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Canfor Pulp Products Inc. Announces Third Quarter 2019 Results and Quarterly Dividend

VANCOUVER , Oct. 23, 2019 /CNW/ - Canfor Pulp Products Inc. ("CPPI") (CFX.TO) today reported third quarter 2019 results and its quarterly dividend:

Canfor Pulp Products Inc. (CNW Group/Canfor Pulp Products Inc.)

Overview

  • Third quarter of 2019 reported operating loss of $44 million
  • Net loss of $32 million , or $0.50 per share


Financial Results

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

(millions of Canadian dollars, except per share amounts)


Q3 
2019


Q2 
2019


YTD
2019


Q3

2018


YTD
2018

Sales

$

216.9

$

319.5

$

840.4

$

328.5

$

1,084.6

Reported operating income (loss) before
amortization

$

(20.3)

$

41.7

$

61.8

$

80.7

$

290.1

Reported operating income (loss)

$

(44.0)

$

18.4

$

(7.5)

$

60.5

$

231.0

Net income (loss)

$

(32.4)

$

10.6

$

(11.0)

$

42.9

$

170.2

Net income (loss) per share, basic and diluted

$

(0.50)

$

0.16

$

(0.17)

$

0.66

$

2.61

Results for 2019 include the adoption of IFRS 16 Leases, from January 1, 2019, on a prospective basis. Comparative periods have not been restated.

The second quarter of 2019 results included an inventory write-down expense of $13.4 million.

 

Reflecting weak global pulp market conditions, significant market-related downtime and fibre supply disruptions from British Columbia ("BC") Interior sawmill curtailments, the Company reported an operating loss of $44.0 million for the third quarter of 2019, down $62.4 million from the operating income of $18.4 million reported for second quarter of 2019. Northern Bleached Softwood Kraft ("NBSK") pulp and Bleached Chemi-Thermo Mechanical Pulp ("BCTMP") prices saw significant declines through the quarter, driven by weak global softwood pulp demand in combination with elevated global pulp inventory levels. In response to the deteriorating pulp market conditions and fibre supply disruptions, the Company took phased summer curtailments at its Intercontinental, Northwood and Prince George NBSK pulp mills in Prince George, BC , as well as at its BCTMP mill in Taylor, BC . Combined, the summer curtailments reduced pulp production in the current quarter by 75,000 tonnes of NSBK pulp and 60,000 tonnes of BCTMP.

Global pulp markets weakened for a third straight quarter with the combination of tepid demand and inventory oversupply, particularly in China and Europe , significantly weighing on global pulp prices. During the current quarter, the US-dollar NBSK pulp list price to China declined to its lowest level in over 10 years, averaging US$585 per tonne, down US$68 per tonne, or 10%, from the previous quarter. Prices to other global regions, including North America and Europe , also experienced similar decreases in the current quarter. As a result of weakening pulp market conditions and pricing, average NBSK pulp and BCTMP unit sales realizations were down significantly compared to the second quarter of 2019.

Energy revenues increased in the current quarter as improved power generation, driven by Northwood's new Turbo Generator Condensing turbine, and higher energy prices, more than offset the decrease in operating days associated with the aforementioned downtime.

Pulp production was 174,000 tonnes, down 126,000 tonnes, or 42%, from the previous quarter, largely reflecting the quarter-over-quarter impact of downtime, which, in the current quarter, principally related to the aforementioned production curtailments at all of the Company's pulp mills. The completion of a scheduled maintenance outage at the Company's Prince George pulp mill in the current quarter further reduced pulp production by 4,000 tonnes. In the second quarter of 2019, the Company completed scheduled maintenance outages at the Intercontinental NBSK pulp and Taylor BCTMP mills which reduced pulp production by 11,000 tonnes and 6,000 tonnes, respectively.

Pulp shipments were 213,000 tonnes, down 75,000 tonnes, or 26%, from the previous quarter reflecting the decrease in pulp production, offset in part by a drawdown of inventory in the current quarter.

Pulp unit manufacturing costs were significantly higher than the previous quarter, principally reflecting reduced production. Fibre costs showed a modest decline, with lower market-based prices for sawmill residual chips (linked to Canadian dollar NBSK pulp sales realizations) offsetting increased seasonal pricing adjustments and a higher proportion of available higher-cost whole log chips.

Operating income in the Company's paper segment was $3.9 million , down $4.2 million from the second quarter of 2019, as declining paper unit sales realizations and reduced paper production, as a result of scheduled maintenance downtime, more than offset lower slush pulp costs (linked to falling Canadian dollar NBSK pulp market prices).

Looking forward, global softwood kraft pulp markets are projected to show signs of a modest recovery in the fourth quarter of 2019 with consumers replenishing inventories following the seasonally slower summer months. It is anticipated that global pulp pricing will slowly improve through the balance of 2019 and into 2020 as global inventories move towards a more balanced range. Given the impacts of recently announced sawmill curtailments and closures in the BC Interior, fibre costs are projected to remain under pressure given the limited supply of incremental pulp logs. Results in the fourth quarter of 2019 will include a one week curtailment at the Company's Prince George NBSK pulp mill and paper machine at the beginning of October, a continuation from the third quarter.

Bleached kraft paper demand is anticipated to remain relatively weak through the balance of the year, with prices projected to remain under pressure in the fourth quarter before stabilizing in 2020.

Commenting on the Company's third quarter of 2019 results and current market conditions, CPPI's Chief Executive Officer, Don Kayne said, "This was an extremely difficult quarter for our pulp business and our employees, as we managed challenging pulp market conditions and made difficult operating decisions due to the reduced fibre supply in BC driven by the industry-wide sawmill curtailments. As a result of the downtime taken during the third quarter, however, we look to be well placed to run without further disruption through the balance of the year and into 2020, when we anticipate market conditions and prices to improve."

On October 23, 2019 , the Board of Directors declared a quarterly dividend of $0.0625 per share, payable on November 12, 2019 to the shareholders of record on November 5, 2019 .

Additional Information and Conference Call 
A conference call to discuss the third quarter's financial and operating results will be held on Thursday, October 24, 2019 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 7, 2019 , please dial Toll-Free 1-888-390-0541 and enter participant pass code 315653#. 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 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.

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 220,000 tonnes of Bleached Chemi-Thermo Mechanical Pulp ("BCTMP").  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.

SOURCE Canfor Pulp Products Inc.


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