VANCOUVER, BC, July 28,
2022 /CNW/ - Canfor Corporation ("The Company" or
"Canfor") (TSX: CFP) today reported its second quarter of 2022
results:
Overview
- Q2 2022 reported operating income of $532 million; quarterly sales of $2.2 billion
- Downward pressure on North American lumber market fundamentals;
significant decline in US-dollar lumber benchmark pricing; uptick
in European market pricing largely tied to traditional quarterly
lag
- Improved lumber & pulp shipments despite ongoing
transportation challenges
- Shareholder net income of $374
million, or $3.02 per
share
Financial Results
The following table summarizes selected financial information
for the Company for the comparative periods:
|
|
Q2
|
|
Q1
|
|
YTD
|
|
Q2
|
|
YTD
|
(millions of Canadian
dollars, except per share amounts)
|
|
2022
|
|
2022
|
|
2022
|
|
2021
|
|
2021
|
Sales
|
$
|
2,171.7
|
$
|
2,213.3
|
$
|
4,385.0
|
$
|
2,495.2
|
$
|
4,437.0
|
Reported operating
income before amortization
|
$
|
630.3
|
$
|
830.7
|
$
|
1,461.0
|
$
|
1,134.6
|
$
|
1,831.3
|
Reported operating
income
|
$
|
531.6
|
$
|
741.9
|
$
|
1,273.5
|
$
|
1,041.3
|
$
|
1,643.9
|
Adjusted operating
income before amortization1
|
$
|
630.8
|
$
|
829.6
|
$
|
1,460.4
|
$
|
1,134.6
|
$
|
1,829.1
|
Adjusted operating
income1
|
$
|
532.1
|
$
|
740.8
|
$
|
1,272.9
|
$
|
1,041.3
|
$
|
1,641.7
|
Net
income2
|
$
|
373.8
|
$
|
534.0
|
$
|
907.8
|
$
|
726.9
|
$
|
1,154.7
|
Net income per share,
basic and diluted2
|
$
|
3.02
|
$
|
4.29
|
$
|
7.32
|
$
|
5.81
|
$
|
9.22
|
Adjusted net
income1, 2
|
$
|
379.7
|
$
|
529.0
|
$
|
908.7
|
$
|
721.2
|
$
|
1,155.4
|
Adjusted net income per
share, basic and diluted1, 2
|
$
|
3.07
|
$
|
4.25
|
$
|
7.33
|
$
|
5.76
|
$
|
9.23
|
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
|
For the second quarter of 2022, the Company reported operating
income of $531.6 million, down
$210.3 million from the operating
income of $741.9 million reported for
the first quarter of 2022 largely reflecting lower lumber segment
earnings following the strong earnings in the previous quarter,
offset to a degree by improved pulp and paper segment results.
Commenting on the Company's second quarter results, Canfor's
President and Chief Executive Officer, Don
Kayne, said, "Despite the pressures on North American lumber
market fundamentals this was a strong quarter for our lumber
business, as our results continue to far exceed pre-pandemic levels
and we continue to capitalize on our global diversification
strategy. In our North American operations, ongoing global supply
chain constraints resulted in the difficult decision to reduce
operating schedules at our Western Canadian sawmills during the
second quarter and into the summer months. We greatly appreciate
our employees' ongoing resilience in managing through these supply
chain challenges. For our pulp business, some relief in
transportation constraints late in the period enhanced our ability
to realize near-record high pricing and recognize improved results
in the quarter."
Results in the lumber segment decreased $230.9 million quarter-over-quarter principally
reflecting a significant downward correction in Western
Spruce/Pine/Fir ("SPF") and Southern Yellow Pine ("SYP") US-dollar
benchmark pricing in the current period, with the average North
American Random Lengths Western SPF 2x4 2&Btr price down
US$408 per Mfbm, or 32%, and the
average SYP East 2x6 #2 down US$546
per Mfbm, or 50%. The decline in North American benchmark lumber
pricing in the current quarter was mitigated somewhat by increased
North American shipment volumes, reflecting a marginal improvement
in a challenging transportation environment, particularly in
Western Canada. Current quarter
results continued to reflect strong earnings from the Company's
European operations as a moderate uplift in European lumber unit
sales realizations (largely tied to the quarterly lag in pricing),
was offset in part by an increase in European unit manufacturing
costs and a 5% stronger Canadian dollar (versus the Swedish Krona
("SEK")).
