Canfor reports Q4 2011 net loss of C$44.1M compared with net income of C$32.9M a year earlier, on weaker lumber and NBSK pulp realizations; full-year 2011 net loss was C$56.6M, compared with income of C$81.4M in 2010
VANCOUVER, British Columbia
February 8, 2012
Canfor Corporation (TSX: CFP.TO - News) today reported a net loss attributable to shareholders ("shareholder net loss") of $44.1 million, or $0.31 per share, for the fourth quarter of 2011, compared to a shareholder net loss of $21.6 million, or $0.15 per share, for the third quarter of 2011 and shareholder net income of $32.9 million, or $0.23 per share, for the fourth quarter of 2010. For the year ended December 31, 2011, the Company's shareholder net loss was $56.6 million, or $0.40 per share, compared to shareholder net income of $81.4 million, or $0.57 per share, for 2010.
The shareholder net loss for the fourth quarter of 2011 included various items affecting comparability with prior periods, which had an overall net negative impact of $12.0 million, or $0.09 per share. After adjusting for such items, the Company's adjusted shareholder net loss for the fourth quarter of 2011 was $32.1 million, or $0.22 per share, compared to an adjusted shareholder net loss of $1.8 million, or $0.01 per share, for the third quarter of 2011, and adjusted shareholder net income of $15.1 million, or $0.11 per share, for the fourth quarter of 2010. For the year ended December 31, 2011, the adjusted shareholder net loss was $31.7 million, or $0.22 per share, compared to adjusted shareholder net income of $74.1 million, or $0.52 per share, for 2010.
The Company reported an operating loss of $64.0 million for the fourth quarter of 2011, an adverse variance of $78.5 million from operating income of $14.5 million in the third quarter of 2011. Included in this variance are restructuring costs of $22.5 million related to the announced closures of the Company's Rustad sawmill and Tackama plywood plant in the BC Interior, and asset impairment charges of $9.2 million relating to certain lumber and panels assets. Excluding these items, and the impact of inventory valuation adjustments, Canfor's operating loss was $21.4 million, an adverse variance of $36.0 million compared to similarly adjusted operating earnings for the previous quarter, reflecting lower prices and higher log costs in the lumber segment, as well as lower prices in the pulp and paper segment.
U.S. housing activity saw a modest improvement in the fourth quarter of 2011, aided by unseasonably mild weather and a slight improvement in the U.S. economy. U.S. housing starts for the quarter averaged 657,000 units (seasonally adjusted annual rate), up 8% from the previous quarter, though much of the increase related to multifamily units, which use a lower proportion of lumber than single family units. While the Company's offshore lumber shipments remained at high levels in the quarter, sales realizations were adversely impacted by softer demand, particularly for lower lumber grades.
The average North America benchmark Western SPF 2x4 #2&Btr price showed a modest decline from the previous quarter. Prices for lower grade product, however, fell sharply during the quarter, with #3 lumber prices down almost 25%, in part reflecting slowing Chinese consumption ahead of the Lunar New Year. Prices for SYP products fared slightly better, with the benchmark SYP 2x4 price essentially unchanged compared to the previous quarter. Northern Bleached Softwood Kraft ("NBSK") pulp markets continued to weaken during the quarter. The average North America list price was US$920 per tonne, down 7% from the previous quarter, while further price erosion was seen in prices to China. Canadian dollar sales realizations for all products were positively impacted by a weaker Canadian dollar (down over 4 cents, or 4%, from the previous quarter), which somewhat mitigated the effects of lower US-dollar pricing.
Lumber shipments were in line with the previous quarter at just under one billion board feet. Production was down 7%, for the most part reflecting downtime taken over the Christmas period, which pushed up unit cash conversion costs, along with seasonally higher energy consumption. Higher unit log costs in the period reflected a shortage of log truckers in parts of the BC Interior in the quarter, along with unseasonably mild weather and higher diesel prices. These increases were partially mitigated by continuing improved productivity at operations upgraded during the year.
