    
    
    4
    
    
    
    (109
    )
    
    
    147
    
    
    
    41
    
    
    
    125Amortization (regular)
    
    
    173
    
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    (1
    )
    
    
    177Amortization (other)
    
    
    124
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (124
    )
    
    
    Operating loss from continuing operations
    
    
    (89
    )
    
    
    4
    
    
    
    (104
    )
    
    
    147
    
    
    
    (84
    )
    
    
    (52
    )Operating loss from continuing operations
before specific items 1
    
    
    (18
    )
    
    
    4
    
    
    
    (104
    )
    
    
    147
    
    
    
    (27
    )
    
    
    (38
    )
 1
    
    Not in accordance with GAAP
 ABICAL ® GRADES (SUPERCALENDERED (SC) AND SOFT-NIP)
 ABI ®
  TABLE 6: SHIPMENTS OF COMMERCIAL PRINTING PAPERS
  2005
    
    
    2004SC, Soft-Nip papers
    
    
    611
    
    
    
    615ABIOFFSETTM papers
    
    
    422
    
    
    
    364Hi-Brite papers
    
    
    306
    
    
    
    271Directory papers
    
    
    135
    
    
    
    140Specialty papers
    
    
    233
    
    
    
    260Total papers
    
    
    1,707
    
    
    
    1,650Market pulp
    
    
    75
    
    
    
    88Total segment
    
    
    1,782
    
    
    
    1,738




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##### 



ABITIBI-CONSOLIDATED / 2005 ANNUAL REPORT
    
    20
 MANAGEMENTS DISCUSSION AND ANALYSIS
 DISTRIBUTION OF COMMERCIAL PRINTING PAPERS SALES
 2005
 
  
 ABIOFFSET TM GRADES
 ABI TM ® ® ABI TM TM
 ABI TM ABI TM ABI TM
 MARKET OUTLOOK
 ABI TM
 CHANGE IN CAPACITY
  WOOD PRODUCTS
 OPERATING RESULTS
   TABLE 7: WOOD PRODUCTS VARIANCE
  Fav/(unfav) variance due to:Foreign2005
    
    
    Volume
    
    
    exchange
    
    
    Prices
    
    
    Costs
    
    
    2004$
    
    
    $
    
    
    $
    
    
    $
    
    
    $
    
    
    $Sales
    
    
    898
    
    
    
    (96
    )
    
    
    (31
    )
    
    
    
    
    
    
    
    
    
    
    1,025CVD / AD
    
    
    67
    
    
    
    8
    
    
    
    5
    
    
    
    
    
    
    
    (30
    )
    
    
    50Mill closure and other elements
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1
    )
    
    
    EBITDA
    
    
    92
    
    
    
    (19
    )
    
    
    (23
    )
    
    
    
    
    
    
    (80
    )
    
    
    214Amortization
    
    
    51
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5
    
    
    
    56Operating profit from continuing operations
    
    
    41
    
    
    
    (19
    )
    
    
    (23
    )
    
    
    
    
    
    
    (75
    )
    
    
    158Operating profit from continuing operations
before specific items 1
    
    
    42
    
    
    
    (19
    )
    
    
    (23
    )
    
    
    
    
    
    
    (42
    )
    
    
    126
 1
    
    Not in accordance with GAAP




---



##### 



21
    
    ABITIBI-CONSOLIDATED / 2005 ANNUAL REPORT
 MANAGEMENTS DISCUSSION AND ANALYSIS
    ENGINEERED WOOD
   DISTRIBUTION OF WOOD PRODUCTS SALES
 2005
 
  
 LUMBER MARKET
    LUMBER DISPUTE
 Injury:




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##### 



ABITIBI-CONSOLIDATED / 2005 ANNUAL REPORT
    
    22
 MANAGEMENTS DISCUSSION AND ANALYSIS
  Anti-dumping Duties:
  Countervailing Duties:




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##### 



23
    
    ABITIBI-CONSOLIDATED / 2005 ANNUAL REPORT
 MANAGEMENTS DISCUSSION AND ANALYSIS
 de minimis de minimis
  Reviews:




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##### 



ABITIBI-CONSOLIDATED / 2005 ANNUAL REPORT
    
    24
 MANAGEMENTS DISCUSSION AND ANALYSIS
  Additional Appeals:
 FOURTH QUARTER ANALYSIS
    TABLE 8: FOURTH QUARTER VARIANCE SUMMARY
  Fav/(unfav) variance due to:Fourth
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    FourthQuarter
    
