VANCOUVER, BC, May 1, 2024
/CNW/ - Canfor Corporation ("The Company" or "Canfor") (TSX:
CFP) today reported its first quarter of 2024 results:
Overview
- Q1 2024 operating loss of $86
million; shareholder net loss of $65
million, or $0.54 per
share
- Sustained pressure on global lumber markets and pricing,
especially for Southern Yellow Pine ("SYP")
- Solid earnings from Europe; US
South results directly impacted by weak SYP lumber pricing; Western
Canadian results remained challenging despite uplift in
Western Spruce/Pine/Fir lumber
pricing
- Modest uptick in NBSK pulp unit sales realizations, 7% increase
in pulp production quarter-over-quarter
- Continued execution of the Company's US South growth strategy
with the announced agreement to acquire the El Dorado lumber manufacturing facility in
Arkansas, as well as plans to
optimize the Company's Alabama
operational footprint
- Ongoing constraints accessing economically viable fibre in
British Columbia impacting lumber
and pulp operating rates in the near-term and through the balance
of 2024
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
|
|
|
|
|
|
2024
|
|
2023
|
|
2023
|
Sales
|
$
|
1,382.7
|
$
|
1,282.9
|
$
|
1,385.4
|
Reported operating
income (loss) before amortization
|
$
|
19.8
|
$
|
(89.1)
|
$
|
(105.7)
|
Reported operating
loss
|
$
|
(85.8)
|
$
|
(191.3)
|
$
|
(208.5)
|
Adjusted operating loss
before amortization1
|
$
|
(10.4)
|
$
|
(130.2)
|
$
|
(43.6)
|
Adjusted operating
loss1
|
$
|
(116.0)
|
$
|
(232.4)
|
$
|
(146.4)
|
Net
loss2
|
$
|
(64.5)
|
$
|
(117.1)
|
$
|
(142.0)
|
Net loss per share,
basic and diluted2
|
$
|
(0.54)
|
$
|
(0.98)
|
$
|
(1.17)
|
Adjusted net
loss1, 2
|
$
|
(52.1)
|
$
|
(127.2)
|
$
|
(144.9)
|
Adjusted net loss per
share, basic and diluted1, 2
|
$
|
(0.44)
|
$
|
(1.06)
|
$
|
(1.20)
|
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
$85.8 million for the first quarter
of 2024, compared to an operating loss of $191.3 million in the fourth quarter of 2023.
After taking into consideration a net $30.2
million reversal of a previously recognized inventory
write-down, the Company's adjusted operating loss was $116.0 million for the first quarter of 2024,
compared to a similarly adjusted operating loss of $232.4 million for the fourth quarter of 2023.
These results largely reflected an improvement in the lumber
segment.
Commenting on the Company's first quarter
results, Canfor's President and Chief Executive Officer,
Don Kayne, said, "Although global
lumber markets remained under pressure in the first quarter,
especially Southern Yellow Pine, our global lumber footprint helped
mitigate some of these market-related pressures, as our European
operations delivered positive results and our Western Canadian
operations benefited from an uplift in Western Spruce/Pine/Fir lumber pricing. Going
forward, we anticipate the benefits of our global diversification
strategy to be further enhanced by our acquisition of the
El Dorado sawmill in Arkansas, as well as the optimization of our
Alabama facilities. In
British Columbia, the operating
conditions remain challenging, as we continue to face persistent
constraints associated with a lack of economically viable
fibre."
"For our pulp business" added Kayne, "generally
balanced global softwood pulp market conditions and steady pulp
production led to a modest uplift in our pulp business results
quarter-over-quarter. Our pulp operations, however, continue to
navigate a constrained fibre supply environment both in the short
and long-term."
First Quarter Lumber Segment
Highlights
For the lumber segment, the adjusted operating
loss was $87.3 million for the first
quarter of 2024, compared to the previous quarter's adjusted
operating loss of $192.4 million.
These results were primarily driven by a 12% uplift in the average
North American Western Spruce/Pine/Fir ("SPF") 2x4 #2&Btr price
and slightly higher market pricing in the United Kingdom ("UK"). In contrast, a
challenging pricing environment for SYP combined with modestly
higher unit manufacturing and product costs in that region,
tempered results from the Company's US South operations in the
current quarter.
