Overview
- Third quarter of 2020 reported operating income of
$300 million , adjusted operating income of$347 million - Record-high adjusted lumber earnings of
$387 million , driven by unprecedented surge in lumber prices and strong operational performance across all regions despite the impact of the coronavirus pandemic - Total net debt of
$526 million atSeptember 30, 2020 , improvement of$331 million from prior quarter; available liquidity of$1.1 billion ; net debt to capitalization of 18.6% atSeptember 30, 2020 - Adjusted shareholder net income of
$259 million , or$2.07 per share Vida Group ("Vida") completed acquisition ofBergs Timber Production AB ("Bergs") sawmill assets- Cumulative cash deposits of
$548 million on countervailing and anti-dumping duties atSeptember 30, 2020
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) | 2020 | 2020 | 2020 | 2019 | 2019 | |||||
Sales | $ | 1,550.4 | $ | 1,115.3 | $ | 3,836.4 | $ | 1,091.4 | $ | 3,553.1 |
Reported operating income (loss) before amortization | $ | 393.1 | $ | 189.5 | $ | 588.2 | $ | (27.4) | $ | 32.3 |
Reported operating income (loss) | $ | 299.6 | $ | 96.9 | $ | 307.7 | $ | (120.3) | $ | (234.7) |
Adjusted operating income before amortization1 | $ | 440.8 | $ | 150.7 | $ | 694.8 | $ | 27.2 | $ | 207.2 |
Adjusted operating income (loss)1 | $ | 347.3 | $ | 58.1 | $ | 414.3 | $ | (65.7) | $ | (59.8) |
Net income (loss)2 | $ | 218.1 | $ | 60.7 | $ | 208.8 | $ | (88.5) | $ | (223.9) |
Net income (loss) per share, basic and diluted2 | $ | 1.74 | $ | 0.48 | $ | 1.67 | $ | (0.71) | $ | (1.79) |
Adjusted net income (loss)2 | $ | 259.4 | $ | 83.4 | $ | 316.6 | $ | (42.6) | $ | (88.5) |
Adjusted net income (loss) per share, basic and diluted2 | $ | 2.07 | $ | 0.67 | $ | 2.53 | $ | (0.34) | $ | (0.71) |
1 Adjusted for countervailing and anti-dumping duties expense ( |
2 Attributable to equity shareholders of the Company. |
For the third quarter of 2020, the Company reported operating income of
After adjusting for countervailing ("CVD") and anti-dumping duties ("ADD") of
Adjusted lumber segment results of
The sharp rise in North American lumber demand saw US housing starts peak at 1,487,000 units in July, posting a year-over-year gain of 23%. Over the balance of the quarter, home construction activity remained strong, particularly for the single-family housing market (which consumes a higher proportion of lumber). For the third quarter of 2020, on a seasonally adjusted basis, US housing starts averaged 1,430,000 units, up 33% from the previous quarter, due to a significant uptick in both single and multi-family housing starts, and to a lesser extent, strength in the repair and remodeling sector driven by increased home centre demand. Canadian housing starts followed similar trends to the US, with August housing starts climbing to their highest levels since
Offshore demand from
The North American Random Lengths Western SPF 2x4 #2&Btr price climbed considerably at the end of the prior quarter and continued its run up through the third quarter, reaching an all-time high of
The North American Random Lengths SYP East 2x4 #2 price rose for a record consecutive twenty-four weeks beginning in the second quarter and into the third quarter of 2020, reaching a high of
The Company's European SPF unit sales realizations were significantly higher quarter-over-quarter despite a more modest increase of 5% in the average European indicative SPF lumber benchmark price to
Total lumber shipments, at 1.37 billion board feet, were 19% higher than the previous quarter, principally due to increased production.
Total lumber production, at 1.42 billion board feet, was 36% above the prior quarter primarily reflecting a return to more regular production rates following COVID-19 market-related curtailments across the Company's Western SPF and SYP operations early in the second quarter, offset in part by four weeks of seasonal production downtime at the Company's European SPF operations in July and August.
Lumber unit manufacturing and product costs improved slightly compared to the previous quarter, primarily reflecting a moderate improvement in unit costs at the Company's Western SPF and SYP operations, largely driven by improved productivity, combined with an ongoing focus on reducing spend. Unit manufacturing and product costs in the Company's European SPF operations experienced a modest increase quarter-over-quarter, principally as a result of the seasonal production downtime in the current quarter.
In the fourth quarter of 2020, it is currently anticipated that the
Results in the pulp and paper segment for the third quarter of 2020 reflected weak global pulp market conditions as well as significant fibre-related and previously deferred scheduled maintenance downtime, stemming from the ongoing impact of COVID-19, combined with a strong Canadian dollar. The significant effect of COVID-19 on lumber sawmill operating rates in the
During the scheduled outage at CPPI's Northwood NBSK pulp mill ("Northwood"), the mill's recovery boiler number one ("RB1") was assessed by Management to be in stable condition. Regarding the mill's recovery boiler number five ("RB5"), the previously announced capital upgrades to the upper furnace are ongoing and progressing well. In mid-October, Management made the decision to extend the outage on RB5 to enable the replacement of the lower furnace, in order to ensure the safe and reliable operation of the boiler. The estimated capital cost of the lower furnace upgrade is
Notwithstanding the anticipated correction of lumber prices, some of which has been experienced in recent weeks, lumber market fundamentals are forecast to reflect continued solid demand with low levels of supply chain inventory persisting into early 2021. Prices are likely to remain strong in the fourth quarter of 2020, as demand remains elevated and supply slowly recovers following severe shortages in the field.
Lumber prices to Asian-Pacific markets are projected to show an improvement through the fourth quarter of 2020. Inventory levels in
European prices are anticipated to improve through the fourth quarter of 2020 with lean inventories and the traditional lag in contract pricing, supporting the positive pricing outlook.
Looking forward, global softwood pulp demand is anticipated to show a slight improvement in the fourth quarter of 2020, as markets continue to recover from the economic impact of COVID-19 and elevated inventory levels slowly begin to normalize following the seasonally slower summer months. CPPI's results in the fourth quarter of 2020 will reflect the continuation of Northwood's scheduled maintenance into early October, as well as the aforementioned capital-related outage on one production line at Northwood (with the second production line continuing to operate over this period), combined with higher associated maintenance costs and lower shipment volumes.
Bleached kraft paper markets are anticipated to soften somewhat through the balance of 2020, particularly in
Commenting on the Company's third quarter results, Canfor's President and Chief Executive Officer,
Additional Information and Conference Call
A conference call to discuss the third quarter's financial and operating results will be held on
Non-IFRS Measures and Forward Looking Statements
Operating Income (Loss) before Amortization, Adjusted Operating Income (Loss), Adjusted Net Income (Loss) and Adjusted Net Income (Loss) per Share are not generally accepted earnings measures and should not be considered as an alternative to net income (loss) or cash flows as determined in accordance with IFRS. Refer to the Company's Annual Management's Discussion and Analysis for a reconciliation of Operating Income (Loss) before Amortization and Adjusted Operating Income (Loss) to Operating Income (Loss) and Adjusted Net Income (Loss) to Net Income (Loss) reported in accordance with IFRS.
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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