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MONTREAL - Forest products firm AbitibiBowater Inc. is prepared to cut production and take a tough line on labour negotiations next year as the world's largest newspaper producer attempts to further reduce costs amid continuing quarterly losses.

"Newsprint consumption is down in 2008 more than we anticipated and costs are higher than we anticipated," CEO Dave Paterson said during a conference call. "Recognizing those challenges, we are ready to take the actions necessary, including elimination of unprofitable production."

For the quarter ended June 30, AbitibiBowater lost $251 million, up from a year-ago loss of $248 million.

AbitibiBowater suggested it will take a tough stand at next year's contract negotiations after workers refused last year to agree to wage and pension concessions the company said were desperately needed to lower operating costs.

"These contracts will be coming up for renewal next year and will be a significant part of our go-forward strategy," Patterson told analysts.

During a first wave of cuts last year, Abitibi closed or idled mills in Quebec, New Brunswick, Ontario, British Columbia and Texas, affecting 2,600 jobs.

The company is increasingly attempting to export its newsprint, especially to the Middle East, South America and Asia, despite facing shipping challenges. Exports can fetch significantly higher prices amid flat demand.