    
    
    
    
    
    Foreign
    
    
    
    
    
    
    
    
    
    
    Quarter2005
    
    
    Volume
    
    
    exchange
    
    
    Prices
    
    
    Costs
    
    
    2004$
    
    
    $
    
    
    $
    
    
    $
    
    
    $
    
    
    $Sales
    
    
    1,310
    
    
    
    (87
    )
    
    
    (50
    )
    
    
    100
    
    
    
    
    
    
    
    1,347Cost of products sold
    
    
    969
    
    
    
    61
    
    
    
    11
    
    
    
    
    
    
    
    (48
    )
    
    
    993Distribution costs
    
    
    148
    
    
    
    9
    
    
    
    3
    
    
    
    
    
    
    
    (2
    )
    
    
    158CVD/AD
    
    
    13
    
    
    
    3
    
    
    
    1
    
    
    
    
    
    
    
    (57
    )
    
    
    (40
    )Selling, general and administrative expenses
    
    
    41
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    41Mill closure and other elements
    
    
    19
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14
    
    
    
    33EBITDA
    
    
    120
    
    
    
    (14
    )
    
    
    (35
    )
    
    
    100
    
    
    
    (93
    )
    
    
    162Amortization (regular)
    
    
    124
    
    
    
    
    
    
    
    6
    
    
    
    
    
    
    
    14
    
    
    
    144Amortization (other)
    
    
    348
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16
    
    
    
    364Operating loss from continuing operations
    
    
    (352
    )
    
    
    (14
    )
    
    
    (29
    )
    
    
    100
    
    
    
    (63
    )
    
    
    (346
    )Operating profit (loss) from continuingoperations before specific items 1
    
    
    15
    
    
    
    (14
    )
    
    
    (29
    )
    
    
    100
    
    
    
    (36
    )
    
    
    (6
    )
 1
    
    Not in accordance with GAAP




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##### 



25
    
    ABITIBI-CONSOLIDATED / 2005 ANNUAL REPORT
 MANAGEMENTS DISCUSSION AND ANALYSIS
       SUMMARY OF QUARTERLY RESULTS
  TABLE 9: SUMMARY OF QUARTERLY RESULTS
 
 2005
    
    
    2004Q-4
    
    
    Q-3
    
    
    Q-2
    
    
    Q-1
    
    
    Q-4
    
    
    Q-3
    
    
    Q-2
    
    
    Q-1$
    
    
    $
    
    
    $
    
    
    $
    
    
    $
    
    
    $
    
    
    $
    
    
    $Sales
    
    
    1,310
    
    
    
    1,355
    
    
    
    1,354
    
    
    
    1,323
    
    
    
    1,347
    
    
    
    1,405
    
    
    
    1,308
    
    
    
    1,239Operating profit (loss)
from continuing operations
    
    
    (352
    )
    
    
    8
    
    
    
    57
    
    
    
    11
    
    
    
    (346
    )
    
    
    75
    
    
    
    41
    
    
    
    (26
    )Operating profit (loss)
from continuing operations
before specific items 1
    
    
    15
    
    
    
    49
    
    
    
    58
    
    
    
    19
    
    
    
    (6
    )
    
    
    80
    
    
    
    53
    
    
    
    (12
    )Earnings (loss) from
continuing operations
    
    
    (345
    )
    
    
    95
    
    
    
    (49
    )
    
    
    (54
    )
    
    
    (115
    )
    
    
    179
    
    
    
    (84
    )
    
    
    (106
    )Earnings (loss) from continuing
operations per share
    
    
    (0.79
    )
    
    
    0.22
    
    
    
    (0.11
    )
    
    
    (0.13
    )
    
    
    (0.26
    )
    
    
    0.40
    
    
    
    (0.19
    )
    
    
    (0.24
    )Net earnings (loss)
    
    
    (355
    )
    
    
    99
    
    
    
    (43
    )
    
    
    (51
    )
    
    
    (108
    )
    
    
    182
    
    
    
    (79
    )
    
    
    (31
    )Net earnings (loss) per share
    
    
    (0.81
    )
    
    
    0.23
    
    
    
