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Canfor posts $67M loss in second quarter

Poor pulp and paper fundamentals drags down Canfor profits
A Canfor pulp mill in Prince George.

Canfor (TSX:CFP) posted a $67 million loss in the second quarter and its pulp business posted a $37.9 million loss.

Like West Fraser Timber (TSX,NYSE:WFG), which yesterday reported a $173 million second quarter loss, the company is blaming a depressed pulp and paper market for much of the declining profits.

Canfor posted a $67 million loss in the second quarter, which is an improvement over the first quarter, when the company posted a $208.5 million loss.

Canfor Pulp (TSX:CFX), meanwhile, posted a $37.9 million loss, compared to $25.2 million loss for the first quarter.

Canfor pointed to strong earnings for its European and U.S. south sawmill operations, “persistent challenges in British Columbia,” and “significant deterioration in global pulp market fundamentals.”

“These results, for the most part, reflect the impact of substantial global pulp pricing declines in the current quarter driven by elevated global market pulp producer inventory levels and weak global softwood pulp demand,” Canfor Pulp said.

West Fraser likewise attributed its second quarter losses largely to depressed pulp sales and prices.

“Global softwood pulp market fundamentals and pricing experienced considerable pressure during the second quarter of 2023 as tepid global demand was combined with rising global softwood pulp producer inventory levels,” Canfor Pulp explained in its Q2 financials.

Canfor said northern bleached softwood kraft (NBSK) pulp prices in China averaged US$668 per tonne – a US$223 per tonne decline (25 per cent) over the previous quarter.

Canfor also noted that a strike at B.C. ports resulted in temporary production curtailments.

“The labour dispute at the ports of Vancouver and Prince Rupert that commenced on July 1, 2023, put pressure on a constrained logistics network in British Columbia,” Canfor noted. “As a direct result, with pulp mill inventories at capacity, the company curtailed its Northwood pulp mill in July for approximately one week, with an estimated 10,000 tonnes of reduced NBSK pulp production.”

In Canfor Pulp’s case, a $6.9 million write-down contributed to its second quarter operating loss. The write-down was a result of the permanent closure of a pulp line at its Northern Bleached Softwood Kraft pulp and paper mill in Prince George.

“In January 2023, the company announced the decision to restructure its operating footprint to align its manufacturing capacity with the long-term supply of economic residual fibre and, as a result, in April 2023, the company wound down and permanently closed the pulp line (in Prince George),” Canfor explained.

“In connection with this closure, the company’s Intercontinental NBSK pulp mill… was successfully converted to provide slush pulp to its specialty paper facility. The combined impact of these operating structure changes is a reduction of approximately 280,000 tonnes of market kraft pulp production annually.”

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