VANCOUVER, BC, May 3, 2022
/CNW/ - Canfor Corporation ("The Company" or "Canfor") (TSX:
CFP) today reported its first quarter of 2022 results:
Overview
- Q1 2022 reported operating income of $742 million driven by strong lumber segment
results with near record-high North American lumber pricing and
strong earnings for the Company's European lumber operations
- Shareholder net income of $534
million, or $4.29 per
share
- Completed acquisition of Millar Western Forest Products Ltd.'s
("Millar Western") solid wood operations and associated tenure for
$440 million, including net working
capital
- Announced $165 million
(US$130 million) investment in the US
South to significantly upgrade and expand Urbana's sawmill and
planer facility
- Announced the implementation of a comprehensive plan to achieve
net-zero carbon emissions by 2050
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
|
|
2022
|
|
2021
|
|
2021
|
Sales
|
$
|
2,213.3
|
$
|
1,571.3
|
$
|
1,941.8
|
Reported operating
income before amortization and impairments
|
$
|
830.7
|
$
|
321.7
|
$
|
696.7
|
Reported operating
income (loss)
|
$
|
741.9
|
$
|
(66.8)
|
$
|
602.6
|
Adjusted operating
income before amortization and impairments1
|
$
|
829.6
|
$
|
311.3
|
$
|
694.5
|
Adjusted operating
income1
|
$
|
740.8
|
$
|
216.3
|
$
|
600.4
|
Net income
(loss)2
|
$
|
534.0
|
$
|
(23.1)
|
$
|
427.8
|
Net income (loss) per
share, basic and diluted2
|
$
|
4.29
|
$
|
(0.19)
|
$
|
3.42
|
Adjusted net
income1, 2
|
$
|
529.0
|
$
|
154.6
|
$
|
434.2
|
Adjusted net income per
share, basic and diluted1, 2
|
$
|
4.25
|
$
|
1.24
|
$
|
3.47
|
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.
|
|
For the first quarter of 2022, the Company reported operating
income of $741.9 million compared to
an operating loss of $66.8 million in
the fourth quarter of 2021. After taking account of adjusting
items, largely comprised of asset impairments in the previous
quarter, the Company's adjusted operating income for the current
quarter of $740.8 million was
$524.5 million higher than adjusted
operating income of $216.3 million
reported for the fourth quarter of 2021, primarily reflecting a
significant increase in lumber segment earnings, and to a much
lesser extent, improved pulp and paper segment results.
Commenting on the Company's first quarter results, Canfor's
President and Chief Executive Officer, Don
Kayne, said, "We are very pleased to see the sustained
strength in global lumber markets continuing into 2022 and while
our pulp business continued to face challenges, we also saw
improved results in the quarter. A solid operating performance
across all of our lumber operating regions allowed us to capitalize
on these favourable market fundamentals and execute on our
diversification strategy with the recent acquisition of
Millar Western. Despite these
factors, the global supply chain crisis continues to negatively
impact our operations and has resulted in curtailed and reduced
lumber and pulp operating schedules. We will continue to assess the
effects of this crisis and will make adjustments to our operating
schedules as conditions evolve. We greatly appreciate our
employees' ongoing resilience in managing through the supply chain
challenges."
In the lumber segment, adjusted earnings increased $509.7 million quarter-over-quarter principally
reflecting an extensive uplift in Western Spruce/Pine/Fir ("SPF")
and Southern Yellow Pine ("SYP") US-dollar benchmark pricing in the
current period, with the average North American Random Lengths
Western SPF 2x4 #2&Btr price up US$563 per Mfbm, or 79%, and the average SYP East
2x6 #2 up US$564 per Mfbm, or 105%.
The near record-high benchmark lumber pricing in the current
quarter was combined with higher production and shipment volumes
for the Company's North American lumber operations, albeit
moderated in part by the ongoing global supply chain challenges,
especially in Western Canada.
Current quarter results also reflected strong earnings for the
Company's European operations principally attributable to
moderately higher European lumber unit sales realizations and, to a
lesser extent, lower unit manufacturing costs, offset in part by a
5% stronger Canadian dollar (versus the Swedish Krona
("SEK")).
North American market conditions remained very strong through
much of the first quarter of 2022, primarily led by continued
strength in new home construction activity. Significant demand
against a backdrop of tight supply, largely stemming from supply
chain disruptions, resulted in the aforementioned increase in North
American benchmark lumber prices in the current quarter. Towards
the end of the current quarter, however, elevated material costs,
tied to the raised benchmark lumber prices, combined with growing
concerns around housing affordability and higher interest rates,
dampened consumer spending in the "do-it-yourself"
sector.
Offshore lumber demand in Asia
weakened somewhat in the first quarter of 2022, particularly in
China. In addition, lumber
inventories in the region were higher than seasonal norms due to
delays in the prior quarter on inbound shipments.
