Canfor suffered $88.8-million operating loss for the first quarter of this year
The outcome represents a $29.2-million increase from the loss the company saw for the same period last year as improvements on the pulp and paper side were more than offset by a further drop in the lumber segment.
The result includes a $63-million inventory write-down for the lumber operating segment, partly offset by a $10.7-million recovery in the inventory write-down provision for the pulp and paper operating segment.
Canfor also paid out $44.4 million in duties on exports to the United States, pushing cumulative cash deposits to $454.5 million.
"The moderate up-tick in lumber market fundamentals and favourable macroeconomic conditions experienced at the end of 2019, particularly in North American home construction activity and the repair and remodeling sector, continued through the first part of the current quarter," the company said in its quarterly report. "Global lumber market conditions weakened, however, in late February and March as the effects of COVID-19 spread globally."
US housing starts, on a seasonally adjusted basis, averaged 1.6 million units for January and February, up 10% from the previous quarter. But in March, they dropped 22% to 1.2 million units, "the largest monthly decline in over 30 years, with continued downward pressure anticipated in April.
Concurrent with the rise and fall, the benchmark price for random lengths western spruce, pine and fir rose to US$422 per thousand board feet but then dropped to US$303 at the end of March in the wake of the pandemic.
That decline, combined with a further drop to US$282 in early April and an anticipated further drop in U.S. housing starts, prompted the lumber inventory write-down, the company said.
In late March, Canfor also invoked production curtailments at Northwood Pulp Mill and Isle Pierre Sawmill in Prince George, Plateau Sawmill in Vanderhoof and Houston Sawmill in Houston for three weeks.
"The current weakness in lumber markets may result in extended sawmill curtailments in the B.C. Interior, with the risk that lower volumes of sawmill residual chips available to pulp mills may cause additional downtime at (Canfor Pulp's) operations," the company said. "Bleached kraft paper markets are currently anticipated to be solid through the second quarter of 2020, particularly in North America, as the impact of COVID-19 is projected to lead to increased demand for bleached kraft paper products that meet food grade specifications.
