Canfor reports results for the second quarter of 2024
Overview.
- Q2 2024 operating loss of
$251 million , shareholder net loss of$191 million , or$1.61 per share. - After taking into consideration adjusting items1 of
$83 million as well as restructuring costs of$39 million , Q2 2024 operating loss of$129 million , compared to a similarly adjusted operating loss of$116 million in Q1 2024. - Sustained weakness in North American lumber markets with continued downward pressure on benchmark pricing, particularly for Southern
Yellow Pine ("SYP"). - Solid earnings from
Europe ; persistently weak SYP pricing negatively impacted results for the US South; Western Canadian results remained challenging. - Announced permanent closure of Polar and
Jackson sawmills and suspension of planned reinvestment inHouston . - Strong global pulp pricing and moderate improvement in NBSK pulp unit sales realizations.
- Announced indefinite curtailment of one production line at Northwood NBSK pulp mill.
- Ongoing constraints accessing economically viable fibre in BC impacting lumber and pulp operating rates in the near-term and through the balance of the year.
Financial results.
The following table summarizes selected financial information for the Company for the comparative periods:
(millions of Canadian dollars, except per share amounts) |
|
Q2 2024 |
|
Q1 2024 |
|
YTD 2024 |
|
Q2 2023 |
|
YTD 2023 |
|
||||
Sales |
$ |
1,381.5 |
$ |
1,382.7 |
$ |
2,764.2 |
$ |
1,446.0 |
$ |
2,831.4 |
|
||||
Reported operating income (loss) before amortization, |
$ |
(98.3) |
$ |
19.8 |
$ |
(78.5) |
$ |
41.0 |
$ |
(64.7) |
|
||||
Reported operating loss |
$ |
(250.8) |
$ |
(85.8) |
$ |
(336.6) |
$ |
(66.7) |
$ |
(275.2) |
|
||||
Adjusted operating loss before amortization, asset |
$ |
(46.9) |
$ |
(10.4) |
$ |
(57.3) |
$ |
(16.4) |
$ |
(60.0) |
|
||||
Adjusted operating loss1 |
$ |
(167.8) |
$ |
(116.0) |
$ |
(283.8) |
$ |
(124.1) |
$ |
(270.5) |
|
||||
Net loss2 |
$ |
(191.1) |
$ |
(64.5) |
$ |
(255.6) |
$ |
(43.9) |
$ |
(185.9) |
|
||||
Net loss per share, basic and diluted2 |
$ |
(1.61) |
$ |
(0.54) |
$ |
(2.15) |
$ |
(0.36) |
$ |
(1.54) |
|
||||
Adjusted net loss1, 2 |
$ |
(168.7) |
$ |
(52.1) |
$ |
(220.8) |
$ |
(44.3) |
$ |
(189.2) |
|
||||
Adjusted net loss per share, basic and diluted 1, 2 |
$ |
(1.42) |
$ |
(0.44) |
$ |
(1.86) |
$ |
(0.36) |
$ |
(1.57) |
|
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. |
|
The Company reported an operating loss of
Commenting on the Company's second quarter results, Canfor's President and Chief Executive Officer,
During the quarter, we made some difficult decisions, including the permanent closure of our Polar sawmill and the suspension of plans to invest in
"For our pulp business" added Kayne, "despite strong global pulp pricing and improved NBSK pulp unit sales realizations experienced during the current quarter, fibre supply constraints in BC led to the announcement of an indefinite curtailment of one production line at our Northwood NBSK pulp mill."
Second quarter lumber segment highlights.
For the lumber segment, the operating loss was
After taking into consideration these adjusting items and restructuring costs, the lumber segment operating loss in the second quarter of 2024 was
In
Throughout the second quarter of 2024, North American lumber markets faced sustained downward pressure. Despite strong underlying fundamentals, persistent affordability constraints continued to discourage potential homebuyers and lowered US residential construction activity during the quarter. The repair and remodeling sector also saw reduced activity quarter-over-quarter, largely due to lower disposable household income levels. These demand trends, coupled with increased available supply led to a notable drop in North American benchmark pricing compared to the previous quarter.
US housing starts averaged 1,348,000 units on a seasonally adjusted basis for the current quarter, down 4% from the previous quarter, reflecting a 5% decrease in single family homes and a 1% decrease in multi-family starts. In
Offshore lumber demand and pricing in
In
Lumber segment outlook.
