VANCOUVER, BC, March 5,
2024 /CNW/ - Canfor Corporation ("The Company" or
"Canfor") (TSX: CFP) today reported its 2023 and fourth
quarter of 2023 results:
Overview
- 2023 operating loss of $532
million; shareholder net loss of $326
million, or $2.71 per
share
- Q4 2023 operating loss of $191
million; shareholder net loss of $117
million or $0.98 per
share
- Solid earnings for the Company's European and US South
operations in 2023, with persistent challenges in British Columbia
- Successful execution of significant capital growth program in
the US South throughout 2023
- Sustained pressure on global lumber market conditions and
pricing through most of the fourth quarter, drove
quarter-over-quarter decline in results in all lumber operating
regions, most notably in Western
Canada
- Moderate uplift in global pulp market fundamentals through the
fourth quarter driven by a slight increase in demand and purchasing
activity in most major regions; 20% improvement in pulp production
quarter-over-quarter
- Ongoing challenges with the availability of economically viable
fibre impacting lumber and pulp operating rates in British Columbia into 2024
Financial Results
The following table summarizes selected financial information
for the Company for the comparative periods:
|
|
Q4
|
|
Q3
|
|
YTD
|
|
Q4
|
|
YTD
|
(millions of Canadian
dollars, except per share amounts)
|
|
2023
|
|
2023
|
|
2023
|
|
2022
|
|
2022
|
Sales
|
$
|
1,282.9
|
$
|
1,312.3
|
$
|
5,426.6
|
$
|
1,373.3
|
$
|
7,426.7
|
Reported operating
income (loss) before
amortization, asset write-downs and impairments
|
$
|
(89.1)
|
$
|
42.6
|
$
|
(111.2)
|
$
|
(62.6)
|
$
|
1,609.9
|
Reported operating
income (loss)
|
$
|
(191.3)
|
$
|
(65.1)
|
$
|
(531.6)
|
$
|
(308.0)
|
$
|
1,074.1
|
Adjusted operating
income (loss) before
amortization, asset write-downs and
impairments1
|
$
|
(130.2)
|
$
|
21.8
|
$
|
(168.4)
|
$
|
(57.0)
|
$
|
1,703.4
|
Adjusted operating
income (loss)1
|
$
|
(232.4)
|
$
|
(85.9)
|
$
|
(588.8)
|
$
|
(163.8)
|
$
|
1,306.2
|
Net income
(loss)2
|
$
|
(117.1)
|
$
|
(23.1)
|
$
|
(326.1)
|
$
|
(207.9)
|
$
|
787.3
|
Net income (loss) per
share, basic and diluted2
|
$
|
(0.98)
|
$
|
(0.19)
|
$
|
(2.71)
|
$
|
(1.70)
|
$
|
6.39
|
Adjusted net income
(loss)1,2
|
$
|
(127.2)
|
$
|
(19.4)
|
$
|
(335.8)
|
$
|
(126.8)
|
$
|
880.4
|
Adjusted net income
(loss) per share, basic and
diluted1,2
|
$
|
(1.06)
|
$
|
(0.16)
|
$
|
(2.79)
|
$
|
(1.04)
|
$
|
7.15
|
1 Adjusted results referenced
throughout this news release are defined as non-IFRS financial
measures. For further details, refer to the "Non-IFRS Financial
Measures" section of this document.
|
2
Attributable to equity shareholders of the Company.
|
2023 was a challenging year for Canfor, as the weak global
lumber market conditions experienced late in 2022 continued
throughout the current year. Ongoing inflationary pressures and
high interest rates gave rise to persistent affordability concerns
for consumers, reducing global lumber demand and increasing lumber
inventory levels in most global regions. Despite the economic
uncertainty, demand in the repair and remodel segment remained
strong through 2023, especially in North
America, exceeding levels observed before the pandemic.
In response to these global market conditions as well as a
constrained fibre supply environment, the Company reduced
production at its Western Canadian operations by a total of 760
million board feet in 2023. In the US South, the Company
successfully started-up its greenfield sawmill in DeRidder, Louisiana, early in 2023, and
continues work on two major growth projects at Urbana, Arkansas and Axis,
Alabama.