    (0.10
    )
    
    
    (0.12
    )
    
    
    (0.24
    )
    
    
    0.41
    
    
    
    (0.18
    )
    
    
    (0.07
    )Exchange rates (CDN$1=US$):Average noon rate
    
    
    0.852
    
    
    
    0.832
    
    
    
    0.804
    
    
    
    0.815
    
    
    
    0.819
    
    
    
    0.765
    
    
    
    0.736
    
    
    
    0.759
 1
    
    Not in accordance with GAAP




---



##### 



ABITIBI-CONSOLIDATED / 2005 ANNUAL REPORT
    
    26
 MANAGEMENTS DISCUSSION AND ANALYSIS
     
 FINANCIAL POSITION AND LIQUIDITY
   CONTINUING OPERATING ACTIVITIES
  FINANCING ACTIVITIES OF CONTINUING OPERATIONS




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##### 



27
    
    ABITIBI-CONSOLIDATED / 2005 ANNUAL REPORT
 MANAGEMENTS DISCUSSION AND ANALYSIS
   TABLE 10: DETAILS OF THE TENDER OFFER FOR CERTAIN OUTSTANDING NOTES COMPLETED ON DECEMBER 16,
2005
  Principal amountOutstanding
    
    
    Tendered
    
    
    Acceptedas at
    
    
    prior to
    
    
    for
    
    
    RemainingSecurity
    
    Dec. 1, 2005
    
    
    expiration
    
    
    purchase
    
    
    outstandingUS $
    
    
    US $
    
    
    US $
    
    
    US $6.95% Notes due December 15, 2006
    
    
    200.0
    
    
    
    184.8
    
    
    
    184.8
    
    
    
    15.27.625% Notes due May 15, 2007
    
    
    200.0
    
    
    
    139.0
    
    
    
    139.0
    
    
    
    61.06.95% Notes due April 1, 2008
    
    
    250.0
    
    
    
    209.2
    
    
    
    50.0
    
    
    
    200.07.875% Notes due August 1, 2009
    
    
    250.0
    
    
    
    204.7
    
    
    
    100.0
    
    
    
    150.08.55% Notes due August 1, 2010
    
    
    500.0
    
    
    
    327.8
    
    
    
    105.0
    
    
    
    395.01,400.0
    
    
    
    1,065.5
    
    
    
    578.8
    
    
    
    821.2




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##### 



ABITIBI-CONSOLIDATED / 2005 ANNUAL REPORT
    
    28
 MANAGEMENTS DISCUSSION AND ANALYSIS
 INVESTING ACTIVITIES OF CONTINUING OPERATIONS
  THE COMPANY INTENDS TO LIMIT ITS CAPITAL EXPENDITURE
PROGRAM IN 2006 AT $200 MILLION.
   
 2004 COMPARED TO 2003




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##### 



29
    
    ABITIBI-CONSOLIDATED / 2005 ANNUAL REPORT
 MANAGEMENTS DISCUSSION AND ANALYSIS
 
 SELECTED ANNUAL INFORMATION
  TABLE 11: SELECTED ANNUAL INFORMATION
 IN MILLIONS OF DOLLARSEXCEPT OTHERWISE NOTED
    
    2005
    
    
    2004
    
    
    2003$
    
    
    $
    
    
    $Sales
    
    
    5,342
    
    
    
    5,299
    
    
    
    4,980Operating loss from
continuing operations
    
    
    (276
    )
    
    
    (256
    )
    
    
    (375
    )Operating profit (loss) from
continuing operations
before specific items1
    
    
    141
    
    
    
    115
    
    
    
    (220
    )Earnings (loss) from
continuing operations
    
    
    (353
    )
    
    
    (126
    )
    
    
    152Earnings (loss) from continuing
operations per share
    
    
    (0.81
    )
    
    
    (0.29
    )
    
    
    0.35Net earnings (loss)
    
    
    (350
    )
    
    
    (36
    )
    
    
    175Net earnings (loss) per share
    
    
    (0.80
    )
    
    
    (0.08
    )
    
    
    0.40Total assets
    
    
    8,044
    
    
    
    9,787
    
    
    
    10,241Total long-term liabilities
    
    
    4,614
    
    
    
    5,124
    
    
    
    5,551Dividends declared
per share
    
    
    0.100
    
    
    
    0.100
    
    
    
    0.175Exchange rates (CDN$1=US$):Closing rate
    
    
    0.860
    
    
    
    0.832
    
    
    
    0.771Average noon rate
    
    
    0.826
    
    
    
    0.769
    
    
    
    0.714
 
 1
    
    Not in accordance with GAAP        OPERATING RESULTS FROM CONTINUING OPERATIONS
BEFORE SPECIFIC ITEMS HAVE IMPROVED SEQUENTIALLY
SINCE 2003.
 
