VANCOUVER, BC, March 1, 2022 /CNW/ - Canfor Pulp Products Inc.
("The Company" or "CPPI" or "Canfor Pulp") (TSX: CFX) today
reported its 2021 and fourth quarter of 2021
results1:
Overview
- 2021 operating income before adjusting items of $32 million; adjusted net income of $25 million, or $0.38 per share
- Fourth quarter of 2021 adjusted operating loss of $41 million; adjusted net loss of $32 million, or $0.49 per share
- 2021 includes an impairment charge of $95 million or $1.06 per share, resulting in a reported
operating loss of $66 million for the
year, net loss of $44 million or
$0.68 per share; fourth quarter of
2021 reported operating loss of $137
million, net loss of $101
million or $1.55 per
share
- Available liquidity of $170
million at December 31,
2021
Financial Results
The following table summarizes selected financial information
for CPPI for the comparative periods:
|
|
Q4
|
|
Q3
|
|
YTD
|
|
Q4
|
|
YTD
|
(millions of Canadian
dollars, except per share amounts)
|
|
2021
|
|
2021
|
|
2021
|
|
2020
|
|
2020
|
Sales
|
$
|
249.3
|
$
|
298.9
|
$
|
1,144.9
|
$
|
237.8
|
$
|
990.5
|
Reported operating
income (loss) before amortization and impairment
|
$
|
(19.6)
|
$
|
37.8
|
$
|
116.8
|
$
|
(6.2)
|
$
|
26.1
|
Reported operating
income (loss)
|
$
|
(137.2)
|
$
|
15.8
|
$
|
(65.5)
|
$
|
(28.3)
|
$
|
(56.1)
|
Adjusted operating
income (loss) before amortization and
impairment1
|
$
|
(18.5)
|
$
|
41.3
|
$
|
119.2
|
$
|
(9.2)
|
$
|
17.6
|
Adjusted operating
income (loss)1
|
$
|
(41.1)
|
$
|
19.3
|
$
|
31.9
|
$
|
(31.3)
|
$
|
(64.6)
|
Net income
(loss)
|
$
|
(101.1)
|
$
|
12.1
|
$
|
(44.4)
|
$
|
(10.2)
|
$
|
(22.4)
|
Net income (loss) per
share, basic and diluted
|
$
|
(1.55)
|
$
|
0.19
|
$
|
(0.68)
|
$
|
(0.16)
|
$
|
(0.34)
|
Adjusted net income
(loss)1
|
$
|
(31.7)
|
$
|
12.1
|
$
|
25.0
|
$
|
(10.2)
|
$
|
(22.4)
|
Adjusted net income
(loss) per share, basic and diluted1
|
$
|
(0.49)
|
$
|
0.19
|
$
|
0.38
|
$
|
(0.16)
|
$
|
(0.34)
|
1 Adjusted
results referenced throughout this news release are defined as
non-IFRS financial measures. For further details, refer to the
"Non-IFRS Financial Measures" section of this document.
|
Following the many challenges driven by the onset of the
coronavirus outbreak ("COVID-19") in 2020, Canfor Pulp experienced
improved results in 2021, primarily reflecting the strengthening of
global pulp market fundamentals in the first half of the year which
more than offset the impacts from extreme weather conditions in
British Columbia ("BC") on supply
chain and operations, production downtime and global pulp market
weakness in the latter part of the year. At the end of the 2021
year, recognizing increasing challenges to the business posed by
fibre availability and costs, the Company recorded an asset
impairment of $95.0 million. Before
taking account of adjusting items, the Company's operating income
was $31.9 million for the current
year, with adjusted net income of $0.38 per share, an improvement of $96.5 million from the adjusted operating loss of
$64.6 million for the prior year, and
adjusted net loss of $0.34 per share.
The Company reported an operating loss for 2021 of $65.5 million, versus an operating loss of
$56.1 million for 2020.
For the fourth quarter of 2021, the Company reported an
operating loss of $137.2 million.
