VANCOUVER, BC, Oct. 22, 2020 /CNW/ - Canfor Pulp Products Inc.
("The Company" or "CPPI") (TSX: CFX) today reported its third
quarter 2020 results:
Overview
- Third quarter of 2020 reported operating loss of $28 million; net loss of $18 million, or $0.28 per share
- Strong balance sheet maintained, net debt to capitalization of
3.4% at September 30, 2020
Financial Results
The following table summarizes selected financial information
for CPPI for the comparative periods:
|
|
Q3
|
|
Q2
|
|
YTD
|
|
Q3
|
|
YTD
|
(millions of Canadian
dollars, except per share amounts)
|
|
2020
|
|
2020
|
|
2020
|
|
2019
|
|
2019
|
Sales
|
$
|
226.4
|
$
|
250.7
|
$
|
752.7
|
$
|
216.9
|
$
|
840.4
|
Reported operating
income (loss) before amortization
|
$
|
(8.7)
|
$
|
13.3
|
$
|
32.3
|
$
|
(20.3)
|
$
|
61.8
|
Reported operating
loss
|
$
|
(27.6)
|
$
|
(6.3)
|
$
|
(27.8)
|
$
|
(44.0)
|
$
|
(7.5)
|
Adjusted operating
income (loss) before amortization1
|
$
|
(11.7)
|
$
|
21.5
|
$
|
26.8
|
$
|
(20.3)
|
$
|
75.5
|
Adjusted operating
income (loss)1
|
$
|
(30.6)
|
$
|
1.9
|
$
|
(33.3)
|
$
|
(44.0)
|
$
|
6.2
|
Net loss
|
$
|
(18.1)
|
$
|
(1.1)
|
$
|
(12.2)
|
$
|
(32.4)
|
$
|
(11.0)
|
Net loss per share,
basic and diluted
|
$
|
(0.28)
|
$
|
(0.02)
|
$
|
(0.19)
|
$
|
(0.50)
|
$
|
(0.17)
|
1 Adjusted for inventory write-downs
and recoveries ($3.0 million net recovery in Q3 2020; $8.2 million
net write-down in Q2 2020).
|
The Company reported an operating loss of $27.6 million for the third quarter of 2020,
compared to an operating loss of $6.3
million reported for the second quarter of 2020. After
adjusting for a $3.0 million recovery
in its inventory write-down provision, the Company's operating loss
was $30.6 million for the third
quarter of 2020, $32.5 million
unfavourable compared to similarly adjusted results for the second
quarter of 2020.
The Company's operating results for the third quarter of 2020
reflected weak global pulp market conditions as well as significant
fibre-related and previously deferred scheduled maintenance
downtime, stemming from the ongoing impact of the coronavirus
("COVID-19") outbreak, combined with a 3
cent, or 4%, stronger Canadian dollar. The significant
effect of COVID-19 on lumber sawmill operating rates in the
British Columbia ("BC") Interior
in the previous quarter materially impacted residual fibre supply
to the Company's Prince George
("PG") based operations heading into the current quarter, resulting
in a four-week curtailment at the Company's Intercontinental
Northern Bleached Softwood Kraft ("NBSK") pulp mill and PG
NBSK pulp and paper mill in July.
Global pulp market conditions were weak during the current
quarter, with the ongoing sharp decline in demand for printing and
writing papers offsetting improved demand for tissue products.
Global softwood pulp producer inventories at the end of
August 2020 remained significantly
above the balanced range at 43 days of supply, an increase of one
day supply compared to June 2020.
NBSK pulp list prices to China averaged US$572 per tonne, broadly in line with the prior
quarter, while average US-dollar NBSK pulp list prices to
North America at US$1,133 per tonne (before discounts, which were
largely unchanged quarter-over-quarter), were down US$25 per tonne or 2%, reflecting softer demand
in that region. As a result of the weak markets, the 4% stronger
Canadian dollar and the timing of shipments (versus orders) in the
previous quarter, the Company's NBSK pulp unit sales realizations
experienced a moderate decrease compared to the prior quarter.
Bleached Chemi-Thermo Mechanical Pulp ("BCTMP") demand fell
sharply during the third quarter with average BCTMP unit sales
realizations well down compared to the prior quarter, reflecting a
significant decline in average US-dollar prices combined with the
stronger Canadian dollar.
Energy revenues were broadly in line with the prior quarter, as
decreased energy generation due to reduced production, was offset
by slightly higher energy prices.
Pulp production was 227,000 tonnes for the third quarter of
2020, down 33,000 tonnes, or 13%, from the previous quarter,
primarily reflecting the quarter-over-quarter impact of downtime.