In British Columbia ("BC"), the
Company continued to face significant challenges accessing
economically viable fibre, both logs and residuals, to support its
BC operations, which resulted in closure announcements early in
2023. Canfor Pulp Products Inc. ("CPPI") made the decision to
permanently close the pulp line at its Prince George Pulp and Paper
Mill ("PG") in April. In connection with this closure, CPPI's
Intercontinental ("Intercon") Northern Bleached Softwood Kraft
("NBSK") pulp mill was successfully converted to provide slush
pulp to its specialty paper facility, formerly supplied by
PG.
In addition, the Company made the difficult decision to further
restructure its lumber operations in BC, by permanently closing its
Chetwynd sawmill and pellet plant
and temporarily closing its Houston sawmill. Late in 2023, the Company
also announced a fibre-driven indefinite curtailment at
its Polar sawmill starting in January 2024.
For 2023, Canfor reported an operating loss of $531.6 million, compared to operating income of
$1,074.1 million in 2022. After
taking account of adjusting items, including inventory valuation
adjustments and an asset write-down and impairment charge in 2022,
the Company's adjusted operating loss was $588.8 million for the current year (adjusted
shareholder net loss per share of $2.79), compared to adjusted operating earnings
of $1,306.2 million for the prior
year (adjusted shareholder net income per share of $7.15).
For the fourth quarter of 2023, the Company reported an
operating loss of $191.3 million,
compared to an operating loss of $65.1
million for the third quarter of 2023. After taking account
of adjusting items, largely comprised of inventory valuation
adjustments, the Company's adjusted operating loss for the fourth
quarter of 2023 was $232.4 million
compared to an adjusted operating loss of $85.9 million for the previous quarter, as an
improvement in pulp and paper segment earnings quarter-over-quarter
was more than offset by a decline in lumber segment results.
Commenting on the Company's 2023 and fourth quarter of 2023
results, Canfor's President and Chief Executive Officer,
Don Kayne, said, "It was an
extremely challenging year for the Company as ongoing affordability
constraints and high global lumber inventory levels put persistent
pressure on lumber market conditions throughout the year, including
in the fourth quarter. While our global footprint helped mitigate
some of these market-related headwinds, our British Columbia operations continued to face
ongoing challenges associated with a lack of economically viable
fibre in BC. For our pulp business, despite an improved fourth
quarter, this was another tough year as relatively weak global pulp
market fundamentals were combined with the ongoing cost and
operational impacts driven by sustained fibre shortages in BC. We
are continuing to adjust our BC operating rates to manage through
this challenging period and while, in the near-term, we anticipate
these conditions to persist, we continue to believe that longer
term lumber market fundamentals remain positive."
Fourth Quarter Lumber Segment Highlights
For the lumber segment, the adjusted operating loss was
$192.4 million for the fourth quarter
compared to the previous quarter's adjusted operating loss of
$20.1 million, principally reflecting
a challenging period for the Company's Western Canadian operations,
with more modest quarter-over-quarter declines experienced in the
US South and Europe. Following the
pricing pressure seen in the previous quarter, the current period
results were principally driven by a continued deterioration in
global lumber market prices, with the average North American Random
Lengths Western Spruce/Pine/Fir ("SPF") 2x4 #2&Btr price down
US$19 per Mfbm, or 5%, the average
Southern Yellow Pine ("SYP") East 2x4 #2 down US$4 per Mfbm, or 1%, and the average SYP East
2x6 #2 down US$71 per Mfbm, or 18%,
quarter-over-quarter. This downward pricing was
coupled with more pronounced decreases for the wider-width
dimensions of both Western SPF and SYP, as well as moderately lower
market pricing in Europe. These
factors were partially offset by the benefit of higher production
and shipments in Europe following
the traditional seasonal downtime taken in the previous
quarter.
North American lumber market conditions remained fairly subdued
throughout most of the fourth quarter as the market softness
experienced at the end of the prior quarter continued well into the
current period. This, combined with a traditionally slower
consumption period, placed further downward pressure on North
American benchmark pricing early in the current quarter. However,
an unanticipated uptick in housing starts, coupled with the impact
of production curtailments, particularly in BC, and steady activity
in the repair and remodel sector, gave rise to a slight improvement
in North American benchmark pricing towards the end of the current
period.
Offshore lumber markets in Asia
remained relatively flat during the current quarter, as ongoing
economic uncertainty and a depressed real estate market, especially
in China, was met with ample
lumber supply in that region, and resulted in slight downward
pressure on pricing.
In Europe, lumber demand and
pricing experienced moderate decreases during the current quarter
driven largely by low residential housing starts and a seasonally
slower do-it-yourself sector.
