Canfor Pulp Products Reports Third Quarter Results
Oct. 24, 2011 - Canfor Pulp Products Inc. (CPPI) today announced its third quarter 2011 results as well as the results of Canfor Pulp Limited Partnership (the Partnership) in which CPPI has a 49.8% ownership.
CPPI reported net income of $8.3 million or $0.23 per share, representing CPPI's share of the Partnership's income less an income tax provision of $3.7 million.
The Partnership reported sales of $233.9 million and net income of $23.9 million or $0.33 per unit, for the quarter ended September 30, 2011. The Partnership generated EBITDA of $49.6 million in the quarter. In the quarter, the Partnership generated distributable cash of $26.4 million, or $0.37 per unit.
The Partnership results were impacted by lower market pulp prices and a planned outage at the Northwood Pulp Mill, partially offset by improved paper segment earnings. A record daily production rate was achieved on the paper machine during the quarter.
Global softwood pulp markets weakened through the third quarter. Global softwood pulp producer inventories increased to 32 days of supply due to historical slow demand during the summer months from Europe and North America, and some destocking by China. As a result, NBSK pulp list prices decreased US$70 per tonne for North America to US$970 and US$60 per tonne for Europe to US$950. The Partnership's NBSK pulp list price for China decreased US$90 per tonne to US$840.
Reduced bleached softwood pulp demand has resulted in increased producer inventories and downward pressure on prices. However, extended fall maintenance downtime in Canada due to several large capital projects funded under the Green Transformation Program (GTP) should mitigate inventory growth in the short-term. A list price decrease of US$20 per tonne was announced in October for North America and US$50 per tonne for China.
The maintenance outage at the Northwood Pulp Mill has been extended into the fourth quarter to complete the installation of the recovery boiler and precipitator upgrade. This reduced production in the third quarter by approximately 45,000 tonnes with an additional 20,000 tonnes projected for the fourth quarter.
The Partnership has been allocated $122.2 million under the Green Transformation Program to proceed with four projects. Two projects were completed in the first half of 2011 and the major Northwood recovery boiler and precipitator upgrade project was substantially completed in October. The final project at the Prince George Pulp and Paper Mill will be to upgrade the feedwater system and precipitator.
The forecast level of capital expenditures for 2011 has been increased to approximately $143 million ($67 million net of GTP funding) from the previously projected $125 million ($49 million net of GTP funding). The increase includes estimated cost increases resulting from delays in completing the Northwood recovery boiler project and also reflects amendments to the timing and costs of other projects in the Partnership's capital program. The increase in planned capital spending is projected to be funded from cash carried forward from lower than normal capital expenditures in 2010 and excess cash generated over distributions for the first three quarters of 2011. CPPI announced a quarterly dividend of $0.40 per share to be paid on November 10, 2011 to shareholders of record at the close of business on November 3, 2011.
Canfor Pulp Products Inc. (CPPI) is the successor to the Canfor Pulp Income Fund (the Fund) following the completion of the conversion of the Fund from an income trust structure to a corporate structure by court approved plan of arrangement under the Business Corporations Act (British Columbia) (the BCBCA) on January 1, 2011 (the Conversion). The Conversion involved the exchange, on a one-for-one basis, of all outstanding Fund Units for common shares of CPPI (CPPI Shares). Upon completion of the Conversion, on January 1, 2011, the unitholders of the Fund became the sole shareholders of CPPI which became sole owner of all of the outstanding Fund Units.
Immediately following the conversion, the Fund was wound up, CPPI received all of the assets and assumed all of the liabilities of the Fund and CPPI became the direct holder of the 49.8% interest in the Partnership previously held by the Fund.
SOURCE: Canfor Pulp Products Inc.