North American lumber market conditions remained
under pressure through most of the current quarter. Despite strong
underlying fundamentals supported by low inventories of new homes
and favourable demographics, prospective homebuyers remained
cautious in the current period due to overarching affordability
concerns. These factors, combined with weather-related disruptions
early in the current quarter, led to a reduction in US residential
construction activity quarter-over-quarter. Steady activity,
however, in the repair and remodel sector, coupled with the impact
of reduced supply stemming from fibre and market-related
curtailments, most notably in Western
Canada, resulted in an uptick in most North American
benchmark prices in the latter part of the period.
US housing starts declined to 1,375,000 units in
January as severe winter weather disrupted homebuilding activity.
As conditions improved in February, housing starts posted
significant gains but dropped again in March, averaging 1,415,000
units on a seasonally adjusted basis for the first quarter of 2024,
down 5% from the previous quarter. This decline reflected a 1%
increase in single family homes and a 20% decrease in multi-family
starts, with the latter mainly driven by an accumulated surplus of
multi-family homes under construction, particularly in the US
South. In Canada, housing starts
averaged 244,000 units on a seasonally adjusted basis in the first
quarter of 2024, unchanged from the previous quarter.
Offshore lumber demand and pricing in
Asia remained relatively flat
quarter-over-quarter. In China,
despite previously introduced government stimulus measures and a
gradual draw-down of high inventory levels in the region, a
depressed real estate market and general economic uncertainty
continued to weigh on demand. In Japan, demand and pricing experienced some
improvement in the current quarter as inventories moved towards
more normalized levels and homebuilder incentives helped to ease
affordability pressures.
In Europe,
increased activity in the do-it-yourself sector, particularly in
the UK, partially alleviated the ongoing impact of low levels of
new home construction in that region. This improved demand was
combined with reduced lumber supply in the region and led to a
moderate improvement in the UK and overall European lumber pricing
quarter-over-quarter.
Lumber Segment Outlook
Looking ahead, North American lumber market
pricing is projected to experience some weakness through the second
quarter of 2024, particularly for SYP. Despite an anticipated
seasonal uptick in residential construction activity and the
benefit of concessions offered by new home builders, demand is
forecast to be challenged by ongoing affordability headwinds in the
near-term, especially in the multi-family segment. Demand in the
repair and remodeling sector, however, is projected to remain
steady through the second quarter of 2024. On the supply side,
ongoing fibre and market-related downtime, especially in
Western Canada, is anticipated to
continue to reduce inventories to more balanced levels.
Offshore lumber demand and pricing in
Asia is projected to show some
improvement in the second quarter of 2024 primarily due to the
benefit of various government stimulus measures, particularly in
Japan, and the ongoing reduction
of lumber inventories in that region.
In Europe,
lumber market pricing is forecast to improve slightly in the second
quarter of 2024, as steady activity in the do-it-yourself sector
and some persistent lumber supply constraints, tied in part to
reduced log availability and increasing log costs in the region,
are met with ongoing low levels of European residential
construction activity.
In the US South, subsequent to quarter-end, in
April 2024, the Company announced the
decision to permanently close its Jackson, Alabama, facility at the end of the
second quarter of 2024 and expand production at its Fulton, Alabama, facility through a second
shift. These steps, together with the previously announced
construction of a new, state-of-the art greenfield sawmill in
Axis, Alabama, are anticipated to
grow the Company's regional manufacturing platform by 100 million
board feet of annual production capacity and consolidate operations
at modern facilities that are well positioned to be competitive for
the long-term.
On the acquisition front, today the Company
announced that it has entered into an agreement with Resolute
Forest Products Inc., an affiliate of Domtar Corporation, to
purchase its El Dorado lumber
manufacturing facility located in Union
County, Arkansas, for US$73
million, including working capital. The facility, which is
close to key end-markets, produces dimensional lumber and specialty
wood products and is expected to increase Canfor's annual SYP
lumber capacity by 175 million board feet after US$50 million of planned upgrades. The
transaction is anticipated to close later in 2024 following the
completion of customary closing conditions.
In Western
Canada, there remains significant uncertainty with regards
to the availability of economically viable fibre in British Columbia ("BC"). The Company continues
to anticipate sustained log cost pressures and persistent
constraints accessing economically viable fibre in BC for its
sawmills, as well as a challenging fibre environment for CPPI's
pulp mills. With these ongoing fibre-related pressures, the Company
continues to evaluate its options and will adjust its operating
rates in BC to align with demand and economically available timber
supply in the near-term and through the balance of 2024.
