Overview
- Q3 2023 consolidated operating loss of
$65 million , including a$49 million operating loss from the pulp business; adjusted operating loss of$86 million ; adjusted shareholder net loss of$19 million , or$0.16 per share - Continued strong results in the US South; solid European results despite seasonal downtime; another challenging quarter for
Western Canada - Persistent pressure on global lumber market demand and pricing through much of the quarter
- Market-driven curtailments in
Western Canada & seasonal downtime inEurope led to lower shipments - Confirmed future investment of approximately
$200 million in a new, state-of-the-art manufacturing facility inHouston, British Columbia - Challenging results for
Canfor Pulp despite stable global pulp market fundamentals;Northwood NBSK Pulp Mill scheduled maintenance completed as planned; restart delayed due to operational challenges
Financial Results
The following table summarizes selected financial information for the Company for the comparative periods:
Q3 | Q2 | YTD | Q3 | YTD | ||||||
(millions of Canadian dollars, except per share amounts) | 2023 | 2023 | 2023 | 2022 | 2022 | |||||
Sales | $ | 1,312.3 | $ | 1,446.0 | $ | 4,143.7 | $ | 1,666.4 | $ | 6,053.4 |
Reported operating income (loss) before amortization | $ | 42.6 | $ | 41.0 | $ | (22.1) | $ | 211.5 | $ | 1,672.5 |
Reported operating income (loss) | $ | (65.1) | $ | (66.7) | $ | (340.3) | $ | 108.6 | $ | 1,382.1 |
Adjusted operating income (loss) before amortization1 | $ | 21.8 | $ | (16.4) | $ | (38.2) | $ | 300.0 | $ | 1,760.4 |
Adjusted operating income (loss)1 | $ | (85.9) | $ | (124.1) | $ | (356.4) | $ | 197.1 | $ | 1,470.0 |
Net income (loss)2 | $ | (23.1) | $ | (43.9) | $ | (209.0) | $ | 87.4 | $ | 995.2 |
Net income (loss) per share, basic and diluted2 | $ | (0.19) | $ | (0.36) | $ | (1.74) | $ | 0.71 | $ | 8.05 |
Adjusted net income (loss)1, 2 | $ | (19.4) | $ | (44.3) | $ | (208.6) | $ | 98.5 | $ | 1,007.2 |
Adjusted net income (loss) per share, basic and diluted1, 2 | $ | (0.16) | $ | (0.36) | $ | (1.73) | $ | 0.80 | $ | 8.15 |
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. |
For the third quarter of 2023, the Company reported a consolidated operating loss of
Results in the current quarter include a net
Commenting on the Company's third quarter results, Canfor's President and Chief Executive Officer,
Lumber Segment Highlights and Outlook
For the lumber segment, adjusted results increased
Lumber market fundamentals remained relatively subdued through most of the third quarter of 2023. Market-related curtailments and wildfires, particularly in
Notwithstanding affordability headwinds, high home prices and low inventory in the existing home market led to an increase in US housing starts in July, particularly for single-family units which consume approximately three times the volume of lumber compared to multi-family homes. Extreme heat across much of the Southern US in August, however, hindered building activity through the balance of the period. As a result, for the current quarter overall, US housing starts averaged 1,359,000 units on a seasonally adjusted basis, down 6% from the previous quarter, reflecting a 3% increase in single-family starts and a 24% decline in multi-family starts. In
Offshore lumber pricing to Asian markets remained relatively stable in the third quarter of 2023, as improved demand in
In
Operationally, in the US South, the Company continued to successfully ramp-up its greenfield
In
Looking ahead, although longer-term lumber market fundamentals remain positive, affordability constraints are anticipated to continue to weigh on demand in the near to mid-term. High mortgage rates, persistent inflation and geopolitical tensions are forecast to exert pressure on new home construction activity through the balance of the year and into 2024. On the positive side, persistent underlying demand for housing in
Offshore lumber demand in
European lumber pricing is forecast to face downward pressure through the fourth quarter of 2023 driven mainly by low levels of residential construction activity, moderated to a degree, by continued strength in the do-it-yourself space.
