VANCOUVER, BC, May 3, 2022
/CNW/ - Canfor Pulp Products Inc. ("The Company" or "CPPI")
(TSX: CFX) today reported its first quarter of 2022 results:
Overview
- Q1 2022 reported operating loss of $26
million; net loss of $20
million, or $0.31 per
share
- Notable uptick in global US-dollar pulp list prices in Q1;
ongoing global supply chain challenges resulting in majority of
price gains being realized in Q2 and Q3
- Lower furnace rebuild of recovery boiler number one ("RB1")
completed mid-April; focused on optimizing production performance
going-forward
- Together with Canfor Corporation, announced the implementation
of a comprehensive plan to achieve net-zero carbon emissions by
2050
- Available liquidity of $111
million at March 31, 2022
Financial Results
The following table summarizes selected financial information
for CPPI for the comparative periods:
|
|
|
|
|
|
|
Q1
|
|
Q4
|
|
Q1
|
(millions of Canadian
dollars, except per share amounts)
|
|
|
|
|
|
|
2022
|
|
2021
|
|
2021
|
Sales
|
|
$
|
219.7
|
$
|
249.3
|
$
|
262.4
|
Reported operating
income (loss) before amortization and impairment
|
|
$
|
(5.9)
|
$
|
(19.6)
|
$
|
25.7
|
Reported operating
income (loss)
|
|
$
|
(26.0)
|
$
|
(137.2)
|
$
|
4.9
|
Adjusted operating
income (loss) before amortization and
impairment1
|
|
$
|
(7.0)
|
$
|
(18.5)
|
$
|
23.5
|
Adjusted operating
income (loss)1
|
|
$
|
(27.1)
|
$
|
(41.1)
|
$
|
2.7
|
Net income
(loss)
|
|
$
|
(19.9)
|
$
|
(101.1)
|
$
|
8.4
|
Net income (loss) per
share, basic and diluted
|
|
$
|
(0.31)
|
$
|
(1.55)
|
$
|
0.13
|
Adjusted net income
(loss)1
|
|
$
|
(19.9)
|
$
|
(31.7)
|
$
|
8.4
|
Adjusted net income
(loss) per share, basic and diluted1
|
|
$
|
(0.31)
|
$
|
(0.49)
|
$
|
0.13
|
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 $26.0 million for the first quarter of 2022,
compared to an operating loss of $137.2
million for the fourth quarter of 2021. After adjusting for
a $1.1 million recovery in its
inventory write-down provision in the current period, the Company's
operating loss was $27.1 million for
the first quarter of 2022, a $14.0
million improvement compared to a similarly adjusted
operating loss for the fourth quarter of 2021 of $41.1 million.
On April 11, 2022, Kevin Edgson joined CPPI as President and Chief
Executive Officer. Commenting on the Company's first quarter's
results, Kevin said, "This was another difficult quarter for Canfor
Pulp, as the ongoing global supply chain crisis continued to impact
not only our operations and shipments, but our ability to realize
on a sharp increase in NBSK pulp list prices. Despite these
challenges and operational upsets, we continued to preserve our
strong cash position. I am working closely with CPPI's leadership
team to begin the process of undertaking a comprehensive business
review and will be developing a plan to improve operational
reliability and optimize fibre supply. In the coming months, with
the Northwood pulp mill recovering well after its RB1
capital-upgrade, we are focused on getting our production
performance back on track."
The Company's operating results in the current period
principally reflected supply-driven increases in Northern Bleached
Softwood Kraft ("NBSK") pulp US-dollar prices that were
significantly moderated by the ongoing impacts of global supply
chain challenges and transportation disruptions in British Columbia ("BC") on the Company's
operations and shipments. As a result, the Company's NBSK pulp and
Bleached Chemi-Thermo Mechanical Pulp ("BCTMP") unit sales
realizations were broadly in line with the previous quarter. In
addition, current quarter results included the impact of
capital-related downtime at the Company's Northwood NBSK pulp mill
("Northwood") related to the rebuild of the lower furnace of RB1.
The lower furnace replacement was completed mid-April, with a total
capital cost of approximately $30.0
million and total reduction in NBSK pulp production of
90,000 tonnes (10,000 tonnes in the fourth quarter of 2021, 70,000
tonnes in the current quarter and a further 10,000 tonnes in
April 2022).
