Canfor Reports Results for third quarter of 2015

October 29, 2015

By: Canfor

Canfor Corporation reported a net loss attributable to shareholders (“shareholder net loss”) of $17.3 million, or $0.13 per share, for the third quarter of 2015, compared to shareholder net income of $11.1 million, or $0.08 per share, for the second quarter of 2015 and $45.5 million, or $0.34 per share, for the third quarter of 2014. For the nine months ended September 30, 2015, the Company’s shareholder net income was $23.1 million, or $0.17 per share, compared to shareholder net income of $145.3 million, or $1.05 per share, reported for the comparable period of 2014.

The following table summarizes selected financial information for the Company for the comparative periods:

(millions of Canadian dollars, except per share amounts) Q3 2015 Q2 2015 YTD 2015 Q3 2014 YTD 2014


Sales $989.90 $952.40 $2872.30 $838.00 $2487.20
Operating income before amortization $61.10 $69.80 $263.90 $132.70 $402.90
Operating income $8.5 $17.6 $109.80 $85.60 $267.30
Net income (loss) attributable to equity shareholders of the Company $(17.3) $11.1 $23.1 $45.5 $145.3
Net income (loss) per share attributable to equity shareholders of the Company, basic and diluted $(0.13) $0.08 $0.17 $0.34 $1.05
Adjusted shareholder net income (loss) $6.4 $(2.0) $50.9 $50.7 $153.8
Adjusted shareholder net income (loss) per share, basic and diluted $0.05 $(0.02) $0.38 $0.38 $1.11


After adjusting for items affecting comparability with the prior periods, the Company’s adjusted shareholder net income for the third quarter of 2015 was $6.4 million, or $0.05 per share, compared to an adjusted shareholder net loss of $2.0 million, or $0.02 per share, for the second quarter of 2015. Canfor’s adjusted shareholder net income for the third quarter of 2014 was $50.7 million, or $0.38 per share.

The Company reported operating income of $8.5 million for the third quarter of 2015, down $9.1 million from $17.6 million reported for the second quarter of 2015. Results for the third quarter included one-time costs of $19.4 million (before tax) associated with the announced closure of the Canal Flats sawmill. Excluding the impact of the Canal Flats sawmill closure, higher earnings in the third quarter of 2015 reflected improved pulp and paper segment results driven by fewer maintenance outages, improved productivity and a modest increase in Northern Bleached Softwood Kraft (“NBSK”) pulp sales realizations which more than offset challenging market conditions in the lumber segment.

In September 2015, key benchmark lumber prices fell to levels not seen since early 2012 as a combination of weak demand in China and oversupply in North America pushed lumber prices lower. Low grade lumber products, in particular, which are principally sold to China saw more pronounced declines. Lumber demand in North America remained relatively stable as total US housing starts in the current quarter averaged 1,163,000 units SAAR (seasonally adjusted annual rate), in line with the previous quarter, while housing starts in Canada averaged 209,000 units SAAR, up 9% from the previous quarter.

The average benchmark North American Random Lengths Western Spruce/Pine/Fir (“SPF”) 2×4 #2&Btr price was US$269 per Mfbm in the third quarter of 2015, in line with the second quarter of 2015 while the benchmark Southern Yellow Pine (“SYP”) East 2×4 #2 price was down US$52 per Mfbm, or 14%, to US$331 per Mfbm. Western SPF lumber sales realizations were broadly in line with the second quarter as the benefit of a 6% weaker Canadian dollar outweighed declines in low grade lumber prices and higher export taxes in the third quarter of 2015. SYP sales realizations were moderately lower in the third quarter of 2015, as the impact of lower US-dollar benchmark prices for narrower width dimensions was partly offset by a combination of less pronounced price decreases in most wider dimension grades and the high-value product mix produced at the recently acquired US South operations.

Lumber shipments at over 1.3 billion board feet were down 2% from the previous quarter principally reflecting slightly lower lumber production as productivity improvements were more than offset by an additional statutory holiday in Canada and shift configuration changes at certain Western SPF operations in the third quarter of 2015. News Release 2 Overall lumber unit manufacturing costs were down slightly compared to the previous quarter partly due to improved productivity and seasonally lower energy costs in the third quarter of 2015.

Global softwood pulp markets weakened slightly through the third quarter of 2015, reflecting a seasonal slowdown in shipments and minimal industry downtime through the summer months. The average NBSK pulp list price to North America, as published by RISI, was down US$13 per tonne, or 1%, to US$967 per tonne with a more pronounced decrease in NBSK list prices to China. However, overall NBSK unit sales realizations were modestly higher compared to the previous quarter as the benefit of a 6% weaker Canadian dollar outweighed lower NBSK US-dollar list prices in the current quarter. Bleached Chemi-Thermo Mechanical Pulp (“BCTMP”) markets and prices continued to be challenging in the current quarter, with pulp unit sales realizations remaining under pressure through the period.

Pulp shipments and production levels were both up approximately 5% from the previous quarter reflecting improved operating rates at the Company’s NBSK operations and fewer maintenance outages in the current quarter. In the latter part of September, the Northwood NBSK pulp mill entered its scheduled maintenance outage reducing NBSK production by approximately 6,000 tonnes in the current quarter. The Northwood pulp mill completed its maintenance outage on schedule in early October and is now operating at target levels. In the comparative second quarter of 2015, scheduled maintenance outages were completed at the Intercontinental and Prince George NBSK pulp mills and the Taylor BCTMP pulp mill, reducing production by 14,000 tonnes. Pulp unit manufacturing costs saw a modest decrease from the second quarter of 2015 largely reflecting the increased productivity and production, as well as lower energy and chemical costs, in the current quarter. The Company continues to see the benefits from its recent investment in energy based projects including the recently completed Intercontinental pulp mill turbine that was commissioned in April 2015.

During the third quarter, the Company announced the acquisition of Anthony Forest Products (“AFP”) based in El Dorado, Arkansas. AFP owns one sawmill, which produces premium SYP lumber located in Arkansas, two laminating facilities which produce beams and glulam products located in Arkansas and Georgia and two chip mills located in Louisiana and Texas. In addition, AFP owns a 50% joint venture with EACOM Timber Corporation located in Sault Ste. Marie, Ontario that manufactures I-joists. The acquisition of AFP is anticipated to close in the fourth quarter of 2015. In conjunction with the acquisition, Canfor completed a US$100.0 million financing at an interest rate of 4.40% with an average maturity in 2024.

Commenting on the Company’s third quarter results, Canfor’s President and Chief Executive Officer, Don Kayne, said, “Despite challenging lumber markets, we continued to see a positive trend in productivity across our operations.” Kayne added “the pulp and paper segment performed very well during the quarter, delivering strong results despite some weakening in global pulp market conditions.”

Looking ahead, North American lumber prices are forecast to improve slightly in the fourth quarter of 2015 due to relatively stable demand and light field inventory levels. The lumber market in Japan is forecast to remain stable while market conditions in China are projected to show a slight improvement as inventory levels return to a more normalized state. With reported global softwood pulp inventories at the high end of what is considered a balance market, there is some risk of downward pressure on global softwood pulp prices in the fourth quarter of 2015. Additional Information and Conference Call A conference call to discuss the third quarter’s financial and operating results will be held on Thursday, October 29, 2015 at 8:00 AM Pacific time. To participate in the call, please dial 416-764-8688 or Toll-Free 888-390-0546. For instant replay access until November 12, 2015, please dial 888-390-0541 and enter participant pass code 418826#. The conference call will be webcast live and will be available at This news release, the attached financial statements and a presentation used during the conference call can be accessed via the Company’s website at

By: Canfor

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