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Canfor announces first quarter 2018 results

Highlights:

• Record quarterly operating income of $85 million, surpassing previous high set in the fourth quarter of 2017
• Record-high quarterly sales of $360 million
• Net income of $64 million, or $0.99 per share

The company reported operating income of $85.1 million for the first quarter of 2018, an increase of $18.3 million from the $66.8 million reported in the fourth quarter of 2017 as the benefit of near-record high US-dollar pricing for Northern Bleached Softwood Kraft (NBSK) pulp and improved productivity in the latter part of the quarter more than offset challenges presented by severe winter weather in Western Canada earlier in the period, and the effects of major transportation disruptions to all the company’s operations through the quarter.

Global softwood pulp markets remained favourable through the first quarter of 2018, resulting in US-dollar NBSK pulp list prices holding at near-record high prices, and a significant increase in average NBSK pulp unit sales realizations. Average Bleached Chemi-Thermo Mechanical Pulp (BCTMP) unit sales realizations showed a more moderate increase in the quarter, with increased demand towards the end of 2017 translating into higher average prices for product shipped in the current quarter.

Pulp shipments were up 3 per cent from the previous quarter, as a 14,000 tonne vessel slippage from December into January more than offset transportation constraints which reflected challenging weather conditions in Western Canada. Pulp production was broadly in line with the fourth quarter of 2017, as strong productivity in March combined with increased operating days following the unscheduled outage at the company’s Northwood pulp mill in the previous quarter largely offset the impacts of various weather-related disruptions in January and February. Pulp unit manufacturing costs were moderately higher than the previous quarter, largely reflecting market-driven increases in fibre costs and weather-related increases in energy costs.

Operating income in the company’s paper segment at $2.9 million was down $4.5 million from the fourth quarter of 2017, as improved paper unit sales realizations were more than offset by increased slush pulp costs linked to higher Canadian dollar NBSK market pulp prices.

Commenting on the Company’s first quarter of 2018 results, CPPI’s chief executive officer, Don Kayne said, “Notwithstanding the various disruptions caused by severe weather conditions in January and February, we had a solid operating performance in the quarter that enabled us to capitalize on the current favourable pulp market conditions and deliver new record-high sales, operating income and net income.” 

Global softwood kraft pulp markets are projected to remain well positioned through the second quarter of 2018, reflecting both continued solid demand and tighter supply arising from the current transportation challenges as well as the traditional spring maintenance period. The outlook for the latter part of 2018 remains more uncertain given incremental pulp capacity currently projected to come online. For the month of April 2018, the Company announced an increase of US$30 per tonne for NBSK pulp list prices to North America. The ongoing transportation disruptions and associated impact on shipments are projected to continue for several months as transportation networks slowly return to normal service levels.

Results in the second quarter of 2018 will reflect scheduled maintenance outages at the Prince George NBSK pulp mill and paper machine, as well as at the Taylor BCTMP mill, with a projected 5,000 tonnes of reduced NBSK pulp production, 4,000 tonnes of reduced paper production and 11,000 tonnes of reduced BCTMP production, respectively, combined with higher associated maintenance costs and lower projected shipment volume. The scheduled outage at the Taylor BCTMP mill will include work associated with the previously announced energy project. The Northwood NBSK pulp mill has a maintenance outage scheduled for the third quarter of 2018, with a projected 22,000 tonnes of reduced NBSK pulp production.

On April 24, 2018, the Board of Directors declared a quarterly dividend of $0.0625 per share, payable on May 14, 2018 to the shareholders of record on May 7, 2018.