Canfor reports third quarter loss
A weakened global market for softwood pulp hurt Canfor Pulp Products, which reported a third quarter net loss of $4.6 million in 2012, after posting $3.3 million in net income in the second quarter and $23.9 million a year ago.
For the nine months ended September 30, 2012, the Canfor’s net income was $9 million, or $0.07 per share compared to $122.8 million, or $1.72 per share for the nine months ended September 30, 2011.
The company also reported an operating loss of $8.2 million for the third quarter of 2012, compared to operating income of $10.4 million in the second quarter of 2012, principally as a result of lower pulp sales realizations. Lower shipments, restructuring costs and one-time costs associated with new five year collective labour agreements were also contributing factors.
“It was a tough quarter as we faced challenges presented by weaker markets and came out of an extended period of major maintenance and capital upgrades,” commented CEO Don Kayne. “The focus now is on getting our recently upgraded pulp mills up to targeted operating rates.”
Results in the third quarter of 2012 were significantly impacted by challenging markets resulting in downward pressure on prices, with Northern Bleached Softwood Kraft (“NBSK”) list prices decreasing over 5% in all regions compared to the previous quarter. Global softwood pulp markets weakened through the summer months, with price erosion occurring for most of the quarter. While softwood pulp inventories remained relatively stable, global hardwood pulp producer inventories increased throughout the quarter. At the end of August (latest available data), global softwood producer inventory levels were at 30 days supply, up marginally compared to the end of the second quarter.
Compared to the previous quarter, average list price for North America was down US$47 to US$853 per tonne. CPPI’s average list price to China and price to Europe were down US$57. Sales realizations were also negatively impacted by a strengthening of the Canadian dollar against the U.S. dollar, which was up 1.5% compared to the previous quarter.
The company’s shipments and production levels for the third quarter reflected an extended scheduled outage for maintenance and capital upgrades at the Company’s Prince George Pulp Mill, during which it completed a replacement of the recovery boiler lower furnace and upgrades to the boiler feedwater treatment system. The impact of the shut was partly offset by higher production at the Northwood Pulp Mill following the unscheduled recovery boiler-related outage from late May to early July. Both mills experienced slower than anticipated ramp ups in the period following the scheduled and unscheduled outages. Inventories subsequently returned to more normal levels by the end of the quarter.
The company’s paper segment results were relatively unchanged in the current quarter, with lower shipment levels offset by higher unit sales realizations and reduced unit manufacturing costs.
During the third quarter of 2012, the Company negotiated new five-year collective labour agreements with its unions. The collective agreements included one-time costs of $3.2 million paid upon ratification, which were expensed in the period.