Weak demand leads Canfor to post $294M operating loss in 2019
Canfor is reporting a 2019 operating loss of $294 million and adjusted operating loss of $92 million due to low lumber prices from weak market demand and excess inventory over the year.
The company’s 2019 Q4 reported operating loss was $60 million; and adjusted operating loss was $33 million.
In contrast to the record-high lumber and pulp prices seen in 2018, weaker than anticipated global lumber and pulp demand for much of 2019 in combination with excess inventory levels gave rise to a sharp drop in market pricing for both lumber and pulp products in the current year. The deterioration in market conditions, in combination with ongoing fibre supply challenges and significant log cost increases in British Columbia resulted in extensive temporary and permanent sawmill curtailments across B.C., as well as summer curtailments at Canfor Pulp.
On a more positive note, 2019 marked a year of transformational global diversification for Canfor with the acquisition of 70 per cent of the Vida Group in early 2019, and the company’s continuing expansion in the U.S. South, including the acquisition of Elliott Sawmilling Co., LLC (Elliott). For the 2019 year, the company reported an operating loss of $294.3 million and a net loss of $2.10 per share, in sharp contrast to operating income of $608.6 million and net income of $2.78 per share reported for the year ended December 31, 2018.
For the fourth quarter of 2019, the company reported an operating loss of $59.6 million, halving the operating loss of $120.3 million for the third quarter of 2019. These results reflected improved earnings in the lumber and pulp and paper segments as global lumber and pulp markets showed signs of bottoming out through the current quarter and supply and demand fundamentals improved at the end of the year.
Reported results for the fourth quarter of 2019 include a net duty expense of $43.7 million, at a current cumulative effective countervailing duty (CVD) and anti-dumping duty (ADD) accrual rate of 29.24 per cent (versus a combined cash deposit rate of 20.52%), compared to $53.5 million reported in the third quarter of 2019 at the same combined rate. Cumulative cash deposits paid to December 31, 2019 were $421.4 million.
Reported results in the fourth quarter of 2019 also include a net $19.9 million recovery in inventory write-down provisions and restructuring, mill closure and severance costs costs of $3.3 million.
Read the company’s quarterly shareholders report.