VANCOUVER, BC, Feb. 28,
2023 /CNW/ - Canfor Corporation ("The Company" or
"Canfor") (TSX: CFP) today reported its 2022 and fourth
quarter of 2022 results1:
Overview
- 2022 adjusted operating income of $1.3
billion; adjusted shareholder net income of $880 million, or $7.15 per share
- Q4 2022 adjusted operating loss of $164
million; adjusted shareholder net loss of $127 million or $1.04 per share
- Significant weakness in lumber market demand in Q4 2022 led to
a sharp deterioration in lumber pricing late in the year
- Q4 lumber production impacted by the continuation of reduced
operating schedules in Western
Canada; pulp production impacted by fibre shortages and
challenging winter weather conditions
- After year end, announced restructuring of lumber and pulp
operations in British Columbia to
better align manufacturing capacity with available long-term fibre
supply and create a stronger and more sustainable footprint
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)
|
|
2022
|
|
2022
|
|
2022
|
|
2021
|
|
2021
|
Sales
|
$
|
1,373.3
|
$
|
1,666.4
|
$
|
7,426.7
|
$
|
1,571.3
|
$
|
7,684.9
|
Reported operating
income (loss) before
amortization, asset write-downs and impairments
|
$
|
(62.6)
|
$
|
211.5
|
$
|
1,609.9
|
$
|
321.7
|
$
|
2,578.4
|
Reported operating
income (loss)
|
$
|
(308.0)
|
$
|
108.6
|
$
|
1,074.1
|
$
|
(66.8)
|
$
|
1,908.1
|
Adjusted operating
income (loss) before
amortization, asset write-downs and
impairments1
|
$
|
(57.0)
|
$
|
300.0
|
$
|
1,703.4
|
$
|
322.8
|
$
|
2,580.8
|
Adjusted operating
income (loss)1
|
$
|
(163.8)
|
$
|
197.1
|
$
|
1,306.2
|
$
|
227.8
|
$
|
2,204.0
|
Net income
(loss)2
|
$
|
(207.9)
|
$
|
87.4
|
$
|
787.3
|
$
|
(23.1)
|
$
|
1,341.6
|
Net income (loss) per
share, basic and diluted2
|
$
|
(1.70)
|
$
|
0.71
|
$
|
6.39
|
$
|
(0.19)
|
$
|
10.74
|
Adjusted net income
(loss)1,2
|
$
|
(126.8)
|
$
|
98.5
|
$
|
880.4
|
$
|
163.0
|
$
|
1,530.2
|
Adjusted net income
(loss) per share, basic and
diluted1,2
|
$
|
(1.04)
|
$
|
0.80
|
$
|
7.15
|
$
|
1.31
|
$
|
12.25
|
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.
|
2022 was another strong year for Canfor, with the strength in
global lumber market fundamentals experienced late in 2021
continuing well into the current year. Significant lumber demand
led by solid activity in both new home construction and the repair
and remodel segment, encountered tight supply due to supply chain
disruptions. The result was ongoing global pricing pressure and
high benchmark lumber prices through the first part of the year. As
the year progressed, rising interest rates and inflation put
significant downward pressure on housing affordability and global
lumber market demand, leading to a rapid decline in global lumber
market pricing in the latter part of the year. In response, the
Company implemented reduced operating schedules at its Western
Canadian operations. The Company's strong earnings, however,
reflect the continued benefit of its global diversification
strategy which helped to moderate these challenges in British Columbia ("BC").
Early in 2023, after an extensive analysis of its pulp mill
operating footprint and the long-term supply of economic residual
fibre, Canfor Pulp made the decision to permanently close the pulp
line at its Prince George Pulp and Paper Mill ("PG"). Similarly, in
order to create a more sustainable operating footprint in BC and to
better align manufacturing capacity with the available long-term
fibre supply, the Company made the difficult decision to
restructure its BC lumber operations by permanently closing its
Chetwynd sawmill and pellet plant
and temporarily closing its Houston sawmill for an extended period to
facilitate a major redevelopment on the site. The Company intends
to build a new, modern, globally competitive manufacturing facility
that employs state of the art technology to produce high value
products from the sustainable timber supply in that region. The
Company is currently undertaking an evaluation of the availability
of economic fibre and a thorough project financial analysis, and is
targeting a final investment decision by the end of the second
quarter of 2023.
Recognizing these permanent closures as well as the ongoing
challenges to the business posed by fibre availability and costs,
the Company recorded asset write-downs and impairments totaling
$138.6 million in its results for the
three and twelve months ended December 31,
2022.
Before taking account of adjusting items, largely comprised of
the aforementioned asset write-down and impairment charges, the
Company's operating income was $1,306.2
million for the current year (adjusted shareholder net
income per share of $7.15), down
$897.8 million compared to the
record-high adjusted operating earnings of $2,204.0 million for the prior year (adjusted
shareholder net income per share of $12.25). The Company reported operating income of
$1,074.1 million for 2022, versus
operating earnings of $1,908.1
million for 2021.