Following significant strength in the previous quarter, North
American market fundamentals experienced downward pressure
throughout most of the current quarter, principally driven by the
impact of elevated interest rates and rising inflation. These
economic headwinds weighed on lumber market demand in the current
period, prompting a modest decline in new home construction
activity in the US, particularly for single-family units. Decreased
demand combined with relatively steady inventory levels in the
supply chain resulted in a significant drop in North American
benchmark lumber prices in the current quarter. In the repair and
remodeling sector, despite inflationary cost pressures and
competing uses for discretionary spending, demand improved as the
quarter progressed with consumers taking advantage of lower cost
building materials tied to the significant decline in US-dollar
benchmark lumber prices.
Offshore lumber demand and prices in Asia showed continued weakness in the second
quarter of 2022, especially in China due to the implementation of a
'zero-COVID' strategy which immobilized economic activities in the
region as citizens were subject to strict testing and quarantine
policies. In Japan, demand also
experienced downward pressure as high inventory levels were coupled
with supply chain challenges which slowed consumption in the
industrial and construction sectors. Lumber demand in Western Europe and Scandinavia remained strong
throughout most of the current quarter largely driven by sustained
residential construction activity. Late in the period, however,
reduced consumer spending, attributed to rising inflation and high
energy costs, generated a decline in the European "do-it-yourself"
sector.
Results in the pulp and paper segment largely reflected
materially higher Northern Bleached Softwood Kraft ("NBSK") pulp
unit sales realizations, and to a lesser extent, a 16% uplift in
pulp shipments, as transportation disruptions globally and in
British Columbia ("BC") eased
somewhat in the latter part of the current quarter. These factors
more than offset the impact of market-related fibre cost increases
and inflation-driven cash conversion cost pressures in the current
period.
Pulp production was up 6% from the previous quarter, as NBSK
productivity in the current quarter was maximized to available
transportation. Concurrently, logistics-related downtime at Canfor
Pulp Product Inc.'s ("CPPI") Taylor Bleached Chemi-Thermo
Mechanical Pulp ("BCTMP") mill ("Taylor"), which commenced in the
first quarter of 2022 and continued throughout the second quarter,
reduced production by approximately 60,000 tonnes. In addition,
NBSK pulp production in the current period included the completion
in mid-April of CPPI's Northwood NBSK pulp mill's ("Northwood")
recovery boiler number one ("RB1") capital upgrade (approximately
10,000 tonnes) as well as a scheduled maintenance outage at
Northwood which commenced in June and was completed mid-July
(approximately 30,000 tonnes in the second quarter and a further
16,000 tonnes in July).
Looking ahead, global lumber market fundamentals are anticipated
to be relatively solid through the third quarter of 2022. New home
construction activity in North
America is projected to weaken in the wake of high mortgage
rates and decreasing housing affordability, particularly for
first-time homebuyers, while activity in the repair and remodeling
sector is estimated to be steady. Offshore lumber demand in
Asia is anticipated to face
continued downward pressure in the third quarter as high inventory
levels in the region continue to exceed consumption.
Results in the third quarter are anticipated to reflect the
continuation of reduced operating schedules across the Company's
Western Canadian sawmills, including two weeks of rotating downtime
in July and August, to help align production capacity with
transportation availability, market demand and sustainable timber
supply. The Company is forecast to use this downtime to complete
maintenance projects and other site activities to help mitigate the
impact on employees. These capacity reductions are anticipated to
result in an incremental impact to production of at least 275
million board feet. In addition, with the material reduction in
North American benchmark lumber prices, rising inflationary cost
pressures, ongoing transportation challenges and the significant
increase in BC stumpage rates effective July
1, 2022, the Company will continue to assess and adjust
operating rates in Western Canada
to align capacity with market demand through the balance of
2022.
