Canfor Corporation (CFP)
Q1 2010 Earnings Call
April 30, 2010 11:00 am ET
James Shepard – President, Chief Executive Officer
Thomas Sitar – Vice President Finance, Chief Financial Officer
Don King – Vice President, Marketing and Sales
Darrel Switzerloft – Raymond James
Paul Quinn – RBC Capital Markets
John Koller – Oppenheimer & Close
[Pierre Lacroix – Desjardine Securities]
[Dave Barry – CKPG News]
Canfor Corporation Q4 2009 Earnings Call Transcript
» Canfor Corporation Q2 2009 Earnings Call Transcript
» Canfor Corporation Q1 2010 Earnings Call Transcript
Welcome to the Canfor Corporation first quarter results 2010 conference call. A recording of this call will be available on the company’s web site. During this call, Canfor’s Chief Executive and Chief Financial Officer will be referring to a slide presentation that is available in the Investor Relations section on 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 risk of such statements.
I would now like to turn the meeting over to Mr. Jim Shepard, President and Chief Executive Officer of Canfor Corporation.
Good morning, everybody and welcome to Canfor’s conference call to discuss the company’s first quarter results of 2010. I’m joined here by Tom Sitar, Canfor’s Vice President of Finance and CFO, Don King, Vice President of Marketing and Sales, and Mark Feldinger, Vice President of Manufacturing. I will give a brief overview of the quarter and then Tom will speak to our financial results.
The combination of our intense focus on cost containment, productivity improvements and customer service is now complimented by rising market prices and that’s starting to show we have some traction at last.
This time last year with reference to the severe economic downturn, I said that we were not at the beginning of the end but we at least we have been at the end of the beginning. Today, I would like to say that we are at the end, but that remains to be seen.
I do however, generally feel that we have passed the worst of it and we came through it in one piece and in good shape. We have a strong balance sheet that will enable us to modernize our facilities to further improve our competitiveness and to take advantage of growth opportunities that are complementary to our focus on becoming the dominant supplier of wood supplier solutions to our highly valued customers.
We have a highly qualified work force that is aligned with our shareholders through incentive plans that are focused on shareholder returns. This I might add, includes all of our hourly people in British Columbia with the signing of a ground breaking agreement with the United Steel Workers that provides the cost reduction elements complemented by a profit incentive program.
We are pleased to report that in the first quarter of 2010, we recorded positive net income. While these results are encouraging, and the market looks favorable for the moment, we are still cautious about the immediate future. There may be rays of sunlight shining right now, but there are still some clouds on the horizon, particularly in the United States like the expected continuation of home mortgage foreclosures, and the continued high unemployment numbers.
For these reasons, we continue to be focused on growing our off shore markets and on cash conservation with prudent capital investment that will enable us to become even more competitive in the future.
That’s not to say that we are not optimistic about the future of Canfor and for the lumber industry. In our view, there is a scenario unfolding globally that will see a worldwide shortage of SBF lumber leading to a strengthening of the lumber price base that will make this industry a good place to invest.
The question at this moment in time is whether or not this current strong lumber price caused by supply constraint will hold up until the long-term reality of the global shortage takes hold. So the good news is that a good lumber market lies ahead. We’re just not sure if it’s here yet permanently or if we have to wait a little longer.
One positive impact of the U.S. housing downturn is that it provided the stimulus to focus on the evolving market of China. The exponential growth that we’ve seen in our shipments to China is only one part of the story. We are also seeing a growing Asian appetite for higher grades of lumber with an increasing percentage of our shipments to China in first quarter being our construction grade to better.
In Japan, which has been an important market for us for many years, we were successful in increasing our market share of prime lumber products.
To further ensure our ability to supply our customers with the lumber product solutions they need, we added a second shift at our Mackenzie sawmill in February. We will also be reopening our Chitin sawmill next month. An incentive program at these operations will engage the efforts and ideas of our hourly workforce and empower them to share in the success of their operations in the future.
As I previously mentioned, we are pleased to say that we have also reached an agreement with the United Steel Workers on a four year agreement that will award our hourly employees in British Columbia with profit based incentives and reinforce the teamwork necessary for high performance at all our mills.
I am cautiously optimistic as I look into the near future. We do believe that prices have firmed, and we hope this trend continues. However, we continue to be cautious about bringing on new capacity. We do not see robust demand coming from U.S. housing starts at this time. We believe most of the effort, pressure and price is related to inventory replenishment and increasing demand offshore.