Overview
• Q2 2022 reported operating income of $532 million; quarterly sales of $2.2 billion
• Downward pressure on North American lumber market fundamentals; significant decline in US-dollar lumber benchmark pricing; uptick in European market pricing largely tied to traditional quarterly lag
• Improved lumber & pulp shipments despite ongoing transportation challenges
• Shareholder net income of $374 million, or $3.02 per share
For the second quarter of 2022, the Company reported operating income of $531.6 million, down $210.3 million from the operating income of $741.9 million reported for the first quarter of 2022 largely reflecting lower lumber segment earnings following the strong earnings in the previous quarter, offset to a degree by improved pulp and paper segment results.
Commenting on the Company’s second quarter results, Canfor’s President and Chief Executive Officer, Don Kayne, said, “Despite the pressures on North American lumber market fundamentals this was a strong quarter for our lumber business, as our results continue to far exceed pre-pandemic levels and we continue to capitalize on our global diversification strategy. In our North American operations, ongoing global supply chain constraints resulted in the difficult decision to reduce operating schedules at our Western Canadian sawmills during the second quarter and into the summer months. We greatly appreciate our employees’ ongoing resilience in managing through these supply chain challenges. For our pulp business, some relief in transportation constraints late in the period enhanced our ability to realize near-record high pricing and recognize improved results in the quarter.”
Results in the lumber segment decreased $230.9 million quarter-over-quarter principally reflecting a significant downward correction in Western Spruce/Pine/Fir (“SPF”) and Southern Yellow Pine (“SYP”) US-dollar benchmark pricing in the current period, with the average North American Random Lengths Western SPF 2×4 2&Btr price down US$408 per Mfbm, or 32%, and the average SYP East 2×6 #2 down US$546 per Mfbm, or 50%. The decline in North American benchmark lumber pricing in the current quarter was mitigated somewhat by increased North American shipment volumes, reflecting a marginal improvement in a challenging transportation environment, particularly in Western Canada. Current quarter results continued to reflect strong earnings from the Company’s European operations as a moderate uplift in European lumber unit sales realizations (largely tied to the quarterly lag in pricing), was offset in part by an increase in European unit manufacturing costs and a 5% stronger Canadian dollar (versus the Swedish Krona (“SEK”)).
Results in the pulp and paper segment largely reflected materially higher Northern Bleached Softwood Kraft (“NBSK”) pulp unit sales realizations, and to a lesser extent, a 16% uplift in pulp shipments, as transportation disruptions globally and in British Columbia (“BC”) eased somewhat in the latter part of the current quarter. These factors more than offset the impact of market-related fibre cost increases and inflation-driven cash conversion cost pressures in the current period.
Pulp production was up 6% from the previous quarter, as NBSK productivity in the current quarter was maximized to available transportation. Concurrently, logistics-related downtime at Canfor Pulp Product Inc.’s (“CPPI”) Taylor Bleached Chemi-Thermo Mechanical Pulp (“BCTMP”) mill (“Taylor”), which commenced in the first quarter of 2022 and continued throughout the second quarter, reduced production by approximately 60,000 tonnes.
more at: https://www.canfor.com/docs/default-source/news-2022/2022_q2_cfp_press_release_tsx.pdf?sfvrsn=666de091_2