Canfor Has Good 1st Quarter Pulp Results

Thursday, May 03, 2007 03:47 AM

The Canfor Income Fund and the Canfor Limited partnership have announced their 1^st Quarter results .

The Partnership reported sales of $238.2 million and net income of $48.6 million, or $0.68 per unit, for the quarter ended March 31, 2007. These results are similar to the fourth quarter of 2006, reflecting improvements in NBSK pulp market pricing and benefits of a weaker Canadian dollar, offset by moderately higher fibre costs, lower production due to scheduled maintenance downtime and higher administration costs.

The first quarter 2007 results are significantly better than the prior year quarter primarily due to higher pulp pricing, partially offset by higher fibre costs and scheduled maintenance downtime.

Based on the Partnership’s results, the Fund earned net income of $24.2 million, or $0.68 per Fund unit, in the first quarter of 2007.

The Partnership generated distributable cash of $51.9 million, or $0.73 per unit, during the first quarter, which compares to $56.9 million, or $0.80 per unit in the fourth quarter of 2006.

The Partnership’s NBSK pulp production during the quarter was 4,800 tonnes lower than in the prior quarter as the Intercon and Prince George Pulp mills had scheduled maintenance downtime during the quarter, with no maintenance downtime in the prior quarter. In addition, Intercon had a sudden equipment rupture, which reduced production and required the mill to produce unbleached pulp for several days.

The effect of this malfunction was more than offset by the Northwood pulp mill producing at a record pace during the quarter.

Fibre costs continued to increase during the quarter due to two factors: higher pulp sales returns directly resulted in an increase in residual chip prices and production curtailments by sawmills in the BC Interior continued to create additional price pressure due to the reduced chip supply. The Partnership augmented its fibre supply by obtaining roundwood chips from two external facilities during the quarter.

The strike action by Canadian National Railway’s (CN) labour union in February created many logistical challenges as the Partnership struggled to maintain deliveries to its customers, using truck deliveries in some instances and storing pulp in several locations. In addition congestion in Vancouver ports further disrupted delivery schedules. Pulp shipments during the quarter were about 6,000 tonnes below production due to these delivery disruptions.

Prices for NBSK pulp continued to increase in all markets during the quarter, with list prices at the end of the quarter at US$760 for delivery to Northern Europe and US$790 for the United States. Commenting on the market conditions, Paul Richards, President and CEO of the Partnership said: “the NBSK pulp market remains strong and the announced April price increases are being absorbed and producers will maintain tight market conditions.”

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