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Canfor Announces 2021 and Fourth Quarter 2021 Results

General News
Canfor Corporation Logo - Lumber Sawmill

Canfor Corporation (“The Company” or “Canfor”) reported its 2021 and fourth quarter 2021 results:


  • Record-high 2021 operating income before adjusting items of $2.2 billion; adjusted shareholder net income of $1.5 billion, or $12.16 per share
  • Fourth quarter of 2021 adjusted operating income of $216 million; adjusted shareholder net income of $155 million or $1.24 per share
  • 2021 includes impairment charges totaling $294 million or $1.47 per share, resulting in reported operating income of $1.9 billion for the year, net shareholder income of $1.3 billion or $10.74 per share; fourth quarter of 2021 operating loss of $67 million, net shareholder loss of $23 million or $0.19 per share
  • Completed acquisition of Millar Western Forest Products Ltd.’s (“Millar Western”) solid wood operations and associated tenure located in Alberta, Canada, for $420 million, including an estimated $56 million in working capital, adding 630 million board feet to Canfor’s annual production capacity • Announced sale of Mackenzie forest tenure and sawmill assets for combined proceeds of $70 million

2021 was a record-breaking year for Canfor, as unprecedented strength in global lumber markets in the first half of the year drove benchmark lumber prices to new record highs. This record pricing, coupled with higher production and shipment volumes in Europe and the US South substantially outweighed the impacts of extreme weather and higher log costs in British Columbia (“BC”), and operational challenges faced by the Company’s pulp business in the latter part of the year.

As a result, the Company reported an all-time high operating income of $1,908.1 million and net income per share of $10.74 for 2021, compared to the previous record-high operating earnings of $727.3 million and net income per share of $4.35 in 2020. After taking account of adjusting items, largely comprised of asset impairments, the Company’s operating income for 2021 was $2,188.7 million, with adjusted net income of $12.16 per share, almost triple the record earnings in the prior year.

For the fourth quarter of 2021, the Company reported an operating loss of $66.8 million. After taking account of adjusting items, the Company’s operating income was $216.3 million for the fourth quarter of 2021, down $114.4 million compared to an adjusted operating income of $330.7 million for the third quarter of 2021, principally reflecting a modest decline in lumber segment earnings combined with moderately lower pulp and paper segment earnings.

For the lumber segment, notwithstanding the upward trend in North American benchmark lumber prices throughout the period, adjusted earnings decreased $49.0 million quarter-over-quarter as a result of slightly lower unit sales realizations in Western Canada and Europe, in part due to a timing lag in shipments (versus orders), combined with transportation related reductions in North American production and shipment volumes, and the associated increase in unit manufacturing costs in that region.

Results for the pulp and paper segment in the current quarter reflected weaker global pulp market conditions, combined with the significant impact of severe weather conditions on Canfor Pulp Products Inc.’s (“CPPI”) operations and shipments, most notably at its Northwood Northern Bleached Softwood Kraft (“NBSK”) pulp mill (“Northwood”) and its Taylor Bleached Chemi-Thermo Mechanical Pulp (“BCTMP”) mill (“Taylor”), as well as capital-related downtime at Northwood relating to CPPI’s decision to rebuild the lower furnace of recovery boiler number one (“RB1”).

Commenting on the Company’s 2021 and fourth quarter of 2021 results, Don Kayne, Canfor’s President and Chief Executive Officer, said “2021 was an exceptional year for Canfor. Although our business was faced with global supply chain disruptions, the ongoing impacts of the COVID-19 pandemic and extreme weather conditions in BC, we were able to generate record-high results for 2021. We continue to see growing demand for the forest products we produce, together with a greater appreciation of their low carbon benefits. Recognizing that our employees at both Canfor and Canfor Pulp faced many challenges in 2021, we want to sincerely thank them for their exceptional commitment to safety, and outstanding resilience and performance. As we move into 2022, we anticipate solid global lumber demand, while for our pulp business we are focused on optimizing production performance, reducing costs, and maximizing fibre utilization in more moderate market conditions.”

North American lumber market fundamentals strengthened through the fourth quarter of 2021 as demand in the repair and remodeling sector continued to outperform global expectations. Housing starts remained strong through the current quarter after some weakness early in the period, related to the traditional seasonal slow-down, supply chain disruptions, severe weather conditions and labour shortages.