After a modest decline in the prior quarter, Western Europe and Scandinavian lumber demand
strengthened throughout the first quarter of 2022 supported by
increased activity in the repair and remodeling sector and
relatively stable residential construction activity.
Results in the pulp and paper segment 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 Canfor Pulp Products Inc.'s ("CPPI")
operations and shipments. As a result, CPPI'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 CPPI's Northwood NBSK pulp mill
("Northwood") related to the rebuild of the lower furnace of
recovery boiler number one ("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).
Looking ahead, global lumber market fundamentals are anticipated
to remain strong through the second quarter of 2022. New home
construction in North America is
projected to show continued strength in the near term, supported by
lean home inventory, an aging housing stock and high levels of
homeowner equity. As the year progresses, however, new home
construction activity is estimated to face increased headwinds due
to high inflation, rising interest rates and decreasing housing
affordability. Demand in the repair and remodeling sector is
anticipated to soften somewhat, principally reflecting inflationary
cost pressures and competing uses for discretionary spending.
Offshore lumber demand in Asia
is forecast to experience some downward pressure in the second
quarter of 2022 before improving through the balance of the year as
inventories in the region move back into balance. The outlook for
European markets remains positive moving into the second quarter
but is anticipated to face increasing challenges associated with
rising inflation and Russia's
recent invasion of the Ukraine
which has disrupted regional supply networks.
Results in the second quarter will reflect reduced operating
schedules across the Company's Western Canadian lumber operations
as a result of the cumulative effects of the supply chain crisis
that has been ongoing for several months. The Company will continue
to closely monitor the supply chain situation and will adjust
future lumber operating schedules, as appropriate, through the
balance of the second quarter and into latter half of 2022.
In addition, the permanent reduction of 150 million board feet
of production capacity at the Company's Plateau sawmill in BC is
anticipated to take effect at the end of the second quarter of
2022. The resizing will align the facility with the reduction in
available, sustainable timber supply in the region following the
Mountain Pine Beetle infestation and other constraints on the
timber harvesting land base.
For the pulp and paper segment, 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 CPPI's operations
and shipments through the coming months, including, as previously
announced, the extension of a transportation-related curtailment at
CPPI's Taylor BCTMP mill ("Taylor") by at least a further
six-weeks, with a projected 25,000 tonnes of reduced BCTMP
production. CPPI 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
2022.
In addition, CPPI'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
CPPI's kraft pulp mills for the balance of 2022 will be on
improving operational reliability and closely managing
manufacturing and fibre costs.
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 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
|
|
2022
|
|
2021
|
|
2021
|
Reported operating
income (loss)
|
$
|
741.9
|
$
|
(66.8)
|
$
|
602.6
|
Asset impairments
|
$
|
-
|
$
|
293.5
|
$
|
-
|
Inventory write-down (recovery), net
|
$
|
(1.1)
|
$
|
1.1
|
$
|
(2.2)
|
Restructuring, mill closure and other items, net
|
$
|
-
|
$
|
(11.5)
|
$
|
-
|
Adjusted operating
income
|
$
|
740.8
|
$
|
216.3
|
$
|
600.4
|
Amortization
|
$
|
88.8
|
$
|
95.0
|
$
|
94.1
|
Adjusted operating
income before amortization and impairments
|
$
|
829.6
|
$
|
311.3
|
$
|
694.5
|
|
|
|
|
|
|
|
After-tax impact, net
of non-controlling interests
|
|
Q1
|
|
Q4
|
|
Q1
|
(millions of Canadian
dollars)
|
|
2022
|
|
2021
|
|
2021
|
Net income
(loss)
|
$
|
534.0
|
$
|
(23.1)
|
$
|
427.8
|
Foreign exchange (gain) loss on term debt
|
$
|
(3.0)
|
$
|
0.2
|
$
|
(2.6)
|
(Gain) loss on derivative financial instruments
|
$
|
(2.0)
|
$
|
3.0
|
$
|
9.0
|
Asset impairments
|
$
|
-
|
$
|
182.9
|
$
|
-
|
Restructuring, mill closure and other items, net
|
$
|
-
|
$
|
(8.4)
|
$
|
-
|
Adjusted net
income3
|
$
|
529.0
|
$
|
154.6
|
$
|
434.2
|
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 leading integrated forest products company based
in Vancouver, BC with interests in
BC, Alberta, North and
South Carolina, Alabama, Georgia, Mississippi and Arkansas, as well as in Sweden with its majority acquisition of the
Vida Group. Canfor produces primarily softwood lumber and also owns
a 54.8% interest in Canfor Pulp Products Inc., which is one of the
largest global producers of market Northern Bleached Softwood Kraft
Pulp and a leading producer of high performance kraft paper. Canfor
shares are traded on the Toronto Stock Exchange under the symbol
CFP. For more information visit canfor.com.
SOURCE Canfor Corporation