VANCOUVER, BC, Oct. 27,
2022 /CNW/ - Canfor Corporation ("The Company" or
"Canfor") (TSX: CFP) today reported its third quarter of 2022
results:
Overview
- Q3 2022 reported operating income of $108.6 million; quarterly sales of $1.7 billion
- Downward pressure on global lumber market fundamentals and
pricing following highs earlier in the year
- Reduced Western Canadian operating schedules & European
seasonal downtime led to lower shipments
- Strong global pulp fundamentals & improved pulp production
following capital-related downtime
- Shareholder net income of $87.4
million, or $0.71 per
share
Financial Results
The following table summarizes selected financial information
for the Company for the comparative periods:
|
|
Q3
|
|
Q2
|
|
YTD
|
|
Q3
|
|
YTD
|
(millions of Canadian
dollars, except per share amounts)
|
|
2022
|
|
2022
|
|
2022
|
|
2021
|
|
2021
|
Sales
|
$
|
1,666.4
|
$
|
2,173.1
|
$
|
6,053.4
|
$
|
1,676.6
|
$
|
6,113.6
|
Reported operating
income before amortization
|
$
|
211.5
|
$
|
630.3
|
$
|
1,672.5
|
$
|
425.4
|
$
|
2,256.7
|
Reported operating
income
|
$
|
108.6
|
$
|
531.6
|
$
|
1,382.1
|
$
|
331.0
|
$
|
1,974.9
|
Adjusted operating
income before amortization1
|
$
|
300.0
|
$
|
630.8
|
$
|
1,760.4
|
$
|
425.1
|
$
|
2,254.2
|
Adjusted operating
income1
|
$
|
197.1
|
$
|
532.1
|
$
|
1,470.0
|
$
|
330.7
|
$
|
1,972.4
|
Net
income2
|
$
|
87.4
|
$
|
373.8
|
$
|
995.2
|
$
|
210.0
|
$
|
1,364.7
|
Net income per share,
basic and diluted2
|
$
|
0.71
|
$
|
3.02
|
$
|
8.05
|
$
|
1.68
|
$
|
10.91
|
Adjusted net
income1,2
|
$
|
98.5
|
$
|
379.7
|
$
|
1,007.2
|
$
|
209.0
|
$
|
1,364.4
|
Adjusted net income per
share, basic and diluted1,2
|
$
|
0.80
|
$
|
3.07
|
$
|
8.15
|
$
|
1.68
|
$
|
10.91
|
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 third quarter of 2022, the Company reported operating
income of $108.6 million, down
$423.0 million from the operating
income of $531.6 million reported for
the second quarter of 2022, largely reflecting a decline in lumber
segment earnings, slightly offset by improved pulp and paper
segment results.
Results in the current quarter include an $88.5 million net inventory write-down,
principally driven by the lumber segment, as well as a net duty
recovery of $97.6 million
(US$73.0 million) resulting from the
finalization of countervailing ("CVD") and anti-dumping duty
("ADD") rates applicable to the third period of review
("POR3").
Commenting on the Company's third quarter results, Canfor's
President and Chief Executive Officer, Don
Kayne, said, "As global lumber market conditions continued
to soften from the highs earlier in the year, our lumber business
delivered solid results in the quarter, largely reflecting the
benefit of our global diversification strategy. However, the steep
declines in global lumber pricing, combined with high log costs in
British Columbia ("BC"), led to
the difficult decision to extend reduced operating schedules at our
Western Canadian sawmills. For our pulp business, our focus on
enhancing operational performance and improving reliability while
managing persistent supply chain and fibre-related challenges
allowed us to realize high Northern Bleached Softwood Kraft
("NBSK") pulp list prices and recognize improved results in the
quarter. While we continue to monitor the current external
challenges facing our lumber and pulp businesses, including the
fibre situation in BC, we greatly appreciate our employees'
continued efforts in navigating through these difficult
conditions."
Reported results in the lumber segment decreased $450.5 million quarter-over-quarter principally
reflecting significant Western Spruce/Pine/Fire ("SPF") and
Southern Yellow Pine ("SYP") US-dollar benchmark pricing declines
in the current period, with the average North American Random
Lengths Western SPF 2x4 2&Btr price down US$286 per Mfbm, or 33%, and the average SYP East
2x6 #2 down US$97 per Mfbm, or 17%,
and notably lower market pricing in Europe. This downward pricing pressure was
coupled with market-related increases in BC log costs as well as
substantially lower production and shipment volumes at the
Company's Western Canadian and European lumber operations, which
contributed to a considerable uplift in unit manufacturing
costs.
In Western Canada, despite an
improvement in transportation networks through the current period,
reduced operating schedules across the Company's BC sawmills, which
commenced in the second quarter, continued well into the third
quarter. In addition, as the third quarter progressed, declining
lumber prices and high log costs led to market-driven curtailments
at most of the Company's BC sawmills late September. Combined,
these capacity reductions reduced production by approximately 200
million board feet during the period. For the Company's European
operations, reduced production in the current quarter was
attributable to regular summer downtime.
North American market fundamentals continued to trend downwards
throughout much of the current quarter, as rising interest rates
alongside high levels of inflation weighed on housing affordability
and led to an 11% decrease in US new home construction activity
during the period, particularly for single-family units. Despite
general economic uncertainty and declines in US housing starts,
demand in the North American repair and remodeling sector remained
strong throughout the quarter supported by lower-cost building
materials and an aged housing stock.
Offshore lumber demand and prices in Asia showed continued weakness in the third
quarter of 2022. In Japan and
Korea, reduced consumption was coupled with increased inventory
levels in those regions. In China,
a slight pick-up in activity was outweighed by the impacts of a
severe summer heatwave which caused factory closures and lowered
lumber consumption. In Western
Europe and Scandinavia, lumber demand and pricing declined
sharply as weakness in the "do-it-yourself" sector late in the
previous quarter persisted through the current period as
inflationary cost pressures and high energy costs reduced consumer
spending.
