Canfor Corp T.CFP

Alternate Symbol(s): CFPZF

Forest Products Lumber & Wood Production

Canfor Corporation is an integrated forest products company. The Company operates through two segments: lumber segment and pulp and paper segment. The Company’s solid wood products include dimension lumber, specialty lumber and engineered wood products. The dimension lumber products include Spruce Pine Fir (SPF), Southern Yellow Pine (SYP), Douglas Fir Larch (DFL) and Canfor Red. The specialty lumber products include Balfour Boards, WynnWood Boards, Decking/Fascia, Lamstock, Long Lengths, Shop/Clears and Access Mat Lumber. Its Pulp products include Bleached Softwood Kraft Pulp and Unbleached Softwood Kraft Pulp. Its paper products include Bleached Kraft, Coloured Kraft and Unbleached Kraft. It also has bioenergy products. It also produces green energy in its lumber and pulp facilities across North America. The Western Canadian operations produce superior SPF lumber from sustainably managed forestlands. It is used for construction projects in North America and around the globe.

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Post by dosperroson Mar 01, 2023 10:16am

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Post# 35312244

bns Q4/22 First Take – Below Expectations on CFX Miss & 2x4s

Q4/22 First Take – Below Expectations on CFX Miss and Lumber Costs

OUR TAKE: Negative. CFP reported adj. EBITDA of -$17.3M (after paid duties of $10.6M), notably below our estimate of $53M and below consensus of $39M. This compares with $196M in Q3/22 and $284M in Q4/21 (after paid duties of $29M and $26M, respectively).

The EBITDA variance was significantly due to lower-than-expected results at CFX (-$47M) and higher-than-expected lumber manufacturing costs (-$30M), minimally offset by lower-than-expected shipping and distribution costs (+$7M), and higher-than-expected Europe lumber shipments (+$6M) and lumber prices (+$5M).

We reiterate our Sector Outperform rating and share price target of $30.00. Our revised estimates reflect higher manufacturing costs and lower shipments, partially offset by an expected reduction in lumber duties from Q4/23 onward (from 5.87% to 7.29%.) Our target is unchanged as we rolled over our reference period to 2024.

KEY POINTS

Excess Capital. CFP's net cash position stood at $1B. Our forecast suggests the company will remain in a net cash position throughout the forecast horizon despite elevated expected capex levels and declining profitability. CFP repurchased 1.5M shares ($33M) in Q4/22, for a total of 3.4M shares ($81M) for the year.

Lumber. Consolidated shipments of 1.2 Bfbm were down 6% sequentially; with W.SPF down 22%, Europe up 35%, and SYP down 11%. Unit sales realizations for W.SPF declined sharply as the US$ benchmark prices continued to drop and offshore unit sales realizations were lower, notably in Japan. This was partially offset by favourable time lags in shipments versus orders and a weaker C$. European unit realizations moderately declined due to weaker pricing and demand, partially offset by a weaker C$ (vs. the SEK). Unit manufacturing costs remained in-line q/q due to slight decreases in log and per-unit conversion costs, which were offset by the weaker C$. Log costs in Western Canada and Europe were lower on q/q basis.

Houston Project. To create a sustainable operating footprint, the company is closing its Chetwynd sawmill and pellet plant permanently, and the Houston sawmill is to be closed for an extended time for redevelopment of a new manufacturing facility. Financial analysis of the project is undergoing, with an investment decision targeted for Q2/23.