Canfor Corporation (TSX: CFP) today reported fourth quarter 2017 results.
Highlights:
* Q4, 2017 adjusted operating income of $190.8 million, aided by improved lumber unit sales realizations and record-high pulp and paper earnings; operating income of $598.5 million and record-high sales of $4.66 billion in 2017
* Adjusted net income of $114.8 million, or $0.89 per share; $363.4 million, or $2.77 per share, for 2017
* CVD/ADD duty deposit rate reduced from 27.98% to 20.52% following final determination by US Department of Commerce; combined duty expense of 14.34% recorded in fourth quarter of 2017 to reflect impact of updated sales and cost data on ADD rate in 2017
* Net debt of $97.5 million, or 4.6% net debt to total capitalization, at December 31, 2017
* Construction of new state-of-the-art US$120 million greenfield sawmill in Georgia approved by Board of Directors: 275 million board feet of high-value dimension Southern Yellow Pine lumber
The Company reported operating income of $214.2 million for the fourth quarter of 2017, up $108.8 million from reported operating income of $105.4 million for the third quarter of 2017, with the increase reflecting higher operating earnings for both the lumber and pulp and paper segments. Lumber segment results reflected significantly higher Western Spruce/Pine/Fir (“Western SPF”) lumber prices, lower duties expensed in the current quarter and modest increases in Southern Yellow Pine (“SYP”) lumber prices. These factors more than offset continued challenges presented by weather which contributed to lower production and shipments through the quarter, as well as upward pressure on purchased wood and unit log costs in Western Canada. Record pulp and paper segment earnings largely reflected a sharp improvement in demand, which resulted in significantly higher Northern Bleached Softwood Kraft (“NBSK”) pulp and Bleached Chemi-Thermo Mechanical Pulp (“BCTMP”) US-dollar pricing.
During the fourth quarter of 2017, the US Department of Commerce (“DOC”) announced its final countervailing duty (“CVD”) and anti-dumping duty (“ADD”) determinations, while the US International Trade Commission issued an affirmative determination of injury. As a result, Canfor was issued a final ADD rate of 7.28%, and was subject to countervailing duties on Canadian lumber exports destined to the US at a reduced rate of 13.24%, effective December 28, 2017. Cash deposits are posted at the published CVD and ADD rates as determined by the DOC. For accounting purposes, however, Canfor recorded the ADD expense at a rate of 1.1%, which was estimated by applying the DOC’s methodology to updated sales and cost data. This resulted in a combined effective CVD and ADD rate of 14.34% for the applicable period in 2017.
Reflecting the aforementioned duty adjustments, reported results for the fourth quarter of 2017 incorporated a net
duty recovery of $23.4 million, determined as follows:
* Recovery of $14.0 million to true-up the preliminary countervailing duty to the Company’s final countervailing duty rate as published by the DOC for applicable shipments made between April 24, 2017 and August 25, 2017;
* A further $30.9 million recovery to true-up the preliminary anti-dumping duty expense to the lower accrual rate on applicable shipments from June 30, 2017 to December 31, 2017 ($15.9 million of this pertained to the fourth quarter of 2017);
* Cash deposits of $21.5 million made in the current period
more detail at: http://www.canfor.com/docs/default-source/news-2018/2017_cfp_q4_press-release_website_final.pdf?sfvrsn=bd0fec91_2