Overview
- First quarter of 2020 reported operating loss of
$89 million , including a$63 million inventory write-down in the lumber segment; adjusted operating income of$9 million - Adjusted shareholder net loss of
$26 million , or$0.21 per share
Financial Results
The following table summarizes selected financial information for the Company for the comparative periods:
(millions of Canadian dollars, except per share amounts) | Q1 | Q4 | Q1 | |||||||
2020 | 2019 | 2019 | ||||||||
Sales | $ | 1,170.7 | $ | 1,105.2 | $ | 1,148.7 | ||||
Reported operating income before amortization | $ | 5.6 | $ | 35.6 | $ | 16.6 | ||||
Reported operating income (loss) | $ | (88.8) | $ | (59.6) | $ | (64.3) | ||||
Adjusted operating income before amortization1 | $ | 103.3 | $ | 62.7 | $ | 91.8 | ||||
Adjusted operating income (loss)1 | $ | 8.9 | $ | (32.5) | $ | 10.9 | ||||
Net income (loss)2 | $ | (70.0) | $ | (39.1) | $ | (86.6) | ||||
Net income (loss) per share, basic and diluted2 | $ | (0.56) | $ | (0.31) | $ | (0.69) | ||||
Adjusted net income (loss)2 | $ | (26.2) | $ | (8.2) | $ | (33.9) | ||||
Adjusted net income (loss) per share, basic and diluted2 | $ | (0.21) | $ | (0.06) | $ | (0.27) |
1 Adjusted for countervailing and anti-dumping duties expense ( |
2 Attributable to equity shareholders of the Company. |
For the first quarter of 2020, the Company reported an operating loss of
Reported results in the first quarter of 2020 included a
Before taking account of inventory write-downs at the end of March, adjusted lumber segment operating income reflected a modest improvement in the quarter-over-quarter results from the Company's Western Spruce/Pine/Fir ("SPF") operations, largely due to a moderate increase in US-dollar Western SPF lumber prices, a modest decline in log costs in
Results in the pulp and paper segment principally reflected a solid operating performance at
The moderate up-tick in lumber market fundamentals and favourable macroeconomic conditions experienced at the end of 2019, particularly in North American home construction activity and the repair and remodeling sector, continued through the first part of the current quarter. Global lumber market conditions weakened, however, in late February and March as the effects of COVID-19 spread globally. US housing starts, on a seasonally adjusted basis, averaged 1,592,000 units for January and February, up 10% from the previous quarter; March housing starts experienced a steep decline to 1,216,000 units, a decrease of 22% in one month, the largest monthly decline in over thirty years, with continued downward pressure anticipated in April. In
The average benchmark North American Random Lengths Western SPF 2x4 #2&Btr price was up
The steep decline in lumber prices through March and into April, combined with the ongoing pressure anticipated on US housing starts, resulted in a lumber inventory write-down related to the Company's Western SPF operations of
The Company's SYP lumber unit sales realizations were broadly in line with the prior quarter, as moderate price increases for most wider-width SYP dimensions were offset by a decrease in the SYP East 2x4 #2 price, which fell 5% to
The average European indicative SPF lumber benchmark price (an internally generated benchmark based on delivered price to the largest continental market), at
Total lumber shipments, at 1.25 billion board feet, were slightly above the previous quarter, with significantly higher European SPF shipments and a moderate increase in SYP shipments in the current quarter more than offsetting decreased shipments of Western SPF lumber. The latter reflected weather-related transportation constraints and rail line blockades early in the period, combined with vessel disruptions, particularly to
Total lumber production, at 1.29 billion board feet, was up 3% from the prior quarter, primarily reflecting an increase in operating days in all regions due to fewer statutory holidays, combined with higher production in the US South following capital-related downtime at two of the Company's sawmills in the previous quarter, as well as increased Western SPF production in the current quarter after the market-related downtime taken in the comparative period. The Company's European SPF operations continued to perform well in the current quarter.
Lumber unit manufacturing and product costs were broadly in line with the prior quarter, as the benefit of increased Western SPF, SYP and, to a lesser extent, European SPF production, combined with lower market pricing on consumed log costs in
After a modest rebound in Asian pulp markets early in the quarter, global pulp markets weakened in late February and into March reflecting the spread of COVID-19. Demand for tissue, however, remained solid, which helped to offset weakness elsewhere, particularly in the printing and writing segment. Global softwood pulp producer inventories ended February at 37 days of supply, in line with
Pulp production was 298,000 tonnes for the first quarter of 2020, up 12,000 tonnes, or 4%, from the previous quarter, principally reflecting improved productivity and increased operating days in the current quarter, following a market-related curtailment early in the previous quarter at CPPI's
Pulp shipments were up 23,000 tonnes, or 9%, from the previous quarter, largely due to the aforementioned increase in pulp production quarter-over-quarter combined with the modest improvement in purchasing from
Pulp unit manufacturing costs were modestly lower than the prior quarter, as the benefit of increased production and lower maintenance spend in the current quarter more than offset seasonally higher energy costs. Fibre costs were slightly lower than the previous period primarily reflecting a lower proportion of higher-cost whole log chips consumed and, to a lesser extent, seasonal pricing adjustments.
In response to the significant global impacts of the COVID-19 pandemic, in late March and early April, Canfor announced a series of significant measures. These included extensive capacity reductions across all three of the Company's sawmill operating regions, most notably, impacting the majority of the Company's BC sawmills, as well as a three-week curtailment of CPPI's Northwood pulp mill in place of the previously scheduled spring maintenance turnaround (postponed until later in 2020). These curtailments are currently anticipated to result in a reduction of approximately 170 million board feet of Western SPF production, 50 million board feet of SYP production, 17 million board feet of European SPF production and 35,000 tonnes of NBSK pulp production in the second quarter of 2020. The Company also announced the immediate reduction of its planned capital expenditures for 2020, which were already modest, by
In addition to the COVID-19 related temporary downtime, CPPI has maintenance outages currently scheduled at the Northwood NBSK pulp mill and the Taylor BCTMP mill in the third quarter of 2020 with a projected 30,000 tonnes of reduced NBSK pulp production and a projected 5,000 tonnes of reduced BCTMP production, respectively.
Looking forward, the impacts of COVID-19 on global macroeconomics are still unfolding and the Company anticipates lumber market conditions will remain extremely volatile through much of 2020. Global lumber market demand in recent weeks has declined sharply in the wake of closures of non-essential businesses and lockdowns implemented in many parts of
Lumber prices to
In the pulp and paper segment, global softwood pulp demand is currently projected to be solid through the second quarter of 2020, particularly from
With the impacts of COVID-19 anticipated to weigh heavily on the Company's 2020 financial performance, the Company has implemented corporate-wide initiatives focused on reducing working capital, which includes accelerating receipt of income tax refund receivables, leveraging payment deferral programs, and suspending all non-essential overhead spend. These initiatives, combined with a continued disciplined approach to cash management, materially reduced capital spending and no debt repayments until 2023 at the earliest, will allow the Company to preserve its solid balance sheet position.
Commenting on the Company's first quarter results, Canfor's President and Chief Executive Officer,
Additional Information and Conference Call
A conference call to discuss the first 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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