Shipment volumes for pulp products were down 5%, reflecting the weaker pulp markets, though production levels were up from third quarter levels with less downtime taken at Canfor Pulp's Northwood pulp mill for its recovery boiler and precipitator upgrade, which was completed early in the fourth quarter. Total pulp unit cash manufacturing costs were down from the previous quarter, mostly due to the higher production levels and lower fibre costs.
The Company continued to make progress on the $300 million, three-year strategic capital investment program at its lumber operations during the quarter, completing new energy systems at its Plateau and Chetwynd sawmills, planer and logyard upgrades at its Grande Prairie mill, and a planer upgrade at its Prince George sawmill. The Company's recently upgraded Vavenby sawmill, which restarted in September on one shift, transitioned to two shifts in December.
Commenting on the quarter, Canfor's President and CEO, Don Kayne, said, "The fourth quarter provided challenges on several fronts. We saw weaker lumber and NBSK pulp realizations, related in part to the slowdown in demand from China, particularly for lower lumber grades, the ongoing slow U.S. recovery and overall global economic issues. To mitigate log cost pressures we have made significant strides in addressing trucker availability, while we continue to see positive trends in productivity, lumber recoveries and conversion costs from our capital investment and continuous improvement initiatives. We expect to see further benefits from our capital investment program in 2012."
Looking ahead, the acquisition of Tembec Industries Ltd.'s southern British Columbia Interior wood products assets is currently scheduled to close towards the end of the first quarter of 2012, subject to customary closing conditions including regulatory approval. Commenting on the acquisition, Kayne said, "This acquisition demonstrates our long-term confidence in the lumber sector, and aligns very well with our strategic focus."
The North American lumber market is forecast to improve modestly as the U.S. economy continues on its slow road to recovery, while the Canadian housing market is projected to remain steady. Strong offshore demand is anticipated to continue into 2012. Shipments to China have picked up in early 2012 after slowing in advance of the Lunar New Year, although prices for lower grade lumber are forecast to remain at low levels through the first quarter. The global softwood pulp market is forecast to remain soft through the first quarter of 2012.
Additional Information and Conference Call
A conference call to discuss the fourth quarter's financial and operating results will be held on Thursday, February 9, 2012 at 8:00 AM Pacific time. To participate in the call, please dial 416-340-9547 or Toll-Free 877-340-9914. For instant replay access until February 9, 2013, please dial 905-694-9451 or 800-408-3053 and enter participant pass code 7168261#. The conference call will be webcast live and will be available at www.canfor.com. This news release, the attached financial statements and a presentation used during the conference call can be accessed via the Company's website at http://www.canfor.ca/investors/webcasts.asp.
Forward Looking Statements
Certain statements in this press release constitute "forward-looking statements" which involve known and unknown risks, uncertainties and other factors that may cause actual results to be materially different from any future results, performance or achievements expressed or implied by such statements. Words such as "expects", "anticipates", "projects", "intends", "plans", "will", "believes", "seeks", "estimates", "should", "may", "could", and variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are based on management's current expectations and beliefs and actual events or results may differ materially. There are many factors that could cause such actual events or results expressed or implied by such forward-looking statements to differ materially from any future results expressed or implied by such statements. Forward-looking statements are based on current expectations and the Company assumes no obligation to update such information to reflect later events or developments, except as required by law.
Canfor is a leading integrated forest products company based in Vancouver, British Columbia (BC) with interests in BC, Alberta, Quebec, Washington state, and North and South Carolina. The Company produces primarily softwood lumber and also produces oriented strand board (OSB), remanufactured lumber products, specialized wood products and bleached chemi-thermo mechanical pulp (BCTMP). Canfor also owns a 50.2% interest in Canfor Pulp Limited Partnership, which is one of the largest producers of northern softwood kraft pulp in Canada and a leading producer of high performance kraft paper. Canfor shares are traded on the Toronto Stock Exchange under the symbol CFP.