VANCOUVER, BC, March 1, 2022 /CNW/ - Canfor Corporation ("The
Company" or "Canfor") (TSX: CFP) today reported its 2021 and
fourth quarter 2021 results1:
Overview
- Record-high 2021 operating income before adjusting items of
$2.2 billion; adjusted shareholder
net income of $1.5 billion, or
$12.16 per share
- Fourth quarter of 2021 adjusted operating income of
$216 million; adjusted shareholder
net income of $155 million or
$1.24 per share
- 2021 includes impairment charges totaling $294 million or $1.47 per share, resulting in reported operating
income of $1.9 billion for the year,
net shareholder income of $1.3
billion or $10.74 per share;
fourth quarter of 2021 operating loss of $67
million, net shareholder loss of $23
million or $0.19 per
share
- Completed acquisition of Millar Western Forest Products Ltd.'s
("Millar Western") solid wood operations and associated tenure
located in Alberta, Canada, for
$420 million, including an estimated
$56 million in working capital,
adding 630 million board feet to Canfor's annual production
capacity
- Announced sale of Mackenzie
forest tenure and sawmill assets for combined proceeds of
$70 million
Financial Results
The following table summarizes selected financial information
for the Company for the comparative periods:
|
|
Q4
|
|
Q3
|
|
YTD
|
|
Q4
|
|
YTD
|
(millions of Canadian
dollars, except per share amounts)
|
|
2021
|
|
2021
|
|
2021
|
|
2020
|
|
2020
|
Sales
|
$
|
1,571.3
|
$
|
1,676.6
|
$
|
7,684.9
|
$
|
1,618.0
|
$
|
5,454.4
|
Reported operating
income before amortization and impairments
|
$
|
321.7
|
$
|
425.4
|
$
|
2,578.4
|
$
|
520.0
|
$
|
1,108.2
|
Reported operating
income (loss)
|
$
|
(66.8)
|
$
|
331.0
|
$
|
1,908.1
|
$
|
419.6
|
$
|
727.3
|
Adjusted operating
income before amortization and impairments1
|
$
|
311.3
|
$
|
425.1
|
$
|
2,565.5
|
$
|
517.0
|
$
|
1,097.5
|
Adjusted operating
income1
|
$
|
216.3
|
$
|
330.7
|
$
|
2,188.7
|
$
|
416.6
|
$
|
716.6
|
Net income
(loss)2
|
$
|
(23.1)
|
$
|
210.0
|
$
|
1,341.6
|
$
|
335.6
|
$
|
544.4
|
Net income (loss) per
share, basic and diluted2
|
$
|
(0.19)
|
$
|
1.68
|
$
|
10.74
|
$
|
2.68
|
$
|
4.35
|
Adjusted net
income1, 2
|
$
|
154.6
|
$
|
209.0
|
$
|
1,519.0
|
$
|
321.7
|
$
|
555.6
|
Adjusted net income
per share, basic and diluted1, 2
|
$
|
1.24
|
$
|
1.68
|
$
|
12.16
|
$
|
2.57
|
$
|
4.44
|
|
1 Adjusted
results referenced throughout this news release are defined as
non-IFRS financial measures. For further details, refer to the
"Non-IFRS Financial Measures" section of this document.
|
2
Attributable to equity shareholders of the Company.
|
2021 was a record-breaking year for Canfor, as unprecedented
strength in global lumber markets in the first half of the year
drove benchmark lumber prices to new record highs. This record
pricing, coupled with higher production and shipment volumes in
Europe and the US South
substantially outweighed the impacts of extreme weather and higher
log costs in British Columbia
("BC"), and operational challenges faced by the Company's pulp
business in the latter part of the year.
As a result, the Company reported an all-time high operating
income of $1,908.1 million and net
income per share of $10.74 for 2021,
compared to the previous record-high operating earnings of
$727.3 million and net income per
share of $4.35 in 2020. After taking
account of adjusting items, largely comprised of asset impairments,
the Company's operating income for 2021 was $2,188.7 million, with adjusted net income of
$12.16 per share, almost triple the
record earnings in the prior year.
For the fourth quarter of 2021, the Company reported an
operating loss of $66.8 million.
