Financial Reports & Markets
Canfor Pulp reports results for second quarter of 2022
July 29, 2022 By P&PC Staff/Canfor Pulp Products
Canfor Pulp Products shared its second quarter of 2022.
Highlights from the report include:
- Q2 2022 reported operating loss of $8 million; net loss of $6 million, or $0.09 per share
- Strong global pulp fundamentals and near-record high global US-dollar pulp list prices in Q2; significant improvement in NBSK pulp unit sales realizations
- Increased pulp shipments reflecting slight transportation relief despite ongoing logistics constraints
- Available liquidity of $106 million at June 30, 2022
The company reported an operating loss of $8.1 million for the second quarter of 2022, compared to an operating loss of $26 million for the first quarter of 2022, in large part reflecting materially higher Northern Bleached Softwood Kraft (NBSK) pulp unit sales realizations, and to a lesser extent, a 16 percent uplift in pulp shipments, as transportation disruptions globally and in British Columbia (B.C.) eased somewhat in the latter part of the current quarter. These factors more than offset the impact of market-related fibre cost increases and inflation-driven cash conversion cost pressures in the current period.
Pulp production was up six percent from the previous quarter, as NBSK productivity in the current quarter was maximized 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 quarter, reduced production by approximately 60,000 tonnes. In addition, NBSK pulp production in the current period included the completion in mid-April of the Company’s Northwood NBSK pulp mill’s (Northwood) recovery boiler number one (RB) capital upgrade (approximately 10,000 tonnes) as well as a scheduled maintenance outage at Northwood which commenced in June and was completed mid-July (approximately 30,000 tonnes in the second quarter and a further 16,000 tonnes in July).
“This was an improved quarter for Canfor Pulp, as we focused on optimizing our operational performance under a constrained logistics situation. Some relief in transportation networks towards the end of the quarter, however, enhanced our ability to realize near-record high NBSK pulp list prices. Throughout the quarter, CPPI’s leadership team has continued to make solid progress on the comprehensive business review for the Company and will continue to advance these efforts in the coming months. While we continue to actively monitor the ongoing transportation situation in BC, our immediate focus remains on getting our production performance back on track while preserving our solid balance sheet,” said Canfor Pulp president and CEO Kevin Edgson.
Following the sharp improvement in global softwood pulp market fundamentals earlier in the year, ongoing global logistics constraints and unplanned global production outages, resulted in strong global pulp market conditions throughout the second quarter. The upward trend in NBSK US-dollar list prices on orders to China experienced in the first quarter, continued into April and held at near-record highs throughout the balance of the period. As a result, the current quarter US-dollar NBSK pulp list price to China averaged US$1,008 per tonne, up US$109 per tonne, or 12 percent, from the previous quarter. Prices to North America (before discounts) experienced more notable increases in the current quarter, largely in response to the uplift in China prices earlier in the year, up US$216 per tonne, or 14 percent, from the previous quarter, to average US$1,743 per tonne. Global softwood pulp producer inventories at the end of May 2022 were slightly above the balanced range at 38 days of supply, an improvement of two days from March 2022.
Operating income in the Company’s paper segment was $6.2 million, up $0.2 million from the previous quarter, as moderately higher paper unit sales realizations, tied to the continued strengthening of global paper demand throughout much of the current quarter, was combined with an increase in paper shipments and a weaker Canadian dollar. These factors were offset, for the most part, by significantly higher paper unit manufacturing costs, principally driven by higher slush costs and increased spend on operating supplies in the current period.
Looking forward, global softwood kraft pulp markets are projected to remain solid through the third quarter of 2022, reflecting both global pulp production and supply constraints, as well as steady demand. High yield markets are forecast to see slight improvements through the third quarter of 2022, also tied to limited supply availability. Notwithstanding the modest improvement in B.C.’s transportation networks seen in the later part of the second quarter, results in the third quarter are anticipated to reflect the continued impact of and uncertainties associated with a constrained rail service network and the related pressures on the company’s operations and shipments. Furthermore, 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 will continue to closely monitor the supply chain challenges and will adjust future operating plans accordingly, through the balance of 2022.
In addition, the company’s results in the third quarter of 2022 will reflect the impact of the continuation of Northwood’s scheduled maintenance outage into mid-July (approximately 16,000 tonnes), as well as a scheduled maintenance outage at the company’s Intercontinental NBSK pulp mill in the latter part of the third quarter and into the fourth quarter, with a projected 12,000 tonnes of reduced NBSK pulp production. Bleached kraft paper markets are projected to weaken somewhat through the third quarter with a modest slowdown in demand anticipated, especially in offshore markets, as global kraft paper inventories return to more normalized levels.
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