CANFOR REPORTS RESULTS FOR THIRD QUARTER OF 2010

October 29, 2010 by timbercommunity

Canfor Corporation (TSX: CFP) today reported net income of $33.5 million for the
third quarter of 2010, compared to $40.4 million for the second quarter of 2010 and $4.1 million for the third quarter of 2009. For the nine months ended September 30, 2010, the Company’s net income was $106.4 million, compared to a net loss of $53.7 million for the comparable period in 2009.
 

Canfor’s reported net income comprises both net income attributable to equity shareholders (“shareholder net income”) and non-controlling interests. The Company’s shareholder net income for the third quarter of 2010 was  $5.6 million, or $0.04 per share, down from $18.1 million, or $0.13 per share, for the second quarter of 2010 and an improvement from a loss of $5.2 million, or $0.04 per share, reported for the third quarter of 2009. For the first nine months of 2010, shareholder net income was $39.3 million, or $0.28 per share, compared to a net loss of $53.5
million, or $0.38 per share, for the first nine months of 2009.
Shareholder net income for the third quarter of 2010 included several items affecting comparability with prior
periods, which had an overall negative impact of $6.0 million, or $0.04 per share. The most significant of these was
an after-tax charge of $13.4 million, or $0.09 per share, relating to the permanent closure of the Company’s Clear
Lake lumber operation. After taking account of all items affecting comparability, the Company’s adjusted shareholder
net income for the third quarter of 2010 was $11.6 million, or $0.08 per share, compared to similarly adjusted net
income of $28.2 million, or $0.20 per share, for the second quarter of 2010 and an adjusted net loss of $37.5 million,
or $0.26 per share, for the third quarter of 2009. For the nine months ended September 30, 2010, adjusted
shareholder net income was $50.2 million, or $0.35 per share, compared to an adjusted net loss of $144.4 million, or
$1.01 per share, for the nine months ended September 30, 2009.
North American lumber market activity was subdued in the third quarter as the weak U.S. economy and the troubled
U.S. housing market continued to weigh on the sector. Average lumber prices in North America were well down from
the previous quarter when prices were boosted by a short-lived price rally that ended abruptly in May. Western SPF
lumber prices edged up in August and September mostly due to seasonal factors and rising demand from China,
while prices for Southern Yellow Pine lumber products continued to slide well into the third quarter before stabilizing
in September. Sales realizations from offshore markets, the majority of which are negotiated quarterly or monthly in
advance, showed a modest increase compared to the second quarter.
Northern Bleached Softwood Kraft (“NBSK”) pulp markets in the third quarter continued to benefit from high prices
reflecting steady demand and balanced supply. Prices peaked at record-high levels early in the quarter before
weakening slightly as a result of declining pulp consumption, particularly in Asia.
The Company’s lumber business operated at approximately 70% of capacity in the third quarter, with its recently
restarted Chetwynd and Quesnel mill operations in the British Columbia Interior operating through the quarter.
Production from the Quesnel mill is being fully dedicated to the China market.
In September, the Company announced the permanent closure in January 2011 of its Clear Lake lumber operation
located near Prince George, B.C. The protracted downturn in the U.S. housing sector and a lack of economic longterm
fibre supply to this facility were the major factors behind this decision.
EBITDA reported by the Company for the third quarter of 2010 was $66.0 million, down $36.5 million from the
second quarter of 2010. Excluding the impact from inventory write-down movements and the Clear Lake closure
provision of $17.8 million, EBITDA was down $26.8 million. For the most part, the decline in EBITDA in the current
quarter reflected lower solid wood prices. The Company ended the third quarter of 2010 with a cash balance of
$223.1 million, and $420.1 million of available undrawn operating lines of credit.
Commenting on the results, Canfor’s President and CEO Jim Shepard said, “While pulp markets remained strong in
the quarter, the stagnant U.S. housing market weighed on the results of our solid wood business. On a more positive
note, we continued to see strong demand from China for our Western SPF lumber, and this was reflected in our
record-high shipments to Asia in the third quarter.”
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Shepard added that the Company remains confident in the longer-term prospects for the lumber sector and is
currently investing in a number of high return capital projects which will further increase the Company’s cost
competitiveness. “We are making good progress on our Fort St. John mill upgrade and are seeing excellent returns
from other recently completed smaller capital projects,” said Shepard.
North American lumber demand is expected to remain steady at current levels over the balance of the year
influenced by slower seasonal activity and the continued overhang of unsold home inventory. The strength of the
offshore lumber market is expected to continue to partially offset the weakness of the North American market.
Several end-use markets in China are now solidly established and are expected to result in higher lumber demand in
the fourth quarter.
For pulp, global softwood inventories held by producers and customers have risen through the third quarter of 2010,
but are still considered to be balanced, in contrast to hardwood pulp inventories which are in an oversupplied
situation. Two North American bleached softwood producers have recently started up, which will result in a modest
increase in supply; however, seasonal maintenance downtime through October may mitigate this impact in the near
term.
Additional Information and Conference Call
A conference call to discuss the third quarter’s financial and operating results will be held on Friday, October 29,
2010 at 9:00 AM Pacific time. To participate in the call, please dial 416-695-6616 or Toll-Free 800-769-8320. For
instant replay access until November 23, 2010, please dial 416-695-5800 or 800-408-3053 and enter participant pass
code 5858765#. The conference call will be webcast live and will be available at www.canfor.com. This news
release, the attached financial statements and presentation used during the conference call can be accessed via the
Company’s website at http://www.canfor.ca/investors/webcasts.asp.
Forward Looking Statements
Certain statements in this press release constitute “forward-looking statements” which involve known and unknown
risks, uncertainties and other factors that may cause actual results to be materially different from any future results,
performance or achievements expressed or implied by such statements. Words such as “expects”, “anticipates”,
“projects”, “intends”, “plans”, “will”, “believes”, “seeks”, “estimates”, “should”, “may”, “could”, and variations of such
words and similar expressions are intended to identify such forward-looking statements. These statements are based
on management’s current expectations and beliefs and actual events or results may differ materially. There are many
factors that could cause such actual events or results expressed or implied by such forward-looking statements to
differ materially from any future results expressed or implied by such statements. Forward-looking statements are
based on current expectations and the Company assumes no obligation to update such information to reflect later
events or developments, except as required by law.
Canfor is a leading integrated forest products company based in Vancouver, British Columbia (BC) with interests in
BC, Alberta, Quebec, Washington state, and North and South Carolina. The Company produces the most softwood
lumber in BC while also producing oriented strand board (OSB), remanufactured lumber products and specialized
wood products. Canfor also owns a 50.2% interest in Canfor Pulp Limited Partnership, which is one of the largest
producers of northern softwood kraft pulp in Canada and a leading producer of high performance kraft paper. Canfor
shares are traded on the Toronto Stock Exchange under the symbol CFP.
Media Contact: Investor Contact:
Dave Lefebvre Pat Elliott
Director, Public Affairs & Treasurer
Corporate Communications (604) 661-5441
(604) 661-5225 Patrick.Elliott@canfor.com
Dave.Lefebvre@canfor.com