After taking account of adjusting items, the Company's operating
income was $216.3 million for the
fourth quarter of 2021, down $114.4
million compared to an adjusted operating income of
$330.7 million for the third quarter
of 2021, principally reflecting a modest decline in lumber segment
earnings combined with moderately lower pulp and paper segment
earnings.
For the lumber segment, notwithstanding the upward trend in
North American benchmark lumber prices throughout the period,
adjusted earnings decreased $49.0
million quarter-over-quarter as a result of slightly lower
unit sales realizations in Western
Canada and Europe, in part
due to a timing lag in shipments (versus orders), combined with
transportation-related reductions in North American production and
shipment volumes, and the associated increase in unit manufacturing
costs in that region.
Results for the pulp and paper segment in the current quarter
reflected weaker global pulp market conditions, combined with the
significant impact of severe weather conditions on Canfor Pulp
Products Inc.'s ("CPPI") operations and shipments, most notably at
its Northwood Northern Bleached Softwood Kraft ("NBSK") pulp mill
("Northwood") and its Taylor Bleached Chemi-Thermo Mechanical Pulp
("BCTMP") mill ("Taylor"), as well as capital-related downtime at
Northwood relating to CPPI's decision to rebuild the lower furnace
of recovery boiler number one ("RB1").
Commenting on the Company's 2021 and fourth quarter of 2021
results, Don Kayne, Canfor's
President and Chief Executive Officer, said "2021 was an
exceptional year for Canfor. Although our business was faced with
global supply chain disruptions, the ongoing impacts of the
COVID-19 pandemic and extreme weather conditions in BC, we were
able to generate record-high results for 2021. We continue to see
growing demand for the forest products we produce, together with a
greater appreciation of their low carbon benefits. Recognizing that
our employees at both Canfor and Canfor Pulp faced many challenges
in 2021, we want to sincerely thank them for their exceptional
commitment to safety, and outstanding resilience and performance.
As we move into 2022, we anticipate solid global lumber demand,
while for our pulp business we are focused on optimizing production
performance, reducing costs, and maximizing fibre utilization in
more moderate market conditions."
North American lumber market fundamentals strengthened through
the fourth quarter of 2021 as demand in the repair and remodeling
sector continued to outperform global expectations. Housing starts
remained strong through the current quarter after some weakness
early in the period, related to the traditional seasonal slow-down,
supply chain disruptions, severe weather conditions and labour
shortages.
US housing starts averaged 1,654,000 units on a seasonally
adjusted basis for the current quarter, up 6% from the previous
quarter, reflecting similar increases for single-family starts and
multi-family starts. In Canada,
housing starts averaged 261,000 units on a seasonally adjusted
basis, broadly in line with the prior quarter.
Offshore lumber demand to Asia,
particularly to China, declined
somewhat in the current quarter primarily reflecting a seasonal
decrease in purchasing activity. Although prices in Japan declined quarter-over-quarter, they
remained significantly above historical averages. Western Europe and Scandinavian lumber demand
showed a modest decline resulting in increased inventories in the
region, particularly in the United
Kingdom, combined with a moderation in activity in both the
repair and remodeling and residential construction sectors
following significant strength in prior quarters.
The average benchmark North American Random Lengths Western
Spruce/Pine/Fir ("SPF") 2x4 #2&Btr price improved significantly
throughout the fourth quarter of 2021, beginning October at
US$555 per Mfbm and ending December
at US$1,045 per Mfbm. For the quarter
overall, the Western SPF 2x4 #2&Btr price averaged US$711 per Mfbm, up US$217 per Mfbm, or 44%, from the previous
quarter. Conversely, offshore lumber prices experienced moderate
declines quarter-over-quarter, due in part to the nature of export
pricing, much of which is negotiated monthly or quarterly in
advance. Overall, the Company's Western SPF lumber unit sales
realizations experienced a modest decrease in the current quarter,
as the uplift in benchmark pricing during the current period, was
more than outweighed by the decline in offshore unit sales
realizations, largely driven by lower pricing to Japan, and, to a lesser extent, an
unfavourable timing lag in shipments (versus orders) and higher
duties.