US housing starts averaged 1,654,000 units on a seasonally adjusted basis for the current quarter, up 6% from the previous quarter, reflecting similar increases for single-family starts and multi-family starts. In Canada, housing starts averaged 261,000 units on a seasonally adjusted basis, broadly in line with the prior quarter.

Offshore lumber demand to Asia, particularly to China, declined somewhat in the current quarter primarily reflecting a seasonal decrease in purchasing activity. Although prices in Japan declined quarter-over-quarter, they remained significantly above historical averages. Western Europe and Scandinavian lumber demand showed a modest decline resulting in increased inventories in the region, particularly in the United Kingdom, combined with a moderation in activity in both the repair and remodeling and residential construction sectors following significant strength in prior quarters.

The average benchmark North American Random Lengths Western Spruce/Pine/Fir (“SPF”) 2×4 #2&Btr price improved significantly throughout the fourth quarter of 2021, beginning October at US$555 per Mfbm and ending December at US$1,045 per Mfbm. For the quarter overall, the Western SPF 2×4 #2&Btr price averaged US$711 per Mfbm, up US$217 per Mfbm, or 44%, from the previous quarter. Conversely, offshore lumber prices experienced moderate declines quarter over-quarter, due in part to the nature of export pricing, much of which is negotiated monthly or quarterly in advance. Overall, the Company’s Western SPF lumber unit sales realizations experienced a modest decrease in the current quarter, as the uplift in benchmark pricing during the current period, was more than outweighed by the decline in offshore unit sales realizations, largely driven by lower pricing to Japan, and, to a lesser extent, an unfavourable timing lag in shipments (versus orders) and higher duties.

The movement in the North American Random Lengths Southern Yellow Pine (“SYP”) East 2×4 #2 price through the fourth quarter of 2021 followed a similar trajectory to that of Western SPF, beginning the quarter at US$620 per Mfbm and ending the year at US$1,280 per Mfbm. For the current quarter overall, the SYP East 2×4 #2 price averaged US$862 per Mfbm, up US$329 per Mfbm, or 62%, from the previous quarter. Less pronounced pricing increases for most wider width dimension products, including the SYP East 2×6 #2 which averaged US$538 per Mfbm in the current period, up US$131 per Mfbm, or 32%, tempered the increase in the Company’s SYP average unit sales realizations quarter-over quarter.

The Company’s European lumber unit sales realizations for the fourth quarter of 2021 were significantly lower than the previous quarter principally reflecting a decline in European lumber market demand and pricing, and, to a lesser extent, a 2% stronger Canadian dollar (versus the Swedish Krona).

Total lumber shipments of 1.32 billion board feet were in line with the previous quarter as significantly higher European lumber shipments, following the seasonal production downtime taken in the prior period, was offset by transportation challenges and reduced production across the Company’s North American lumber operations. In BC, unprecedented flooding severely damaged rail and highway infrastructure, combined with intense cold weather that followed, significantly reduced shipment volumes in the current quarter. In the US South, shipments were hampered by rail service issues, limited offshore container availability and a tight trucking market.

Total lumber production, at 1.29 billion board feet, was broadly comparable with the previous quarter, as the benefit of increased operating days at the Company’s European operations following the aforementioned seasonal downtime was mostly offset by a decline in Western SPF and SYP lumber production. In BC, the reduced operating schedules implemented in August 2021, reflecting fibre constraints and supply infrastructure challenges, continued through most of the fourth quarter, and impacted Western SPF production by approximately 220 million board feet in the current period. Lower SYP production in the current period primarily reflected log shortages and reduced trucking availability tied to COVID-19 absenteeism.

Lumber unit manufacturing and product costs increased modestly from the previous quarter, largely reflecting moderately higher log costs in Western Canada and, to a lesser extent, the US South, combined with the incremental impact of lower production volumes at the Company’s North American operations on unit manufacturing costs. In BC, log cost increases in the current quarter were primarily driven by the direct and indirect impact of a rise in market-based stumpage costs to historically high levels, and, to a lesser extent, increased purchased wood costs. In the US South, log cost pressures were largely driven by hauling capacity constraints and increased log demand. These increases were mitigated in part by slightly lower log costs at the Company’s European operations correlated with market-related declines in that region.

