Canfor reports Q3 2017 results
Oct. 23, 2017 - Canfor Pulp Products Inc. reported net income of $12.6 million, or $0.19 per share, for the third quarter of 2017, compared to $20.2 million, or $0.31 per share, for the second quarter of 2017 and $22.4 million, or $0.34 per share, for the third quarter of 2016.
For the nine months ended September 30, 2017, the company’s net income was $56.9 million, or $0.86 per share, compared to $47.7 million, or $0.70 per share, for the nine months ended September 30, 2016.
The company reported operating income of $21.1 million for the third quarter of 2017, down $10.4 million from the $31.5 million reported for the second quarter of 2017. While pulp shipments and production were both up quarter-over-quarter, the related increase in operating income was more than offset by the impact on unit pulp and paper sales realizations of a significantly stronger Canadian dollar.
Entering the third quarter of 2017, global pulp markets showed signs of weakness; however, as the quarter progressed, demand and pricing rebounded particularly in China, in part due to China’s new regulations restricting the import of recycled mixed paper. The resulting positive price momentum will largely be realized in the fourth quarter of 2017, reflecting the timing of shipments (versus orders). As a result average Northern Bleached Softwood Kraft (NBSK) pulp US-dollar list prices to China were consistent quarter-over-quarter; however, NBSK pulp unit sales realizations experienced a moderate decrease, due to a 5 cent or 7 per cent stronger Canadian dollar.
Bleached Chemi-Thermo Mechanical Pulp (BCTMP) US-dollar list prices trended positively through the third quarter of 2017, but BCTMP unit sales realizations were also negatively impacted by a stronger Canadian dollar. Energy revenues were well up in the current quarter reflecting a return to more normalized power generation levels.
Pulp shipments and production volumes were up 10 per cent and 11 per cent, respectively, from the previous quarter, principally reflecting a decline in scheduled maintenance outages. In the current quarter, the company completed a scheduled maintenance outage at the Intercontinental NBSK pulp mill which reduced pulp production by approximately 10,000 tonnes. In the second quarter, a scheduled maintenance outage at the company’s larger Northwood NBSK pulp mill resulted in approximately 33,000 tonnes of reduced production. Shipments for the third quarter of 2017 were also impacted by a 14,000 tonne vessel slippage into early October. Pulp unit manufacturing costs improved from the previous quarter, largely reflecting the lower quarter-over-quarter scheduled maintenance outages coupled with seasonally lower energy prices and usage.
Operating income in the company’s paper segment at $4.9 million was down $1.7 million from the second quarter of 2017, largely reflecting a modest decline in paper unit sales realizations, due to higher market-driven US-dollar paper pricing being more than offset by the stronger Canadian dollar. Partially offsetting this decline in paper unit sales realizations was a moderate improvement in paper unit manufacturing costs, primarily driven by lower slush pulp costs, combined with a decline in maintenance spend.
Commenting on the company’s third quarter of 2017 results, CPPI CEO Don Kayne said, “Despite the stronger Canadian dollar, market conditions were somewhat better than anticipated, allowing us to generate solid results for the quarter. With global pulp markets strong as we head into the fourth quarter, and our major NBSK pulp maintenance shutdowns now behind us, we are very focused on optimizing our production performance and sales mix through the balance of the year.”
For the month of October 2017, the company announced increases of US$105 per tonne and US$30 per tonne for NBSK pulp list prices to China and North America, respectively, reflecting a surge in demand, principally from China, as well as supply disruptions. Global pulp markets are anticipated to remain strong through the fourth quarter of 2017.
Results in the fourth quarter of 2017 will reflect a scheduled outage at the Taylor pulp mill to complete preliminary work associated with the previously announced energy project, with a projected 3,000 tonnes of reduced BCTMP production as well as lower projected shipment volumes.
On October 20, 2017, the board of directors declared a quarterly dividend of $0.0625 per share, payable on November 9, 2017 to the shareholders of record on November 2, 2017.
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