Canfor Pulp Reports Results for Second Quarter of 2020

• Second quarter of 2020 reported operating loss of $6 million, includes $8 million inventory write-down
• Net loss of $1 million, or $0.02 per share

The Company reported an operating loss of $6.3 million for the second quarter of 2020, down $12.4 million from operating income of $6.1 million reported for the first quarter of 2020. Reported results for the second quarter of 2020 included an $8.2 million finished pulp and raw material inventory write-down at period end. After adjusting for this, the Company’s operating income was $1.9 million for the second quarter of 2020, up $6.5 million from a similarly adjusted operating result in the previous quarter.

The Company’s operating results for the second quarter of 2020 reflected direct and indirect impacts of the coronavirus outbreak (“COVID-19”) on global markets, and more specifically the pulp and paper business. Global pulp prices improved during April, resulting largely from increased demand for at-home tissue coupled with supply disruptions, principally in Latin America and Australasia; however, prices came increasingly under pressure in the back half of the current quarter reflecting a sharp decline in printing and writing demand combined with more moderated tissue purchasing activity. For the second quarter as a whole, Canadian-dollar pulp unit sales realizations showed a modest increase compared to the previous quarter, boosted by slightly higher Northern Bleached Softwood Kraft (“NBSK”) prices to North America, improved prices for Bleached Chemi-Thermo Mechanical Pulp (“BCTMP”) and a weaker Canadian dollar. The effect of COVID-19 on lumber sawmill operating rates in the BC Interior, particularly in April and May, materially impacted residual fibre supply to the Company’s Prince George (“PG”) based operations, resulting in a three-week curtailment at the Company’s Northwood NBSK pulp mill (“Northwood”) in the current quarter, as well as increased fibre costs reflecting a higher proportion of more expensive whole log chips.

Global softwood pulp producer inventories at the end of June 2020 were significantly above the balanced range at 42 days of supply, an increase of six days supply compared to March 2020 (market conditions are generally considered balanced when inventories are in the 27-34 days of supply range).
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