May 1, 2019 - Vancouver, B.C. - Canfor Corporation (TSX: CFP) today reported its first quarter of 2019 results:
- First quarter of 2019 reported operating loss of $70 million, adjusted operating income of $5 million (after adjusting for duties and inventory write-downs)
- Adjusted shareholder net loss of $37 million, or $0.29 per share
- Completed acquisition of 70% of the Vida Group of Sweden (“Vida”)
The following table summarizes selected financial information for the Company for the comparative periods:
For the first quarter of 2019, the Company reported an operating loss of $69.9 million, an improvement of $9.2 million from the operating loss of $79.1 million reported for the fourth quarter of 2018. The modest increase in financial performance reflected improved operating earnings for the pulp and paper segment and one month of Vida earnings following the closing of this acquisition on February 28.
Reported results for the first quarter of 2019 included a net duty expense of $36.3 million, at a combined countervailing duty (“CVD”) and anti-dumping duty (“ADD”) rate of 26.24%, compared to $39.9 million reported in the fourth quarter of 2018 at a cumulative combined duty deposit rate of 16.14% (for the 18-month administrative review period ended December 31, 2018). Reported results in the first quarter of 2019 also included a $38.6 million lumber and log inventory write-down, in addition to the $36.7 million write-down reported in the fourth quarter of 2018. After adjusting for the aforementioned items, the Company’s operating income was $5.0 million for the first quarter of 2019, up $7.5 million from similarly adjusted operating income in the fourth quarter of 2018.
As mentioned, the Company successfully closed its acquisition of 70% of Vida at the end of February. The preliminary purchase price was 4,136 million Swedish Krona (“SEK”) (CAD$590.2 million), including estimated working capital. Vida’s results are consolidated with those of Canfor and one month of Vida’s earnings (subsequently referenced as the Company’s European Spruce/Pine/Fir (“SPF”) lumber operations) are reflected in the Company’s current quarter results within the lumber operating segment.
Adjusted lumber segment operating income included the Company’s new European SPF operations results, which combined with a modest increase in average Western Spruce/Pine/Fir (“Western SPF”) benchmark lumber prices and increased production in the US South, offset various weather, operational and market-related challenges in Western Canada. In response to the continued weak market conditions, log supply constraints and cost pressures in British Columbia (“BC”), the Company took production curtailments of 95 million board feet in the current quarter, in addition to 100 million board feet of curtailment taken late in the fourth quarter of 2018.
Results in the pulp and paper segment reflected improved production and shipments, which more than offset the impact of lower US-dollar pulp prices to China. Notwithstanding previously announced kiln-related operational disruptions at two of Canfor Pulp Product Inc.’s (“CPPI”) Northern Bleach Softwood Kraft (“NBSK”) pulp mills in January and challenges associated with severe winter weather, pulp production was up 22% from the previous quarter, largely as a result of significant downtime taken at CPPI’s Northwood pulp mill in the comparative period to perform repairs to one of its two recovery boilers.