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Canfor Pulp Products reports operating income, production up in Q1 2019

May 1, 2019  By P&PC Staff/Canfor Pulp Products

May 1, 2019 – Canfor Pulp Products has released its results for the first quarter of 2019, reporting operating income of $18.1 million, up $2.5 million from the fourth quarter of 2018.

The company cites improved production and increased shipments as offsets to the impact of lower U.S.-dollar pulp prices to China.

Pulp segment
Notwithstanding previously announced kiln-related operational disruptions at two of the company’s Northern Bleach Softwood Kraft (NBSK) pulp mills in January and challenges associated with severe winter weather, pulp production was up 22 per cent from the previous quarter, largely as a result of significant downtime taken at the company’s Northwood pulp mill in the comparative period to perform repairs to one of its two recovery boilers.


The weaker pulp market conditions experienced towards the end of 2018 extended into early 2019, and, as a result, global softwood pulp producer inventory levels remained well above the balanced range through the first quarter. After declining in January, NBSK pulp prices to China, the world’s largest pulp consumer, showed a modest recovery to end the quarter at US$730 per tonne. The average U.S.-dollar NBSK pulp list price to China for the first quarter of 2019 was US$710 per tonne, down US$95, or 12 per cent, from the fourth quarter of 2018, and down US$200 per tonne compared to the first quarter of 2018. Prices to other global regions, including North America and Europe, experienced more modest declines when compared to the same comparative periods.

Despite the significantly lower U.S.-dollar pricing to China, the company’s geographic sales mix, combined with a one cent, or one per cent, weaker Canadian dollar, resulted in the company’s average NBSK pulp unit sales realizations moderately declining quarter-over-quarter. Average Bleached Chemi-Thermo Mechanical Pulp (BCTMP) sales unit realizations were well down over the same period reflecting an 11 per cent decline in average U.S.-dollar prices. Higher energy revenues in the current quarter reflected increased energy production, seasonally higher power prices, as well as the successful commercialization ramp-up in March of the previously announced Turbo Generator Condensing turbine at the Northwood pulp mill.

Pulp production was 274,000 tonnes for the first quarter of 2019, up 50,000 tonnes, or 22 per cent, from the previous quarter, with improved productivity and increased operating days in the current quarter more than offsetting the aforementioned kiln-related operational disruptions at the company’s Northwood and Intercontinental pulp mills in January, and, to a lesser extent, cold-weather related production challenges at all mills in February and early March. Pulp shipments were up 28,000 tonnes, or 12 per cent, from the previous quarter mostly reflecting the higher production offset in part by the replenishment of inventory levels significantly drawn down during the fourth quarter of 2018 due to the Northwood outage.

Pulp unit manufacturing costs were moderately lower in the current quarter compared to the fourth quarter of 2018, as the benefit of increased production volumes, lower maintenance spend and reduced chemical costs in the current quarter, more than offset higher energy costs related to the aforementioned winter weather conditions, and the continued disruptive impact on natural gas supply and pricing resulting from a third-party natural gas pipeline explosion near Prince George in the fourth quarter. Fibre costs were slightly lower than the previous quarter, as seasonal pricing adjustments combined with lower market-based prices for sawmill residual chips (linked to Canadian dollar NBSK pulp sales realizations) offset an increased proportion of higher-cost whole log chips.

Paper segment
Operating income in the company’s paper segment was $5.9 million, up $2.4 million from the fourth quarter of 2018. The increase largely reflected lower slush pulp costs linked to lower Canadian dollar NBSK pulp prices and, to a lesser extent, improved paper unit sales realizations.

Results in the second quarter of 2019 will include a recently completed scheduled maintenance outage at the Intercontinental NBSK pulp mill in April, which reduced NBSK pulp production by approximately 11,000 tonnes, as well as higher associated maintenance costs. Additional maintenance outages are scheduled at the Taylor BCTMP mill and the Prince George NBSK pulp mill in the second and third quarters of 2019 with a projected 5,000 tonnes of reduced BCTMP production and 6,000 tonnes of reduced NBSK pulp production, respectively. A maintenance outage is currently planned at the company’s paper machine during the third quarter of 2019 with a projected 4,000 tonnes of reduced paper production.

Don Kayne, CPPI’s chief executive officer, says, “While our financial results showed a modest improvement compared to the last quarter of 2018, they also reflected several operational, weather and market-related challenges during the period. With Intercontinental pulp mill’s scheduled shutdown now behind us, we are focused on increasing our productivity and overall financial performance going forward.”

Read the full Q1 2019 Canfor Pulp Products financial report.

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