Canfor Pulp Products Inc. Announces 2019 and Fourth Quarter 2019 Results and Quarterly Dividend
VANCOUVER, Feb. 20, 2020 /CNW/ - Canfor Pulp Products Inc. ("CPPI") (TSX: CFX) today reported 2019 and fourth quarter 2019 results and its quarterly dividend:
Overview
- 2019 reported operating loss of $31 million; net loss of $31 million, or $0.47 per share
- Fourth quarter of 2019 reported operating loss of $24 million; net loss of $20 million, or $0.30 per share
Financial Results
The following table summarizes selected financial information for CPPI for the comparative periods:
Q4 |
Q3 |
YTD |
Q4 |
YTD |
||||||
(millions of Canadian dollars, except per share amounts) |
2019 |
2019 |
2019 |
2018 |
2018 |
|||||
Sales |
$ |
247.5 |
$ |
216.9 |
$ |
1,087.9 |
$ |
289.7 |
$ |
1,374.3 |
Reported operating income (loss) before |
$ |
0.1 |
$ |
(20.3) |
$ |
61.9 |
$ |
36.1 |
$ |
326.2 |
Reported operating income (loss) |
$ |
(23.5) |
$ |
(44.0) |
$ |
(31.0) |
$ |
15.6 |
$ |
246.6 |
Adjusted operating income (loss) before |
$ |
(2.9) |
$ |
(20.3) |
$ |
72.6 |
$ |
36.1 |
$ |
326.2 |
Adjusted operating income (loss)1 |
$ |
(26.5) |
$ |
(44.0) |
$ |
(20.3) |
$ |
15.6 |
$ |
246.6 |
Net income (loss) |
$ |
(19.5) |
$ |
(32.4) |
$ |
(30.5) |
$ |
14.2 |
$ |
184.4 |
Net income (loss) per share, basic and diluted |
$ |
(0.30) |
$ |
(0.50) |
$ |
(0.47) |
$ |
0.21 |
$ |
2.83 |
Results for 2019 include the adoption of IFRS 16 Leases, from January 1, 2019, on a prospective basis. Comparative periods have not been restated. |
1 Adjusted for an inventory write-down recovery ($3.0 million net recovery in Q4 2019). |
Following record-high pulp prices and operating income in 2018, Canfor Pulp saw a sharp reversal of market conditions in 2019, which along with the impact of significant sawmill curtailments on supply and costs, weighed heavily on financial results. For the 2019 year, the Company reported an operating loss of $31.0 million and a net loss of $0.47 per share, compared to operating income of $246.6 million and net income of $2.83 per share for the year ended December 31, 2018.
For the fourth quarter of 2019, the Company reported an operating loss of $23.5 million, compared to an operating loss of $44.0 million reported for the third quarter of 2019. The lower reported loss in the current period principally reflected higher pulp shipments and lower pulp unit manufacturing costs, both factors largely attributable to increased production at the Company's NBSK pulp and BCTMP mills, following market-related curtailments throughout the prior quarter.
Global pulp prices remained at depressed levels through the fourth quarter of 2019, with weak pricing in Asia spilling over to North America and Europe as the quarter progressed. Purchasing activity from China picked up during the quarter, but elsewhere demand remained weak, particularly in Europe, contributing to a slight increase in global inventory levels by year end to 37 days of supply. US-dollar NBSK pulp list prices to China averaged US$588 per tonne, broadly in line with the prior quarter, reflecting the aforementioned demand and supply factors. The Company's NBSK pulp unit sales realizations were modestly lower than the prior quarter principally reflecting lower prices to North America, where list prices (before discounts) declined US$55 per tonne, or 5%, quarter-over-quarter. BCTMP unit sales realizations showed a modest increase from the previous quarter as BCTMP prices edged upwards in the latter part of the quarter.
Energy revenues increased quarter-over-quarter, principally reflecting seasonally higher energy prices combined with an increase in operating days in the current quarter, due to the downtime taken in the summer months.
Pulp production was 286,000 tonnes for the fourth quarter of 2019, up 112,000 tonnes, or 64%, from the previous quarter, largely reflecting phased summer curtailments taken in the previous quarter, offset in part by an extended market-related curtailment in early October at the Company's Prince George NBSK pulp mill ("PG Pulp mill"). To a lesser extent, improved productivity at the Company's PG Pulp mill and at its Taylor BCTMP mill, which set a new record-high for production in the current quarter, largely offset kiln-related operational disruptions at the Company's Northwood and Intercontinental pulp mills in December.
The Company's pulp shipments totaled 267,000 tonnes, up 54,000 tonnes, or 25%, from the previous quarter, principally reflecting the aforementioned increase in pulp production quarter-over-quarter, offset in part by a rebuild of pulp inventories to more normal levels in the current quarter after a material drawdown in the previous quarter.
