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• 2019 reported operating loss of $31 million; net loss of $31 million, or $0.47 per share
• Fourth quarter of 2019 reported operating loss of $24 million; net loss of $20 million, or $0.30 per share
Following record-high pulp prices and operating income in 2018, Canfor Pulp saw a sharp reversal of market conditions in 2019, which along with the impact of significant sawmill curtailments on supply and costs, weighed heavily on financial results. For the 2019 year, the Company reported an operating loss of $31.0 million and a net loss of $0.47 per share, compared to operating income of $246.6 million and net income of $2.83 per share for the year ended December 31, 2018.
For the fourth quarter of 2019, the Company reported an operating loss of $23.5 million, compared to an operating loss of $44.0 million reported for the third quarter of 2019. The lower reported loss in the current period principally reflected higher pulp shipments and lower pulp unit manufacturing costs, both factors largely attributable to increased production at the Company’s NBSK pulp and BCTMP mills, following market-related curtailments throughout the prior quarter.
Global pulp prices remained at depressed levels through the fourth quarter of 2019, with weak pricing in Asia spilling over to North America and Europe as the quarter progressed. Purchasing activity from China picked up during the quarter, but elsewhere demand remained weak, particularly in Europe, contributing to a slight increase in global inventory levels by year end to 37 days of supply. US-dollar NBSK pulp list prices to China averaged US$588 per tonne, broadly in line with the prior quarter, reflecting the aforementioned demand and supply factors. The Company’s NBSK pulp unit sales realizations were modestly lower than the prior quarter principally reflecting lower prices to North America, where list prices (before discounts) declined US$55 per tonne, or 5%, quarter-over-quarter. BCTMP unit sales realizations showed a modest increase from the previous quarter as BCTMP prices edged upwards in the latter part of the quarter.
Pulp production was 286,000 tonnes for the fourth quarter of 2019, up 112,000 tonnes, or 64%, from the previous quarter, largely reflecting phased summer curtailments taken in the previous quarter, offset in part by an extended market-related curtailment in early October at the Company’s Prince George NBSK pulp mill (“PG Pulp mill”). To a lesser extent, improved productivity at the Company’s PG Pulp mill and at its Taylor BCTMP mill, which set a new record-high for production in the current quarter, largely offset kiln-related operational disruptions at the Company’s Northwood and Intercontinental pulp mills in December.
The Company’s pulp shipments totaled 267,000 tonnes, up 54,000 tonnes, or 25%, from the previous quarter, principally reflecting the aforementioned increase in pulp production quarter-over-quarter, offset in part by a rebuild of pulp inventories to more normal levels in the current quarter after a material drawdown in the previous quarter.
Pulp unit manufacturing costs were down significantly from the prior quarter, primarily reflecting increased production offset, in part, by seasonally higher energy costs. Fibre costs were slightly lower than the previous period, principally driven by lower market-based prices for sawmill residual chips (linked to falling Canadian dollar NBSK pulp sales realizations), which more than offset an increased proportion of higher-cost whole log chips, reflecting ongoing sawmill-related fibre supply disruptions.
Operating income in the Company’s paper segment was $5.0 million, up $1.1 million from the previous quarter, largely as a result of lower slush pulp costs (linked to falling Canadian dollar NBSK pulp market prices) and paper unit manufacturing costs, which more than offset the impact of declining paper unit sales realizations tied to softness in most global kraft paper markets.