For the fourth quarter of 2022, the Company reported an
operating loss of $308.0 million.
After taking account of adjusting items, the Company's operating
loss for the fourth quarter of 2022 was $163.8 million compared to an adjusted operating
income of $197.1 million for the
previous quarter, largely reflecting a material decline in both the
lumber and pulp and paper segment results.
Commenting on the Company's 2022 and fourth quarter of 2022
results, Canfor's President and Chief Executive Officer,
Don Kayne, said, "After a strong
start to the year, unfavourable global lumber market conditions led
to sharp pricing declines and temporary capacity reductions across
our Western Canadian sawmills, which also disrupted the supply of
fibre to our pulp mills. As a result, our lumber and pulp business
both faced significant challenges in the fourth quarter which
directly impacted our quarterly results. Early in 2023, we made the
difficult but necessary decision to create a more sustainable
operating footprint in BC. Our goal is to match mill capacity with
the economically available fibre for harvest to enhance our ability
to compete and to operate throughout the market cycles. This is
what will ultimately create greater stability for our employees and
communities, while ensuring we can continue to provide the high
quality, low carbon products that are in demand by our customers
around the world. We sincerely regret the impact these decisions
have on our employees, their families, contractors, and the
businesses that support our operations and the local community. We
thank our employees for their hard work, resilience, and commitment
to safety as we work together to navigate this very challenging
environment."
Lumber Segment Highlights and Outlook
For the lumber segment, adjusted results decreased $295.6 million in the current quarter primarily
reflecting a challenging period for the Company's Western Canadian
operations. These results were principally driven by a significant
decline in global lumber market prices, with the average North
American Random Lengths Western Spruce/Pine/Fir ("SPF") 2x4
2&Btr price down US$170 per Mfbm,
or 29%, quarter-over-quarter, the average Southern Yellow Pine
("SYP") East 2x4 #2 down US$271 per
Mfbm, or 38%, and moderately lower market pricing in Europe. This material drop in global lumber
pricing was combined with a 17% decline in North American shipment
volumes and the continuation of production curtailments in
Western Canada, which lowered SPF
production by approximately 250 million board feet in the current
period. These factors were partially offset by the benefit of
higher production and shipments in Europe following the seasonal downtime taken
in the prior quarter.
North American lumber market conditions remained under pressure
through the fourth quarter of 2022, with supply continuing to
exceed demand. Persistent inflationary pressures alongside rising
interest rates continued to reduce housing affordability in the
current period, which lowered residential construction activity,
particularly for single-family units. Activity in the repair and
remodeling sector also trended downwards in the current quarter
principally driven by seasonal impacts, coupled with declining
existing home sales.
Offshore lumber demand and prices in Asia continued to be negatively impacted by
elevated global inventory levels combined with reduced consumption
in the fourth quarter of 2022, particularly in China as a result of COVID-19 related
lockdowns in that region through much of the current period. In
Western Europe and Scandinavia,
lumber demand and pricing declined due to an unseasonably high
inventory build and weakness in both the home building and
do-it-yourself sectors tied to high inflation and energy costs
which lowered consumer spending.
Looking ahead, global lumber market conditions are anticipated
to remain under pressure through the first quarter of 2023. High
inflation and interest rates are projected to continue to weigh on
housing affordability and slow down demand for new home
construction, especially in the single-family sector. On the other
hand, the repair and remodeling sector is anticipated to improve as
existing homeowners look to "fix-up" in lieu of "moving-up" in a
high interest rate environment. In the longer term, underlying
global lumber market fundamentals are projected to be solid,
principally reflecting strong demographic trends, consistent demand
driven by an aging housing stock and low inventories of new homes
available.
The weakness in offshore lumber demand in Asia that was experienced in the fourth
quarter of 2022 is forecast to continue through the first quarter
of 2023. However, this softness is anticipated to be mitigated in
part by the introduction of government incentive packages in key
Asian markets intended to revive economies in those regions. Lower
lumber demand is also anticipated in Europe, driven for the most part by reduced
activity in both the residential construction and do-it-yourself
sectors.
Pulp and Paper Segment Highlights and Outlook
Results for the pulp and paper segment in the current quarter
principally reflected modestly weaker global pulp market
conditions, combined with the impact of material reductions in
residual fibre supply and challenging winter weather conditions in
BC, significantly impacting Canfor Pulp Products Inc.'s ("CPPI")
operating performance, particularly at its Intercontinental
("Intercon") and Northwood Northern Bleached Softwood Kraft
("NBSK") ("Northwood") pulp mills. Pulp production in the current
period also reflected ongoing downtime at CPPI's Taylor Bleached
Chemi-Thermo Mechanical Pulp ("BCTMP") mill ("Taylor"), which
commenced in the first quarter of 2022 and continued through the
balance of the year. As a result of a reduction in the long-term
supply of fibre in the Peace region, CPPI does not see a path
forward to restarting the Taylor mill at this time and is exploring
alternative uses for the site.
