Canfor Pulp Reports "Slightly" Improved First Quarter Results
May 1, 2013) - Canfor Pulp Products Inc. ("CPPI") today reported net income of $10.9 million, or $0.15 per share, for the first quarter of 2013, compared to a net income of $5.4 million, or $0.08 per share, for the fourth quarter of 2012 and net income of $10.01 million, or $0.12 per share, for the first quarter of 2012.
The Company reported operating income of $19.0 million for the first quarter of 2013, an increase of $6.9 million from operating income of $12.1 million reported for the fourth quarter of 2012. The increase primarily reflected modest gains in Northern Bleached Softwood Kraft ("NBSK") pulp sales realizations coupled with a reduction in unit manufacturing costs. Included in results were certain one-time items with the current quarter results including a non-cash $1.5 million benefit from scientific research and development tax credits while the previous quarter included a $5.3 million accounting gain related to amendments to the Company's salaried post retirement benefit plans.
Results in the first quarter of 2013 reflected a slight improvement in global softwood pulp markets resulting in prices slowly improving through the quarter. Global softwood pulp shipments and printing and writing demand were relatively flat compared to the previous quarter, with global softwood pulp producer inventory levels in March 2013 at 29 days supply, in line with the end of December 2012.
Compared to the previous quarter, the average NBSK pulp list price to North America increased US$34, or 4%, to US$897 per tonne. Sales to China and Europe were also up through the quarter, with pricing to China up US$16 per tonne and pricing to Europe up US$29 per tonne. Current quarter sales realizations did not match the full list price increases due to increased volumes into lower margin regions, principally China. A slight weakening of the Canadian dollar against the US dollar, down 2%, further contributed to improved Canadian dollar sales realizations.
Contributing to improved pulp segment results were a 5% increase in shipments from the previous quarter, principally reflecting higher volumes to China. Pulp production was up slightly from the previous quarter as a result of improved operating rates during the quarter. Unit manufacturing costs were down 3% from the previous quarter largely the result of lower maintenance costs coupled with the increased production levels, partially offset by seasonally higher energy costs and slightly higher fibre costs.
The Company's paper segment results decreased $1.1 million from the previous quarter, reflecting higher costs for slush pulp and lower sales realizations, mitigated slightly by higher shipment levels.
The Company ended the quarter with cash and cash equivalents of $16.5 million and $108 million available under its operating loans.
Commenting on the first quarter's results, CPPI's CEO, Don Kayne, said, "Global pulp markets improved slightly as we saw some modest upward movement in prices ahead of the seasonally stronger spring period. We are encouraged by continued operating rate improvements at our facilities through the quarter as well as progress made around investments in our energy business."
Kayne added, "We continue to advance our energy business and will be investing in upgrades to support incremental electricity generation that will move our facilities closer to self sufficiency while diversifying the Company's earnings profile." Investments include upgrades to two existing turbines and a new precipitator that will be completed in 2013.
NBSK pulp markets are projected to remain fairly challenging through the second quarter of 2013, but annual spring maintenance downtime should allow for modest price increases. The outlook for the second half of the year is more uncertain given the new hardwood and softwood pulp capacity projected to come online.
For the month of April, the Company announced an increase in the North American NBSK pulp list price of US$30 to US$930 per tonne.
Maintenance outages are planned at the Intercontinental and Northwood Pulp Mills during the second quarter of 2013. The Intercontinental outage will result in approximately 6,000 tonnes of reduced production. The Northwood outage will be extended to complete upgrades to the recovery boiler with an estimated 40,000 tonnes of reduced production, of which approximately 15,000 tonnes will fall in the second quarter with the balance in the third quarter.
CPPI is a leading global supplier of pulp and paper products with operations based in the central interior of British Columbia. The Company owns and operates three mills with annual capacity to produce over one million tonnes of northern softwood market kraft pulp, 90% of which is bleached to become NBSK pulp for sale to the market, and approximately 140,000 tonnes of kraft paper. For additional information, visit: www.canforpulp.com
SOURCE: Canfor Pulp Products Inc.