VANCOUVER, BC, July 27, 2023 /CNW/ - Canfor Pulp Products Inc.
("The Company" or "CPPI") (TSX: CFX) today reported its second
quarter of 2023 results1:
Overview
- Q2 2023 reported operating loss of $38
million; net loss of $28
million, or $0.44 per
share
- Significant deterioration in global pulp market fundamentals
throughout the quarter driven by record high pulp producer
inventory levels and weak global pulp demand
- Completed closure of pulp line at Prince George Pulp and Paper
mill
- Subsequent to quarter-end, a labour dispute at British
Columbian ports resulted in transportation bottlenecks and a short
curtailment at the Company's Northwood NBSK pulp mill
Financial Results
The following table summarizes selected financial information
for CPPI for the comparative periods:
|
|
Q2
|
|
Q1
|
|
YTD
|
|
Q2
|
|
YTD
|
(millions of Canadian
dollars, except per share amounts)
|
|
2023
|
|
2023
|
|
2023
|
|
2022
|
|
2022
|
Sales
|
$
|
249.5
|
$
|
243.3
|
$
|
492.8
|
$
|
288.9
|
$
|
509.2
|
Reported operating
income (loss) before amortization
|
$
|
(15.3)
|
$
|
(0.6)
|
$
|
(15.9)
|
$
|
15.7
|
$
|
9.8
|
Reported operating
loss
|
$
|
(37.9)
|
$
|
(25.2)
|
$
|
(63.1)
|
$
|
(8.1)
|
$
|
(34.1)
|
Adjusted operating
income (loss) before amortization
|
$
|
(8.4)
|
$
|
3.0
|
$
|
(5.4)
|
$
|
16.2
|
$
|
9.2
|
Adjusted operating
loss1
|
$
|
(31.0)
|
$
|
(21.6)
|
$
|
(52.6)
|
$
|
(7.6)
|
$
|
(34.7)
|
Net loss
|
$
|
(28.4)
|
$
|
(18.8)
|
$
|
(47.2)
|
$
|
(5.7)
|
$
|
(25.6)
|
Net loss per share,
basic and diluted
|
$
|
(0.44)
|
$
|
(0.29)
|
$
|
(0.72)
|
$
|
(0.09)
|
$
|
(0.39)
|
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.
|
The Company reported an operating loss of $37.9 million for the second quarter of 2023,
compared to an operating loss of $25.2
million for the first quarter of 2023. After taking into
consideration a net $6.9 million
inventory write-down in the current period, the Company's adjusted
operating loss was $31.0 million for
the second quarter of 2023, compared to an adjusted operating loss
of $21.6 million for the first
quarter of 2023. These results, for the most part, reflect the
impact of substantial global pulp pricing declines in the current
quarter driven by elevated global market pulp producer inventory
levels and weak global softwood pulp demand.
In January 2023, the Company
announced the decision to restructure its operating footprint to
align its manufacturing capacity with the long-term supply of
economic residual fibre and, as a result, in April 2023, the Company wound down and
permanently closed the pulp line at its Prince George ("PG") Northern Bleached
Softwood Kraft ("NBSK") Pulp and Paper mill. In connection with
this closure, the Company's Intercontinental NBSK pulp mill
("Intercon") was successfully converted to provide slush pulp to
its specialty paper facility. The combined impact of these
operating structure changes is a reduction of approximately 280,000
tonnes of market kraft pulp production annually.
Commenting on the Company's second quarter of 2023 results,
CPPI's President and Chief Executive Officer, Kevin Edgson, said, "Following our difficult
decision to permanently close the pulp line at the Prince George
Pulp and Paper mill, we had a smooth and efficient wind down of the
pulp line and an effective transition of slush pulp supply to our
paper machine. We want to thank our employees for their unwavering
commitment to safety along with their determination, dedication,
and resilience to continue to strive for improved operating
performance and reliability. Financially, this was a challenging
quarter for the pulp business as declining global pulp market
conditions weighed heavily on results. While we continue to
navigate the current external challenges facing our pulp business,
including the ongoing weak global pulp market fundamentals, we
greatly appreciate our employees' continued efforts in navigating
through these difficult conditions."
