CANFOR PULP REPORTS 2022 AND FOURTH QUARTER OF 2022 RESULTS

VANCOUVER, BC, Feb. 28, 2023 /CNW/ - Canfor Pulp Products Inc. ("The Company" or "CPPI" or "Canfor Pulp") (TSX: CFX) today reported its 2022 and fourth quarter of 2022 results¹:

Overview

• 2022 adjusted operating loss of $59 million; adjusted net loss of $43 million, or $0.66 per share
• Q4 2022 adjusted operating loss of $42 million; adjusted net loss of $34 million, or $0.52 per share
• Q4 pulp production faced with fibre shortages and challenging winter weather conditions
• After year end, announced permanent closure of pulp line at Prince George Pulp and Paper Mill to right-size operating footprint tied to long-term supply of economic residual fibre

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)		2022		2022		2022		2021		2021
Sales	$	268.1	$	308.3	$	1,085.6	$	249.3	$	1,144.9
Reported operating income (loss) before amortization, asset write-down and impairment	$	(15.1)	$	46.7	$	41.4	$	(19.6)	$	116.8
Reported operating income (loss)	$	(91.1)	$	19.2	$	(106.0)	$	(137.2)	$	(65.5)
Adjusted operating income (loss) before amortization, asset write-down and impairment^1	$	(15.6)	$	45.6	$	39.2	$	(18.5)	$	119.2
Adjusted operating income (loss)^1	$	(42.0)	$	18.1	$	(58.6)	$	(41.1)	$	31.9
Net income (loss)	$	(69.8)	$	16.3	$	(79.1)	$	(101.1)	$	(44.4)
Net income (loss) per share, basic and diluted	$	(1.07)	$	0.25	$	(1.21)	$	(1.55)	$	(0.68)
Adjusted net income (loss)^1	$	(33.6)	$	16.3	$	(42.9)	$	(31.7)	$	25.0
Adjusted net income (loss) per share, basic and diluted^1	$	(0.52)	$	0.25	$	(0.66)	$	(0.49)	$	0.38

¹ Adjusted results referenced throughout this news release are defined as non-IFRS financial measures. For further details, refer to the "Non-IFRS Financial Measures" section of this document.

2022 was a difficult year for Canfor Pulp, as strong global pulp market fundamentals and near-record high pulp list prices were more than outweighed by the impact of global supply chain disruptions, fibre shortages in British Columbia ("BC") as well as operational efficiency and reliability challenges at all of the Company's pulp mills.

Early in 2023, after an extensive analysis of its operating footprint and the long-term supply of economic residual fibre, Canfor Pulp made the decision to permanently close the pulp line at its Prince George Pulp and Paper Mill ("PG"). As a result of this decision, as well as the ongoing challenges to the business posed by fibre availability and costs, the Company recorded an asset write-down and impairment charge totaling $49.6 million in its results for the three and twelve months ended December 31, 2022.

Before taking account of adjusting items, largely comprised of the aforementioned asset-write down and impairment charge, the Company's operating loss was $58.6 million for the current year, down $90.5 million from the adjusted operating income of $31.9 million for the prior year. The Company reported an operating loss for 2022 of $106.0 million, versus an operating loss of $65.5 million for 2021.

For the fourth quarter of 2022, the Company reported an operating loss of $91.1 million. After taking account of adjusting items, the Company's operating loss for the fourth quarter of 2022 was $42.0 million compared to an adjusted operating income of $18.1 million for the previous quarter. The loss in the current period principally reflected the impact on pulp production of material reductions in the Company's residual fibre supply, as well as challenging operating conditions due to winter weather in BC.    

Commenting on the Company's 2022 and fourth quarter of 2022 results, CPPI's President and Chief Executive Officer, Kevin Edgson, said, "This was a difficult quarter to end a challenging year for Canfor Pulp. Our pulp business faced many uncontrollable challenges this year, but especially in the fourth quarter, including material fibre supply disruptions as a result of sawmill curtailments. The decision to shut down the pulp line at Prince George Pulp and Paper mill was extremely difficult, but necessary, in order to right-size our operating platform and set the Company up for a sustainable long-term future. We are working to support our employees through these transitions and regret the impact these decisions have on our employees, their families and the local community. We want to recognize our employees for their dedication and resilience as we work through these significant changes in the organization."

Following the strong global pulp market conditions experienced mid-year, market fundamentals came under modest pressure in the current quarter, driven by a decline in demand and purchasing activity, particularly from Asian markets, as well as an uptick in global pulp market supply, primarily from Europe and South America. These factors were combined with the sustained effect of elevated global softwood pulp producer inventories which, at the end of December 2022, remained on the high end of the balanced range at 43 days of supply. As a result, the current quarter US-dollar Northern Bleached Softwood Kraft ("NBSK") pulp list prices to China averaged US$920 per tonne, down US$49 per tonne, or 5%, from the previous quarter.