Pulp unit manufacturing costs were down significantly from the prior quarter, primarily reflecting increased production offset, in part, by seasonally higher energy costs. Fibre costs were slightly lower than the previous period, principally driven by lower market-based prices for sawmill residual chips (linked to falling Canadian dollar NBSK pulp sales realizations), which more than offset an increased proportion of higher-cost whole log chips, reflecting ongoing sawmill-related fibre supply disruptions.
Operating income in the Company's paper segment was $5.0 million, up $1.1 million from the previous quarter, largely as a result of lower slush pulp costs (linked to falling Canadian dollar NBSK pulp market prices) and paper unit manufacturing costs, which more than offset the impact of declining paper unit sales realizations tied to softness in most global kraft paper markets.
Recognizing the challenging markets, the Company launched a $40 million cost reduction initiative at the beginning of 2020, aimed at reducing unit manufacturing costs. Most of the savings will be achieved through improving reliability, reducing overhead cost and improving fibre utilization, with the full amount of annualized savings targeted by the end of 2021.
Looking forward, while global softwood kraft pulp markets are projected to remain fairly challenging for the first part of 2020, market conditions and prices should gradually improve through the balance of the year as global inventories become more in-line with demand. The potential impact of the emerging coronavirus on global pulp demand, particularly from China, is uncertain, and the Company continues to monitor the situation. Bleached kraft paper demand is currently anticipated to stabilize in the first half of 2020 as inventories within the market return to more normalized levels. Given the fibre dynamics in the BC Interior, fibre costs are projected to remain under pressure, particularly for incremental pulp log supply. On a more positive note, however, as a result of additional sawmill residual and pulp log fibre supply secured in the latter part of 2019, the Company is not currently anticipating any material fibre-related curtailments in 2020.
The Company has no maintenance outages planned for the first quarter of 2020. A maintenance outage is currently planned at the Northwood NBSK pulp mill in the second quarter of 2020 with a projected 30,000 tonnes of reduced NBSK pulp production. In addition, maintenance outages are scheduled at the Intercontinental NBSK pulp mill and the Taylor BCTMP mill in the third quarter of 2020 with a projected 10,000 tonnes of reduced NBSK pulp production and a projected 5,000 tonnes of reduced BCTMP production, respectively.
Commenting on the Company's 2019 and fourth quarter of 2019 results, CPPI's Chief Executive Officer, Don Kayne said, "Clearly, this was an extremely challenging year and another difficult quarter for our pulp business given the weak market fundamentals. Following the market-driven downtime taken in the latter half of 2019, we are very focused on optimizing our production performance, reducing costs, and maximizing fibre utilization in the coming months, as we look to fully capitalize on the projected improvement in market conditions through 2020 and 2021."
On February 20, 2020, the Board of Directors declared a quarterly dividend of $0.0625 per share, payable on March 11, 2020 to the shareholders of record on March 4, 2020.
Refer to the Company's annual Management's Discussion and Analysis for further discussion on the Company's results for the fourth quarter of 2019 on page 17.
Additional Information and Conference Call
A conference call to discuss the fourth quarter's financial and operating results will be held on Friday, February 21, 2020 at 8:00 AM Pacific time. To participate in the call, please dial Toll-Free 1-888-390-0546. For instant replay access until March 6, 2020, please dial Toll-Free 1-888-390-0541 and enter participant pass code 543748#. The conference call will be webcast live and will be available at www.canfor.com. This news release, financial statements and a presentation used during the conference call can be accessed via the Company's website at http://www.canfor.com/investor-relations/webcasts.
Non-IFRS Measures and Forward Looking Statements
Operating Income (Loss) before Amortization and Adjusted Operating Income (Loss) are not generally accepted earnings measures and should not be considered as an alternative to net income (loss) or cash flows as determined in accordance with IFRS. Refer to the Company's Annual Management's Discussion and Analysis for a reconciliation of Operating Income (Loss) reported in accordance with IFRS to Operating Income (Loss) before Amortization and to Adjusted Operating Income (Loss).
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 Pulp Products Inc. ("Canfor Pulp" or "CPPI") is a leading global supplier of pulp and paper products with operations in the central interior of British Columbia ("BC") employing approximately 1,300 people throughout the organization. Canfor Pulp owns and operates three mills in Prince George, BC with a total capacity of 1.1 million tonnes of Premium Reinforcing Northern Bleached Softwood Kraft Pulp and 140,000 tonnes of kraft paper, as well as one mill in Taylor, BC with an annual production capacity of 230,000 tonnes of Bleached Chemi-Thermo Mechanical Pulp. Canfor Pulp is the largest North American, and one of the largest global producers of market NBSK pulp. CPPI shares are traded on the Toronto Stock Exchange under the symbol CFX. For more information visit canfor.com.
SOURCE Canfor Pulp Products Inc.
Media Contact: Michelle Ward, Canfor's Director, Corporate Communications, (604) 661-5225, [email protected]; Investor Contact: Pat Elliott, Canfor's Vice President, Corporate Finance and Strategy, (604) 661-5441, [email protected]
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