After taking account of adjusting items, largely comprised of an
asset impairment, the Company's operating loss for the fourth
quarter of 2021 was $41.1 million
compared to an adjusted operating income of $19.3 million for the previous quarter. The loss
in the current period reflected weaker global pulp market
conditions, combined with the significant impact of severe weather
conditions on the Company's operations and shipments in the current
quarter, most notably at its Northwood Northern Bleached Softwood
Kraft ("NBSK") pulp mill ("Northwood") and its Taylor Bleached
Chemi-Thermo Mechanical Pulp ("BCTMP") mill ("Taylor"), as well as
capital-related downtime at Northwood relating to the Company's
decision to rebuild the lower furnace of recovery boiler number one
("RB1").
Commenting on the Company's 2021 and fourth quarter of 2021
results, CPPI's Chief Executive Officer, Don Kayne said, "This was a difficult quarter to
end what was an improved year for Canfor Pulp. Our pulp business
faced many uncontrollable challenges in the second half of the
year, including intense weather conditions in BC and global supply
chain disruptions. We once again want to thank our employees for
their hard work, resilience, and commitment to safety. The decision
to rebuild the lower furnace of Northwood's RB1 came earlier than
anticipated, but this capital rebuild will support the
Company's efforts to achieve more operational stability. Despite
these various challenges and upsets, we continued to preserve our
strong cash position and ended the year with a solid balance sheet.
With the completion of the RB1 rebuild anticipated by the end of
March, we are very focused on optimizing our production
performance, reducing costs, and maximizing fibre utilization in
the coming months."
For the fourth quarter of 2021, the weaker pulp market
conditions experienced towards the end of the previous quarter
continued into the current period and, as a result, global softwood
pulp producer inventory levels remained well above the balanced
range (43 days of supply at December
2021, a decrease of two days from September 2021).
After declining in October and November, NBSK pulp prices to
China, the world's largest pulp
consumer, showed a modest recovery in December following unexpected
global supply disruptions and ended the quarter at US$760 per tonne. NBSK pulp list prices to
China averaged US$723 per tonne during the current quarter, as
published by RISI, down US$109 per
tonne, or 13%, from the previous quarter. As a result, the
Company's average NBSK pulp unit sales realizations experienced a
corresponding decrease quarter-over-quarter. The downward trend in
demand and US-dollar prices for BCTMP, particularly from the
printing and writing segment, continued through the current quarter
giving rise to a significant decline in the Company's BCTMP unit
sales realizations quarter-over-quarter.
Pulp production was 190,000 tonnes for the fourth quarter of
2021, down 57,000 tonnes, or 23%, from the previous quarter,
primarily reflecting the quarter-over-quarter impact of downtime.
The current quarter was particularly challenging as unprecedented
flooding and harsh winter conditions in BC significantly impacted
the operational performance at all the Company's pulp mills and
resulted in material transportation-related downtime at Northwood
and Taylor. Production at
Northwood was also impacted by the extended outage on one
production line at Northwood from early December to enable the
replacement of the lower furnace on RB1. Combined, these factors
reduced current quarter NBSK pulp production by approximately
100,000 tonnes and BCTMP production by 20,000 tonnes.
In the third quarter of 2021, decreased operating days largely
reflected scheduled maintenance outages at the Company's Prince
George NBSK pulp mill ("PG") and Taylor, as well as incremental downtime at
Northwood and Taylor reflecting
both weather-related rail disruptions and, in the case of
Northwood, digester-related operational upsets in July (combined,
reducing pulp production by approximately 42,000 tonnes). In
addition, the previous quarter's pulp production reflected various
smaller operational upsets through the quarter (approximately
15,000 tonnes).
The Company's pulp shipments totaled 216,000 tonnes, down 25,000
tonnes, or 10%, from the previous quarter, principally due to the
impact of weather-related transportation disruptions in BC and the
associated decrease in production volumes, combined with the
ongoing effects of a constrained global logistics network, offset
in part by a drawdown of inventory in the current quarter during
the aforementioned Northwood RB1 downtime.
Pulp unit manufacturing costs were significantly higher than the
prior quarter principally reflecting reduced production in the
current period, offset in part by decreased energy usage and lower
maintenance spend.
Operating income in the Company's paper segment was $1.7 million, up $4.2
million from the operating loss of $2.5 million in the previous quarter, as
moderately higher paper unit sales realizations, tied to
strengthening global paper demand and tight supply, was combined
with lower slush costs, linked to lower Canadian dollar NBSK pulp
market prices.
