Canfor Pulp Reports Results for First Quarter of 2024
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Canfor Pulp Products Inc. reported its first quarter of 2024 results.
Overview
- Q1 2024 operating loss of $16 million; net loss of $2 million, or $0.04 per share
- Modest uptick in NBSK pulp unit sales realizations, despite relatively subdued global pulp demand and flat producer inventory levels
- 7% increase in pulp production quarter-over-quarter reflecting solid operational performance and reduced unplanned downtime
- Persistent challenges associated with the availability of economic fibre in British Columbia in the near-term and through the balance of 2024
Financial Results
The Company reported an operating loss of $15.7 million for the first quarter of 2024, compared to an operating loss of $15.1 million for the fourth quarter of 2023. After adjusting for certain one-time items, including a $10.9 million reversal of a previously recognized inventory write-down in the prior period, the Company's operating results for the first quarter of 2024 reflected a $10.3 million improvement compared to an adjusted operating loss of $26.0 million for the fourth quarter of 2023. These results were largely driven by a modest uplift in the Company's average Northern Bleached Softwood Kraft ("NBSK") sales unit pulp realizations in the current quarter combined with a 7% increase in pulp production compared to the fourth quarter of 2023.
Commenting on the Company's first quarter of 2024 results, CPPI's President and Chief Executive Officer, Kevin Edgson, said, "This was an improved quarter for Canfor Pulp, as we benefited from generally steady global softwood pulp market conditions and solid pulp production at both NBSK mills. While we continue to navigate the external challenges facing our business in relation to the availability of economically viable fibre, both in the short and longer term, we greatly appreciate our employees' continued focus on enhancing our operational performance and efficiency."
First Quarter Highlights
Global softwood pulp markets remained flat through most of the current quarter, principally tied to generally subdued demand, particularly from Asia, combined with stable pulp producer inventory levels. Late in the current quarter, however, NBSK pulp prices to China, the world's largest pulp consumer, showed some upward momentum, largely driven by global pulp supply concerns, tied in part, to Finland's national transport workers' strike.
As any related price changes will be realized in subsequent quarters, for the current quarter overall, average US-dollar NBSK pulp list prices to China were US$745 per metric ton, broadly in line with the previous quarter.
Pulp production was 158,000 metric tons for the first quarter of 2024, up 10,000 metric tons, or 7%, from the previous quarter, largely reflecting solid productivity and the benefit of reduced downtime in the current period. In the current quarter, however, the operational performance at both the Company's Northwood ("Northwood") and Intercontinental ("Intercon") NBSK pulp mills was challenged by extreme winter weather conditions, particularly in January, as well as other minor operational disruptions throughout the period.
Operating income in the Company's paper segment was $1.1 million, compared to operating income of $3.5 million in the previous quarter, resulting from higher slush pulp costs, linked to the uplift in Canadian dollar NBSK pulp unit sales realizations, combined with a decrease in paper production quarter-over-quarter.
Outlook
Looking forward, global softwood kraft pulp market conditions are anticipated to strengthen somewhat through the second quarter of 2024, largely in response to global pulp supply disruptions, stemming from the transportation labour dispute in Finland, as well as pulp producer downtime.
Bleached kraft paper demand is forecast to show signs of strengthening through the second quarter of 2024, before stabilizing through the balance of the year.
In the second quarter of 2024, maintenance outages are scheduled at Intercon and at the Company's paper machine, which are projected to reduce NBSK market pulp production by 5,000 tonnes and reduce paper production by 5,000 tonnes.
Given the ongoing uncertainty with regards to the availability of economically viable fibre in British Columbia, and the continued weakness in North American lumber markets, the Company anticipates a challenging fibre supply environment for its pulp mills (both for sawmill residual chips and whole log chips), in the near-term and through the balance of 2024. The Company will continue to evaluate its operating conditions and will adjust operating rates at its pulp mills to align with economically viable fibre supply, which will impact the Company's production, shipments and cost structure. These factors could also affect the Company's operating plan, liquidity, cash flows and the valuation of long-lived assets.