Results in the pulp and paper segment largely reflected
materially higher NBSK pulp unit sales realizations, and to a
lesser extent, a 2 cent, or 2% weaker
Canadian dollar.
Following the completion of capital-related downtime in the
first half of 2022, pulp production was up 4% from the previous
quarter, as NBSK pulp productivity steadily improved as the quarter
progressed. Consistent with the prior period, however, NBSK pulp
production in the current quarter continued to be limited 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 and third
quarters, reduced production by approximately 60,000 tonnes in the
current period. In addition, NBSK pulp production in the current
quarter included the completion in mid-July of CPPI's Northwood
NBSK pulp mill's ("Northwood") scheduled maintenance outage
(approximately 16,000 tonnes) as well as the commencement in
September of CPPI's Intercontinental NBSK pulp mill's ("Intercon")
planned maintenance downtime (approximately 6,000 tonnes in the
third quarter and a further 6,000 tonnes in October).
Looking ahead, global lumber market fundamentals are anticipated
to face significant downward pressure through the balance of 2022.
Decreasing housing affordability, tied to persistent inflation and
interest rates, is projected to continue to reduce new home
construction activity in North
America while the repair and remodeling sector is forecast
to experience some softness in the fourth quarter, albeit to a
lesser extent, driven principally by seasonal impacts. Offshore
lumber demand in Asia is estimated
to see ongoing weakness as high inventories in the region persist
through the balance of the year. European lumber pricing is
anticipated to continue to weaken through the fourth quarter,
largely driven by subdued activity in the repair and remodeling
segment in that region.
As a result of the challenging market conditions, results in the
fourth quarter are forecast to reflect the continuation of reduced
operating schedules across the Company's Western Canadian sawmills,
as well as some reduced shifts at the Company's European
operations, which, in the case of Europe, may be less than originally
anticipated. The Company will continue to closely monitor the
external challenges impacting the business, including global lumber
market conditions, supply chain networks, as well as the
availability of economically viable fibre in BC, and will adjust
operating rates accordingly through the balance of 2022.
Looking forward, global softwood pulp markets are projected to
soften somewhat through the fourth quarter of 2022, reflecting
tempered pulp demand, particularly from China.
Results in the fourth quarter are also anticipated to reflect
the continued uncertainties associated with lingering supply chain
challenges and the related pressures on CPPI's operations and
shipments. As previously disclosed, 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's results in the fourth quarter of 2022 will see the
continuation of Intercon's scheduled maintenance outage into
October, with an estimated 6,000 tonnes of reduced NBSK pulp
production. In addition, NBSK pulp production in the fourth quarter
will reflect a temporary curtailment at Intercon due to a lack of
available economic fibre (approximately 16,000 tonnes). The current
weakness in lumber markets may result in extended sawmill
curtailments in the BC Interior, with the risk that lower volumes
of sawmill residual chips available to pulp mills may cause further
downtime at CPPI's operations. CPPI will continue to closely
monitor the supply chain challenges as well as the availability of
economically viable chip supply, and will adjust future operating
plans accordingly, through the balance of 2022.
Additional Information and Conference Call
A conference call to discuss the third quarter's financial and
operating results will be held on Friday,
October 28, 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 November 11, 2022, please dial 1-888-390-0541 and
enter participant pass code 601480#. 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)
|
|
|
|
|
|
Q3
|
|
Q2
|
|
YTD
|
|
Q3
|
|
YTD
|
|
|
|
|
|
2022
|
|
2022
|
|
2022
|
|
2021
|
|
2021
|
Reported operating
income
|
$
|
108.6
|
$
|
531.6
|
$
|
1,382.1
|
$
|
331.0
|
$
|
1,974.9
|
Inventory write-down,
net
|
$
|
88.5
|
$
|
0.5
|
$
|
87.9
|
$
|
3.5
|
$
|
1.3
|
Restructuring, mill
closure and other items, net
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
(3.8)
|
$
|
(3.8)
|
Adjusted operating
income
|
$
|
197.1
|
$
|
532.1
|
$
|
1,470.0
|
$
|
330.7
|
$
|
1,972.4
|
Amortization
|
$
|
102.9
|
$
|
98.7
|
$
|
290.4
|
$
|
94.4
|
$
|
281.8
|
Adjusted operating
income before amortization
|
$
|
300.0
|
$
|
630.8
|
$
|
1,760.4
|
$
|
425.1
|
$
|
2,254.2
|
After-tax impact, net
of non-controlling interests
|
|
|
Q3
|
|
Q2
|
|
YTD
|
|
Q3
|
|
YTD
|
(millions of Canadian
dollars)
|
|
2022
|
|
2022
|
|
2022
|
|
2021
|
|
2021
|
Net
income
|
$
|
87.4
|
$
|
373.8
|
$
|
995.2
|
$
|
210.0
|
$
|
1,364.7
|
Foreign exchange
(gain) loss on term debt
|
$
|
10.6
|
$
|
4.9
|
$
|
12.5
|
$
|
2.6
|
$
|
(5.7)
|
(Gain) loss on
derivative financial instruments
|
$
|
0.5
|
$
|
1.0
|
$
|
(0.5)
|
$
|
(0.8)
|
$
|
8.2
|
Restructuring, mill
closure and other items, net
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
(2.8)
|
$
|
(2.8)
|
Adjusted net
income3
|
$
|
98.5
|
$
|
379.7
|
$
|
1,007.2
|
$
|
209.0
|
$
|
1,364.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 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