Like other central and northern BC Interior pulp producers, the
Company's supply of sawmill residual chips has been significantly
reduced over the last few years, primarily driven by extensive
permanent sawmill curtailments in the region. As a result, the
Company's fibre purchases have experienced ongoing cost pressures
that include an increase in the proportion of higher-cost whole log
chips and higher transportation costs.
Looking forward there remains significant uncertainty with
regards to the future of economically viable fibre within BC. This
uncertainty is driven by, among other factors, the lasting impacts
of the Mountain Pine Beetle epidemic, wildfire events, future
Timber Supply Review determinations by the BC Government, as well
as uncertainties associated with unsettled land and title claims by
various Indigenous Nations and outstanding policy, land use
decisions and legislative initiatives by the BC Government. This
includes the BC Government's announced deferral of harvesting on
2.6 million hectares of BC's old-growth forests and the potential
redistribution of Crown tenure harvesting rights, including
Indigenous Nations.
Consequently, the BC sawmill manufacturing industry faces a
constrained fibre supply environment, where existing sawmill
capacity outstrips the available timber supply in BC. Until this
imbalance is corrected, the Company anticipates that escalating log
cost pressures in BC will translate into a higher cost fibre supply
for its pulp mills (both for sawmill residual chips and whole-log
chips). In addition, it is expected that the long-term aggregate
available chip supply will be permanently reduced.
Recognizing these increased fibre costs as well as ongoing
uncertainty surrounding fibre availability, the Company performed
an impairment test for its pulp segment as of December 31, 2021, which resulted in an
impairment charge of $95.0 million
being recognized in the current year as a reduction to the carrying
value of pulp segment assets.
In early 2022, global softwood kraft pulp market conditions have
strengthened somewhat, largely in response to unexpected global
supply outages and a heavily congested supply chain network,
combined with an uptick in market demand from China. Notwithstanding high inventory levels
and the potential for ongoing supply chain driven pricing
volatility, global softwood kraft pulp markets are projected to
continue to strengthen moderately through the first quarter of
2022, reflecting the ongoing improvement in demand from
China coupled with tight global
supply. Modest increases experienced in the high yield BCTMP market
through the fourth quarter of 2021 are anticipated to continue
through the first quarter of 2022.
Despite the recent uplift in global pulp markets, the limited
and intermittent rail service in BC experienced in recent weeks has
put further pressure on an already constrained global logistics
network. Consequently, as previously announced, the Company's
results in the first quarter of 2022 will reflect a minimum
six-week curtailment at Taylor,
with a projected 25,000 tonnes of reduced BCTMP production. The
Company also anticipates that the transportation disruptions will
result in lower projected NBSK pulp and paper shipment volumes in
the first quarter of 2022. The Company will continue to monitor and
adapt to the unfolding logistic situation over the coming weeks. In
addition, global inflationary cost increases, particularly for
chemicals, are projected to weigh on the Company's results in the
first quarter of 2022.
Furthermore, the Company's results in the first quarter of 2022
will reflect the impact of the RB1 capital-related outage at
Northwood into late-March, including reduced pulp production
(approximately 70,000 tonnes) and shipments, as well as higher pulp
unit manufacturing costs. As the RB1 rebuild approaches completion
a key focus of the Company's kraft pulp mills in 2022 will be on
improving operational reliability and closely managing
manufacturing and fibre costs.
No major maintenance outages are planned for the first quarter
of 2022. In the second quarter of 2022, a maintenance outage is
currently planned at Northwood and Taylor, with a projected 25,000 tonnes of
reduced NBSK pulp production and an estimated 5,000 tonnes of
reduced BCTMP production, respectively. In addition, a maintenance
outage is scheduled at the Intercontinental NBSK pulp mill in the
third quarter of 2022 with a projected 10,000 tonnes of reduced
NBSK pulp production.
Bleached kraft paper markets are anticipated to continue to
strengthen through the first quarter of 2022, as growing demand for
paper products, largely driven by the environmental, social, and
regulatory pressures to eliminate single-use plastics, is combined
with tight supply and low inventories in the North American and
Asian paper markets.
