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Outages, lower sales bring down Canfor results

Canfor Pulp Products Inc. reported net income of $2.2 million for the second quarter of 2016, compared to $23.1 million for the first quarter of 2016 and $17.7 million for the second quarter of 2015. For the six months ended June 30, 2016, the company’s net income was $25.3 million compared to $45.7 million for the six months ended June 30, 2015.

The company reported operating income of $5.2 million for the second quarter of 2016, down $33.9 million from $39.1 million reported for the first quarter of 2016.

Results in the second quarter reflected scheduled maintenance outages taken at all three of the company’s NBSK pulp mills and its kraft paper operation as well as lower NBSK pulp unit sales realizations and energy revenues, according to a statement from Canfor Pulp.

Positive pricing momentum in global softwood pulp markets during the second quarter of 2016 was due mostly to the impact of industry spring maintenance outages and solid demand, particularly from China, the company states. The average North American US-dollar NBSK pulp list price, as published by RISI, was up US$37 per tonne, or 4%, to US$980 per tonne, while the average price to China was up US$27 per tonne, or 5%. However, NBSK pulp unit sales realizations showed a modest decline from the previous quarter as price increases were outweighed by the 5 cent, or 7%, stronger Canadian dollar and a higher proportion of shipments at the beginning of the quarter when NBSK prices were lower, the Canfor statement explains.

Similarly, BCTMP US-dollar list prices also trended positively in the second quarter of 2016 but the increases were offset by the stronger Canadian dollar.

Commenting on the company’s second quarter results, Canfor Pulp’s CEO, Don Kayne, said: “This was a challenging quarter for Canfor Pulp given the scheduled maintenance downtime at all of our NBSK pulp mills. With the significant majority of the scheduled NBSK pulp mill maintenance outages now behind us, our focus for the remainder of the year is on returning to our targeted productivity levels at all mills.”

Lower energy revenue in the current quarter reflected both increased scheduled maintenance downtime and seasonally lower energy prices, the company states.

Operating income in the company’s paper segment at $5.5 million was down $3.4 million from the first quarter of 2016. Lower earnings compared to the previous quarter was largely due to lower paper unit sales realizations and a five-day scheduled maintenance outage in the current quarter, partially offset by increased shipments as well as lower prices for slush pulp.

“Looking ahead,” reads the Canfor statement, “with global softwood inventories at the low end of the balanced range and steady market demand, it is anticipated that prices will remain stable through the third quarter of 2016. Looking towards the end of 2016 and into 2017, there continues to be a risk of downward pressure on pricing due in part to previously announced new pulp capacity forecast to come online in the latter part of 2016.”

For the month of July 2016, Canfor Pulp announced NBSK pulp list prices of US$1,000 per tonne in North America unchanged from June 2016.