Highlights
* Q1, 2018 adjusted operating income of $238.7 million driven by historically high lumber prices and record-high pulp and paper earnings; record-high sales of $1.23 billion
* Adjusted net income of $145.4 million, or $1.13 per share
* Net debt of $96.8 million, or 4.3% net debt to total capitalization, at March 31, 2018
The Company reported operating income of $203.8 million for the first quarter of 2018, down $10.4 million from reported operating income of $214.2 million for the fourth quarter of 2017, as lower operating earnings for the lumber segment were offset in part by record-high operating earnings for the pulp and paper segment. Reported results in the first quarter of 2018 include a net duty expense of $34.9 million, at a combined effective countervailing duty (“CVD”) and anti-dumping duty (“ADD”) rate of 14.34%. This compares to a net duty recovery of $23.4 million in the fourth quarter of 2017 reflecting the year-to-date true-up of preliminary CVD and ADD rates to current rates following final determinations announced by the US Department of Commerce (“DOC”) and US International Trade Commission (“ITC”). After adjusting for the duties, operating income was $238.7 million for the first quarter of 2018, up $47.9 million from similarly adjusted operating income in the fourth quarter of 2017.
Adjusted lumber segment earnings largely reflected higher Western Spruce/Pine/Fir (“Western SPF”) and Southern Yellow Pine (“SYP”) benchmark lumber prices, more than offsetting the impact of adverse winter weather conditions which resulted in significant transportation delays and contributed to increased unit log costs and lower production volumes through the quarter. Unit log costs in Western Canada also increased reflecting higher market-based stumpage and continued upward pressure on purchased wood costs. Record pulp and paper segment earnings largely reflected continued strong demand that resulted in significantly higher Northern Bleached Softwood Kraft (“NBSK”) pulp unit sales realizations.
North American lumber demand remained solid in the first quarter of 2018. US housing starts averaged 1,314,000 units on a seasonally adjusted basis, up 5% from the previous quarter and up 6% from the first quarter of 2017. Canadian housing construction activity in the first quarter of 2018 was in line with the previous quarter, at an average of 227,000 units on a seasonally adjusted basis. Offshore lumber demand from China, Japan and other regions remained solid through the first quarter, particularly for the Company’s higher-value lumber products.
Global softwood pulp markets remained favourable through the first quarter of 2018, resulting in US-dollar NBSK pulp list prices holding at near-record high prices, and a significant increase in average NBSK pulp unit sales realizations. Average Bleached Chemi-Thermo Mechanical Pulp (“BCTMP”) unit sales realizations showed a more moderate increase in the quarter, with increased demand towards the end of 2017 translating into higher average prices for product shipped in the current quarter.
Pulp shipments were up 3% from the previous quarter, as a 14,000 tonne vessel slippage from December into January more than offset transportation constraints in the current quarter. Pulp production was broadly in line with the fourth quarter of 2017, as strong productivity in March combined with increased operating days following the unscheduled outage at CPPI’s Northwood pulp mill in the previous quarter largely offset the impacts of various weather-related disruptions in January and February. Pulp unit manufacturing costs were moderately higher than the previous quarter, largely reflecting market-driven increases in fibre costs and weather-related increases in energy costs.
Commenting on the Company’s first quarter results, Canfor’s President and Chief Executive Officer, Don Kayne, said, “Despite the unprecedented challenges caused by severe weather and railcar availability, both our lumber and pulp businesses recorded solid financial results for the first quarter of 2018. This reflected strong market demand and the commitment of our sales, transportation and operations teams to ensure we minimized any disruption to our customers.”
more detail at: http://www.canfor.com/docs/default-source/news-2018/2018_q1_cfp_press-release_final.pdf?sfvrsn=7292ed91_2