VANCOUVER, July 25, 2019 /CNW/ - Canfor Pulp Products
Inc. ("CPPI") (TSX: CFX) today reported second quarter 2019 results
and its quarterly dividend:
Overview
- Second quarter of 2019 reported operating income of
$18 million
- Operating income of $32 million
after adjusting for inventory write-downs
- Net income of $11 million, or
$0.16 per share
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)
|
|
2019
|
|
2019
|
|
2019
|
|
2018
|
|
2018
|
Sales
|
$
|
319.5
|
$
|
304.0
|
$
|
623.5
|
$
|
396.4
|
$
|
756.1
|
Reported operating
income before amortization
|
$
|
41.7
|
$
|
40.4
|
$
|
82.1
|
$
|
105.1
|
$
|
209.4
|
Reported operating
income
|
$
|
18.4
|
$
|
18.1
|
$
|
36.5
|
$
|
85.4
|
$
|
170.5
|
Adjusted operating
income before amortization1
|
$
|
55.1
|
$
|
40.4
|
$
|
95.5
|
$
|
105.1
|
$
|
209.4
|
Adjusted operating
income1
|
$
|
31.8
|
$
|
18.1
|
$
|
49.9
|
$
|
85.4
|
$
|
170.5
|
Net income
|
$
|
10.6
|
$
|
10.8
|
$
|
21.4
|
$
|
63.0
|
$
|
127.3
|
Net income per share,
basic and diluted
|
$
|
0.16
|
$
|
0.17
|
$
|
0.33
|
$
|
0.97
|
$
|
1.95
|
Results for 2019
include the adoption of IFRS 16 Leases, from January 1,
2019, on a prospective basis. Comparative periods have not been
restated.
|
1 Adjusted for inventory write-down
(expense of $13.4 million in the second quarter of
2019).
|
The Company reported operating income of $18.4 million for the second quarter of 2019, up
$0.3 million from the first quarter
of 2019. Reported results for the second quarter of 2019 included a
$13.4 million finished pulp and raw
material inventory write-down at period end. After adjusting for
this, the Company's operating income was $31.8 million for the second quarter of 2019, up
$13.7 million from the previous
quarter.
The Company's operating results reflected a solid operating
performance at the Company's pulp and paper mills, which more than
offset the effects of pricing declines due to continued elevated
global market pulp inventory levels and weaker demand, particularly
in China and Europe.
After showing a modest recovery in March, Northern Bleached
Softwood Kraft ("NBSK") pulp prices to China, the world's largest pulp consumer, fell
sharply, declining US$130 per tonne,
or 18%, to end the quarter at US$600
per tonne. The average US-dollar NBSK pulp list price to
China for the second quarter of
2019 was US$653 per tonne, down
US$57 per tonne, or 8%, from the
previous quarter. Prices to other global regions, including
North America and Europe, also came under significant pressure
as the quarter progressed, but quarter-over-quarter showed more
modest declines. Notwithstanding the significant decline in global
pulp list prices, the Company's average NBSK pulp unit sales
realizations showed a more moderate decrease compared to the
previous quarter, primarily reflecting the Company's geographic
sales mix and the timing of shipments (versus orders).
Energy revenues increased in the current quarter as seasonally
lower energy prices were more than offset by increased power
generation, driven by improved productivity and a full quarter with
Northwood's new Turbo Generator Condensing turbine in
operation.
Pulp production was 300,000 tonnes, up 26,000 tonnes, or 9%,
from the previous quarter reflecting improved operating rates at
all pulp mills throughout most of the current quarter. During the
second quarter, the Company completed scheduled maintenance outages
at its Intercontinental NBSK pulp and Taylor Bleached Chemi-Thermo
Mechanical Pulp ("BCTMP") mills, which reduced pulp production by
11,000 tonnes and 6,000 tonnes, respectively. Pulp shipments were
up 29,000 tonnes, or 11%, from the previous quarter reflecting the
increase in pulp production.
