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Canfor Pulp Products reports $10M net income in fourth quarter of 2016

Feb. 15, 2017 - Canfor Pulp Products Inc. (CPPI) has reported a net income of $10.1 million, or $0.15 per share, for the fourth quarter of 2016, compared to $22.4 million, or $0.34 per share, for the third quarter of 2016 and $29.7 million, or $0.43 per share, for the fourth quarter of 2015. For the year ended December 31, 2016, the Company's net income was $57.8 million, or $0.86 per share, compared to $106.6 million, or $1.52 per share, for 2015.

The company had no items affecting comparability in the fourth quarter of 2016 or for the year ended Dec. 31, 2016. Adjusted net income was $29.0 million, or $0.42 per share, for the fourth quarter of 2015, and $111.8 million, or $1.59 per share, for 2015. 

The company reported operating income of $22.9 million for the fourth quarter of 2016, a decrease of $8.1 million from $31.0 million reported for the third quarter of 2016. The decrease in operating income was largely attributable to adverse weather conditions, which impacted both shipment logistics and operations through the period. Sales realizations for Northern Bleached Softwood Kraft (NBSK) pulp were largely unchanged quarter-over-quarter, while Bleached Chemi-Thermo Mechanical Pulp (BCTMP) sales realizations saw a marked improvement. The company's net income for the fourth quarter of 2016 included the pre-tax write-down of $7.0 million of advances made in connection with the biofuels technology initiative with Licella Fibre Fuels Pty. Ltd. (Licella), a subsidiary of Ignite Energy Resources Ltd. Notwithstanding the future benefits that may result from this innovative effort, the write-down reflected the research and development nature of the advances.

Global softwood pulp markets were relatively stable through most of the fourth quarter of 2016 as evidenced by the average China US-dollar NBSK pulp list price, as published by RISI, remaining at US$595 per tonne. NBSK pulp unit sales realizations were broadly in line with the third quarter of 2016, as a slightly weaker Canadian dollar was offset by increased pricing pressure in North America. BCTMP unit sales realizations increased significantly, reflecting the continued improvement in BCTMP markets. Energy revenues moderately increased during the current quarter, for the most part, reflecting increased power generation and seasonally higher energy prices.

Pulp shipments were down 14 per cent from the previous quarter principally reflecting weather-related impacts on shipments, including a delayed vessel shipment over the year end. Pulp production was 3 per cent lower than the previous quarter, primarily due to the severe weather conditions, which more than offset the impacts of scheduled maintenance outages in the previous quarter. Pulp unit manufacturing costs were up slightly from the previous quarter, reflecting higher energy usage combined with seasonally higher energy costs, as well as the unfavourable per unit impact of lower production volumes.

Operating income in the company's paper segment at $8.1 million for the fourth quarter of 2016 was up $0.9 million from the third quarter of 2016, largely reflecting slightly higher paper unit sales realizations in the current quarter, principally due to a 2 per cent weaker Canadian dollar and lower manufacturing unit costs resulting from higher production volumes during the current quarter.

Commenting on the 2016 year, CPPI's chief executive officer, Don Kayne, said, "The company delivered another solid year in 2016, maintaining steady operational performance and a strong balance sheet, despite market pressures and weather challenges in the fourth quarter".

For the month of January 2017, the company announced an increase of US$20 per tonne for NBSK pulp list price to China, equating to US$630 per tonne, and an increase of US$10 per tonne for BCTMP. For the month of February 2017, the company announced a further US$20 per tonne increase to both its NBSK pulp and BCTMP list prices to China. Global softwood markets are currently seeing positive pricing momentum, for both NBSK pulp and BCTMP, and this is anticipated to continue into the second quarter of 2017.

On Feb. 8, 2017, the Board of Directors declared a quarterly dividend of $0.0625 per share, payable on Feb. 28, 2017 to the shareholders of record on Feb. 21, 2017.