First Quarter Pulp and Paper
Segment Highlights
For the pulp and paper segment, the adjusted
operating loss was $15.7 million for
the first quarter of 2024, compared to an adjusted operating loss
of $26.0 million for the fourth
quarter of 2023. These results were largely driven by a modest
uplift in Canfor Pulp Product Inc.'s ("CPPI") average Northern
Bleached Softwood Kraft ("NBSK") sales unit pulp realizations in
the current quarter combined with a 7% increase in pulp production
compared to the fourth quarter of 2023.
Global softwood pulp markets remained flat
through most of the current quarter, principally tied to generally
subdued demand, particularly from Asia, combined with stable pulp producer
inventory levels. Late in the current quarter, however, NBSK pulp
prices to China, the world's
largest pulp consumer, showed some upward momentum, largely driven
by global pulp supply concerns, tied in part, to Finland's national transport workers' strike.
As any related price changes will be realized in subsequent
quarters, for the current quarter overall, average US-dollar NBSK
pulp list prices to China were
US$745 per tonne, broadly in line
with the previous quarter.
Pulp and Paper Segment
Outlook
Looking forward, global softwood kraft pulp
market conditions are anticipated to strengthen somewhat through
the second quarter of 2024, largely in response to global pulp
supply disruptions, stemming from the transportation labour dispute
in Finland, as well as pulp
producer downtime.
In the second quarter of 2024, maintenance
outages are scheduled at CPPI's Intercontinental ("Intercon") pulp
mill and at its paper machine, which are projected to reduce NBSK
market pulp production by 5,000 tonnes and reduce paper production
by 5,000 tonnes.
Given the ongoing uncertainty with regards to the
availability of economically viable fibre in BC, and the continued
weakness in North American lumber markets, CPPI anticipates a
challenging fibre supply environment for its pulp mills (both for
sawmill residual chips and whole log chips), through the balance of
2024. CPPI will continue to evaluate its operating conditions and
will adjust operating rates at its pulp mills to align with
economically viable fibre supply, which will impact CPPI's
production, shipments and cost structure. These factors could also
affect CPPI's operating plan, liquidity, cash flows and the
valuation of long-lived assets.
Additional Information and
Conference Call
A conference call to discuss the first quarter's
financial and operating results will be held on Thursday, May 2, 2024, 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 16, 2024, please dial
Toll-Free 1-888-390-0541 and enter participant pass code
012200#.
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
|
|
|
|
|
|
2024
|
|
2023
|
|
2023
|
Reported operating
loss
|
$
|
(85.8)
|
$
|
(191.3)
|
$
|
(208.5)
|
Inventory write-down
(recovery), net
|
$
|
(30.2)
|
$
|
(41.1)
|
$
|
62.1
|
Adjusted operating
loss
|
$
|
(116.0)
|
$
|
(232.4)
|
$
|
(146.4)
|
Amortization
|
$
|
105.6
|
$
|
102.2
|
$
|
102.8
|
Adjusted operating loss
before amortization
|
$
|
(10.4)
|
$
|
(130.2)
|
$
|
(43.6)
|
After-tax impact, net
of non-controlling interests
|
|
|
|
|
|
Q1
|
|
Q4
|
|
Q1
|
(millions of Canadian
dollars)
|
|
|
|
|
|
2024
|
|
2023
|
|
2023
|
Net
loss3
|
$
|
(64.5)
|
$
|
(117.1)
|
$
|
(142.0)
|
Foreign exchange
(gain) loss on term debt
|
$
|
6.6
|
$
|
(5.3)
|
$
|
(0.4)
|
(Gain) loss on
derivative financial instruments
|
$
|
5.8
|
$
|
(4.8)
|
$
|
(2.5)
|
Adjusted net
loss3
|
$
|
(52.1)
|
$
|
(127.2)
|
$
|
(144.9)
|
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 global leader in the manufacturing
of high-value low-carbon forest products including dimension and
specialty lumber, engineered wood products, pulp and paper, wood
pellets and green energy. Proudly headquartered in Vancouver, British Columbia, Canfor produces
renewable products from sustainably managed forests, at more than
50 facilities across its diversified operating platform in
Canada, the United States and Europe. The Company has a 70% stake in Vida
AB, Sweden's largest privately
owned sawmill company and also owns a 54.8% interest in Canfor Pulp
Products Inc. Canfor shares are traded on The Toronto Stock
Exchange under the symbol CFP. For more information visit
canfor.com.
SOURCE Canfor Corp