The movement in the North American Random Lengths Southern
Yellow Pine ("SYP") East 2x4 #2 price through the fourth quarter of
2021 followed a similar trajectory to that of Western SPF,
beginning the quarter at US$620 per
Mfbm and ending the year at US$1,280
per Mfbm. For the current quarter overall, the SYP East 2x4 #2
price averaged US$862 per Mfbm, up
US$329 per Mfbm, or 62%, from the
previous quarter. Less pronounced pricing increases for most
wider-width dimension products, including the SYP East 2x6 #2 which
averaged US$538 per Mfbm in the
current period, up US$131 per Mfbm,
or 32%, tempered the increase in the Company's SYP average unit
sales realizations quarter-over-quarter.
The Company's European lumber unit sales realizations for the
fourth quarter of 2021 were significantly lower than the previous
quarter principally reflecting a decline in European lumber market
demand and pricing, and, to a lesser extent, a 2% stronger
Canadian dollar (versus the Swedish Krona).
Total lumber shipments of 1.32 billion board feet were in line
with the previous quarter as significantly higher European lumber
shipments, following the seasonal production downtime taken in the
prior period, was offset by transportation challenges and reduced
production across the Company's North American lumber operations.
In BC, unprecedented flooding severely damaged rail and highway
infrastructure, combined with intense cold weather that followed,
significantly reduced shipment volumes in the current quarter. In
the US South, shipments were hampered by rail service issues,
limited offshore container availability and a tight trucking
market.
Total lumber production, at 1.29 billion board feet, was broadly
comparable with the previous quarter, as the benefit of increased
operating days at the Company's European operations following the
aforementioned seasonal downtime was mostly offset by a decline in
Western SPF and SYP lumber production. In BC, the reduced operating
schedules implemented in August 2021,
reflecting fibre constraints and supply infrastructure challenges,
continued through most of the fourth quarter, and impacted Western
SPF production by approximately 220 million board feet in the
current period. Lower SYP production in the current period
primarily reflected log shortages and reduced trucking availability
tied to COVID-19 absenteeism.
Lumber unit manufacturing and product costs increased modestly
from the previous quarter, largely reflecting moderately higher log
costs in Western Canada and, to a
lesser extent, the US South, combined with the incremental impact
of lower production volumes at the Company's North American
operations on unit manufacturing costs. In BC, log cost increases
in the current quarter were primarily driven by the direct and
indirect impact of a rise in market-based stumpage costs to
historically high levels, and, to a lesser extent, increased
purchased wood costs. In the US South, log cost pressures were
largely driven by hauling capacity constraints and increased log
demand. These increases were mitigated in part by slightly lower
log costs at the Company's European operations correlated with
market-related declines in that region.
Since the beginning of 2019, industry-wide rationalization in BC
has removed over 2.2 billion board feet of annual Western SPF
production capacity. In many areas of the province, the Allowable
Annual Cut ("AAC") has been reduced through Timber Supply Review
determinations of the AAC by the BC Government. In 2021, the Prince
George Timber Supply Area ("PGTSA") was directly negatively
impacted by the Minister's apportionment decision, which allocates
the AAC among tenures following a timber supply determination.
Further reductions to the AAC of the PGTSA are anticipated in 2023.
In addition, it is anticipated that the AAC in the BC Interior may
be further reduced from current levels as a result of the impacts
of the Mountain Pine Beetle ("MPB") infestation, losses resulting
from wildfire events, as well as other pressures on BC's Timber
Harvesting Land Base.
In recent years, the Company has taken various steps to secure
access to high-quality fibre and ensure the viability and
competitiveness of its BC lumber operations, but despite these
actions, since 2019, the Company has permanently closed two mills,
indefinitely curtailed its Mackenzie sawmill (prior to its recently
announced sale in February 2022), and
closed one production line at its Plateau sawmill (as recently
announced). In 2021, as a result of escalating log costs driven by
an insufficient supply of economically viable timber following the
MPB epidemic, wildfire events and a reduction in AAC in the PGTSA,
as well as higher market-based stumpage, the Company performed an
impairment test on its Western Canadian lumber operations as of
December 31, 2021. This assessment
resulted in an impairment charge of $198.5
million being recognized in the current year as a reduction
to the carrying value of lumber segment assets.
