Canfor announces first quarter financial results
April 27, 2016 - Canfor Pulp Products Inc. reported net income of $23.1 million for the first quarter of 2016, compared to $29.7 million for the fourth quarter of 2015 and $28.0 million for the first quarter of 2015.
The Company had no items affecting comparability in the first quarter of 2016. After adjusting for such items in the comparative periods, adjusted net income was $29.0 million for the fourth quarter of 2015 and $35.0 million for the first quarter of 2015.
The Company reported operating income of $39.1 million for the first quarter of 2016, up $0.5 million from $38.6 million reported for the fourth quarter of 2015. Results in the first quarter of 2016 reflected lower unit manufacturing costs, principally from lower fibre costs and the impact of the scheduled maintenance outage at the Northwood pulp mill in the previous quarter as well as improved paper segment earnings. Offsetting these factors were lower Northern Bleached Softwood Kraft (“NBSK”) pulp shipment volumes and slightly lower NBSK pulp unit sales realizations in the current quarter.
Commenting on the Company’s first quarter results, CPPI’s Chief Executive Officer, Don Kayne said, “Canfor Pulp continues to generate strong free cash flow, with results in the current quarter reflecting a solid operational performance.”
Global softwood pulp markets were relatively balanced through the first quarter of 2016 as increased customer restocking absorbed additional supply resulting from minimal maintenance downtime in the period. The average North American U.S. dollar NBSK pulp list price, as published by RISI, was relatively unchanged compared to the fourth quarter of 2015, while the average price to China was down US$10 per tonne, or two per cent.
NBSK pulp unit sales realizations were slightly lower in the current quarter as the favourable impact of a three per cent weaker Canadian dollar was more than offset by lower transaction prices which reflected slightly higher discounts and a less favourable regional sales mix in the first quarter of 2016.
Bleached Chemi-Thermo Mechanical Pulp (“BCTMP”) list prices were lower in the first quarter of 2016; however, BCTMP unit sales realizations improved slightly from the previous quarter reflecting the weaker Canadian dollar and a more favourable sales mix in the quarter. Contributions from the Company’s energy business were slightly lower in the current quarter reflecting fewer operating days.
Total pulp shipments were 10 per cent lower principally reflecting a drawdown in finished inventory levels in the fourth quarter of 2015 as well as fewer operating days in the current quarter. NBSK pulp production was broadly in line with the previous quarter reflecting similar operating rates to the fourth quarter of 2015.
In the previous quarter, the impact of the scheduled maintenance outage at the Northwood pulp mill, which reduced market pulp production by 20,000 tonnes, was largely offset by additional operating days in the fourth quarter of 2015. NBSK pulp unit manufacturing costs were moderately lower in the current quarter principally a result of lower fibre, maintenance and energy costs. BCTMP production volumes were consistent with the previous quarter while unit manufacturing costs were slightly lower.
Operating income in the Company’s paper segment was up $2.0 million from the previous quarter to $8.9 million in the first quarter of 2016 largely reflecting the positive impact of the weaker Canadian dollar on unit sales realizations and an increased proportion of higher-priced prime bleached paper shipments.
Looking ahead, relatively balanced global softwood pulp markets heading into the annual spring maintenance period may support a modest NBSK pulp price increase through the second quarter of 2016. In the latter half of 2016, there remains a risk of price weakness due in part to previously announced significant new global pulp capacity coming online. For May 2016, the Company announced NBSK pulp list prices of US$980 per tonne in North America an increase of US$30 per tonne from March 2016. The recent strengthening of the Canadian dollar is anticipated to offset improvements in U.S. dollar prices in the second quarter of 2016.
Results in the second quarter of 2016 will be impacted by maintenance outages planned at the Northwood and Intercontinental pulp mills, with a projected 38,000 tonnes of reduced NBSK pulp production, higher associated maintenance costs and lower projected shipment volumes. The Prince George pulp mill has a maintenance outage scheduled for the third quarter of 2016 and the Taylor BCTMP mill will complete a maintenance outage in the fourth quarter of 2016.