Canfor Corporation (
Q2 2011 Earnings Call
July 29, 2011 11:00 am ET
Don Kayne - President CEO
Allen Nickel - CFO
Alistair Cook - SVP Wood Products
Darrell Switzerloft - Raymond James
Michael Jenning [ph]
Sean Steuart - TD Securities
Paul Quinn - RBC Capital Markets
Mark Nielsen - Prince George Citizen
Ross Marowits - The Canadian Press
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Good morning ladies and gentlemen, welcome to the Canfor Corporation second quarter results 2011 conference call. A recording of the call and a transcript will be available on Canfor’s website. During this call, Canfor’s Chief Financial Officer will be referring to a slide presentation that is available in the Investor Relations section of their website.
Also, the company would like to point out that this call will include forward-looking statements. So please refer to the press release for the associated risks of such statements
I would now like to turn the meeting over to Mr. Don Kayne, President and CEO of Canfor Corporation. Please go ahead, Mr. Kayne.
Thank you operator, good morning everyone and welcome to Canfor’s conference call to discuss the company’s second quarter results for 2011. I will speak very briefly about our quarter two highlight before turning it over to Allen Nickel our Chief Financial Officer. Alistair Cook our Senior Vice President of Wood Products Operations, and Wayne Guthrie our Senior Vice President of sales and marketing are with me as well.
Yesterday, Canfor announced shareholder net income of $26.2 million for the second quarter and an EBITDA of $66.8 million. Allen will speak to our financial performers in a few minutes. Despite the fact that we are seeing a few more positive signs in the recovery of the US economy, we still believe that recovery will be a very, very gradual process. June housing start figures were somewhat encouraging and US corporate earnings appeared to be improving.
We do remain very cautious in our expectation and continue to believe that the US will take another 18 to 24 months to reach more normal demand levels. Total BC lumber sales to China exceeded those to the US for the first time in May. A benchmark achievement that reflects many years of work on the part of Canfor, our industry colleagues and the BC at Federal Government in creating this new market for solid wood.
Continuing to aggressively work to develop Wood frame construction with China’s the largest developers and builders, will result in this market continuing to grow and strengthen well in to the future. Year-to-date, Asia has represented 35% of our lumber shipment. Canfor is very focused on continuing to develop the Chinese market and on bringing aboard a successful transition into the widespread use of wood frame construction in China.
India, while presenting slightly different market entry challenges from what we experienced in China offers considerable feature promise as well. Our Japanese market also continues to show very good progress despite that nations fear if they get a Tsunami. Overall shipments to Japan continue to increase from quarter one. I was in Japan in June and while we have some sense from North America of the scope of the devastation, it is hard to imagine just how severe it is without seeing first hand.
For reconstruction it will take some time for a civil planning effort of this size to get underway. When Japan does start to rebuild; overtime we expect that it will include about 200,000 homes. Many other wood suitable structures were damaged or destroyed as well including 800 nursing homes and hundreds of schools. Despite growth in Asian and sales and early signs of recuperation in the US, we remain closely focused on cost across company.
We are making solid progress on our capital investment program which will see us in debt at $120 million this year (inaudible) improvements and modernizations over and above normal maintenance pending. These investments will substantially improve our cost performance. In Q1 we announced the capital program that included technology and efficiency investment at our Vavenby Polar and Plato operations.
Yesterday, we announced a further $46.7 million at our (inaudible) and PG Saw mill operation. These investments include player upgrades in (inaudible) and the purchase of (inaudible) cogeneration facility as well as planer upgrade in our (inaudible). We have also announced that our Vavenby operation will resume with a one shift operation on September 6th. As co-production the Vavenby mill will add about 240 million board feet to our capacity on an annual basis.
Lumber production is up from quarter one and lumber unit manufacturing costs are down, primarily due to productivity improvements. Weather challenges in the first quarter were followed by the weather spring in summer in many years which is having an effect on our harvesting operation and long hauling. Our wooden [ph] group has been focused on maintain supply to ensure normal operations.
I would like to now turn the call over to Allen to discuss Canfor’s financial performance for the quarter.
Thank you Don. Good morning everyone. In my comments on Canfor’s second quarter financial performance, I will be referring to our second quarter over few slide presentations which you will find on our website in the Investor Relations section. Full details (inaudible) are contained in our news release issued yesterday. Our second quarter of 2011 equity share holder net income which includes; just over 50% share of earning from Canfor Pulp Limited partnership with $2 million or $0.01per share.