Like other central and northern BC Interior pulp producers,
CPPI's supply of sawmill residual chips has been significantly
reduced over the last few years, primarily driven by extensive
permanent sawmill curtailments in the region. As a result, CPPI's
fibre purchases have experienced ongoing cost pressures that
include an increase in the proportion of higher-cost whole log
chips and higher transportation costs.
Looking forward there remains significant uncertainty with
regards to the future of economically viable fibre within BC. This
uncertainty is driven by, among other factors, the lasting impacts
of the MPB epidemic, wildfire events, future Timber Supply
Review determinations by the BC Government, as well as
uncertainties associated with unsettled land and title claims by
various Indigenous Nations and outstanding policy, land use
decisions and legislative initiatives by the BC Government. This
includes the BC Government's announced deferral of harvesting on
2.6 million hectares of BC's old-growth forests and the potential
redistribution of Crown tenure harvesting rights, including
Indigenous Nations.
Consequently, the BC sawmill manufacturing industry faces a
constrained fibre supply environment, where existing sawmill
capacity outstrips the available timber supply in BC. Until this
imbalance is corrected, the Company anticipates escalating log cost
pressures in BC for its sawmills and a higher cost fibre supply for
CPPI's pulp mills (both for sawmill residual chips and whole-log
chips). In addition, it is expected that the long-term aggregate
available chip supply will be permanently reduced.
Recognizing these increased fibre costs as well as ongoing
uncertainty surrounding fibre availability, the Company
also performed an impairment test for its pulp and paper
segment as of December 31, 2021,
which resulted in an impairment charge of $95.0 million being recognized in the current
year as a reduction to the carrying value of pulp assets within the
pulp and paper segment.
As at December 31, 2021, the
Company had paid cumulative cash deposits of $682.5 million on countervailing ("CVD") and
anti-dumping duties ("ADD"). In January
2022, the US Department of Commerce ("DOC") announced the
preliminary results for the third period of review ("POR3"), which
indicated that the Company's preliminary CVD and ADD rate for 2020
was 1.83% and 4.92%, respectively. Upon finalization of these rates
(anticipated in the third quarter of 2022), a recovery, estimated
at $88.8 million (US$66.5 million), will be recognized in the
Company's consolidated financial statements to reflect the
difference between the combined accrual rate and the DOC rates for
POR3. In addition, once final, the Company's current combined cash
deposit rate of 19.54% will be reset to the DOC rates for POR3
(currently estimated to be 6.75% based on the preliminary
determination). Despite the reduced preliminary rates for the POR3,
no cash duties will be refunded to the Company until such time as
the litigation regarding the imposition of CVD and ADD has been
settled.
On the acquisition front, from 2018 to 2021, the Company has
added 1.5 billion board feet in annual production capacity through
its various acquisitions, focused primarily in the US South and
Europe. Subsequent to year end, on
February 1, 2022, the Vida Group
purchased V-Timber AB for $13.0
million and on March 1, 2022,
Canfor completed the acquisition of Millar
Western's solid wood operations and associated forest
tenure, located in Alberta,
Canada, for $420.0 million,
including an estimated $56.0 million
in working capital. Together, these recent acquisitions will add
690 million board feet to the Company's annual production capacity,
630 million board feet in Western
Canada and 60 million board feet in Europe.
On February 24, 2022, the Company
announced its intention to sell its forest tenure in the
Mackenzie region to McLeod Lake
Indian Band and Tsay Keh Dene Nation
and that it had entered into a separate agreement with Peak
Mackenzie Properties Ltd. to sell its Mackenzie sawmill assets, for combined
proceeds of $70.0 million. During the
year ended December 31, 2021, the
Company recognized a gain of $4.5
million reflecting the sale of certain Mackenzie sawmill assets during the fourth
quarter of 2021.
Looking ahead, strength in North American lumber market
fundamentals is projected to continue through the first quarter of
2022, supported by lean existing home inventory, an aging housing
stock and strong household balance sheets. Activity in the repair
and remodeling sector, however, is anticipated to experience
downward pressure in the near term as a result of seasonally slower
consumption and reduced consumer spending, with an uptick estimated
towards the end of the first quarter of 2022. Notwithstanding
favourable lumber demand fundamentals overall, transportation
congestion across Western Canada
has significantly impacted rail service to and from the Company's
sawmills in recent weeks. Reduced lumber shipments, combined with
rising inflationary cost pressures, are anticipated to somewhat
impact results in the first quarter of 2022.
