CANFOR PULP REPORTS RESULTS FOR FIRST QUARTER OF 2023
VANCOUVER, BC, May 3, 2023 /CNW/ - Canfor Pulp Products Inc. ("The Company" or "CPPI") (TSX: CFX) today reported its first quarter of 2023 results1:
Overview
Q1 2023 reported operating loss of $25 million; net loss of $19 million, or $0.29 per share
Global pulp market fundamentals softened late in the quarter amid uncertainty associated with rising pulp producer inventory levels
Improved pulp production despite ongoing fibre challenges and wind down of pulp line at Prince George Pulp and Paper mill
Subsequent to quarter-end, expanded and extended its operating loan facility and term debt
Financial Results
The following table summarizes selected financial information for CPPI for the comparative periods:
Q1 | Q4 | Q1 | |||||||||
(millions of Canadian dollars, except per share amounts) | 2023 | 2022 | 2022 | ||||||||
Sales | $ | 243.3 | $ | 268.1 | $ | 220.3 | |||||
Reported operating loss before amortization, asset write-down and | $ | (0.6) | $ | (15.1) | $ | (5.9) | |||||
Reported operating loss | $ | (25.2) | $ | (91.1) | $ | (26.0) | |||||
Adjusted operating income (loss) before amortization, asset write-down | $ | 3.0 | $ | (15.6) | $ | (7.0) | |||||
Adjusted operating loss1 | $ | (21.6) | $ | (42.0) | $ | (27.1) | |||||
Net loss | $ | (18.8) | $ | (69.8) | $ | (19.9) | |||||
Net loss per share, basic and diluted | $ | (0.29) | $ | (1.07) | $ | (0.31) | |||||
Adjusted net loss1 | $ | (18.8) | $ | (33.6) | $ | (19.9) | |||||
Adjusted net loss per share, basic and diluted1 | $ | (0.29) | $ | (0.52) | $ | (0.31) | |||||
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 an operating loss of $25.2 million for the first quarter of 2023, compared to an operating loss of $91.1 million for the fourth quarter of 2022. After adjusting for certain one-time items, including a $3.6 million inventory write-down in the current period, the Company's operating loss was $21.6 million for the first quarter of 2023, a $20.4 million improvement compared to an adjusted operating loss of $42.0 million for the fourth quarter of 2022. These results, for the most part, reflected a 13% increase in pulp production and an associated decline in pulp unit manufacturing costs quarter-over-quarter.
Commenting on the Company's first quarter of 2023 results, CPPI's President and Chief Executive Officer, Kevin Edgson, said, "This was a difficult quarter for the Company as the decision to shut down the pulp line at the Prince George Pulp and Paper mill weighed heavily on our employees, their families and the local community. Despite this challenging news, the results from our pulp business improved during the quarter as we focused on improving our operational reliability and productivity within the constrained fibre environment we are navigating. With a smooth and efficient wind down of the pulp line at Prince George now complete, our focus remains on continuing to improve our overall performance and preserving our balance sheet."
Following the strong global pulp market conditions experienced in 2022, market fundamentals came under modest pressure late in the first quarter of 2023. Relatively stable demand in the quarter was outweighed by an uptick in global pulp producer inventories, which, at the end of February 2023, were well above the balanced range, at 50 days of supply, an increase of seven days from the 43 days of supply at the end of December 2022 (Market conditions are generally considered balanced when inventories are in the 32-43 days of supply range). Consequently, the Northern Bleached Softwood Kraft ("NBSK") US-dollar list price on orders to China saw a modest decline, falling US$48 per tonne to US$865 per tonne in March 2023. For the current quarter overall, US-dollar NBSK pulp list prices to China averaged US$891 per tonne, down US$29 per tonne, or 3%, from the previous quarter.
As mentioned, pulp production was up 13% from the previous quarter, principally reflecting the benefit of improved NBSK productivity in the current period following the numerous difficulties in the prior quarter driven by a shortage of economic fibre and winter weather conditions. The Company's Intercontinental NBSK pulp mill ("Intercon") started the current period curtailed as a result of ongoing fibre shortages, which reduced NBSK pulp production by approximately 35,000 tonnes in the first quarter of 2023. While challenges with operational reliability persisted throughout the current quarter, and impacted NBSK pulp production by approximately 30,000 tonnes, the operating performance at Intercon and at the Company's Northwood NBSK pulp mill ("Northwood") improved as the quarter progressed.
Operating income in the Company's paper segment was $3.3 million, up $1.4 million from the previous quarter, as a reduction in slush pulp costs, linked to lower Canadian dollar NBSK pulp market prices, was combined with an increase in paper production and shipments quarter-over-quarter.
Looking forward, global softwood kraft pulp markets are anticipated to continue to weaken through the second quarter of 2023, as relatively stable demand is projected to be overshadowed by above-average global pulp producer inventory levels.
Results in the second quarter of 2023 are also forecast to reflect the impact on pulp production and shipments of the closure of the Company's pulp line at the Prince George Pulp and Paper mill. No major maintenance outages are planned for the second quarter of 2023.
Bleached kraft paper markets are projected to weaken somewhat through the second 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.
Additional Information and Conference Call
A conference call to discuss the first quarter's financial and operating results will be held on Thursday, May 4, 2023 at 8:00 AM Pacific time. To participate in the call, please dial Toll-Free 1-888-390-0546. For instant replay access until May 18, 2023, please dial Toll-Free 1-888-390-0541 and enter participant pass code 514554#. 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 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:
Q1 | Q4 | Q1 | ||||
(millions of Canadian dollars) | 2023 | 2022 | 2022 | |||
Reported operating loss | $ | (25.2) | $ | (91.1) | $ | (26.0) |
Asset write-down and impairment | $ | - | $ | 49.6 | $ | - |
Inventory write-down (recovery), net | $ | 3.6 | $ | (0.5) | $ | (1.1) |
Adjusted operating loss | $ | (21.6) | $ | (42.0) | $ | (27.1) |
Amortization | $ | 24.6 | $ | 26.4 | $ | 20.1 |
Adjusted operating income (loss) before amortization, asset write-down | $ | 3.0 | $ | (15.6) | $ | (7.0) |
Net loss | $ | (18.8) | $ | (69.8) | $ | (19.9) |
Asset write-down and impairment, net of tax | $ | - | $ | 36.2 | $ | - |
Adjusted net loss | $ | (18.8) | $ | (33.6) | $ | (19.9) |
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 Canfor 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 two 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.
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