Canfor reports steady markets
Oct. 30, 2013, Vancouver - Canfor Pulp Products today reported net income of $9.1 million, or $0.13 per share, for the third quarter of 2013, compared to net income of $7.6 million, or $0.11 per share, for the second quarter of 2013 and a net loss of $5.0 million, or $0.07 per share, for the third quarter of 2012. For the nine months ended September 30, 2013, the Company's net income was $27.6 million, or $0.39 per share compared to $8.0 million, or $0.06 per share for the nine months ended September 30, 2012.
The net income for the third quarter of 2013 included various items affecting comparability with prior periods, which had an overall net positive impact on the company's results of $3.5 million, or $0.05 per share. After adjusting for such items, the company's adjusted net income for the third quarter of 2013 was $5.6 million, or $0.08 per share, down $9.8 million, or $0.14 per share, from an adjusted net income of $15.4 million, or $0.22 per share, for the second quarter of 2013. CPPI's adjusted net loss for the third quarter of 2012 was $8.5 million, or $0.12 per share.
The Company reported operating income of $11.3 million for the third quarter of 2013, down $8.2 million from operating income of $19.5 million reported for the second quarter of 2013, with lower production and shipment volumes slightly offset by improved Northern Bleached Softwood Kraft ("NBSK") pulp sales realizations.
Results in the third quarter of 2013 reflected relatively steady global softwood pulp markets despite the seasonally slower summer period. Global softwood pulp producer inventory levels were balanced during the quarter, decreasing to 27 days' supply in September 2013, from 28 days in June 2013.
Market conditions are generally considered balanced when inventories are in the 27-30 days of supply range. Average NBSK pulp list prices were relatively stable in all regions during the third quarter, with list prices to North America and Europe moving up US$10 per tonne, to US$947 per tonne and US$867 per tonne, respectively. The NBSK pulp price to China declined US$15 per tonne, averaging US$685 per tonne in the quarter, but demand from China gathered momentum through the quarter with the September price settling at US$695 per tonne. Third quarter sales realizations showed a modest increase, mostly as a result of a one per cent weakening of the Canadian dollar against the US dollar.
The company's pulp shipments and production levels in the third quarter were impacted by a scheduled major maintenance outage at the Northwood Pulp Mill and lower overall operating rates. The outage at the Northwood Pulp Mill included upgrades to the recovery boiler, and impacted production by 32,000 tonnes in the current quarter, in addition to the impact of 12,000 tonnes in the prior quarter.
The company's operational performance was also impacted by severe thunderstorms in the Prince George region, which resulted in power interruptions and the shutdown of all operations, impacting production by 10,000 tonnes. Pulp unit manufacturing costs for the current quarter increased marginally from the previous quarter, largely reflecting the lower production levels as well as higher fibre costs, partially offset by the timing of maintenance spending, lower chemical costs and seasonally lower energy costs.
The company's paper segment results were down $1.2 million from the previous quarter, which was primarily the result of reduced shipments and higher unit manufacturing costs, the latter reflecting higher slush pulp costs and the impact of lower pulp production levels.
The Company ended the quarter with cash and cash equivalents of $28.7 million and net debt to capitalization of 17.1%.
Commenting on the third quarter's results, CPPI's Chief Executive Officer, Don Kayne, said, "As is evident from our results, our operational performance was significantly impacted by the scheduled outages and disruptions at our pulp operations in the third quarter. With our scheduled maintenance shutdowns now behind us and our next outage not planned until the second quarter of next year, we will be focused on enhancing our operational performance in the coming quarters."
NBSK pulp markets are projected to improve modestly in the fourth quarter of 2013. Producer inventories are balanced with steady demand and solid order files through the first half of the fourth quarter. For the month of October, the company has announced an increase in the NBSK pulp list price of US$20 per tonne in all regions and an additional price increase of US$20 per tonne for all regions effective November 1st. A risk of price weakness continues to exist from further hardwood pulp capacity projected to come online in early 2014. A scheduled maintenance outage at the Prince George Pulp Mill was completed in early October 2013 and resulted in reduced market pulp production of approximately 4,000 tonnes.
On October 29, 2013, the Board of Directors declared a quarterly dividend of $0.05 per share with a declaration date of October 30, 2013, payable on November 19, 2013, to the shareholders of record on November 12, 2013.