 OTHER NOTEWORTHY EVENTS




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ABITIBI-CONSOLIDATED / 2005 ANNUAL REPORT
    
    30
 MANAGEMENTS DISCUSSION AND ANALYSIS
 
 RISKS AND UNCERTAINTIES
 GLOBAL MARKETS AND COMPETITION
      FIBRE SUPPLY




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31
    
    ABITIBI-CONSOLIDATED / 2005 ANNUAL REPORT
 MANAGEMENTS DISCUSSION AND ANALYSIS
     ENERGY
       SOFTWOOD LUMBER DISPUTE




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ABITIBI-CONSOLIDATED / 2005 ANNUAL REPORT
    
    32
 MANAGEMENTS DISCUSSION AND ANALYSIS
    ENVIRONMENT
  THE COMPANY ALSO MET ITS COMMITMENT TO OBTAIN
THE SUSTAINABLE FOREST MANAGEMENT CERTIFICATION
FOR ITS NORTH AMERICAN OPERATIONS BY THE END OF
2005.
     FOREIGN EXCHANGE
   PENSION FUNDS
 Critical Accounting
Policies and Estimates,
 CHANGES IN BANKING AND CAPITAL
MARKETS AND CHANGES IN INTEREST RATES
  
 PRICE, COST AND EXCHANGE RATE SENSITIVITY




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33
    
    ABITIBI-CONSOLIDATED / 2005 ANNUAL REPORT
 MANAGEMENTS DISCUSSION AND ANALYSIS
 TABLE 12: SENSITIVITY ANALYSIS
   Impact onPre-tax
    
    
    Net
    
    
    Net earningsearnings
    
    
    earnings
    
    
    per share$
    
    
    $
    
    
    $US$25
change in transaction price  per unitNewsprint1
    
    
    108
    
    
    
    73
    
    
    
    0.166Commercial printing papers1
    
    
    51
    
    
    
    34
    
    
    
    0.078Wood products2
    
    
    63
    
    
    
    43
    
    
    
    0.097Foreign exchange3US$0.01 change in relative value to the Canadian dollarCash impact
    
    
    29
    
    
    
    20
    
    
    
    0.044Non-cash impact
    
    
    45
    
    
    
    36
    
    
    
    0.082Manufacturing costsVirgin fibre (2% on external source)
    
    
    3
    
    
    
    2
    
    
    
    0.005Recycled fibre (2% on external source)
    
    
    3
    
    
    
    2
    
    
    
    0.005EnergyNatural Gas (US$1/Gj)
    
    
    12
    
    
    
    8
    
    
    
    0.019Bunker C (US$1/BARREL)
    
    
    2
    
    
    
    1
    
    
    
    0.003Electricity ($1/MWh)Regulated markets
    
    
    9
    
    
    
    6
    
    
    
    0.014Deregulated markets
    
    
    2
    
    
    
    1
    
    
    
    0.002
 
 1
    
    Per tonne2
    
    Per thousand board feet3
    
    Cash impact partly offsets non-cash impact mainly attributable to translation of foreign
currencies. 
 OUTLOOK
   TABLE 13: PRODUCTION CAPACITY
 Newsprint1(thousand tonnes)
    
    
    3,853Commercial printing papers1(thousand tonnes)
    
    
    2,002Market pulp (thousand tonnes)
    
    
    93Lumber (million board feet)
    
    
    2,078I-joist (million linear feet)
    
    
    73
 
 1
    
    Includes currently idled capacity  THE COMPANY ALSO INTENDS TO APPLY FREE CASH
FLOWS TOWARD THE REDUCTION OF LONG-TERM DEBT.
   
