For Immediate Release
CANFOR REPORTS RESULTS FOR THIRD QUARTER OF 2010
October 28, 2010 Vancouver, B.C. - Canfor Corporation (TSX: CFP) today reported net income of $33.5 million for the third quarter of 2010, compared to $40.4 million for the second quarter of 2010 and $4.1 million for the third quarter of 2009. For the nine months ended September 30, 2010, the Company’s net income was $106.4 million, compared to a net loss of $53.7 million for the comparable period in 2009.
Canfor’s reported net income comprises both net income attributable to equity shareholders (“shareholder net income”) and non-controlling interests. The Company’s shareholder net income for the third quarter of 2010 was $5.6 million, or $0.04 per share, down from $18.1 million, or $0.13 per share, for the second quarter of 2010 and an improvement from a loss of $5.2 million, or $0.04 per share, reported for the third quarter of 2009.
For the first nine months of 2010, shareholder net income was $39.3 million, or $0.28 per share, compared to a net loss of $53.5 million, or $0.38 per share, for the first nine months of 2009.
Shareholder net income for the third quarter of 2010 included several items affecting comparability with prior periods, which had an overall negative impact of $6.0 million, or $0.04 per share. The most significant of these was an after-tax charge of $13.4 million, or $0.09 per share, relating to the permanent closure of the Company’s Clear Lake lumber operation. After taking account of all items affecting comparability, the Company’s adjusted shareholder net income for the third quarter of 2010 was $11.6 million, or $0.08 per share, compared to similarly adjusted net income of $28.2 million, or $0.20 per share, for the second quarter of 2010 and an adjusted net loss of $37.5 million, or $0.26 per share, for the third quarter of 2009.
For the nine months ended September 30, 2010, adjusted shareholder net income was $50.2 million, or $0.35 per share, compared to an adjusted net loss of $144.4 million, or $1.01 per share, for the nine months ended September 30, 2009.
North American lumber market activity was subdued in the third quarter as the weak U.S. economy and the troubled U.S. housing market continued to weigh on the sector. Average lumber prices in North America were well down from the previous quarter when prices were boosted by a short-lived price rally that ended abruptly in May. Western SPF lumber prices edged up in August and September mostly due to seasonal factors and rising demand from China, while prices for Southern Yellow Pine lumber products continued to slide well into the third quarter before stabilizing in September. Sales realizations from offshore markets, the majority of which are negotiated quarterly or monthly in advance, showed a modest increase compared to the second quarter.
Northern Bleached Softwood Kraft (“NBSK”) pulp markets in the third quarter continued to benefit from high prices reflecting steady demand and balanced supply. Prices peaked at record-high levels early in the quarter before weakening slightly as a result of declining pulp consumption, particularly in Asia.
The Company’s lumber business operated at approximately 70% of capacity in the third quarter, with its recently restarted Chetwynd and Quesnel mill operations in the British Columbia Interior operating through the quarter. Production from the Quesnel mill is being fully dedicated to the China market.
In September, the Company announced the permanent closure in January 2011 of its Clear Lake lumber operation located near Prince George, B.C. The protracted downturn in the U.S. housing sector and a lack of economic longterm fibre supply to this facility were the major factors behind this decision.
EBITDA reported by the Company for the third quarter of 2010 was $66.0 million, down $36.5 million from the second quarter of 2010. Excluding the impact from inventory write-down movements and the Clear Lake closure provision of $17.8 million, EBITDA was down $26.8 million. For the most part, the decline in EBITDA in the current quarter reflected lower solid wood prices. The Company ended the third quarter of 2010 with a cash balance of $223.1 million, and $420.1 million of available undrawn operating lines of credit.
Commenting on the results, Canfor’s President and CEO Jim Shepard said, “While pulp markets remained strong in the quarter, the stagnant U.S. housing market weighed on the results of our solid wood business. On a more positive note, we continued to see strong demand from China for our Western SPF lumber, and this was reflected in our record-high shipments to Asia in the third quarter.”
Shepard added that the Company remains confident in the longer-term prospects for the lumber sector and is currently investing in a number of high return capital projects which will further increase the Company’s cost competitiveness. “We are making good progress on our Fort St. John mill upgrade and are seeing excellent returns from other recently completed smaller capital projects,” said Shepard.
North American lumber demand is expected to remain steady at current levels over the balance of the year influenced by slower seasonal activity and the continued overhang of unsold home inventory. The strength of the offshore lumber market is expected to continue to partially offset the weakness of the North American market. Several end-use markets in China are now solidly established and are expected to result in higher lumber demand in the fourth quarter.
For pulp, global softwood inventories held by producers and customers have risen through the third quarter of 2010, but are still considered to be balanced, in contrast to hardwood pulp inventories which are in an oversupplied situation. Two North American bleached softwood producers have recently started up, which will result in a modest increase in supply; however, seasonal maintenance downtime through October may mitigate this impact in the near term.
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