Canfor Reports Results for First Quarter 2014
Apr 29, 2014 - Canfor Corporation (CFP.TO) today reported net income attributable to shareholders ("shareholder net income") of $45.5 million, or $0.33 per share, for the first quarter of 2014, compared to $28.0 million, or $0.20 per share, for the fourth quarter of 2013 and $61.9 million, or $0.43 per share, for the first quarter of 2013.
After adjusting for items affecting comparability with the prior periods, the Company's adjusted shareholder net income for the first quarter of 2014 was $46.4 million, or $0.34 per share, compared to an adjusted shareholder net income of $48.8 million, or $0.35 per share, for the fourth quarter of 2013. Canfor's adjusted shareholder net income for the first quarter of 2013 was $70.3 million, or $0.49 per share.
The Company reported operating income of $84.4 million for the first quarter of 2014, compared to operating income of $53.8 million for the fourth quarter of 2013. After adjusting for one-time costs in the previous quarter, most notably costs associated with the announced closure of the Company's Quesnel Sawmill, operating income for the current quarter was up $9.5 million. The modest improvement in operating income was largely attributable to gains in lumber and pulp sales realizations, with both benefitting from a weaker Canadian dollar. These gains were partially offset by significantly lower lumber and pulp shipments resulting from abnormally severe winter weather which limited railcar supply to Western Canada, and a 28-day truckers' strike at Canada's largest port in Vancouver, British Columbia.
The harsh winter weather conditions also curtailed home construction activity across much of North America in the current quarter. U.S. housing starts averaged 923,000 units SAAR (seasonally adjusted annual rate), down 8% from the previous quarter. In Canada, housing starts were down 11% from the fourth quarter of 2013, to 175,000 units SAAR. Offshore demand was stable but the truckers' strike at the port in Vancouver materially impacted lumber shipments.
The Company's lumber sales realizations in North America were up from the previous quarter, largely due to a 5% weaker Canadian dollar and, to a lesser extent, the absence of export taxes on U.S. bound shipments (for the Company's Canadian operations) compared to the previous quarter. U.S. dollar prices for North American products saw little change quarter-over-quarter, with a US$3 decrease in the benchmark North American Random Lengths Western Spruce/Pine/Fir ("SPF") 2X4 #2&Btr price to US$367 per Mfbm, offset by modest increases in several other grades and dimensions. Overall sales realizations for Southern Yellow Pine ("SYP") products saw modest increases compared to the previous quarter, with a US$12 per Mfbm, or 3%, decrease in the benchmark SYP 2x4 #2 price, more than offset by moderate gains in wider dimension products. Offshore sales realizations (in US$) saw moderate gains in the current quarter, for the most part reflecting stable demand and improved prices, the latter partly reflecting negotiated monthly or quarterly pricing.
Lumber shipments were down 16% from the previous quarter reflecting the aforementioned transportation challenges, while lumber production was up 3%, primarily the result of more operating hours mainly due to the Christmas period in the previous quarter as well as additional shifts in the current period at the Company's southern pine operations. Production in the current quarter continued to be impacted by capital related downtime and ramp-ups, as well as the closure of the Company's Quesnel Sawmill in mid-March. Unit manufacturing costs were higher compared to the previous quarter, reflecting a modest increase in unit log costs, principally driven by market-related increases in stumpage, coupled with higher seasonal and market-related energy costs and continued dust control efforts, all of which were partly offset by the favourable impact on unit costs from higher production.
Global softwood pulp markets showed a modest improvement in all major regions in the first quarter of 2014, while global softwood pulp producer inventory levels remained balanced over the period increasing 1 day from the end of December 2013, to 28 days' supply in March 2014. Average Northern Bleached Softwood Kraft ("NBSK") pulp list prices saw solid gains in all regions during the first quarter of 2014, with the North American NBSK pulp list price increasing US$34, or 3%, from the previous quarter to US$1,017 per tonne (the highest level in almost three years), while list prices to China and Europe saw gains of 2%. Current quarter pulp sales realizations were also buoyed by the weaker Canadian dollar and proportionately higher shipments to the higher-margin U.S. market.
Pulp shipments were down 74,000 tonnes, or 22%, from the prior quarter, largely reflecting the transportation challenges experienced in the quarter. Pulp production levels were up 4% from the previous quarter, mainly as a result of an improvement in operating rates as the quarter progressed and a scheduled maintenance outage at Canfor Pulp's Prince George Pulp Mill in the previous quarter. Pulp unit manufacturing costs were up slightly compared to the previous quarter, with the favourable impact of increased production more than offset by higher market prices for sawmill residual chips and higher energy costs, the latter reflecting both seasonally higher consumption as well as natural gas price increases.
On March 28, 2014, the Company completed the sale of its Daaquam Sawmill. Total proceeds related to the disposition of the Daaquam operation approximated $25 million.
Commenting on the first quarter performance, Canfor's President and Chief Executive Officer, Don Kayne, said, "Despite the many challenges presented by weather and transportation related disruptions, we continued to see progress during the quarter from the significant capital investments made at our lumber and pulp facilities in recent years."
Looking ahead, North American lumber consumption is forecast to rebound in the second quarter of 2014, as warmer weather contributes to stronger demand in the residential construction market. Lumber shipments across North America are anticipated to improve through the second and third quarters of 2014, releasing the backlog of shipments caused by the shortage of railcars earlier in 2014. Offshore lumber markets are projected to remain stable, supported by steady demand from Asia and other emerging markets. Delayed offshore lumber shipments resulting from the truckers' strike at the Vancouver Port are forecast to be largely cleared through the second quarter of 2014. NBSK pulp markets are projected to face challenges by the middle of the year; a risk of price weakness remains due in part to the significant new hardwood pulp capacity forecast to come online through 2014. Canfor Pulp anticipates that it will clear its transportation-related backlog of finished inventories by early in the third quarter of 2014.
Canfor is a leading integrated forest products company based in Vancouver, British Columbia ("BC") with interests in BC, Alberta, North and South Carolina and Alabama. Canfor produces primarily softwood lumber and also produces bleached chemi-thermo mechanical pulp and specialized wood products. Canfor also owns a 50.4% interest in Canfor Pulp Products Inc., which is one of the largest producers of northern bleached softwood kraft pulp in Canada and a leading producer of high performance kraft paper. To learn more please visit: www.canfor.com.
SOURCE: Canfor Corporation