 FORWARD-LOOKING STATEMENTS




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ABITIBI-CONSOLIDATED / 2005 ANNUAL REPORT
    
    34
 MANAGEMENTS DISCUSSION AND ANALYSIS
 Risks and
Uncertainties
 
 FINANCIAL INSTRUMENTS AND
OTHER INSTRUMENTS
  FOREIGN EXCHANGE
   INTEREST RATE
   CREDIT RISK
   
 CONTRACTUAL OBLIGATIONS




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35
    
    ABITIBI-CONSOLIDATED / 2005 ANNUAL REPORT
 MANAGEMENTS DISCUSSION AND ANALYSIS
 TABLE 14: SUMMARY OF CONTRACTUAL OBLIGATIONS
  Total commitments by periodTotal
    
    
    Within
    
    
    1  3
    
    
    4  5
    
    
    Aftercommitments
    
    
    1 year
    
    
    year
    
    
    year
    
    
    5 years$
    
    
    $
    
    
    $
    
    
    $
    
    
    $Long-term debt
    
    
    3,762
    
    
    
    18
    
    
    
    542
    
    
    
    640
    
    
    
    2,562Operating leases
    
    
    63
    
    
    
    20
    
    
    
    25
    
    
    
    10
    
    
    
    8Purchase obligations
    
    
    248
    
    
    
    42
    
    
    
    50
    
    
    
    49
    
    
    
    107Total contractual obligations
    
    
    4,073
    
    
    
    80
    
    
    
    617
    
    
    
    699
    
    
    
    2,677
 
 OFF-BALANCE SHEET ARRANGEMENTS
  
 TRANSACTIONS WITH RELATED PARTIES
  TABLE 15: TRANSACTIONS WITH RELATED PARTIES
  2005
    
    
    2004$
    
    
    $Value of fibre supplied to SFK GP
    
    
    
    
    
    
    14Purchases of market pulp
    
    
    
    
    
    
    3
 
 CHANGES IN ACCOUNTING POLICIES
 ADOPTED DURING FISCAL YEAR OF 2005
 CONSOLIDATION OF VARIABLE INTEREST ENTITIES
 Consolidation of Variable Interest Entities.
  EXPECTED TO BE ADOPTED IN SUBSEQUENT YEARS
 FINANCIAL INSTRUMENTS, HEDGES AND COMPREHENSIVE INCOME
 Financial Instruments  Recognition
and Measurement, Hedges Comprehensive Income.




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ABITIBI-CONSOLIDATED / 2005 ANNUAL REPORT
    
    36
 MANAGEMENTS DISCUSSION AND ANALYSIS
 
 CRITICAL ACCOUNTING
POLICIES AND ESTIMATES
  FOREIGN EXCHANGE
 Foreign Currency Translation
  PROPERTY, PLANT AND EQUIPMENT
    GOODWILL
 Goodwill and other intangible assets
    EMPLOYEE FUTURE BENEFITS PLANS
 Employee Future Benefits




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37
    
    ABITIBI-CONSOLIDATED / 2005 ANNUAL REPORT
 MANAGEMENTS DISCUSSION AND ANALYSIS
     FUTURE INCOME TAXES
 Income taxes
   
 USE OF NON-GAAP FINANCIAL MEASURES
   TABLE 16: EBITDA RECONCILIATION
  2005
    
    
    2004$
    
    
    $Operating loss from
continuing operations
1, 2
    
    
    (276
    )
    
    
    (256
    )Plus:Amortization of plant
and equipment
    
    
    863
    
    
    
    919Amortization of intangible assets
    
    
    16
    
    
    
    16EBITDA 1
    
    
    603
    
    
    
    679
 1
    
    Included in 2005, mill closure and other
elements of $37 million and a charge of $9
million for an early retirement program and
labour force reductions. Included in 2004,
CVD/AD credits from prior years of $32
million, mill closure and other elements of
$32 million and Alma start-up cost of $7
million.2
    
    Included in 2005 and in 2004, asset
write downs of $371 million and $364
million, respectively.




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ABITIBI-CONSOLIDATED / 2005 ANNUAL REPORT
    
    38
 MANAGEMENTS DISCUSSION AND ANALYSIS
 
 DISCLOSURE CONTROLS AND
PROCEDURES AND INTERNAL CONTROLS
    
 OVERSIGHT ROLE OF AUDIT COMMITTEE AND BOARD
OF DIRECTORS
  
 ADDITIONAL INFORMATION