As mentioned, the current quarter was a challenging period for the Company's pulp mills, with pulp production down 18% from the previous quarter, as a shortage of economic fibre, combined with challenging winter conditions in BC, significantly impacted operating performance, particularly at the Company's Intercontinental ("Intercon") and Northwood NBSK ("Northwood") pulp mills. Pulp production in the current period also reflected ongoing downtime at the Company's Taylor Bleached Chemi-Thermo Mechanical Pulp ("BCTMP") mill ("Taylor"), which commenced in the first quarter of 2022 and continued through the balance of the year. As a result of a reduction in the long-term supply of fibre in the Peace region, the Company does not see a path forward to restarting the Taylor mill at this time and is exploring alternative uses for the site.

Operating income in the Company's paper segment was $1.9 million, down $2.2 million from the operating income of $4.1 million in the previous quarter, as modestly higher paper unit sales realizations, largely tied to the 4% weaker Canadian dollar, were more than outweighed by a moderate uplift in chemical costs and increased spend on operating supplies quarter-over-quarter.

In recent weeks, global softwood kraft pulp market conditions have experienced a modest uptick as unplanned global supply outages, principally stemming from fibre-related downtime in Western Canada, has more than outweighed weak global macroeconomic conditions. Reflecting this favourable momentum, the Company announced a US$30 per tonne increase to its NBSK pulp list price to China in February 2023 to US$970 per tonne. Looking forward, global softwood kraft pulp markets are projected to remain relatively stable through the balance of the first quarter of 2023, as persistent high global pulp inventory levels and additional hardwood pulp capacity predicted to come online in 2023, combine with steady Chinese demand. Notwithstanding the projected increased supply, global pulp pricing is anticipated to remain above historic average price levels in the short-term.

As a result of the recent announcement, the Company's results in the first quarter of 2023 will reflect the impact on production and shipments of the wind down the Company's pulp line at PG. Looking forward, the Company is focused on optimizing a sustainable operating footprint, improving operational reliability and closely managing manufacturing and fibre costs.

No major maintenance outages are planned for the first and second quarters of 2023. In the third quarter of 2023, a maintenance outage is currently planned at Northwood, with a projected 25,000 tonnes of reduced NBSK pulp production.

Bleached kraft paper markets are projected to weaken somewhat through the first quarter of 2023, with a modest slowdown in demand anticipated as global kraft paper inventories return to more normalized levels. A maintenance outage is currently planned at the Company's paper machine in the second quarter of 2023 with a projected 5,000 tonnes of reduced paper production.

Refer to the Company's annual Management's Discussion and Analysis for further discussion on the Company's results for the fourth quarter of 2022 on page 18.

Additional Information and Conference Call 

A conference call to discuss the fourth quarter's financial and operating results will be held on Wednesday, March 1, 2023 at 7:00 AM Pacific time. To participate in the call, please dial Toll-Free 1-888-390-0546. For instant replay access until March 15, 2023, please dial Toll-Free 1-888-390-0541 and enter participant pass code 110844#. 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 Financial Measures

Throughout this press release, reference is made to certain non-IFRS financial measures which are used to evaluate the Company's performance but are not generally accepted under IFRS and may not be directly comparable with similarly titled measures used by other companies. The following table provides a reconciliation of these non-IFRS financial measures to figures reported in the Company's consolidated financial statements:

		Q4		Q3		YTD		Q4		YTD
(millions of Canadian dollars)		2022		2022		2022		2021		2021
Reported operating income (loss)	$	(91.1)	$	19.2	$	(106.0)	$	(137.2)	$	(65.5)
Asset write-down and impairment	$	49.6	$	-	$	49.6	$	95.0	$	95.0
Inventory write-down (recovery), net	$	(0.5)	$	(1.1)	$	(2.2)	$	1.1	$	2.4
Adjusted operating income (loss)	$	(42.0)	$	18.1	$	(58.6)	$	(41.1)	$	31.9
Amortization	$	26.4	$	27.5	$	97.8	$	22.6	$	87.3
Adjusted operating income (loss) before amortization, asset write-down and impairment	$	(15.6)	$	45.6	$	39.2	$	(18.5)	$	119.2
Net income (loss)	$	(69.8)	$	16.3	$	(79.1)	$	(101.1)	$	(44.4)
Asset write-down and impairment, net of tax	$	36.2	$	-	$	36.2	$	69.4	$	69.4
Adjusted net income (loss)	$	(33.6)	$	16.3	$	(42.9)	$	(31.7)	$	25.0

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.

About Canfor Pulp Products Inc.

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"). Canfor Pulp owns and operates three mills in Prince George, BC with a total capacity of 780,000 tonnes of Premium Reinforcing Northern Bleached Softwood Kraft ("NBSK") Pulp and 140,000 tonnes of kraft paper. 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, VP, Corporate, Communications, [phone], [email protected]; Investor Contacts: Pat Elliott, CFO & SVP, Sustainability, [phone], [email protected]; Dan Barwin, Director, Corporate Finance, [phone], [email protected]