Offshore lumber demand in Asia,
particularly in China, is
projected to weaken slightly in the first quarter of 2022 as
ongoing pandemic related concerns are projected to combine with
growing uncertainty in the real estate market and increasing
inventory levels. In Japan, demand
in the first quarter of 2022 is anticipated to be lower than that
experienced in the fourth quarter, as the market adjusts to changes
in inventory levels in that region. European lumber markets are
forecast to be relatively solid early in 2022 driven by a continued
focus on green building initiatives and a projected uptick in
demand in the repair and remodeling sector.
In early 2022, global softwood kraft pulp market conditions have
strengthened somewhat, largely in response to unexpected global
supply outages and a heavily congested supply chain network,
combined with an uptick in market demand from China. Notwithstanding high inventory levels
and the potential for ongoing supply chain driven pricing
volatility, global softwood kraft pulp markets are projected to
continue to strengthen moderately through the first quarter of
2022, reflecting the ongoing improvement in demand from
China coupled with tight global
supply. Modest increases experienced in the high yield BCTMP market
through the fourth quarter of 2021 are anticipated to continue
through the first quarter of 2022.
Despite the recent uplift in global pulp markets, the limited
and intermittent rail service in BC experienced in recent weeks has
put further pressure on an already constrained global logistics
network. Consequently, as previously announced, CPPI's results in
the first quarter of 2022 will reflect a minimum six-week
curtailment at Taylor, with a
projected 25,000 tonnes of reduced BCTMP production. CPPI also
anticipates that the transportation disruptions will result in
lower projected NBSK pulp and paper shipment volumes in the first
quarter of 2022. CPPI will continue to monitor and adapt to the
unfolding logistic situation over the coming weeks. In addition,
global inflationary cost increases, particularly for chemicals, are
projected to weigh on CPPI's results in the first quarter of
2022.
Furthermore, CPPI's results in the first quarter of 2022 will
reflect the impact of the RB1 capital-related outage at Northwood
into late-March, including reduced pulp production (approximately
70,000 tonnes) and shipments, as well as higher pulp unit
manufacturing costs. As the RB1 rebuild approaches completion a key
focus of CPPI's kraft pulp mills in 2022 will be on improving
operational reliability and closely managing manufacturing and
fibre costs.
Refer to the Company's annual Management's Discussion and
Analysis for further discussion on the Company's results for the
fourth quarter of 2021 on page 36.
Additional Information and Conference Call
A conference call to discuss the fourth quarter's financial and
operating results will be held on Wednesday,
March 2, 2022 at 8:00 AM Pacific
time. To participate in the call, please dial Toll-Free
1-888-390-0546. For instant replay access until March 16, 2022, please dial Toll-Free
1-888-390-0541 and enter participant pass code 930645#.
The conference call will be webcast live and will be available
at www.canfor.com. This news release, the attached financial
statements and a presentation used during the conference call can
be accessed via the Company's website at
http://www.canfor.com/investor-relations/webcasts.