Pulp unit manufacturing costs were moderately lower than the
previous quarter, principally reflecting improved productivity and
seasonally lower energy usage. Fibre costs showed a modest
decline, with lower market-based prices for sawmill residual chips
(linked to Canadian dollar NBSK pulp sales realizations) offsetting
increased seasonal pricing adjustments and a higher proportion of
higher-cost whole log chips. The latter reflected the impact of
curtailments on the supply of sawmill residual chips, which will
continue into the third quarter.
Operating income in the Company's paper segment was $8.1 million, up $2.2
million from the first quarter of 2019, reflecting both
lower slush pulp costs, linked to lower Canadian dollar NBSK pulp
prices, and a solid operating performance.
Global softwood pulp markets are projected to remain challenging
through the third quarter of 2019 given the current oversupply in
global pulp markets and typically seasonally slower demand in the
summer months. Reflecting the difficult market conditions, in
combination with fibre supply constraints and higher fibre costs
resulting from recent sawmill curtailments, the Company is taking
phased summer curtailments at its Intercontinental and Northwood
NBSK pulp mills in Prince George, British
Columbia ("BC"), as well as at its BCTMP mill in
Taylor, BC. In addition, the
Company announced today that it will be extending the curtailment
at its BCTMP mill by a further five weeks to September 9, 2019. Combined, the summer
curtailments will reduce third quarter pulp production by an
estimated 75,000 tonnes of NBSK pulp and 50,000 tonnes of BCTMP,
respectively. Maintenance outages are also scheduled at the Prince
George NBSK pulp mill and at the Company's paper mill in
September 2019, with a projected
6,000 tonnes of reduced NBSK pulp production and 4,000 tonnes of
reduced paper production, respectively.
Towards the end of 2019 and into 2020, global inventory levels
are forecast to move towards a more balanced range reflecting a
gradual drawdown of inventory that will include the anticipated
impact of the conversion to dissolving pulp of two large NBSK pulp
mills outside of North America by
the end of 2019, as well as production curtailments. Given the
impacts of recently announced sawmill curtailments and closures in
the BC Interior, fibre costs are projected to remain under pressure
as a result of an increased proportion of higher-cost whole log
chips, which are currently in tight supply. Bleached kraft paper
demand is anticipated to decline slightly through the balance of
the year.
Commenting on the Company's second quarter of 2019 results and
current market conditions, CPPI's Chief Executive Officer,
Don Kayne said, "The second quarter
saw an improved operational performance at all of our pulp mills,
and strong collaboration across our various business areas as we
navigated the various challenges presented by sawmill curtailments
in the period. As a result of our planned summer market and
fibre-related downtime, we will be well placed to run at full
capacity through the fall and winter, when we anticipate market
conditions and prices will be improved."
On July 25, 2019, the Board of
Directors declared a quarterly dividend of $0.0625 per share, payable on August 14, 2019 to the shareholders of record on
August 7, 2019.
Additional Information and Conference Call
A
conference call to discuss the second quarter's financial and
operating results will be held on Friday,
July 26, 2019 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 9, 2019, please dial Toll-Free
1-888-390-0541 and enter participant pass code 728808#. 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 Measures and Forward Looking
Statements
Operating Income before Amortization and Adjusted
Operating Income are not generally accepted earnings measures and
should not be considered as an alternative to net income or cash
flows as determined in accordance with IFRS. Refer to the Company's
Annual Management's Discussion and Analysis for a reconciliation of
Operating Income reported in accordance with IFRS to Operating
Income before Amortization and to Adjusted Operating
Income.
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
the Company assumes no obligation to update such information to
reflect later events or developments, except as required by
law.
CPPI is a leading global supplier of pulp and paper products
with operations in the central interior of British Columbia ("BC") employing
approximately 1,300 people throughout the organization.
Canfor Pulp owns and operates three mills in Prince George, BC with a total capacity of 1.1
million tonnes of Premium Reinforcing Northern Bleached Softwood
Kraft Pulp and 140,000 tonnes of kraft paper, as well as one mill
in Taylor, BC with an annual
production capacity of 220,000 tonnes of Bleached Chemi-Thermo
Mechanical Pulp ("BCTMP"). Canfor Pulp is the largest North
American, and one of the largest global producers of market NBSK
pulp. CPPI shares are traded on the Toronto Stock Exchange
under the symbol CFX.
SOURCE Canfor Pulp Products Inc.