Global pulp markets tightened significantly during the first
quarter of 2022, principally driven by the ongoing global
transportation challenges and combined with unplanned pulp supply
disruptions, largely due to labour disruptions in Europe and logistic constraints in BC. As a
result, NBSK US-dollar list prices on orders from China saw a sharp increase during the period,
reaching near-record highs of US$985
per tonne in March, to average US$899
per tonne for the current quarter, up US$176 per tonne, or 24%, from the previous
quarter. Prices to North America
also experienced strengthening, although not to the same degree as
China, up US$55 per tonne, or 4%, from the prior quarter to
US$1,527 per tonne (before
discounts). Despite the uplift in global US-dollar pulp pricing,
global softwood pulp producer inventories at the end of
February 2022 were at 45 days supply,
up two days from December 2021, well
above the balanced range and largely reflecting the aforementioned
supply chain constraints.
Operating income in the Company's paper segment was $6.0 million, up $4.3
million from the previous quarter, as modestly higher paper
unit sales realizations, tied to the continued strengthening of
global paper demand and tight supply, was combined with an increase
in paper production and shipments and slightly lower paper unit
manufacturing costs in the current period.
Global softwood kraft pulp markets are projected to remain
strong through the second quarter of 2022, driven largely by tight
supply arising from the current global supply chain challenges and
transportation constraints in BC, as well as the traditional spring
maintenance period. High yield markets are forecast to see more
modest improvements through the second quarter of 2022, also tied
to limited supply availability.
Results in the second quarter of 2022 are anticipated to reflect
in part, the near record-high US-dollar pulp list pricing seen in
the first quarter of 2022. However, the intermittent and limited
rail service experienced in BC in the first quarter of 2022 is
projected to continue well into the second quarter, putting
sustained pressure on the Company's operations and shipments
through the coming months, including, as previously announced, the
extension of a transportation-related curtailment at Taylor by at least a further six-weeks, with a
projected 25,000 tonnes of reduced BCTMP production. The Company
will continue to closely monitor the ongoing supply chain
challenges and will adjust future operating plans accordingly,
through the balance of the second quarter and into latter half of
2022.
In addition, the Company's results in the second quarter of 2022
will reflect the impact of the RB1 capital-related outage at
Northwood into mid-April (approximately 10,000 tonnes), as well as
a scheduled maintenance outage at Northwood in the latter part of
the second quarter, with a projected 25,000 tonnes of reduced NBSK
pulp production. With the RB1 rebuild now complete a key focus of
the Company's kraft pulp mills for the balance of 2022 will be on
improving operational reliability and closely managing
manufacturing and fibre costs.
Bleached kraft paper markets are projected to show continued
strength through the second quarter of 2022, as tight supply and
low inventories in the North American and Asian paper markets is
combined with growing demand for kraft paper products.
Additional Information and
Conference Call
A conference call to discuss the first quarter's financial and
operating results will be held on Wednesday,
May 4, 2022 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 18, 2022, please dial Toll-Free
1-888-390-0541 and enter participant pass code 210218#. 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.
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:
|
|
Q1
|
|
Q4
|
|
Q1
|
|
(millions of Canadian
dollars)
|
|
2022
|
|
2021
|
|
2021
|
|
Reported operating
income (loss)
|
$
|
(26.0)
|
$
|
(137.2)
|
$
|
4.9
|
Asset impairment
|
$
|
-
|
$
|
95.0
|
$
|
-
|
Inventory write-down (recovery), net
|
$
|
(1.1)
|
$
|
1.1
|
$
|
(2.2)
|
Adjusted operating
income (loss)
|
$
|
(27.1)
|
$
|
(41.1)
|
$
|
2.7
|
Amortization
|
$
|
20.1
|
$
|
22.6
|
$
|
20.8
|
Adjusted operating
income (loss) before amortization and impairment
|
$
|
(7.0)
|
$
|
(18.5)
|
$
|
23.5
|
|
|
|
|
|
|
|
Net income
(loss)
|
$
|
(19.9)
|
$
|
(101.1)
|
$
|
8.4
|
Asset impairment, net of tax
|
$
|
-
|
$
|
69.4
|
$
|
-
|
Adjusted net income
(loss)
|
$
|
(19.9)
|
$
|
(31.7)
|
$
|
8.4
|
|
|
|
|
|
|
|
|
|
|
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.
Canfor Pulp is a leading global supplier of pulp and paper
products with operations in the central interior of 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 230,000 tonnes of Bleached Chemi-Thermo Mechanical Pulp. Canfor
Pulp is one of the largest North American and 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.