Canfor Pulp Products Inc. ("CPPI") (TSX: CFX) today reported net income of$17.7 million, or $0.25 per share, for the second quarter of 2015, compared to $28.0 million, or $0.40 per share, for the first quarter of 2015 and $18.8 million, or $0.27 per share, for the second quarter of 2014. For the six months ended June 30, 2015, the Company's net income was $45.7 million, or $0.65 per share, compared to $44.5 million, or $0.63 per share, for the six months ended June 30, 2014.
The following table summarizes selected financial information for the Company for the comparative periods:
|(millions of Canadian dollars, except per share amounts)||2015||2015||2015||2014||2014|
|Operating income before amortization||$||36.4||$||57.1||$||93.5||$||44.8||$||97.2|
|Net income per share, basic and diluted||$||0.25||$||0.40||$||0.65||$||0.27||$||0.63|
|Adjusted net income||$||13.0||$||35.0||$||48.0||$||18.4||$||45.1|
|Adjusted net income per share, basic and diluted||$||0.18||$||0.50||$||0.68||$||0.26||$||0.64|
After adjusting for items affecting comparability with the prior periods, the Company's adjusted net income for the second quarter of 2015 was $13.0 million, or $0.18 per share, compared to an adjusted net income of $35.0 million, or $0.50 per share, for the first quarter of 2015. CPPI's adjusted net income for the second quarter of 2014 was $18.4 million, or $0.26 per share.
The Company reported operating income of $20.9 million for the second quarter of 2015, a decrease of $20.5 millionfrom $41.4 million reported for the first quarter of 2015. The decrease largely reflected the impact of maintenance outages and lower unit sales realizations for both pulp and paper segments. The current quarter results included scheduled maintenance outages at two of the Company's Northern Bleached Softwood Kraft ("NBSK") pulp mills, its Bleached Chemi-Thermo Mechanical Pulp ("BCTMP") mill and its kraft paper machine.
Global softwood pulp markets remained relatively balanced through the second quarter of 2015, supported by solid global softwood pulp demand and the industry's seasonal spring maintenance period. The average NBSK pulp list price to North America, as published by RISI, was stable through the quarter, remaining unchanged from March 2015 at US$980 per tonne, and down US$15 per tonne, or 2%, compared to the average in the previous quarter. Overall, NBSK pulp unit sales realizations were down compared to the previous quarter, reflecting lower pricing in all regions, and, to a lesser extent, the impact of a slightly stronger Canadian dollar (up 1%) and increased shipments to lower-margin regions. BCTMP markets were challenging in the second quarter, with the Company seeing a modest decline in unit sales realizations compared to the first quarter of 2015.
Pulp shipments increased 7% from the previous quarter, reflecting a full quarter of shipments from the Taylor Pulp Mill, as well as a marginal increase in NBSK pulp shipments, principally to China, in part due to the traditional Chinese Lunar New Year holiday impacting shipments in the first quarter. Pulp production levels were up 2%, with the Taylor Pulp Mill production more than offsetting scheduled maintenance outages at the Company's Intercontinental and Prince George Pulp Mills, which reduced market pulp production by approximately 11,000 tonnes. In the current quarter, there was also a scheduled maintenance outage at the Taylor Pulp Mill, which reduced market pulp production by approximately 3,000 tonnes. Pulp unit manufacturing costs in the second quarter of 2015 were up compared to the first quarter of 2015, largely reflecting these maintenance outages, offset somewhat by seasonally lower energy prices and usage.
The Company's paper segment's operating income was down $2.2 million from the previous quarter, reflecting the impact of the scheduled maintenance outage of the Prince George Kraft paper machine, and to a lesser extent, a marginal decrease in unit sales realizations, offset in part by increased shipments to the North American market.
Commenting on the second quarter's results, CPPI's Chief Executive Officer, Don Kayne, said, "Results in the quarter reflected fairly stable NBSK market conditions, the impact of the scheduled maintenance outages at several of Canfor Pulp's facilities as well as higher shipments to China, reflecting the impact of the Chinese Lunar New Year in the first quarter."
For the month of July 2015, the Company's NBSK pulp list price is US$980 per tonne in North America, unchanged from June 2015. With reported global softwood pulp inventories at the high end of the balanced range heading into the seasonally slower summer period, there is some risk of downward pressure on global softwood pulp prices in the third quarter of 2015. A weakening of the Canadian dollar should mitigate this price pressure.
A maintenance outage is planned to begin at the Northwood Pulp Mill in September 2015, with a projected 25,000 tonnes of reduced NBSK pulp production, 5,000 tonnes of which will fall in the third quarter of 2015 with the balance in the fourth quarter of 2015.
On July 21, 2015, the Board of Directors declared a quarterly dividend of $0.0625 per share and a special dividend of $1.1250 per share, both payable on August 10, 2015, to the shareholders of record on August 3, 2015. The special dividend has been declared as a result of strong cash generated by the business in 2014 and 2015 to-date.