Since the beginning of 2019, industry-wide rationalization in BC has removed over 2.2 billion board feet of annual Western SPF production capacity. In many areas of the province, the Allowable Annual Cut (“AAC”) has been reduced through Timber Supply Review determinations of the AAC by the BC Government. In 2021, the Prince George Timber Supply Area (“PGTSA”) was directly negatively impacted by the Minister’s apportionment decision, which allocates the AAC among tenures following a timber supply determination. Further reductions to the AAC of the PGTSA are anticipated in 2023. In addition, it is anticipated that the AAC in the BC Interior may be further reduced from current levels as a result of the impacts of the Mountain Pine Beetle (“MPB”) infestation, losses resulting from wildfire events, as well as other pressures on BC’s Timber Harvesting Land Base.

In recent years, the Company has taken various steps to secure access to high-quality fibre and ensure the viability and competitiveness of its BC lumber operations, but despite these actions, since 2019, the Company has permanently closed two mills, indefinitely curtailed its Mackenzie sawmill (prior to its recently announced sale in February 2022), and closed one production line at its Plateau sawmill (as recently announced). In 2021, as a result of escalating log costs driven by an insufficient supply of economically viable timber following the MPB epidemic, wildfire events and a reduction in AAC in the PGTSA, as well as higher market-based stumpage, the Company performed an impairment test on its Western Canadian lumber operations as of December 31, 2021. This assessment resulted in an impairment charge of $198.5 million being recognized in the current year as a reduction to the carrying value of lumber segment assets.

Like other central and northern BC Interior pulp producers, CPPI’s supply of sawmill residual chips has been significantly reduced over the last few years, primarily driven by extensive permanent sawmill curtailments in the region. As a result, CPPI’s fibre purchases have experienced ongoing cost pressures that include an increase in the proportion of higher-cost whole log chips and higher transportation costs.

Looking forward there remains significant uncertainty with regards to the future of economically viable fibre within BC. This uncertainty is driven by, among other factors, the lasting impacts of the MPB epidemic, wildfire events, future Timber Supply Review determinations by the BC Government, as well as uncertainties associated with unsettled land and title claims by various Indigenous Nations and outstanding policy, land use decisions and legislative initiatives by the BC Government. This includes the BC Government’s announced deferral of harvesting on 2.6 million hectares of BC’s oldgrowth forests and the potential redistribution of Crown tenure harvesting rights, including Indigenous Nations.

Consequently, the BC sawmill manufacturing industry faces a constrained fibre supply environment, where existing sawmill capacity outstrips the available timber supply in BC. Until this imbalance is corrected, the Company anticipates escalating log cost pressures in BC for its sawmills and a higher cost fibre supply for CPPI’s pulp mills (both for sawmill residual chips and whole-log chips). In addition, it is expected that the long-term aggregate available chip supply will be permanently reduced.

Recognizing these increased fibre costs as well as ongoing uncertainty surrounding fibre availability, the Company also performed an impairment test for its pulp and paper segment as of December 31, 2021, which resulted in an impairment charge of $95.0 million being recognized in the current year as a reduction to the carrying value of pulp assets within the pulp and paper segment.

As at December 31, 2021, the Company had paid cumulative cash deposits of $682.5 million on countervailing (“CVD”) and anti-dumping duties (“ADD”). In January 2022, the US Department of Commerce (“DOC”) announced the preliminary results for the third period of review (“POR3”), which indicated that the Company’s preliminary CVD and ADD rate for 2020 was 1.83% and 4.92%, respectively. Upon finalization of these rates (anticipated in the third quarter of 2022), a recovery, estimated at $88.8 million (US$66.5 million), will be recognized in the Company’s consolidated financial statements to reflect the difference between the combined accrual rate and the DOC rates for POR3. In addition, once final, the Company’s current combined cash deposit rate of 19.54% will be reset to the DOC rates for POR3 (currently estimated to be 6.75% based on the preliminary determination). Despite the reduced preliminary rates for the POR3, no cash duties will be refunded to the Company until such time as the litigation regarding the imposition of CVD and ADD has been settled.

On the acquisition front, from 2018 to 2021, the Company has added 1.5 billion board feet in annual production capacity through its various acquisitions, focused primarily in the US South and Europe. Subsequent to year end, on February 1, 2022, the Vida Group purchased V-Timber AB for $13.0 million and on March 1, 2022, Canfor completed the acquisition of Millar Western’s solid wood operations and associated forest tenure, located in Alberta, Canada, for $420.0 million, including an estimated $56.0 million in working capital. Together, these recent acquisitions will add 690 million board feet to the Company’s annual production capacity, 630 million board feet in Western Canada and 60 million board feet in Europe.

