Canfor Announces 2022 and Fourth Quarter 2022 Results

• 2022 adjusted operating income of $1.3 billion;
• Q4 2022 adjusted operating loss of $164 million;
• Significant weakness in lumber market demand in Q4 2022 led to a sharp deterioration in lumber pricing late in the year

2022 was another strong year for Canfor, with the strength in global lumber market fundamentals experienced late in 2021 continuing well into the current year. Significant lumber demand led by solid activity in both new home construction and the repair and remodel segment, encountered tight supply due to supply chain disruptions. The result was ongoing global pricing pressure and high benchmark lumber prices through the first part of the year. As the year progressed, rising interest rates and inflation put significant downward pressure on housing affordability and global lumber market demand, leading to a rapid decline in global lumber market pricing in the latter part of the year. In response, the Company implemented reduced operating schedules at its Western Canadian operations. The Company’s strong earnings, however, reflect the continued benefit of its global diversification strategy which helped to moderate these challenges in British Columbia (“BC”).

Early in 2023, after an extensive analysis of its pulp mill operating footprint and the long-term supply of economic residual fibre, Canfor Pulp made the decision to permanently close the pulp line at its Prince George Pulp and Paper Mill (“PG”). Similarly, in order to create a more sustainable operating footprint in BC and to better align manufacturing capacity with the available long-term fibre supply, the Company made the difficult decision to restructure its BC lumber operations by permanently closing its Chetwynd sawmill and pellet plant and temporarily closing its Houston sawmill for an extended period to facilitate a major redevelopment on the site. The Company intends to build a new, modern, globally competitive manufacturing facility that employs state of the art technology to produce high value products from the sustainable timber supply in that region. The Company is currently undertaking an evaluation of the availability of economic fibre and a thorough project financial analysis, and is targeting a final investment decision by the end of the second quarter of 2023. Recognizing these permanent closures as well as the ongoing challenges to the business posed by fibre availability and costs, the Company recorded asset write-downs and impairments totaling $138.6 million in its results for the three and twelve months ended December 31, 2022.
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