CANFOR PULP PRODUCTS INC. 
Overview
- Third quarter of 2020 reported operating loss of
$28 million ; net loss of$18 million , or$0.28 per share - Strong balance sheet maintained, net debt to capitalization of 3.4% at
September 30, 2020
Financial Results
The following table summarizes selected financial information for CPPI for the comparative periods:
Q3 | Q2 | YTD | Q3 | YTD | ||||||
(millions of Canadian dollars, except per share amounts) | 2020 | 2020 | 2020 | 2019 | 2019 | |||||
Sales | $ | 226.4 | $ | 250.7 | $ | 752.7 | $ | 216.9 | $ | 840.4 |
Reported operating income (loss) before amortization | $ | (8.7) | $ | 13.3 | $ | 32.3 | $ | (20.3) | $ | 61.8 |
Reported operating loss | $ | (27.6) | $ | (6.3) | $ | (27.8) | $ | (44.0) | $ | (7.5) |
Adjusted operating income (loss) before amortization1 | $ | (11.7) | $ | 21.5 | $ | 26.8 | $ | (20.3) | $ | 75.5 |
Adjusted operating income (loss)1 | $ | (30.6) | $ | 1.9 | $ | (33.3) | $ | (44.0) | $ | 6.2 |
Net loss | $ | (18.1) | $ | (1.1) | $ | (12.2) | $ | (32.4) | $ | (11.0) |
Net loss per share, basic and diluted | $ | (0.28) | $ | (0.02) | $ | (0.19) | $ | (0.50) | $ | (0.17) |
1 Adjusted for inventory write-downs and recoveries ( |
The Company reported an operating loss of
The Company's operating results 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 the coronavirus ("COVID-19") outbreak, combined with a
Global pulp market conditions were weak during the current quarter, with the ongoing sharp decline in demand for printing and writing papers offsetting improved demand for tissue products. Global softwood pulp producer inventories at the end of
NBSK pulp list prices to
Energy revenues were broadly in line with the prior quarter, as decreased energy generation due to reduced production, was offset by slightly higher energy prices.
Pulp production was 227,000 tonnes for the third quarter of 2020, down 33,000 tonnes, or 13%, from the previous quarter, primarily reflecting the quarter-over-quarter impact of downtime. In the current quarter, decreased operating days primarily reflected the aforementioned curtailment, which reduced pulp production by 38,000 tonnes. This was combined with a scheduled maintenance outage at the Company's Taylor BCTMP mill, which reduced pulp production by 10,000 tonnes, and, to a lesser extent, several operational issues at the Company's PG pulp mill. In September, the Company's Northwood NBSK pulp mill ("Northwood") commenced its scheduled maintenance outage, which was completed on one production line in early October; this outage reduced pulp production by 20,000 tonnes in the current quarter and by a further 15,000 tonnes in
During Northwood's scheduled outage, 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
Pulp shipments were in line with the previous quarter, as the 13% decrease in pulp production was offset by a drawdown of inventory in the current quarter during the downtime.
Pulp unit manufacturing costs were moderately higher than the prior quarter primarily reflecting reduced production in the current quarter. Fibre costs showed a slight decline over the same period, largely driven by lower market-based prices for sawmill residual chips (linked to Canadian dollar NBSK pulp sales realizations) in the current quarter.
Operating income in the Company's paper segment was
Looking forward, the Company anticipates global softwood pulp demand 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. The Company'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, CPPI's 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 and Adjusted Operating Income (Loss) 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) reported in accordance with IFRS to Operating Income (Loss) before Amortization and to Adjusted Operating Income (Loss).
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 the Company assumes no obligation to update such information to reflect later events or developments, except as required by law.
SOURCE
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