Canfor Corporation's CEO Discusses Q4 2011 Results - Earnings Call Transcript
Canfor Corporation (
)
Q4 2011 Earnings Conference Call
February 9, 2012 11:00 ET
Executives
Don Kayne – President and CEO
Alan Nicholl – CFO
Alistair Cook – SVP, Wood Products Operations
Analysts
Paul Quinn – RBC Capital Markets
Mark Kennedy – CIBC World Markets
Sean Steuart – TD Securities
Presentation
Operator
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Good morning, ladies and gentlemen. Welcome to the Canfor Corporation Fourth Quarter Results 2011 Conference Call. A recording of the call and the transcript will be available at 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 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 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.
Don Kayne
Thank you, operator. Good morning everyone and welcome to Canfor’s conference call to discuss the company’s fourth quarter results for 2011. I am calling in from Beijing this morning, as I am part of the business delegation participating in Prime Minister Harper’s mission to China. I will speak very briefly about our Q4 highlights before turning the call over to Alan Nicholl, 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 also with me today as well to answer any questions you may have specific to their responsibility areas.
Our year-end financials paint a picture of a company that continues to invest in its operations despite challenging market conditions. On balance while Q4 was challenging Canfor’s solid productivity gains and continued strong balance sheet positions the company to drive as economic conditions improve. We continue to see slow but reassuring demand signals from our key markets and I will speak to that later.
Yesterday, we reported an adjusted loss from continuing operations of $32 million on sales of $576 million for the fourth quarter and negative EBITDA of $16 million excluding inventory valuation adjustments, closure provisions and asset impairment charges. Alan will speak to our financial performance shortly. The Q4 loss is attributable in large part to lower low grade market prices and higher log costs. Conditions in the United States housing market remained relatively steady over the quarter, in line with forecast expectations.
We continued to anticipate that further 18 to 24 months will be necessary to see the U.S. return to more normal demand levels that we are encouraged to see positive demand signals coming from the U.S. as compared with Q4 of last year. In November, overall British Columbia year-to-date exports reached $1 billion, a tremendous achievement brought about by a decade of strategic market development investment by the BC and Canadian governments and forest companies.
Canfor’s Asian Pacific business continued to be very strong. Offshore lumber shipments were 15% higher this quarter as compared with Q4 of 2010, reflecting continued growth in shipments to China. Sales volumes to Japan and Korea also experienced increases over last year.
We continue to see strong growth prospects for wood markets in Asia and continue our aggressive market development activities to grow the uptake of wood frame construction in China and also across Asia. Our market strategy in China is increasingly focused on China’s major developers and builders targeting those companies that have the capacity to build with wood at a significant scale in the country.
Unseasonal weather patterns continued throughout our operations in Western Canada, combined with higher diesel costs and increased hauling costs contributed to the increased in unit log costs experienced in Q4. Overall lumber production was up 7% compared to the fourth quarter of 2010 for a total $867 million board feet. These production increases are the result of solid productivity improvements and a restart of the Vavenby Division sawmill, and are partially offset by the closure of the Clear Lake mill in early 2011.
Our capital investment program is delivering solid results to our cost performance and productivity is strengthening across the operations. We remained very confident in our Asia-Pacific markets and exceptional customer base in China, Japan, Korea and several of the other Asian countries. As demand recovers in North America, and continues to grow in Asia, Canfor will be well positioned to prosper.
At this point, I’d like to now turn the call over to Alan to discuss Canfor’s financial performance in the quarter.
Alan Nicholl
Thank you Don, and good morning everyone. My comments will be principally focused on our financial performance for the fourth quarter of 2011 by reference to the previous quarter. In my comments, I’ll be referring to our fourth quarter overview slide presentation which you will find on our upgraded website in the Investor Relations section on the webcast. Full details and amounts are contained in our news release issued yesterday afternoon.
For the fourth quarter of 2011, we reported an equity shareholder net loss of $44 million or $0.31 per share. This compares to a shareholder net loss of $22 million or $0.15 per share for the third quarter of 2011 and shareholder net income of $33 million or $0.23 per share for the fourth quarter of 2010.
On slide three of our presentation, we highlight various non-operating items, net of tax of non-controlling interest which affects comparability of results between the third and fourth quarters. The most significant of these in Q4 was a provision of $17 million relating to the closures at our Rustad and Tackama manufacturing operations with both operations build and done in January 2012. After taking account all of these non-operating items which totaled $12 million or $0.09 per share, the fourth quarter adjusted net loss was $32 million or $0.22 per share. This compares to similarly adjusted net loss of $2 million or $0.01 per share for the third quarter of 2011, a decrease of $30 million or $0.21 per share.
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