On February 24, 2022, the Company announced its intention to sell its forest tenure in the Mackenzie region to McLeod Lake Indian Band and Tsay Keh Dene Nation and that it had entered into a separate agreement with Peak Mackenzie Properties Ltd. to sell its Mackenzie sawmill assets, for combined proceeds of $70.0 million. During the year ended December 31, 2021, the Company recognized a gain of $4.5 million reflecting the sale of certain Mackenzie sawmill assets during the fourth quarter of 2021.

Looking ahead, strength in North American lumber market fundamentals is projected to continue through the first quarter of 2022, supported by lean existing home inventory, an aging housing stock and strong household balance sheets. Activity in the repair and remodeling sector, however, is anticipated to experience downward pressure in the near term as a result of seasonally slower consumption and reduced consumer spending, with an uptick estimated towards the end of the first quarter of 2022. Notwithstanding favourable lumber demand fundamentals overall, transportation congestion across Western Canada has significantly impacted rail service to and from the Company’s sawmills in recent weeks. Reduced lumber shipments, combined with rising inflationary cost pressures, are anticipated to somewhat impact results in the first quarter of 2022.

Offshore lumber demand in Asia, particularly in China, is projected to weaken slightly in the first quarter of 2022 as ongoing pandemic related concerns are projected to combine with growing uncertainty in the real estate market and increasing inventory levels. In Japan, demand in the first quarter of 2022 is anticipated to be lower than that experienced in the fourth quarter, as the market adjusts to changes in inventory levels in that region. European lumber markets are forecast to be relatively solid early in 2022 driven by a continued focus on green building initiatives and a projected uptick in demand in the repair and remodeling sector.

In early 2022, global softwood kraft pulp market conditions have strengthened somewhat, largely in response to unexpected global supply outages and a heavily congested supply chain network, combined with an uptick in market demand from China. Notwithstanding high inventory levels and the potential for ongoing supply chain driven pricing volatility, global softwood kraft pulp markets are projected to continue to strengthen moderately through the first quarter of 2022, reflecting the ongoing improvement in demand from China coupled with tight global supply. Modest increases experienced in the high yield BCTMP market through the fourth quarter of 2021 are anticipated to continue through the first quarter of 2022.

Despite the recent uplift in global pulp markets, the limited and intermittent rail service in BC experienced in recent weeks has put further pressure on an already constrained global logistics network. Consequently, as previously announced, CPPI’s results in the first quarter of 2022 will reflect a minimum six-week curtailment at Taylor, with a projected 25,000 tonnes of reduced BCTMP production. CPPI also anticipates that the transportation disruptions will result in lower projected NBSK pulp and paper shipment volumes in the first quarter of 2022. CPPI will continue to monitor and adapt to the unfolding logistic situation over the coming weeks. In addition, global inflationary cost increases, particularly for chemicals, are projected to weigh on CPPI’s results in the first quarter of 2022. Furthermore, CPPI’s results in the first quarter of 2022 will reflect the impact of the RB1 capital-related outage at Northwood into late-March, including reduced pulp production (approximately 70,000 tonnes) and shipments, as well as higher pulp unit manufacturing costs. As the RB1 rebuild approaches completion a key focus of CPPI’s kraft pulp mills in 2022 will be on improving operational reliability and closely managing manufacturing and fibre costs.

For the complete press release, click here.

About Canfor

Canfor is a leading integrated forest products company based in Vancouver, BC with interests in BC, Alberta, North and South Carolina, Alabama, Georgia, Mississippi and Arkansas, as well as in Sweden with its majority acquisition of the Vida Group. Canfor produces primarily softwood lumber and also owns a 54.8% interest in Canfor Pulp Products Inc., which is one of the largest global producers of market Northern Bleached Softwood Kraft Pulp and a leading producer of high performance kraft paper. Canfor shares are traded on the Toronto Stock Exchange under the symbol CFP. For more information visit


Pat Elliott – Vice President Corporate Finance & Strategy – – (604) 661-5441

Dan Barwin – Director, Corporate Finance – – (604) 661-5390

Source: Canfor Corporation