Looking forward from an operational perspective, there remains significant uncertainty with regards to the availability of economically viable fibre in BC. This uncertainty is driven by recent wildfire events, combined with the lasting impacts of the Mountain Pine Beetle epidemic, uncertainties associated with unsettled land and title claims by various Indigenous Nations and outstanding policy, land use decisions and legislative initiatives by the BC Government. While the Company has taken a number of actions in recent years in response to these fibre constraints, the near-term outlook in BC remains challenging. As a result, the Company continues to anticipate sustained log cost pressures in BC for its sawmills and a challenging fibre supply environment for CPPI's pulp mills (both for sawmill residual chips and whole-log chips). With these continued log cost pressures and the projected weaker North American lumber market demand and pricing, the Company will continue to adjust operating rates to align with demand and economically available timber supply.
Pulp and Paper Segment Highlights and Outlook
For the pulp and paper segment, the adjusted operating loss was
Global softwood pulp market fundamentals were relatively flat through the current quarter, following a significant decline in the preceding quarter. Later in the period, however, buyers started to regain some market confidence, with lower global pulp pricing leading to a slight increase in purchasing activity, as producers worked to reduce their higher-than-average inventory levels. Consequently, US-dollar NBSK list prices to
Looking forward, global softwood pulp markets are anticipated to experience a slight improvement in the fourth quarter of 2023, as elevated inventory levels slowly begin to normalize following the seasonally slower summer months. These factors are projected to be tempered by general global economic uncertainty and pressures.
CPPI's results in the fourth quarter of 2023 will reflect the aforementioned operational challenges at Northwood associated with the delayed startup, with a projected 30,000 tonnes of reduced NBSK pulp production, combined with higher associated maintenance costs and lower shipment volumes. These factors are also anticipated to give rise to a larger-than-normal unfavourable timing lag in shipments (vs orders) and thus it is estimated that fourth quarter results will reflect persistently lower NBSK pulp sales unit realizations, regardless of any uptick in US-dollar NBSK list prices that may arise.
While no major maintenance outages are planned at CPPI's operations in the fourth quarter of 2023, given the ongoing uncertainty with regards to the availability of economically viable fibre in BC, and a projected weaker North American lumber market, CPPI anticipates a challenging fibre supply environment for its pulp mills (both for sawmill residual chips and whole-log chips). CPPI will continue to monitor operating conditions and will adjust operating rates, to align with economically viable fibre supply, through the balance of 2023 and into 2024.
Additional Information and Conference Call
A conference call to discuss the third quarter's financial and operating results will be held on
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 condensed consolidated interim financial statements:
(millions of Canadian dollars) | Q3 2023 | Q2 2023 | YTD 2023 | Q3 2022 | YTD 2022 | ||||||||||
Reported operating income (loss) | $ | (65.1) | $ | (66.7) | $ | (340.3) | $ | 108.6 | $ | 1,382.1 | |||||
Inventory write-down (recovery), net | $ | (20.8) | $ | (57.4) | $ | (16.1) | $ | 88.5 | $ | 87.9 | |||||
Adjusted operating income (loss) | $ | (85.9) | $ | (124.1) | $ | (356.4) | $ | 197.1 | $ | 1,470.0 | |||||
Amortization | $ | 107.7 | $ | 107.7 | $ | 318.2 | $ | 102.9 | $ | 290.4 | |||||
Adjusted operating income (loss) before amortization | $ | 21.8 | $ | (16.4) | $ | (38.2) | $ | 300.0 | $ | 1,760.4 | |||||
After-tax impact, net of non-controlling interests | Q3 2023 | Q2 | YTD | Q3 | YTD | ||||||||||
Net income (loss)3 | $ | (23.1) | $ | (43.9) | $ | (209.0) | $ | 87.4 | $ | 995.2 | |||||
Foreign exchange (gain) loss on term debt | $ | 6.4 | $ | (6.7) | $ | (0.7) | $ | 10.6 | $ | 12.5 | |||||
(Gain) loss on derivative financial instruments | $ | (2.7) | $ | 6.3 | $ | 1.1 | $ | 0.5 | $ | (0.5) | |||||
Adjusted net income (loss)3 | $ | (19.4) | $ | (44.3) | $ | (208.6) | $ | 98.5 | $ | 1007.2 |
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
SOURCE
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