European lumber pricing is anticipated to experience ongoing
pressure through the third quarter of 2022, driven principally by
weakness experienced in the North American region in the second
quarter, combined with the continued downward pressure in the
repair and remodeling segment in Europe. The Company's European lumber business
will take its traditional seasonal production downtime in the third
quarter of 2022, reducing European lumber production by
approximately 100 million board feet.
Global softwood kraft pulp markets are projected to remain solid
through the third quarter of 2022, reflecting both global pulp
production and supply constraints, as well as steady demand. High
yield markets are forecast to see slight improvements through the
third quarter of 2022, also tied to limited supply
availability.
Notwithstanding the modest improvement in BC's transportation
networks seen in the later part of the second quarter, results in
the third quarter are anticipated to reflect the continued impact
of and uncertainties associated with a constrained rail service
network and the related pressures on CPPI's operations and
shipments. Furthermore, it is projected that a restart of
Taylor will not be contemplated
until such time as there is a return to more normal transportation
service levels to all of CPPI's pulp and paper mills. CPPI will
continue to closely monitor the supply chain challenges and will
adjust future operating plans accordingly, through the balance of
2022.
In addition, pulp and paper segment results in the third quarter
of 2022 will reflect the impact of the continuation of Northwood's
scheduled maintenance outage into mid-July (approximately 16,000
tonnes), as well as a scheduled maintenance outage at CPPI's
Intercontinental NBSK pulp mill in the latter part of the third
quarter and into the fourth quarter, with a projected 12,000 tonnes
of reduced NBSK pulp production.
Additional Information and
Conference Call
A conference call to discuss the second quarter's financial and
operating results will be held on Friday,
July 29, 2022 at 8:00 AM Pacific
time. To participate in the call, in North America please dial Toll-Free
1-888-390-0546. For instant replay access until August 12, 2022, please dial 1-888-390-0541 and
enter participant pass code 049770#. 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 condensed consolidated interim financial statements:
(millions of Canadian
dollars)
|
|
Q2
|
|
Q1
|
|
YTD
|
|
Q2
|
|
YTD
|
|
2022
|
|
2022
|
|
2022
|
|
2021
|
|
2021
|
Reported operating
income
|
$
|
531.6
|
$
|
741.9
|
$
|
1,273.5
|
$
|
1,041.3
|
$
|
1,643.9
|
Inventory write-down
(recovery), net
|
$
|
0.5
|
$
|
(1.1)
|
$
|
(0.6)
|
$
|
-
|
$
|
(2.2)
|
Adjusted operating
income
|
$
|
532.1
|
$
|
740.8
|
$
|
1,272.9
|
$
|
1,041.3
|
$
|
1,641.7
|
Amortization
|
$
|
98.7
|
$
|
88.8
|
$
|
187.5
|
$
|
93.3
|
$
|
187.4
|
Adjusted operating
income before amortization
|
$
|
630.8
|
$
|
829.6
|
$
|
1,460.4
|
$
|
1,134.6
|
$
|
1,829.1
|
|
|
|
|
|
|
|
|
|
|
|
After-tax impact, net
of non-controlling interests
|
|
Q2
|
|
Q1
|
|
YTD
|
|
Q2
|
|
YTD
|
(millions of Canadian
dollars)
|
|
2022
|
|
2022
|
|
2022
|
|
2021
|
|
2021
|
Net income
|
$
|
373.8
|
$
|
534.0
|
$
|
907.8
|
$
|
726.9
|
$
|
1,154.7
|
Foreign exchange
(gain) loss on term debt
|
$
|
4.9
|
$
|
(3.0)
|
$
|
1.9
|
$
|
(5.7)
|
$
|
(8.3)
|
(Gain) loss on
derivative financial instruments
|
$
|
1.0
|
$
|
(2.0)
|
$
|
(1.0)
|
$
|
-
|
$
|
9.0
|
Adjusted net
income3
|
$
|
379.7
|
$
|
529.0
|
$
|
908.7
|
$
|
721.2
|
$
|
1,155.4
|
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, 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 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