Lumber Segment Outlook
Looking ahead, global lumber market conditions are anticipated
to remain under pressure through the first quarter of 2024, as
near-term challenges of affordability are projected to persist,
despite recent declines in mortgage rates in the US. On the supply
side, it is forecast that operational disruptions, driven by
geopolitical tensions as well as fibre and market-related
curtailments, especially in Western
Canada, will help reduce inventories to more normalized
levels. In the repair and remodel sector, demand is projected to
remain relatively steady through the first quarter of 2024, albeit
declining slightly from the levels experienced in 2023. Despite the
near-term challenges, underlying global lumber market fundamentals
in the longer term remain solid, with demographic trends supporting
the need for additional new home construction activity against the
backdrop of an aging housing stock and low inventories of new homes
available.
Offshore lumber demand in China
and Japan is forecast to show
signs of modest improvement through the first quarter of 2024, as
the benefits of various government stimulus measures implemented in
that region in 2023 are realized and inventories return to more
normalized levels.
In Europe, lumber markets and
pricing are anticipated to experience some upward momentum later in
the first quarter of 2024, as lumber supply constraints in that
region, tied in part to reduced log availability and increasing log
costs, are projected to overshadow the ongoing impact of low levels
of European residential construction activity.
From an operational perspective, there remains significant
uncertainty with regards to the availability of economically viable
fibre in BC. While the Company has taken a number of actions in
recent years in response to these fibre constraints, including the
aforementioned closures and capacity reductions, the near-term
fibre outlook in BC remains challenging. The Company continues to
anticipate sustained log cost pressures and persistent constraints
accessing economically viable fibre in BC for its sawmills, as well
as a challenging fibre supply environment for CPPI's pulp mills.
With these continued fibre-related pressures and the projected
weaker North American lumber market demand and pricing in the
near-term, the Company will continue to adjust operating rates in
BC to align with demand and economically available timber
supply.
Fourth Quarter Pulp and Paper Segment
Highlights
For the pulp and paper segment, the adjusted operating loss was
$26.0 million for the fourth quarter
of 2023, compared to an adjusted operating loss of $51.3 million for the third quarter of 2023.
These results principally reflected a moderate improvement in
global pulp market conditions, combined with a 20% increase in pulp
production quarter-over-quarter.
Following a relatively weak second and third quarter of 2023,
global softwood pulp markets moderately improved in the current
quarter, largely reflecting a slight uptick in demand and
purchasing activity in most major regions as global pulp producer
inventories returned to a more balanced range, ending December 2023 at 40 days of supply. The positive
pricing momentum in US-dollar NBSK list prices to China experienced towards the end of the prior
quarter, continued well into the current period, with prices
peaking in November 2023. For the
current quarter overall, average US-dollar NBSK pulp list prices to
China were US$748 per tonne, up US$68 per tonne, or 10%, from the previous
quarter.
Upon the successful completion of a scheduled maintenance outage
in September, the restart of CPPI's Northwood NBSK pulp mill
("Northwood") was delayed into the fourth quarter of 2023,
resulting in reduced NBSK pulp production early in the current
period. For the quarter overall however, the operating performance
at Northwood and Intercon continued to improve as the quarter
progressed, resulting in a 20% increase in pulp production in the
current period.
Pulp and Paper Segment Outlook
Looking forward, global softwood kraft pulp markets are
projected to be fairly subdued through the first quarter of 2024.
While global pulp producer inventories are estimated to remain
within the balanced range, demand uncertainty is anticipated,
driven principally by the deceleration in China NBSK pulp list prices in December and
leading up to the seasonally slower spring period in
China.
While no major maintenance outages are planned at CPPI's
operations in the first quarter of 2024, given the ongoing
uncertainty with regards to the availability of economically viable
fibre in BC, and a projected weak North American lumber market,
CPPI anticipates a challenging fibre supply environment for its
pulp mills (both for sawmill residual chips and whole-log chips),
especially in the near-term. CPPI will continue to monitor
operating conditions and will adjust operating rates at its pulp
mills to align with economically viable fibre supply.
Refer to the Company's annual Management's Discussion and
Analysis for further discussion on the Company's results for the
fourth quarter of 2023 on page 25.
Additional Information and Conference Call
A conference call to discuss the fourth quarter's financial and
operating results will be held on Wednesday,
March 6, 2024 at 8:00 AM Pacific
time. To participate in the call, please dial Toll-Free
1-888-390-0546. For instant replay access until March 20, 2024, please dial Toll-Free
1-888-390-0541 and enter participant pass code 242132#.