Non-IFRS Financial Measures
Throughout this press release, reference is made to certain
non-IFRS financial measures which are used to evaluate the
Company's performance but are not generally accepted under IFRS and
may not be directly comparable with similarly titled measures used
by other companies. The following table provides a reconciliation
of these non-IFRS financial measures to figures reported in the
Company's consolidated financial statements:
|
|
Q4
|
|
Q3
|
|
YTD
|
|
Q4
|
|
YTD
|
(millions of Canadian
dollars)
|
|
2021
|
|
2021
|
|
2021
|
|
2020
|
|
2020
|
Reported operating
income (loss)
|
$
|
(66.8)
|
$
|
331.0
|
$
|
1,908.1
|
$
|
419.6
|
$
|
727.3
|
Asset
impairments
|
$
|
293.5
|
$
|
-
|
$
|
293.5
|
$
|
-
|
$
|
-
|
Inventory write-down
(recovery), net
|
$
|
1.1
|
$
|
3.5
|
$
|
2.4
|
$
|
(3.0)
|
$
|
(26.1)
|
Restructuring, mill
closure and other items, net
|
$
|
(11.5)
|
$
|
(3.8)
|
$
|
(15.3)
|
$
|
-
|
$
|
15.4
|
Adjusted operating
income3
|
$
|
216.3
|
$
|
330.7
|
$
|
2,188.7
|
$
|
416.6
|
$
|
716.6
|
Amortization
|
$
|
95.0
|
$
|
94.4
|
$
|
376.8
|
$
|
100.4
|
$
|
380.9
|
Adjusted operating
income before amortization
and impairments3
|
$
|
311.3
|
$
|
425.1
|
$
|
2,565.5
|
$
|
517.0
|
$
|
1,097.5
|
|
3 Effective Q1 2021, results were no
longer adjusted for countervailing and anti-dumping duties. Prior
periods above have been restated to reflect this change ($95.5
million recovery in Q4 2020, $18.8 million expense in YTD
2020).
|
After-tax impact, net
of non-controlling interests
|
|
Q4
|
|
Q3
|
|
YTD
|
|
Q4
|
|
YTD
|
(millions of Canadian
dollars)
|
|
2021
|
|
2021
|
|
2021
|
|
2020
|
|
2020
|
Net income
(loss)4
|
$
|
(23.1)
|
$
|
210.0
|
$
|
1,341.6
|
$
|
335.6
|
$
|
544.4
|
Foreign exchange
(gain) loss on term debt
|
$
|
0.2
|
$
|
2.6
|
$
|
(5.5)
|
$
|
(11.7)
|
$
|
(3.6)
|
(Gain) loss on
derivative financial instruments
|
$
|
3.0
|
$
|
(0.8)
|
$
|
11.2
|
$
|
(2.2)
|
$
|
3.6
|
Asset
impairments
|
$
|
182.9
|
$
|
-
|
$
|
182.9
|
$
|
-
|
$
|
-
|
Restructuring, mill
closure and other items, net
|
$
|
(8.4)
|
$
|
(2.8)
|
$
|
(11.2)
|
$
|
-
|
$
|
11.2
|
Adjusted net
income4, 5
|
$
|
154.6
|
$
|
209.0
|
$
|
1,519.0
|
$
|
321.7
|
$
|
555.6
|
|
4 Attributable to equity shareholders
of the Company.
|
5 Effective Q1 2021, net income and
net income per share were no longer adjusted for the after-tax
impact of duty deposits, net duty deposits recoverable, and foreign
exchange on duty deposits recoverable. Prior periods above have
been restated to reflect this change (favourable per share impact
of $0.51 in Q4 2020, unfavourable of $0.15 in YTD 2020).
|
Forward Looking Statements
Certain statements in this press release constitute
"forward-looking statements" which involve known and unknown risks,
uncertainties and other factors that may cause actual results to be
materially different from any future results, performance or
achievements expressed or implied by such statements. Words such as
"expects", "anticipates", "projects", "intends", "plans", "will",
"believes", "seeks", "estimates", "should", "may", "could", and
variations of such words and similar expressions are intended to
identify such forward-looking statements. These statements are
based on management's current expectations and beliefs and actual
events or results may differ materially. There are many factors
that could cause such actual events or results expressed or implied
by such forward-looking statements to differ materially from any
future results expressed or implied by such statements.
Forward-looking statements are based on current expectations and
Canfor assumes no obligation to update such information to reflect
later events or developments, except as required by law.
Canfor is a leading integrated forest products company based
in Vancouver, BC with interests in
BC, Alberta, North and
South Carolina, Alabama, Georgia, Mississippi and Arkansas, as well as in Sweden with its majority acquisition of the
Vida Group. Canfor produces primarily softwood lumber and also owns
a 54.8% interest in Canfor Pulp Products Inc., which is one of the
largest global producers of market Northern Bleached Softwood Kraft
Pulp and a leading producer of high performance kraft paper. Canfor
shares are traded on the Toronto Stock Exchange under the symbol
CFP. For more information visit canfor.com.
SOURCE Canfor Corporation