VANCOUVER, BC, May 3, 2023
/CNW/ - Canfor Corporation ("The Company" or "Canfor") (TSX:
CFP) today reported its first quarter of 2023
results1:
Overview
- Q1 2023 adjusted operating loss of $146
million; adjusted shareholder net loss of $145 million, or $1.20 per share
- Strong earnings from the Company's European operations and more
modest earnings from its US South operations outweighed by
continued pricing pressure on its Western Canadian operations
- Increased lumber production & shipments notwithstanding
North American market-related challenges; uplift in pulp production
despite ongoing fibre constraints
Financial Results
The following table summarizes selected financial information
for the Company for the comparative periods:
(millions of Canadian
dollars, except per share amounts)
|
|
|
|
|
|
Q1
|
|
Q4
|
|
Q1
|
|
|
|
|
|
2023
|
|
2022
|
|
2022
|
Sales
|
$
|
1,385.4
|
$
|
1,373.3
|
$
|
2,213.9
|
Reported operating
income (loss) before amortization, asset write-downs and
impairments
|
$
|
(105.7)
|
$
|
(62.6)
|
$
|
830.7
|
Reported operating
income (loss)
|
$
|
(208.5)
|
$
|
(308.0)
|
$
|
741.9
|
Adjusted operating
income (loss) before amortization, asset write-downs and
impairments1
|
$
|
(43.6)
|
$
|
(57.0)
|
$
|
829.6
|
Adjusted operating
income (loss)1
|
$
|
(146.4)
|
$
|
(163.8)
|
$
|
740.8
|
Net income
(loss)2
|
$
|
(142.0)
|
$
|
(207.9)
|
$
|
534.0
|
Net income (loss) per
share, basic and diluted2
|
$
|
(1.17)
|
$
|
(1.70)
|
$
|
4.29
|
Adjusted net income
(loss)1, 2
|
$
|
(144.9)
|
$
|
(126.8)
|
$
|
529.0
|
Adjusted net income
(loss) per share, basic and diluted1, 2
|
$
|
(1.20)
|
$
|
(1.04)
|
$
|
4.25
|
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.
|
The Company reported an operating loss of $208.5 million for the first quarter of 2023,
compared to an operating loss of $308.0
million in the fourth quarter of 2022. After adjusting for
certain one-time items, including a $62.1
million inventory write-down in the current period, the
Company's operating loss was $146.4
million for the first quarter of 2023, a $17.4 million improvement compared to an adjusted
operating loss of $163.8 million for
the fourth quarter of 2022. These results reflected improved pulp
and paper segment results, offset in part by a decline in lumber
segment earnings.
Commenting on the Company's first quarter results, Canfor's
President and Chief Executive Officer, Don
Kayne, said, "This was another challenging quarter for our
lumber business. Strong earnings from our European operations and
more modest earnings from our US South operations were overshadowed
by ongoing weakness in Western Spruce/Pine/Fir lumber pricing,
which resulted in further temporary capacity reductions across our
Western Canadian sawmills. In addition, we announced and began
implementing a restructuring of our British Columbian lumber
operations to better align manufacturing capacity with the
available long-term fibre supply. Despite improved earnings, this
was also a difficult quarter for our pulp business, driven by the
wind down of the pulp line at the Prince George Pulp and Paper
mill. While these restructuring decisions for both our lumber and
pulp business will create a more sustainable operating footprint
for Canfor going forward, we sincerely regret the impact on our
employees, their families, contractors and our local
communities."
Lumber Segment Highlights and Outlook
For the lumber segment, adjusted results decreased $6.8 million quarter-over-quarter as strong
earnings from the Company's European operations and more modest
earnings from its US South operations, were more than offset by the
challenging results from its Western Canadian operations. Overall,
lumber segment results were primarily driven by a moderate decline
in most North American benchmark lumber market prices, with the
average North American Random Lengths Western Spruce/Pine/Fir
("SPF") 2x4 2&Btr price and the average Southern Yellow Pine
("SYP") East 2x6 #2 price both down 6% quarter-over-quarter. These
factors were offset in part by slightly higher market pricing in
Europe. In addition, the current
quarter reflected moderately higher production and shipment volumes
across all three lumber operating regions, primarily due to
increased operating days in the US South and Europe, as well as reduced market-related
temporary downtime in Western
Canada (approximately 240 million board feet in the current
period versus 250 million board feet in the prior quarter).
North American lumber market conditions remained under pressure
through most of the first quarter of 2023. Residential construction
activity was in line with the previous quarter but continued to be
impacted by housing affordability constraints stemming from
persistent inflationary cost pressures and high interest rates.
These ongoing housing sector challenges more than offset slightly
improved demand in the repair and remodeling sector and led to a
decline in most North American US-dollar benchmark lumber prices in
the current quarter.
Offshore lumber demand and pricing to Asian markets experienced
continued weakness in the first quarter of 2023, most notably in
Japan and Korea, due to the
combined impact of high inflation and interest rates as well as
elevated lumber inventory levels in those regions. In China, despite the introduction of government
stimulus measures early in the current period aimed at reviving the
domestic economy, lumber demand and pricing continued to be
negatively impacted by high inventory levels in that region.
In Europe, and to a greater
extent the United Kingdom, lumber
demand and pricing experienced a modest improvement through the
first quarter of 2023, reflecting a slight uptick in residential
construction activity combined with restricted supply from
Russia and Belarus. These factors more than outweighed
the impact of ongoing weakness in the do-it-yourself sector during
the period.