Following the strong global pulp market conditions experienced
mid-year, market fundamentals came under modest pressure in the
current quarter, driven by a decline in demand and purchasing
activity, particularly from Asian markets, as well as an uptick in
global pulp market supply, primarily from Europe and South
America. These factors were combined with the sustained
effect of elevated global softwood pulp producer inventories which,
at the end of December 2022, remained
on the high end of the balanced range at 43 days of supply.
In recent weeks, global softwood kraft pulp market conditions
have experienced a modest uptick as unplanned global supply
outages, principally stemming from fibre-related downtime in
Western Canada, has more than
outweighed weak global macroeconomic conditions. Reflecting this
favourable momentum, CPPI announced a US$30 per tonne increase to its NBSK pulp list
price to China in February 2023 to US$970 per tonne. Looking forward, global
softwood kraft pulp markets are projected to remain relatively
stable through the balance of the first quarter of 2023, as
persistent high global pulp inventory levels and additional
hardwood pulp capacity predicted to come online in 2023, combine
with steady Chinese demand. Notwithstanding the projected increased
supply, global pulp pricing is anticipated to remain above historic
average price levels in the short-term.
Refer to the Company's annual Management's Discussion and
Analysis for further discussion on the Company's results for the
fourth quarter of 2022 on page 32.
Additional Information and Conference Call
A conference call to discuss the fourth quarter's financial and
operating results will be held on Wednesday,
March 1, 2023 at 7:00 AM Pacific
time. To participate in the call, please dial Toll-Free
1-888-390-0546. For instant replay access until March 15, 2023, please dial Toll-Free
1-888-390-0541 and enter participant pass code 110844#.
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)
|
|
2022
|
|
2022
|
|
2022
|
|
2021
|
|
2021
|
Reported operating
income (loss)
|
$
|
(308.0)
|
$
|
108.6
|
$
|
1,074.1
|
$
|
(66.8)
|
$
|
1,908.1
|
Asset write-downs and
impairments
|
$
|
138.6
|
$
|
-
|
$
|
138.6
|
$
|
293.5
|
$
|
293.5
|
Inventory write-down,
net
|
$
|
5.6
|
$
|
88.5
|
$
|
93.5
|
$
|
1.1
|
$
|
2.4
|
Adjusted operating
income (loss)3
|
$
|
(163.8)
|
$
|
197.1
|
$
|
1,306.2
|
$
|
227.8
|
$
|
2,204.0
|
Amortization
|
$
|
106.8
|
$
|
102.9
|
$
|
397.2
|
$
|
95.0
|
$
|
376.8
|
Adjusted operating
income (loss) before
amortization, asset write-downs and
impairments3
|
$
|
(57.0)
|
$
|
300.0
|
$
|
1,703.4
|
$
|
322.8
|
$
|
2,580.8
|
3 Effective
Q1 2022, adjusted operating income (loss) was no longer adjusted
for restructuring, mill closure and other items, net. Prior periods
have been restated to reflect this change ($11.5 million net
recovery in Q4 2021 and $15.3 million net recovery in YTD
2021).
|
After-tax impact, net
of non-controlling interests
|
|
Q4
|
|
Q3
|
|
YTD
|
|
Q4
|
|
YTD
|
(millions of Canadian
dollars)
|
|
2022
|
|
2022
|
|
2022
|
|
2021
|
|
2021
|
Net income
(loss)4
|
$
|
(207.9)
|
$
|
87.4
|
$
|
787.3
|
$
|
(23.1)
|
$
|
1,341.6
|
Foreign exchange
(gain) loss on term debt
|
$
|
(1.7)
|
$
|
10.6
|
$
|
10.8
|
$
|
0.2
|
$
|
(5.5)
|
(Gain) loss on
derivative financial instruments
|
$
|
(2.0)
|
$
|
0.5
|
$
|
(2.5)
|
$
|
3.0
|
$
|
11.2
|
Asset write-downs and
impairments
|
$
|
84.8
|
$
|
-
|
$
|
84.8
|
$
|
182.9
|
$
|
182.9
|
Adjusted net income
(loss)4,5
|
$
|
(126.8)
|
$
|
98.5
|
$
|
880.4
|
$
|
163.0
|
$
|
1,530.2
|
4
Attributable to equity shareholders of the Company.
|
5 Effective
Q1 2022, operating income (loss), net income (loss) and net income
(loss) per share were no longer adjusted for restructuring, mill
closure and other items, net. Prior periods have been restated to
reflect this change (favourable per share impact of $0.07 in Q4
2021 and $0.09 in YTD 2021).
|
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