Canfor Pulp Products (CFX) Q2 2024 earnings summary

Executive summary

• Q2 2024 saw significant operating and net losses, with permanent closures of the Polar and Jackson sawmills, suspension of Houston reinvestment, and indefinite curtailment of a Northwood NBSK pulp mill line due to fibre constraints.

• Alberta operations remained profitable, while US South focused on consolidating production and progressing the Axis, Alabama project.

• European operations delivered strong earnings, benefiting from improved market pricing and specialty product focus.

• Intercon mill faced extended downtime from unplanned recovery boiler repairs, reducing pulp production by 18%.

• Supply chain disruptions from wildfires, potential rail strikes, and increased US softwood lumber duties are key concerns.

Financial highlights

• Lumber business posted an operating loss of $231M in Q2, with adjusted operating loss of $75M; shareholder net loss was $191.1M ($1.61/share).

• European operations contributed CAD 45M in cash earnings for the quarter and CAD 76M year-to-date.

• Canfor Pulp had an operating loss of $5.6M, improved from $15.7M in Q1, driven by higher pulp prices.

• Consolidated capital expenditures were approximately CAD 170M in Q2.

• Gross sales were $1,381.5M, nearly flat sequentially.

Outlook and guidance

• Lumber markets expected to remain challenging for the rest of 2024, despite solid medium- to long-term fundamentals.

• Capital expenditures in the lumber segment projected at CAD 450M for 2024, with a significant reduction anticipated in 2025.

• Canfor Pulp capital spend forecasted at $50M for 2024.

• Global softwood kraft pulp markets expected to soften in Q3 2024 as supply stabilizes and new hardwood capacity comes online in China and Brazil.

• No major maintenance outages planned for Q3 2024.