CANFOR PULP REPORTS RESULTS FOR THIRD QUARTER OF 2022

VANCOUVER, BC, Oct. 27, 2022 /CNW/ - Canfor Pulp Products Inc. ("The Company" or "CPPI") (TSX: CFX) today reported its third quarter of 2022 results:

Overview

• Q3 2022 reported operating income of $19 million; net income of $16 million, or $0.25 per share
• Strong global pulp fundamentals principally led by supply shortages; significant uptick in NBSK pulp unit sales realizations
• Improved pulp production following capital-related downtime earlier in the year

Financial Results

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

		Q3			Q2		YTD		Q3		YTD
(millions of Canadian dollars, except per share amounts)		2022			2022		2022		2021		2021
Sales	$	308.3	$	288.9		$	817.5	$	298.9	$	895.6
Reported operating income before amortization	$	46.7	$	15.7		$	56.5	$	37.8	$	136.4
Reported operating income (loss)	$	19.2	$	(8.1)		$	(14.9)	$	15.8	$	71.7
Adjusted operating income before amortization^1	$	45.6	$	16.2		$	54.8	$	41.3	$	137.7
Adjusted operating income (loss)^1	$	18.1	$	(7.6)		$	(16.6)	$	19.3	$	73.0
Net income (loss)	$	16.3	$	(5.7)		$	(9.3)	$	12.1	$	56.7
Net income (loss) per share, basic and diluted	$	0.25	$	(0.09)		$	(0.14)	$	0.19	$	0.87

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.

The Company reported operating income of $19.2 million for the third quarter of 2022, up $27.3 million from an operating loss of $8.1 million reported for the second quarter of 2022, in large part reflecting materially higher Northern Bleached Softwood Kraft ("NBSK") pulp unit sales realizations, and to a lesser extent, a 2 cent, or 2%, weaker Canadian dollar.

Commenting on the Company's third quarter's results, CPPI's President and Chief Executive Officer, Kevin Edgson, said, "This was a solid quarter for Canfor Pulp, as we focused on enhancing our operational performance and improving reliability while navigating persistent supply chain and fibre-related challenges, in order to realize high NBSK pulp list prices. While we will continue to actively monitor the current external challenges facing our business, including the fibre situation in British Columbia, our immediate focus remains on optimizing productivity while preserving our solid balance sheet."

Global softwood pulp market conditions remained relatively strong through most of the third quarter of 2022, principally reflecting increased demand, particularly from the North American and European markets, coupled with supply shortages, tied to ongoing global logistical challenges and unforeseen global production disruptions. Market fundamentals came increasingly under pressure in the latter part of the quarter however, driven largely by a moderation in purchasing activity from China. Despite relatively steady global market fundamentals, global softwood pulp producer inventories at the end of August 2022 were well above the balanced range at 44 days of supply, four days higher than at the end of June 2022, largely tied to the ongoing global supply chain challenges.

The strong NBSK US-dollar pulp list prices to China experienced in the first half of the year, continued into the current quarter, with prices reaching a near-record high of US$1,010 per tonne in July, before declining in August and September, to end the quarter at US$948 per tonne. Consequently, average US-dollar NBSK pulp list prices to China were US$969 per tonne, down US$39 per tonne, or 4%, from the previous quarter. Prices to North America continued to strengthen in the current quarter, averaging US$1,800 per tonne (before discounts), up US$57 per tonne, or 3%, from the previous quarter.

Following the completion of capital-related downtime in the first half of 2022, pulp production was up 4% from the previous quarter, as NBSK pulp productivity steadily improved as the quarter progressed. Consistent with the prior period, however, NBSK pulp production in the current quarter continued to be limited to available transportation. Concurrently, logistics-related downtime at the Company's Taylor Bleached Chemi-Thermo Mechanical Pulp ("BCTMP") mill ("Taylor"), which commenced in the first quarter of 2022 and continued throughout the second and third quarters, reduced production by approximately 60,000 tonnes in the current period. In addition, NBSK pulp production in the current quarter included the completion in mid-July of the Company's Northwood NBSK pulp mill's ("Northwood") scheduled maintenance outage (approximately 16,000 tonnes) as well as the commencement in September of the Company's Intercontinental NBSK pulp mill's ("Intercon") planned maintenance downtime (approximately 6,000 tonnes in the third quarter and a further 6,000 tonnes in October).

Operating income in the Company's paper segment was $4.1 million, down $2.1 million from the previous quarter, as moderately higher US-dollar paper pricing and a weaker Canadian dollar were more than offset by significantly higher slush pulp costs (linked to Canadian dollar NBSK market pulp prices).

Looking forward, global softwood pulp markets are projected to soften somewhat through the fourth quarter of 2022, reflecting tempered pulp demand, particularly from China.

Results in the fourth quarter are anticipated to reflect the continued uncertainties associated with lingering supply chain challenges and the related pressures on the Company's operations and shipments. As previously disclosed, it is projected that a restart of Taylor will not be contemplated until such time as there is a return to more normal transportation service levels to all of the Company's pulp and paper mills. 

The Company's results in the fourth quarter of 2022 will see the continuation of Intercon's scheduled maintenance outage into October, with an estimated 6,000 tonnes of reduced NBSK pulp production. In addition, NBSK pulp production in the fourth quarter will reflect a temporary curtailment at Intercon due to a lack of available economic fibre (approximately 16,000 tonnes). The current weakness in lumber markets may result in extended sawmill curtailments in the British Columbia Interior, with the risk that lower volumes of sawmill residual chips available to pulp mills may cause further downtime at the Company's operations. The Company will continue to closely monitor the supply chain challenges as well as the availability of economically viable fibre, and will adjust future operating plans accordingly, through the balance of 2022.

Bleached kraft paper markets are projected to experience a modest slowdown in the fourth quarter, particularly in the North American and offshore markets, as global kraft paper inventory levels move towards a more balanced range.

Additional Information and Conference Call 

A conference call to discuss the third quarter's financial and operating results will be held on Friday, October 28, 2022 at 8:00 AM Pacific time. To participate in the call, please dial Toll-Free 1-888-390-0546. For instant replay access until November 11, 2022, please dial Toll-Free 1-888-390-0541 and enter participant pass code 601480#. 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.com/investor-relations/webcasts.

Non-IFRS Financial Measures

Throughout this news 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 condensed consolidated interim financial statements:

		Q3		Q2		YTD		Q3		YTD
(millions of Canadian dollars)		2022		2022		2022		2021		2021
Reported operating income (loss)	$	19.2	$	(8.1)	$	(14.9)	$	15.8	$	71.7
Inventory write-down (recovery), net	$	(1.1)	$	0.5	$	(1.7)	$	3.5	$	1.3
Adjusted operating income (loss)	$	18.1	$	(7.6)	$	(16.6)	$	19.3	$	73.0
Amortization	$	27.5	$	23.8	$	71.4	$	22.0	$	64.7
Adjusted operating income before amortization	$	45.6	$	16.2	$	54.8	$	41.3	$	137.7

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 is a leading global supplier of pulp and paper products with operations in the central interior of 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 one of the largest North American and global producers of market northern softwood kraft 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, VP, Corporate, Communications, [phone], [email protected]; Investor Contacts: Pat Elliott, CFO & SVP, Sustainability, [phone], [email protected]; Dan Barwin, Director, Corporate Finance, [phone], [email protected]