The conference call will be webcast live and will be available
at www.canfor.com. This news release, the attached financial
statements and a presentation used during the conference call can
be accessed via the Company's website at
http://www.canfor.com/investor-relations/webcasts.
Non-IFRS Financial Measures
Throughout this press release, reference is made to certain
non-IFRS financial measures which are used to evaluate the
Company's performance but are not generally accepted under IFRS and
may not be directly comparable with similarly titled measures used
by other companies.
The following table provides a reconciliation of these non-IFRS
financial measures to figures reported in the Company's
consolidated financial statements:
|
|
Q4
|
|
Q3
|
|
YTD
|
|
Q4
|
|
YTD
|
(millions of Canadian
dollars)
|
|
2023
|
|
2023
|
|
2023
|
|
2022
|
|
2022
|
Reported operating
income (loss)
|
$
|
(191.3)
|
$
|
(65.1)
|
$
|
(531.6)
|
$
|
(308.0)
|
$
|
1,074.1
|
Asset write-downs and
impairments
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
138.6
|
$
|
138.6
|
Inventory write-down
(recovery), net
|
$
|
(41.1)
|
$
|
(20.8)
|
$
|
(57.2)
|
$
|
5.6
|
$
|
93.5
|
Adjusted operating
income (loss)3
|
$
|
(232.4)
|
$
|
(85.9)
|
$
|
(588.8)
|
$
|
(163.8)
|
$
|
1,306.2
|
Amortization
|
$
|
102.2
|
$
|
107.7
|
$
|
420.4
|
$
|
106.8
|
$
|
397.2
|
Adjusted operating
income (loss) before
amortization, asset write-downs and
impairments3
|
$
|
(130.2)
|
$
|
21.8
|
$
|
(168.4)
|
$
|
(57.0)
|
$
|
1,703.4
|
After-tax impact, net
of non-controlling interests
|
|
Q4
|
|
Q3
|
|
YTD
|
|
Q4
|
|
YTD
|
(millions of Canadian
dollars)
|
|
2023
|
|
2023
|
|
2023
|
|
2022
|
|
2022
|
Net income
(loss)3
|
$
|
(117.1)
|
$
|
(23.1)
|
$
|
(326.1)
|
$
|
(207.9)
|
$
|
787.3
|
Foreign exchange
(gain) loss on term debt
|
$
|
(5.3)
|
$
|
6.4
|
$
|
(6.0)
|
$
|
(1.7)
|
$
|
10.8
|
Gain on derivative
financial instruments
|
$
|
(4.8)
|
$
|
(2.7)
|
$
|
(3.7)
|
$
|
(2.0)
|
$
|
(2.5)
|
Asset write-downs and
impairments
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
84.8
|
$
|
84.8
|
Adjusted net income
(loss)3
|
$
|
(127.2)
|
$
|
(19.4)
|
$
|
(335.8)
|
$
|
(126.8)
|
$
|
880.4
|
3
Attributable to equity shareholders of the Company.
|
Forward Looking Statements
Certain statements in this press release constitute
"forward-looking statements" which involve known and unknown risks,
uncertainties and other factors that may cause actual results to be
materially different from any future results, performance or
achievements expressed or implied by such statements. Words such as
"expects", "anticipates", "projects", "intends", "plans", "will",
"believes", "seeks", "estimates", "should", "may", "could", and
variations of such words and similar expressions are intended to
identify such forward-looking statements. These statements are
based on management's current expectations and beliefs and actual
events or results may differ materially. There are many factors
that could cause such actual events or results expressed or implied
by such forward-looking statements to differ materially from any
future results expressed or implied by such statements.
Forward-looking statements are based on current expectations and
Canfor assumes no obligation to update such information to reflect
later events or developments, except as required by law.
Canfor is a leading integrated forest products company based
in Vancouver, BC with interests in
BC, Alberta, North and
South Carolina, Alabama, Georgia, Mississippi, and Arkansas, as well as in Sweden with its majority acquisition of the
Vida Group. Canfor produces primarily softwood lumber and also owns
a 54.8% interest in Canfor Pulp Products Inc., which is one of the
largest global producers of market Northern Bleached Softwood Kraft
Pulp and a leading producer of high performance kraft paper. Canfor
shares are traded on the Toronto Stock Exchange under the symbol
CFP. For more information visit canfor.com.
SOURCE Canfor Corp