Tough 2019 lumber market results in big loss for Canfor
Soft demand and sagging prices take a big toll on the lumber producer’s sales and profits.
Canfor, the Vancouver, British Columbia-based lumber and pulp producer, reported that fourth quarter 2019 sales increased 7.5% to 1.105 billion Canadian dollars (US$836.6 million) from sales of C$1.028 million (US$ 778.3 million) in the fourth quarter 2018.
Sales for the full year fell 7.6% to C$4.658 billion (US$3.53 billion) compared to sales of C$5.044 billion (US$3.82 billion) in 2018.
Canfor posted a net loss of C$39.1 million (US$29.6 million) in the quarter. The company reported a net loss of C$52.4 million (US$39.68 million) in the fourth quarter last year.
For the full year, Canfor reported a net loss of C$263 million (US$199 million) – a huge, downward swing from a net income of C$354.9 million (US$268.7 million).
Unlike record-high lumber and pulp prices in 2018, weaker global lumber and pulp demand for much of 2019 along with excess inventory levels resulted in a sharp drop in market pricing for both lumber and pulp products.
During much of 2019, Canfor was hampered by numerous curtailments and shutdowns throughout its network of sawmills.
Canfor said that global lumber market fundamentals have displayed modest improvement in recent months, particularly in the United States, resulting from moderate growth in home construction activity in addition to demand in the repair and remodeling sector.
In the fourth quarter, Canfor and Canfor Corporation and Great Pacific Capital Corp. mutually terminated an acquisition agreement. The plan called for Great Pacific Capital, a subsidiary of Great Pacific, to acquire the remaining 49% of Canfor that it does not already own. Great Pacific is owned by Canadian billionaire Jim Pattison.
The deal was worth an estimated C$1 billion (US$757 million).
The Bottom Line: Weaker demand and soft lumber prices hammered Canfor’s sales and profits as the company reports a net loss of C$263 million (US$199 million) for 2019.
What the CEO said: “The challenging global lumber and pulp market conditions of 2019, particularly across all our BC operations, overshadowed the transformational global diversification undertaken by the company during the year, with the acquisition of Vida and the expansion in our business in the U.S. South,” said Don Kayne, Canfor CEO and president.
“We look forward to further leveraging benefits from our diversification strategy, while maintaining a focus across all our operations on improving productivity, maximizing fibre utilization and reducing costs and debt levels, so that we are well-positioned to fully capitalize on improving market conditions through 2020,” Kayne said.
Company info: The full fourth quarter 2019 report from Canfor is available here.
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