By Cindy Macdonald
Canfor Pulp Products reported net income of $23.1 million for the first quarter of 2016, compared to $29.7 million for the fourth quarter of 2015 and $28.0 million for the first quarter of 2015.
Sales for the period were $295.3 million
The company recorded operating income of $39.1 million for the first quarter of 2016, up $0.5 million from $38.6 million reported for the fourth quarter of 2015. Results in the first quarter of 2016 were said to reflect lower unit manufacturing costs, principally from lower fibre costs and the impact of the scheduled maintenance outage at the Northwood pulp mill in the previous quarter, as well as improved paper segment earnings.
Offsetting these factors were lower northern bleached softwood kraft (NBSK) pulp shipment volumes and slightly lower NBSK pulp unit sales realizations in the current quarter, reported Canfor Pulp.
The company stated that global softwood pulp markets were relatively balanced through the first quarter of 2016 as increased customer restocking absorbed additional supply resulting from minimal maintenance downtime in the period. The average North American US-dollar NBSK pulp list price, as published by RISI, was relatively unchanged compared to the fourth quarter of 2015, while the average price to China was down US$10 per tonne, or two per cent. NBSK pulp unit sales realizations were slightly lower in the current quarter as the favourable impact of a three per cent weaker Canadian dollar was more than offset by lower transaction prices which reflected slightly higher discounts and a less favourable regional sales mix in the first quarter of 2016.
According to Canfor Pulp, bleached chemi-thermo mechanical pulp (BCTMP) list prices were lower in the first quarter of 2016; however, BCTMP unit sales realizations improved slightly from the previous quarter reflecting the weaker Canadian dollar and a more favourable sales mix in the quarter.
Operating income in the Company’s paper segment was up $2.0 million from the previous quarter to $8.9 million in the first quarter of 2016 which the company attributed to the positive impact of the weaker Canadian dollar on unit sales realizations and an increased proportion of higher-priced prime bleached paper shipments.
Looking ahead, the company predicts relatively balanced global softwood pulp markets heading into the annual spring maintenance period that may support a modest NBSK pulp price increase through the second quarter of 2016. In the latter half of 2016, Canfor noted a risk of price weakness due in part to previously announced significant new global pulp capacity coming online. For May 2016, the company announced NBSK pulp list prices of US$980 per tonne in North America, an increase of US$30 per tonne from March 2016. The recent strengthening of the Canadian dollar is anticipated to offset improvements in US-dollar prices in the second quarter of 2016.
Canfor Pulp said results in the second quarter of 2016 will be impacted by maintenance outages planned at the Northwood and Intercontinental pulp mills, with a projected 38,000 tonnes of reduced NBSK pulp production, higher associated maintenance costs and lower projected shipment volumes. The Prince George pulp mill has a maintenance outage scheduled for the third quarter of 2016 and the Taylor BCTMP mill will complete a maintenance outage in the fourth quarter of 2016.