Canfor (CFP) Q2 2024 earnings summary

Executive summary

• Q2 2024 saw an operating loss of $250.8 million and a net loss of $191.1 million ($1.61 per share), driven by weak North American lumber markets, significant restructuring, and permanent closures in BC and Alabama.

• Adjusted operating loss was $167.8 million after $83 million in inventory and asset write-downs and $38.5 million in restructuring costs.

• European operations delivered solid earnings, but were overshadowed by North American challenges; pulp segment improved due to higher global prices.

• Permanent closures of the Polar and Jackson sawmills, suspension of Houston reinvestment, and indefinite curtailment at Northwood pulp mill due to fibre constraints were announced.

• Acquisition agreement for El Dorado, Arkansas, for US$73 million, with a $50 million investment planned to expand capacity.

Financial highlights

• Sales were $1,381.5 million, down 4% year-over-year and flat sequentially.

• Shareholder net loss was $191.1 million ($1.61/share) in Q2 2024, compared to $64.5 million ($0.54/share) in Q1 2024.

• Adjusted net loss was $168.7 million ($1.42/share), compared to $52.1 million ($0.44/share) in Q1.

• Cash from operating activities was $115.7 million, up from a use of $81.0 million in Q1 2024.

• Capital additions totaled $170.4 million, mainly for US South and European sawmill projects.

Outlook and guidance

• North American lumber markets are expected to remain weak through 2024, with affordability and demand headwinds.

• European lumber pricing faces modest pressure due to seasonal slowdown and log supply constraints.

• Pulp market conditions anticipated to soften in Q3 2024 as global supply stabilizes and new hardwood capacity comes online.

• Ongoing evaluation of BC operating rates due to fibre supply and cost pressures.

• Share buybacks will continue modestly, with a focus on maintaining balance sheet strength amid market uncertainty.