Refer to the Company's annual Management's Discussion and
Analysis for further discussion on the Company's results for the
fourth quarter of 2021 on page 19.
Additional Information and Conference Call
A conference call to discuss the fourth quarter's financial and
operating results will be held on Wednesday,
March 2, 2022 at 8:00 AM Pacific
time. To participate in the call, please dial Toll-Free
1-888-390-0546. For instant replay access until March 16, 2022, please dial Toll-Free
1-888-390-0541 and enter participant pass code 930645#. The
conference call will be webcast live and will be available at
www.canfor.com. This news release, financial statements and a
presentation used during the conference call can be accessed via
the Company's website at
http://www.canfor.com/investor-relations/webcasts.
Non-IFRS Financial Measures
Throughout this press release, reference is made to certain
non-IFRS financial measures which are used to evaluate the
Company's performance but are not generally accepted under IFRS and
may not be directly comparable with similarly titled measures used
by other companies. The following table provides a reconciliation
of these non-IFRS financial measures to figures reported in the
Company's consolidated financial statements:
|
|
Q4
|
|
Q3
|
|
YTD
|
|
Q4
|
|
YTD
|
(millions of Canadian
dollars)
|
|
2021
|
|
2021
|
|
2021
|
|
2020
|
|
2020
|
Reported operating
income (loss)
|
$
|
(137.2)
|
$
|
15.8
|
$
|
(65.5)
|
$
|
(28.3)
|
$
|
(56.1)
|
Asset
impairment
|
$
|
95.0
|
$
|
-
|
$
|
95.0
|
$
|
-
|
$
|
-
|
Inventory write-down
(recovery), net
|
$
|
1.1
|
$
|
3.5
|
$
|
2.4
|
$
|
(3.0)
|
$
|
(8.5)
|
Adjusted operating
income (loss)
|
$
|
(41.1)
|
$
|
19.3
|
$
|
31.9
|
$
|
(31.3)
|
$
|
(64.6)
|
Amortization
|
$
|
22.6
|
$
|
22.0
|
$
|
87.3
|
$
|
22.1
|
$
|
82.2
|
Adjusted operating
income (loss) before amortization and impairment
|
$
|
(18.5)
|
$
|
41.3
|
$
|
119.2
|
$
|
(9.2)
|
$
|
17.6
|
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
$
|
(101.1)
|
$
|
12.1
|
$
|
(44.4)
|
$
|
(10.2)
|
$
|
(22.4)
|
Asset impairment, net
of tax
|
$
|
69.4
|
$
|
-
|
$
|
69.4
|
$
|
-
|
$
|
-
|
Adjusted net income
(loss)
|
$
|
(31.7)
|
$
|
12.1
|
$
|
25.0
|
$
|
(10.2)
|
$
|
(22.4)
|
Forward Looking Statements
Certain statements in this press release constitute
"forward-looking statements" which involve known and unknown risks,
uncertainties and other factors that may cause actual results to be
materially different from any future results, performance or
achievements expressed or implied by such statements. Words such as
"expects", "anticipates", "projects", "intends", "plans", "will",
"believes", "seeks", "estimates", "should", "may", "could", and
variations of such words and similar expressions are intended to
identify such forward-looking statements. These statements are
based on management's current expectations and beliefs and actual
events or results may differ materially. There are many factors
that could cause such actual events or results expressed or implied
by such forward-looking statements to differ materially from any
future results expressed or implied by such statements.
Forward-looking statements are based on current expectations and
the Company assumes no obligation to update such information to
reflect later events or developments, except as required by
law.
Canfor Pulp is a leading global supplier of pulp and paper
products with operations in the central interior of BC employing
approximately 1,300 people throughout the organization. Canfor Pulp
owns and operates three mills in Prince
George, BC with a total capacity of 1.1 million tonnes of
Premium Reinforcing NBSK Pulp and 140,000 tonnes of kraft paper, as
well as one mill in Taylor, BC
with an annual production capacity of 230,000 tonnes of BCTMP.
Canfor Pulp is one of the largest North American and global
producers of market northern softwood kraft pulp. CPPI shares are
traded on the Toronto Stock Exchange under the symbol CFX. For more
information visit canfor.com.
SOURCE Canfor Pulp Products Inc.