Trouble getting product from Western Canadian operations to market appeared to have little affect on the bottom lines of Canfor Corp. and West Fraser Timber Co. Ltd., during the first quarter of this year.
Canfor reported $534 million in net income or $4.29 per share on Tuesday, compared to $427.8 million over the same period last year.
Last week, West Fraser reported US$1.09 billion in earnings for the quarter, or US$10.25 per share, compared to US$334 million or US$3.13 per share for the first quarter of 2021.
Near record-high North American lumbers prices and strong earnings for the company's European lumber operations were credited for the outcome at Canfor.
"We are very pleased to see the sustained strength in global lumber markets continuing into 2022 and while our pulp business continued to face challenges, we also saw improved results in the quarter," CEO Don Kayne said in a news release.
"A solid operating performance across all of our lumber operating regions allowed us to capitalize on these favourable market fundamentals and execute on our diversification strategy with the recent acquisition of Millar Western.
"Despite these factors, the global supply chain crisis continues to negatively impact our operations and has resulted in curtailed and reduced lumber and pulp operating schedules. We will continue to assess the effects of this crisis and will make adjustments to our operating schedules as conditions evolve.
"We greatly appreciate our employees’ ongoing resilience in managing through the supply chain challenges."
On March 1, Canfor said it had completed purchase of Alberta-based Millar Western Assets, adding two sawmills in Whitecourt and Fox Creek and Spruceland Millworks in Acheson.
Conversely, production at its Western Canadian lumber and pulp operations was curtailed in the face of transporation issues brought on by a "global supply chain crisis."
Canfor Pulp Products Inc. lost $19.9 million on $219.7 million in sales due to ongoing transportation challenges and pulp supply disruptions. That compared with a net loss of $101.1 million on $249.3 million of revenues in the fourth quarter and profit of $8.4 million on $262.4 million of revenues in the first quarter of fiscal 2021.
A $30-million rebuild of the lower furnace of the recovery boiler at the Northwood pulp mill was completed in mid-April.
Looking ahead, Canfor expects both lumber and pulp will remain strong through the second quarter, "supported by lean home inventory, an aging housing stock and high levels of homeowner equity.
"As the year progresses, however, new home construction activity is estimated to face increased headwinds due to high inflation, rising interest rates and decreasing housing affordability. Demand in the repair and remodelling sector is anticipated to soften somewhat, principally reflecting inflationary cost pressures and competing uses for discretionary spending."
In addition, one of the three production lines at its Plateau sawmill in Vanderhoof will be shut down at the end of the second quarter, at a cost of about 70 jobs and 150 million board feet of dimension lumber.
On the pulp side, near record-high US-dollar prices are expected to continue, but so is "intermittent and limited rail service."
West Fraser CEO Ray Ferris issued similar comments to Kayne's.
"Despite a number of ongoing challenges, we posted strong results in the first quarter of 2022,” he said in a news release issued Thursday.
“We continued to manage significant transportation challenges and the resulting mill disruptions that commenced late last year in B.C. and that were exacerbated in the first quarter by the typical transportation issues posed by Canadian winters. These near-term constraints to North American supply were offset by continued strong demand for our products.
"While we continue to monitor rising mortgage rates and the potential risk to demand for new home construction and our wood building products, fundamentals for housing and repair and remodelling activity appear favourable.
"I expect our team will continue to be agile and creative as we navigate our supply challenges and the evolving requirements of our customers."
Canfor has 39 manufacturing plants in in North America, 18 of them in each of B.C. and the United States and three in Alberta. The company also has 13 lumber operations and nine value-added (packaging and building) facilities in Sweden.
West Fraser has 65 wood products operations, 11 of them in B.C., 15 in Alberta, 30 in the U.S., three in Scotland and one in each of England and Belgium.
Conifex, which operates a sawmill and power plant in Mackenzie, will release its first quarter results this coming Tues., May 10.
- with files from The Canadian Press
