Canfor Pulp gains from less mill maintenance
Oct. 31, 2016 - Less scheduled maintenance downtime at Canfor's Northern Bleached Softwood Kraft pulp mills is the main reason behind the company's $25.8 million jump in operating income compared to Q2.
By Maria Church
Canfor Pulp Products Inc.’s Q3 report notes that higher pulp shipment volumes, increased energy revenues, and an improvement in pulp and paper unit sales realizations are three other major factors for the improved results.
Canfor reported net income of $22.4 million, or $0.34 per share, for the third quarter of 2016, compared to $2.2 million, or $0.03 per share, for the second quarter of 2016 and $31.2 million, or $0.45 per share, for the third quarter of 2015. For the nine months ended Sept. 30, 2016, the company’s net income was $47.7 million, or $0.70 per share, compared to $76.9 million, or $1.09 per share, for the nine months ended Sept. 30, 2015.
The company had no items affecting comparability in the third quarter of 2016 or for the nine months ended September 30, 2016. Adjusted net income was $34.8 million, or $0.50 per share, for the third quarter of 2015 and $82.8 million, or $1.17 per share, for the nine months ended September 30, 2015.
The company reported operating income of $31.0 million for the third quarter of 2016, up $25.8 million from $5.2 million reported for the second quarter of 2016. The improvement in the Company’s operating results primarily reflected significantly less scheduled maintenance downtime at the Company’s Northern Bleached Softwood Kraft pulp mills in the current quarter. Also contributing to the third quarter results were higher pulp shipment volumes, increased energy revenues as well as an improvement in pulp and paper unit sales realizations.
Global softwood pulp markets were relatively stable through the third quarter of 2016 with the average North American US-dollar NBSK pulp list price, as published by RISI, up US$18 per tonne, or 2%, to US$998 per tonne, while the average list price to China was down US$22 per tonne, or 4%, to US$595 per tonne. NBSK pulp unit sales realizations were up slightly compared to the second quarter of 2016 as the benefit of the 1 cent, or 1%, weaker Canadian dollar more than offset modestly lower NBSK pulp prices in China during the quarter. Bleached Chemi-Thermo Mechanical Pulp (“BCTMP”) markets improved in the third quarter of 2016, positively impacting BCTMP unit sales realizations at the Company’s Taylor pulp mill. Energy revenues were well up in the current quarter reflecting a return to more normalized power generation levels as well as higher energy prices.
Pulp shipment and production volumes were up 11% and 12%, respectively, from the previous quarter primarily reflecting the quarter-over-quarter impact of scheduled maintenance downtime. In the current quarter, the Company completed scheduled maintenance outages at the Prince George pulp mill and at the Taylor BCTMP mill which reduced pulp production by approximately 3,700 tonnes and 3,100 tonnes, respectively, while in the second quarter of 2016 scheduled maintenance outages and, to a lesser extent, isolated operational disruptions reduced NBSK pulp production by approximately 40,000 tonnes. NBSK unit manufacturing costs were substantially lower in the current quarter principally as a result of lower maintenance costs.
Operating income in the Company’s paper segment at $7.2 million was up $1.7 million from the second quarter of 2016, largely reflecting improved paper unit sales realizations as a result of a higher-value sales mix and, to a lesser extent, the favourable impact of the weaker Canadian dollar in the third quarter of 2016. The Company completed a nine- day scheduled maintenance outage at the paper operations in the current quarter reducing paper production by approximately 3,300 tonnes, but this was offset by improved productivity. In the previous quarter, a five-day scheduled maintenance outage that reduced paper production by approximately 1,800 tonnes was completed.
Commenting on the Company’s third quarter results, CPPI’s Chief Executive Officer, Don Kayne said, “Canfor Pulp delivered solid financial results for the third quarter, following a return to more normal operating levels after the significant scheduled maintenance outages taken in the previous quarter.”
Looking ahead, with new pulp capacity forecast to come on line there is risk of downward pressure on pricing. For the month of October 2016, the Company’s announced NBSK pulp list price is US$1,000 per tonne in North America.
On October 26, 2016, the Board of Directors declared a quarterly dividend of $0.0625 per share, payable on November 15, 2016 to the shareholders of record on November 8, 2016.