Looking ahead, North American lumber market conditions are forecast to experience continued weakness in the third quarter of 2024 and through the balance of the year. Residential construction activity is anticipated to be challenged by ongoing affordability headwinds in the near-term, especially in the multi-family segment. Demand in the repair and remodeling sector is also projected to trend downwards through the balance of the year.
Offshore lumber demand and pricing in
European lumber pricing is anticipated to come under some modest pressure in the third quarter of 2024 as a seasonal slow-down in the do-it-yourself space and ongoing low levels of residential construction activity are combined with continued log supply constraints associated with reduced log availability and increasing costs in the region.
In the US South, the Company's ongoing capital investments in its new greenfield sawmill in
In BC, there remains significant ongoing uncertainty with regards to the availability of economically viable fibre. The Company continues to anticipate sustained log cost pressures and persistent constraints accessing economically viable fibre in BC for its sawmills, as well as a challenging fibre environment for
Second quarter pulp and paper segment highlights.
For the pulp and paper segment, the operating loss was
In
Although global pulp producer inventories remained relatively balanced throughout the current quarter, the uplift in global softwood kraft pulp markets experienced at the end of the first quarter continued well into the second quarter, as global supply disruptions gave rise to an uptick in global pulp pricing. As a result, NBSK pulp list prices on orders from
Pulp and paper segment outlook.
Looking forward, global softwood kraft pulp market conditions are anticipated to soften through the third quarter of 2024 as global softwood pulp supply stabilizes, following disruptions in the first and second quarters of 2024, and as new hardwood capacity in
As a result of the aforementioned decision to wind down one production line at CPPI's Northwood pulp mill in
Additional information and conference call.
A conference call to discuss the second quarter's financial and operating results will be held on
The conference call will be webcast live and will be available at www.canfor.com. This news release, the attached financial statements and a presentation used during the conference call can be accessed via the Company's website at www.canfor.com/investor-relations/webcasts.
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, except per share amounts) |
|
Q2 2024 |
|
Q1 2024 |
|
YTD 2024 |
|
Q2 2023 |
|
YTD 2023 |
||||
Reported operating loss |
$ |
(250.8) |
$ |
(85.8) |
$ |
(336.6) |
$ |
(66.7) |
$ |
(275.2) |
||||
Asset write-downs and impairments |
$ |
31.6 |
$ |
- |
$ |
31.6 |
$ |
- |
$ |
- |
||||
Inventory write-down (recovery), net |
$ |
51.4 |
$ |
(30.2) |
$ |
21.2 |
$ |
(57.4) |
$ |
4.7 |
||||
Adjusted operating loss |
$ |
(167.8) |
$ |
(116.0) |
$ |
(283.8) |
$ |
(124.1) |
$ |
(270.5) |
||||
Amortization |
$ |
120.9 |
$ |
105.6 |
$ |
226.5 |
$ |
107.7 |
$ |
210.5 |
||||
Adjusted operating loss before amortization, asset write-downs and impairments |
$ |
(46.9) |
$ |
(10.4) |
$ |
(57.3) |
$ |
(16.4) |
$ |
(60.0) |
After-tax impact, net of non-controlling interests |
|
Q2 2024 |
|
Q1 2024 |
|
YTD 2024 |
|
Q2 2023 |
|
YTD 2023 |
|
|||||||
Net loss3 |
$ |
(191.1) |
$ |
(64.5) |
$ |
(255.6) |
$ |
(43.9) |
$ |
(185.9) |
|
|||||||
Foreign exchange (gain) loss on term debt |
$ |
3.1 |
$ |
6.6 |
$ |
9.7 |
$ |
(6.7) |
$ |
(7.1) |
|
|||||||
(Gain) loss on derivative financial instruments |
$ |
(3.9) |
$ |
5.8 |
$ |
1.9 |
$ |
6.3 |
$ |
3.8 |
|
|||||||
Asset write-downs and impairments |
$ |
23.2 |
$ |
- |
$ |
23.2 |
$ |
- |
$ |
- |
|
|||||||
Adjusted net loss3 |
$ |
(168.7) |
$ |
(52.1) |
$ |
(220.8) |
$ |
(44.3) |
$ |
(189.2) |
|
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.
About
Canfor is a global leader in the manufacturing of high-value low-carbon forest products including dimension and specialty lumber, engineered wood products, pulp and paper, wood pellets and green energy. Proudly headquartered in
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