VANCOUVER – Canfor reported an operating loss of $88.8 million for the first quarter, this on top of the $59.6 million loss it experienced in the fourth quarter of 2019.
Canfor said the COVID-19 outbreak and “ongoing pressure anticipated on U.S. housing starts,” played significant roles in the company’s first quarter operating loss results which included a $63 million inventory write-down of its lumber operating segment. Canfor noted that “(T)he moderate up-tick in lumber market fundamentals and favorable macroeconomic conditions experienced at the end of 2019, particularly in North American home construction activity and the repair and remodeling sector, continued through the first part of the current quarter. Global lumber market conditions weakened, however, in late February and March as the effects of COVID-19 spread globally.”
The company further observed that U.S. housing starts, on a seasonally adjusted basis, averaged 1,592,000 units for January and February, “experienced a steep decline to 1,216,000 units, a decrease of 22% in one month, the largest monthly decline in over thirty years, with continued downward pressure anticipated in April.” Canadian housing starts increased 3% during the first quarter, averaging 207,000 units on a seasonally adjusted basis.
“Looking forward, the impacts of COVID-19 on global macroeconomics are still unfolding and the company anticipates lumber market conditions will remain extremely volatile through much of 2020,” the company stated. “Global lumber market demand in recent weeks has declined sharply in the wake of closures of non-essential businesses and lockdowns implemented in many parts of North America and Europe. The company currently anticipates that U.S. home construction activity will remain at depressed levels with demand volatility varying on a regional basis. In North America, following a sharp fall-off in pricing from mid-March through early April, prices have stabilized somewhat in response to a material reduction in supply in recent weeks.”
"In this time of significant uncertainty due to the COVID-19 pandemic, our top priorities continue to be ensuring the health and safety of our employees and implementing the necessary measures to safeguard the business,” said Don Kayne, president and CEO of Canfor. “While we saw a modest improvement in our results at our lumber and pulp and paper operations in the first quarter, these results were significantly overshadowed by the virus outbreak and the extreme market volatility and major economic turmoil it has caused. We are focused on maintaining a strong balance sheet and believe we are well-positioned to weather the impacts of the pandemic. We continue to actively assess the ongoing situation and remain prepared to take further action if necessary."
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