- Q2 2022 reported operating income of
$532 million ; quarterly sales of$2.2 billion - Downward pressure on North American lumber market fundamentals; significant decline in US-dollar lumber benchmark pricing; uptick in European market pricing largely tied to traditional quarterly lag
- Improved lumber & pulp shipments despite ongoing transportation challenges
- Shareholder net income of
$374 million , or$3.02 per share
The following table summarizes selected financial information for the Company for the comparative periods:
Q2 | Q1 | YTD | Q2 | YTD | ||||||
(millions of Canadian dollars, except per share amounts) | 2022 | 2022 | 2022 | 2021 | 2021 | |||||
Sales | $ | 2,171.7 | $ | 2,213.3 | $ | 4,385.0 | $ | 2,495.2 | $ | 4,437.0 |
Reported operating income before amortization | $ | 630.3 | $ | 830.7 | $ | 1,461.0 | $ | 1,134.6 | $ | 1,831.3 |
Reported operating income | $ | 531.6 | $ | 741.9 | $ | 1,273.5 | $ | 1,041.3 | $ | 1,643.9 |
Adjusted operating income before amortization1 | $ | 630.8 | $ | 829.6 | $ | 1,460.4 | $ | 1,134.6 | $ | 1,829.1 |
Adjusted operating income1 | $ | 532.1 | $ | 740.8 | $ | 1,272.9 | $ | 1,041.3 | $ | 1,641.7 |
Net income2 | $ | 373.8 | $ | 534.0 | $ | 907.8 | $ | 726.9 | $ | 1,154.7 |
Net income per share, basic and diluted2 | $ | 3.02 | $ | 4.29 | $ | 7.32 | $ | 5.81 | $ | 9.22 |
Adjusted net income1, 2 | $ | 379.7 | $ | 529.0 | $ | 908.7 | $ | 721.2 | $ | 1,155.4 |
Adjusted net income per share, basic and diluted1, 2 | $ | 3.07 | $ | 4.25 | $ | 7.33 | $ | 5.76 | $ | 9.23 |
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 |
For the second quarter of 2022, the Company reported operating income of
Commenting on the Company's second quarter results, Canfor's President and Chief Executive Officer,
Results in the lumber segment decreased
Following significant strength in the previous quarter, North American market fundamentals experienced downward pressure throughout most of the current quarter, principally driven by the impact of elevated interest rates and rising inflation. These economic headwinds weighed on lumber market demand in the current period, prompting a modest decline in new home construction activity in the US, particularly for single-family units. Decreased demand combined with relatively steady inventory levels in the supply chain resulted in a significant drop in North American benchmark lumber prices in the current quarter. In the repair and remodeling sector, despite inflationary cost pressures and competing uses for discretionary spending, demand improved as the quarter progressed with consumers taking advantage of lower cost building materials tied to the significant decline in US-dollar benchmark lumber prices.
Offshore lumber demand and prices in
Results in the pulp and paper segment largely reflected materially higher Northern Bleached Softwood Kraft ("NBSK") pulp unit sales realizations, and to a lesser extent, a 16% uplift in pulp shipments, as transportation disruptions globally and in
Pulp production was up 6% from the previous quarter, as NBSK productivity in the current quarter was maximized to available transportation. Concurrently, logistics-related downtime at
Looking ahead, global lumber market fundamentals are anticipated to be relatively solid through the third quarter of 2022. New home construction activity in
Results in the third quarter are anticipated to reflect the continuation of reduced operating schedules across the Company's Western Canadian sawmills, including two weeks of rotating downtime in July and August, to help align production capacity with transportation availability, market demand and sustainable timber supply. The Company is forecast to use this downtime to complete maintenance projects and other site activities to help mitigate the impact on employees. These capacity reductions are anticipated to result in an incremental impact to production of at least 275 million board feet. In addition, with the material reduction in North American benchmark lumber prices, rising inflationary cost pressures, ongoing transportation challenges and the significant increase in BC stumpage rates effective
European lumber pricing is anticipated to experience ongoing pressure through the third quarter of 2022, driven principally by weakness experienced in the North American region in the second quarter, combined with the continued downward pressure in the repair and remodeling segment in
Global softwood kraft pulp markets are projected to remain solid through the third quarter of 2022, reflecting both global pulp production and supply constraints, as well as steady demand. High yield markets are forecast to see slight improvements through the third quarter of 2022, also tied to limited supply availability.
Notwithstanding the modest improvement in BC's transportation networks seen in the later part of the second quarter, results in the third quarter are anticipated to reflect the continued impact of and uncertainties associated with a constrained rail service network and the related pressures on CPPI's operations and shipments. Furthermore, it is projected that a restart of
In addition, pulp and paper segment results in the third quarter of 2022 will reflect the impact of the continuation of Northwood's scheduled maintenance outage into mid-July (approximately 16,000 tonnes), as well as a scheduled maintenance outage at CPPI's Intercontinental NBSK pulp mill in the latter part of the third quarter and into the fourth quarter, with a projected 12,000 tonnes of reduced NBSK pulp production.
A conference call to discuss the second quarter's financial and operating results will be held on
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 condensed consolidated interim financial statements:
(millions of Canadian dollars) | Q2 | Q1 | YTD | Q2 | YTD | |||||
2022 | 2022 | 2022 | 2021 | 2021 | ||||||
Reported operating income | $ | 531.6 | $ | 741.9 | $ | 1,273.5 | $ | 1,041.3 | $ | 1,643.9 |
Inventory write-down (recovery), net | $ | 0.5 | $ | (1.1) | $ | (0.6) | $ | - | $ | (2.2) |
Adjusted operating income | $ | 532.1 | $ | 740.8 | $ | 1,272.9 | $ | 1,041.3 | $ | 1,641.7 |
Amortization | $ | 98.7 | $ | 88.8 | $ | 187.5 | $ | 93.3 | $ | 187.4 |
Adjusted operating income before amortization | $ | 630.8 | $ | 829.6 | $ | 1,460.4 | $ | 1,134.6 | $ | 1,829.1 |
After-tax impact, net of non-controlling interests | Q2 | Q1 | YTD | Q2 | YTD | |||||
(millions of Canadian dollars) | 2022 | 2022 | 2022 | 2021 | 2021 | |||||
Net income | $ | 373.8 | $ | 534.0 | $ | 907.8 | $ | 726.9 | $ | 1,154.7 |
Foreign exchange (gain) loss on term debt | $ | 4.9 | $ | (3.0) | $ | 1.9 | $ | (5.7) | $ | (8.3) |
(Gain) loss on derivative financial instruments | $ | 1.0 | $ | (2.0) | $ | (1.0) | $ | - | $ | 9.0 |
Adjusted net income3 | $ | 379.7 | $ | 529.0 | $ | 908.7 | $ | 721.2 | $ | 1,155.4 |
3 Attributable to equity shareholders of the Company. |
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
SOURCE
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