Canfor reports lower profit during second quarter

Canfor Corporation is still making money, but not as much as it did just a short while ago

Canfor Corporation is still making money, but not as much as it did just a short while ago.

The company recently reported net income of $26.2 million for the second quarter of 2011, compared to $32.3 million for the first quarter. For first six months of 2011, the company’s net income was $58.5 million, compared to $79.2 million for the comparable period in 2010.

“We are seeing several positive indicators in lumber markets, especially Asia where we shipped record high volumes in the quarter,” said Canfor president and CEO Don Kayne. “That said, a sustained recovery of lumber markets and prices will not begin until there is a turnaround in the U.S. economy, and particularly the housing sector.”

Ongoing projects include upgrades at the Vavenby sawmill in advance of its reopening in the fall, a major planer rebuild at the Polar sawmill, as well as new energy systems at the Plateau and Chetwynd sawmills.

The Vavenby upgrades are part of Canfor’s $300 million, three-year strategic capital investment program at its lumber operations. The program saw the completion of several significant capital projects during the quarter, and solid progress on numerous other projects scheduled for completion in the second half of the year.

The second quarter of 2011 saw little change in the underlying factors constraining the recovery of North American lumber markets. The U.S. economy continued its painfully slow recovery, with no significant improvement in the housing sector.

Prices bottomed out in May and were followed by a modest recovery before the end of the quarter in response to more balanced inventory levels.

The average Western SPF (spruce-pine-fir) 2×4 #2&Btr benchmark price for the quarter was US$240 per Mfbm (thousand board feet), down 19 per cent from the previous quarter.

Canadian dollar sales realizations for all products were negatively impacted by the stronger Canadian dollar compared to the US dollar, up two per cent over the previous quarter and six per cent over the second quarter of 2010.

Canfor’s lumber shipments rebounded after weather-related transportation constraints in the first quarter, increasing by 14 per cent to just under a billion board feet for the quarter, with increased demand from China also a major factor.

Extreme wet weather conditions in many parts of the B.C. Interior in recent months hampered log-harvesting activities. Should the adverse weather conditions persist, some mill operations may be forced to take downtime in the coming weeks.

The company operated at 72 per cent of lumber capacity in the second quarter, with production of approximately 900 million board feet, up four per cent from the previous quarter. The increase principally reflected productivity improvements and less capital downtime taken.

Compared to the second quarter of 2010, lumber production was up 10 per cent, reflecting improved productivity in the period and market curtailment at the Chetwynd and Quesnel sawmills during the second quarter of 2010, with these sawmills reopening in May and June of 2010 respectively.

This was offset in part by the Clear Lake closure in early 2011.