BRITISH COLUMBIA - Canadian lumber giant Canfor reported an operating loss of $124 million for the third quarter - compared to second quarter loss of $49.7 million.
Citing weak global market conditions, the company said the decline reflected significantly lower operating earnings in both the lumber and pulp and paper segments. largely spawned by substantial curtailments this quarter.
"Reported results for the third quarter of 2019 included a net duty expense of $53.5 million, at a combined countervailing duty (CVD) and anti-dumping duty (ADD) accrual rate of 29.24 per cent, compared to $45.2 million reported in the second quarter of 2019 at a combined rate of 26.24 percent. Results in the third quarter of 2019 also included a net $5.3 million recovery in the lumber and log inventory write-down provisions, as well as restructuring costs of $6.4 million related to the previously announced permanent capacity reductions and indefinite curtailments at the Vavenby, Mackenzie and Isle Pierre sawmills."
The company said its lumber segment losses primarily reflected prolonged weakness in Western Spruce/Pine/Fir (Western SPF) benchmark lumber prices, continued elevated log costs in BC, and 360 million board feet of production curtailments.
In August, Canfor received a $981 million bid from Great Pacific to take the company private. Great Pacific is owned by 90-year-old Canadian billionaire Jim Pattison - who already owns 51 percent of Canfor.
Canfor is an integrated forest products company based in Vancouver, British Columbia, with interests in British Columbia, Alberta, North and South Carolina, Alabama, Georgia, Mississippi and Arkansas, as well as in Sweden with its recent majority acquisition of Vida Group. The company shut down one British Columbia sawmill and permanently eliminated a shift at another in July. In combination with previous curtailments and the shutdown of its Vavenby sawmill, Canfor will lose 400 million board feet of lumber. Canfor sold cutting rights to its Vavenby mill to Interfor in June.
Softwood lumber import tariffs of around 21 percent were levied onto Canada last year - severely affecting the country's forest products industry. The National Association of Home Builders (NAHB) told MarketWatch that those tariffs are restructuring the entire lumber global supply chain - incentivizing U.S. buyers to import from overseas rather than ship lumber across the Canadian border.
U.S. production has also ramped up, surpassing Canadian production in 2018.
Canadian sawmills have been plagued with shutdowns, curtailments, and layoffs. Many of the country's biggest players have taken a hit - including West Fraser, Canfor, and Conifex - and
restricted lumber production, with West Fraser and Canfor curtailing production more than once. Thirteen indefinite closures are also ongoing - affecting around 1,000 workers. If you add in curtailments, around 3,000 workers have been affected.
British Columbia - Canada's largest lumber-producing province - exported just over 514 million board feet of lumber to the U.S. in October 2018, down from 645 million board feet from the same time 2017.
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