Looking ahead, global lumber market conditions are anticipated
to face continued challenges through the second quarter of 2023 as
general economic uncertainty accompanied by affordability pressures
are projected to continue to weigh on demand. Notwithstanding these
headwinds, in the longer term, underlying global lumber market
fundamentals are forecast to be solid, principally reflecting
strong demographic trends, consistent demand driven by an aging
housing stock and low inventories of new homes. Demand in the
repair and remodeling sector is anticipated to be strong through
the second quarter of 2023, despite inflationary pressures, due to
an aged housing stock and seasonal factors.
Offshore lumber demand in Asia
is forecast to experience ongoing weakness in the second quarter of
2023 but improve through the latter half of the year as inventories
in that region return to more balanced levels. In Europe, lumber demand is anticipated to be
solid in the second quarter of 2023 as modest demand in the
residential construction segment is combined with a seasonal uptick
in the do-it-yourself sector.
Results in the second quarter of 2023 will also reflect the
impact on production and shipments of the permanent closure of the
Company's Chetwynd sawmill and
pellet plant, as well as the temporary closure of its Houston sawmill following their wind down in
April 2023.
In the US South, the construction of the Company's greenfield
sawmill in DeRidder, Louisiana, is
progressing well and its ramp-up in production is anticipated to
commence in the second quarter of 2023 and continue through the
balance of the year.
Pulp and Paper Segment Highlights and Outlook
For the pulp and paper segment, the adjusted operating loss was
$21.6 million for the first quarter
of 2023, a $20.4 million improvement
compared to an adjusted operating loss of $42.0 million for the fourth quarter of 2022.
These results for the most part reflected a 13% increase in pulp
production and an associated decline in pulp unit manufacturing
costs.
Following the strong global pulp market conditions experienced
in 2022, market fundamentals came under modest pressure late in the
first quarter of 2023. Relatively stable demand in the quarter was
outweighed by an uptick in global pulp producer inventories, which,
at the end of February 2023, were
well above the balanced range, at 50 days of supply, an increase of
seven days from the 43 days of supply at the end of December 2022 (Market conditions are generally
considered balanced when inventories are in the 32-43 days of
supply range). Consequently, the Northern Bleached Softwood Kraft
("NBSK") US-dollar list price on orders to China saw a modest decline, falling
US$48 per tonne to US$865 per tonne in March
2023. For the current quarter overall, US-dollar NBSK pulp
list prices to China averaged
US$891 per tonne, down US$29 per tonne, or 3%, from the previous
quarter.
Looking forward, global softwood kraft pulp markets are
anticipated to continue to weaken through the second quarter of
2023, as relatively stable demand is projected to be overshadowed
by above-average global pulp producer inventory levels.
Results in the second quarter of 2023 are also forecast to
reflect the impact on pulp production and shipments of the closure
of Canfor Pulp Products Inc.'s ("CPPI") pulp line at the Prince
George Pulp and Paper mill. No major maintenance outages are
planned for the second quarter of 2023.
Additional Information and Conference Call
A conference call to discuss the first quarter's financial and
operating results will be held on Thursday,
May 4, 2023, at 8:00 AM Pacific
time. To participate in the call, please dial Toll-Free
1-888-390-0546. For instant replay access until May 18, 2023, please dial Toll-Free
1-888-390-0541 and enter participant pass code 514554#. 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
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 condensed consolidated interim financial statements:
(millions of Canadian
dollars)
|
|
|
|
|
|
Q1
|
|
Q4
|
|
Q1
|
|
|
|
|
|
2023
|
|
2022
|
|
2022
|
Reported operating
income (loss)
|
$
|
(208.5)
|
$
|
(308.0)
|
$
|
741.9
|
Asset write-downs and
impairments
|
$
|
-
|
$
|
138.6
|
$
|
-
|
Inventory write-down
(recovery), net
|
$
|
62.1
|
$
|
5.6
|
$
|
(1.1)
|
Adjusted operating
income (loss)
|
$
|
(146.4)
|
$
|
(163.8)
|
$
|
740.8
|
Amortization
|
$
|
102.8
|
$
|
106.8
|
$
|
88.8
|
Adjusted operating
income (loss) before amortization, asset write-downs
and
impairments
|
$
|
(43.6)
|
$
|
(57.0)
|
$
|
829.6
|
After-tax impact, net
of non-controlling interests
|
|
|
|
|
|
Q1
|
|
Q4
|
|
Q1
|
(millions of Canadian
dollars)
|
|
|
|
|
|
2023
|
|
2022
|
|
2022
|
Net income
(loss)3
|
$
|
(142.0)
|
$
|
(207.9)
|
$
|
534.0
|
Foreign exchange gain
on term debt
|
$
|
(0.4)
|
$
|
(1.7)
|
$
|
(3.0)
|
Gain on derivative
financial instruments
|
$
|
(2.5)
|
$
|
(2.0)
|
$
|
(2.0)
|
Asset write-downs and
impairments
|
$
|
-
|
$
|
84.8
|
$
|
-
|
Adjusted net income
(loss)3
|
$
|
(144.9)
|
$
|
(126.8)
|
$
|
529.0
|
3
Attributable to equity shareholders of the Company.
|
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, British Columbia
("BC") with interests in BC, Alberta, North and South Carolina, Alabama, Georgia, Mississippi, Arkansas and Louisiana, 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 CPPI, 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