Global softwood pulp market fundamentals and pricing experienced
considerable pressure during the second quarter of 2023 as tepid
global demand was combined with rising global softwood pulp
producer inventory levels. As a result, NBSK US-dollar list
prices to China dropped sharply
throughout the quarter to end June at a low of US$648 per tonne. For the current quarter
overall, US-dollar NBSK pulp list prices to China averaged US$668 per tonne, down US$223 per tonne, or 25%, from the previous
quarter. Prices to other global regions experienced less pronounced
declines in the current period, with the average US-dollar NBSK
pulp list price to North America
at US$1,510 per tonne (before
discounts), down US$165 per tonne, or
10%, from the prior quarter. Global softwood pulp producer
inventories climbed substantially throughout the current quarter
and, at the end of May 2023 were
significantly above the balanced range at 54 days of supply, an
increase of five days from March
2023. (Market conditions are generally considered balanced
when inventories are within a normal range of 32-43 days of
supply).
Pulp production was down 17% from the previous quarter, mainly
due to the aforementioned operating platform changes, and, to a
lesser extent, operational challenges at the Company's Northwood
NBSK pulp mill ("Northwood") in the current period.
Operating income in the Company's paper segment was $0.7 million, down $2.6
million from the previous quarter, as a reduction in slush
pulp costs, linked to lower Canadian dollar NBSK pulp market
prices, was more than outweighed by a decrease in paper production
and shipments as a result of a scheduled maintenance outage
completed in the current period, as well as higher energy costs
quarter-over-quarter.
Looking forward, global softwood kraft pulp markets are
anticipated to remain challenging through the third quarter of
2023, as record high global pulp producer inventory levels are
projected to continue to be met with weak global pulp demand,
particularly for paper and writing grades. In addition, the
traditionally slower summer months are anticipated to further
soften global pulp demand, particularly in the short-term. The
Company will continue to monitor the challenging market conditions
and will adjust operating rates, if appropriate, through the
balance of 2023.
The labour dispute at the Ports of Vancouver and Prince
Rupert that commenced on July 1,
2023, put pressure on a constrained logistics network in
British Columbia. As a direct
result, with pulp mill inventories at capacity, the Company
curtailed its Northwood pulp mill in July for approximately one
week, with an estimated 10,000 tonnes of reduced NBSK pulp
production.
Results in the third quarter of 2023 are also forecast to
reflect a scheduled maintenance outage at Northwood in September,
with a projected 25,000 tonnes of reduced NBSK pulp production, as
well as higher associated maintenance costs and lower projected
shipment volume. As part of this outage, the Company will complete
an inspection of its assets at this facility, including the two
recovery boilers, with the intention of formulating a re-investment
plan for Northwood's recovery boiler number one ("RB1"), as well as
the facility as a whole, that is focused on optimizing this mill
for the long-term.
Bleached kraft paper markets are anticipated to weaken through
the third quarter of 2023, particularly in the North American
markets, as tepid demand is combined with above-average paper
inventory levels.
Additional Information and Conference Call
A conference call to discuss the second quarter's financial and
operating results will be held on Friday,
July 28, 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 August 11, 2023, please dial Toll-Free
1-888-390-0541 and enter participant pass code 989608#. 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 news
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:
|
|
Q2
|
|
Q1
|
|
YTD
|
|
Q2
|
|
YTD
|
(millions of Canadian
dollars)
|
|
2023
|
|
2023
|
|
2023
|
|
2022
|
|
2022
|
Reported operating
loss
|
$
|
(37.9)
|
$
|
(25.2)
|
$
|
(63.1)
|
$
|
(8.1)
|
$
|
(34.1)
|
Inventory write-down (recovery), net
|
$
|
6.9
|
$
|
3.6
|
$
|
10.5
|
$
|
0.5
|
$
|
(0.6)
|
Adjusted operating
loss
|
$
|
(31.0)
|
$
|
(21.6)
|
$
|
(52.6)
|
$
|
(7.6)
|
$
|
(34.7)
|
Amortization
|
$
|
22.6
|
$
|
24.6
|
$
|
47.2
|
$
|
23.8
|
$
|
43.9
|
Adjusted operating
income (loss) before amortization
|
$
|
(8.4)
|
$
|
3.0
|
$
|
(5.4)
|
$
|
16.2
|
$
|
9.2
|
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.
About Canfor Pulp Products Inc.
Canfor Pulp
Products Inc. ("Canfor Pulp" or "CPPI") is a leading global
supplier of pulp and paper products with operations in the central
interior of British Columbia
("BC"). Canfor Pulp owns and operates two mills in Prince George, BC with a total capacity of
780,000 tonnes of Premium Reinforcing Northern Bleached Softwood
Kraft ("NBSK") Pulp and 140,000 tonnes of kraft paper. CPPI shares
are traded on the Toronto Stock Exchange under the symbol CFX. For
more information visit canfor.com.
SOURCE Canfor Pulp Products Inc.