In the current quarter, decreased operating days primarily
reflected the aforementioned curtailment, which reduced pulp
production by 38,000 tonnes. This was combined with a scheduled
maintenance outage at the Company's Taylor BCTMP mill, which
reduced pulp production by 10,000 tonnes, and, to a lesser extent,
several operational issues at the Company's PG pulp mill. In
September, the Company's Northwood NBSK pulp mill ("Northwood")
commenced its scheduled maintenance outage, which was completed on
one production line in early October; this outage reduced pulp
production by 20,000 tonnes in the current quarter and by a further
15,000 tonnes in October 2020. In the
second quarter of 2020, the Company's pulp production was impacted
by a three-week COVID-19 related curtailment at Northwood, which
reduced pulp production by 35,000 tonnes.
During Northwood's scheduled outage, the mill's recovery boiler
number one ("RB1") was assessed by Management to be in stable
condition. Regarding the mill's recovery boiler number five
("RB5"), the previously announced capital upgrades to the upper
furnace are ongoing and progressing well. In mid-October,
Management made the decision to extend the outage on RB5 to enable
the replacement of the lower furnace, in order to ensure the safe
and reliable operation of the boiler. The estimated capital cost of
the lower furnace upgrade is $30
million, with the work anticipated to take between 70-80
days during the fourth quarter on one production line, which will
reduce NBSK pulp production by 60,000 to 70,000 tonnes. This lower
furnace replacement, in conjunction with the upper furnace
upgrades, is projected to ensure RB5's continued operation for
another 15 to 20 years. In light of the assessments made by
Management with regards to RB1 and RB5, the previously considered
option of a new "super" recovery boiler ("RB6"), at an estimated
cost of $400 million, will now not be
required.
Pulp shipments were in line with the previous quarter, as the
13% decrease in pulp production was offset by a drawdown of
inventory in the current quarter during the downtime.
Pulp unit manufacturing costs were moderately higher than the
prior quarter primarily reflecting reduced production in the
current quarter. Fibre costs showed a slight decline over the same
period, largely driven by lower market-based prices for sawmill
residual chips (linked to Canadian dollar NBSK pulp sales
realizations) in the current quarter.
Operating income in the Company's paper segment was $5.0 million, down $2.4
million from the previous quarter, principally due to
reduced paper production and shipments as a result of the
aforementioned curtailment. This was offset in part by slightly
higher paper unit sales realizations and marginally lower paper
unit manufacturing costs in the current quarter. The latter was due
to moderately lower slush pulp costs largely driven by decreased
Canadian dollar NBSK pulp unit sales realizations.
Looking forward, the Company anticipates global softwood pulp
demand to show a slight improvement in the fourth quarter of 2020,
as markets continue to recover from the economic impact of COVID-19
and elevated inventory levels slowly begin to normalize following
the seasonally slower summer months. The Company's results in the
fourth quarter of 2020 will reflect the continuation of Northwood's
scheduled maintenance into early October, as well as the
aforementioned capital-related outage on one production line at
Northwood (with the second production line continuing to operate
over this period), combined with higher associated maintenance
costs and lower shipment volumes.
Bleached kraft paper markets are anticipated to soften somewhat
through the balance of 2020, particularly in North America, following seasonally higher
summer demand. Offshore bleached kraft paper markets are
anticipated to be relatively stable over the fourth quarter of
2020.
Commenting on the Company's third quarter results, CPPI's Chief
Executive Officer, Don Kayne said,
"We are extremely proud of the exceptional efforts of our teams to
execute on our strategy to ensure a safe work environment,
including a strong focus on COVID-19 safety procedures and
protocols. Our pulp business continues to be challenged with global
oversupply of product and tepid demand, but market conditions
appear to be slowly improving, with various market price forecasts
for 2021 guiding to a modest recovery of prices."
Additional Information and Conference Call
A
conference call to discuss the third quarter's financial and
operating results will be held on Friday,
October 23, 2020 at 8:00 AM Pacific
time. To participate in the call, please dial Toll-Free
1-888-390-0546. For instant replay access until November 6, 2020, please dial Toll-Free
1-888-390-0541 and enter participant pass code 851086#. 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 (Loss) before Amortization and Adjusted
Operating Income (Loss) are not generally accepted earnings
measures and should not be considered as an alternative to net
income (loss) 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 (Loss) reported in
accordance with IFRS to Operating Income (Loss) before Amortization
and to Adjusted Operating Income (Loss).
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.
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") 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 ("NBSK") Pulp and 140,000 tonnes
of kraft paper, as well as one mill in Taylor, BC with an annual production capacity
of 230,000 tonnes of Bleached Chemi-Thermo Mechanical Pulp
("BCTMP"). Canfor Pulp is the largest North American and one of the
largest global producers of market northern softwood kraft pulp.
CPPI shares are traded on the Toronto Stock Exchange under the
symbol CFX. For more information visit canfor.com.
SOURCE Canfor Pulp Products Inc.