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Introduction & Market Context
Canfor Corporation (TSX:CFP) released its first quarter 2025 interim report on May 9, 2025, showing sequential improvement in financial performance despite continued operating losses. The company benefited from rising lumber and pulp prices during the quarter, though market uncertainty persists in both segments.
The forest products company reported a narrower operating loss of $28.5 million for Q1 2025, compared to a $45.9 million loss in Q4 2024, representing a 38% improvement quarter-over-quarter. This improvement came as North American lumber prices strengthened and the company’s pulp segment returned to profitability.
As shown in the following comprehensive financial summary, Canfor reported a shareholder net loss of $31 million ($0.26 per share) in Q1 2025, compared to a $63.3 million loss ($0.53 per share) in the previous quarter:
Quarterly Performance Highlights
Canfor’s consolidated sales increased to $1,417.5 million in Q1 2025, up 10.3% from $1,285.7 million in Q4 2024, though only slightly higher than the $1,382.7 million reported in the same quarter last year. The company’s adjusted operating loss narrowed significantly to $32.2 million, compared to $82.0 million in Q4 2024 and $116.0 million in Q1 2024.
The improvement in operating results was driven by higher lumber prices in North America and Europe, as well as better performance in the pulp and paper segment. Adjusted operating income before amortization reached $68.9 million in Q1 2025, a substantial improvement from $16.6 million in Q4 2024.
The reconciliation between reported and adjusted financial measures shows the impact of inventory valuation adjustments on the company’s results:
The key financial metrics for Q1 2025 show the company’s improved performance across multiple indicators, though Canfor continues to face challenges in generating positive operating income:
Segment Performance
Lumber Segment
Canfor’s lumber segment, which accounts for approximately 86% of total sales, reported an operating loss of $25.5 million in Q1 2025, an improvement from the $36.6 million loss in Q4 2024. The segment benefited from higher lumber prices, with the average Western SPF (WSPF) 2x4 #2&Btr lumber price increasing to US$492 per thousand board feet in Q1 2025, up 13% from US$435 in Q4 2024.
Production of WSPF lumber decreased to 367 million board feet in Q1 2025 from 449 million board feet in Q4 2024, while Southern Yellow (OTC:YELLQ) Pine (SYP) lumber production increased to 463 million board feet from 392 million board feet. European lumber unit sales realizations also experienced a significant increase compared to the same period in the prior year, primarily due to improved lumber market pricing and a 4% weaker Canadian dollar versus the Swedish krona.
Pulp and Paper Segment
The pulp and paper segment showed marked improvement, reporting operating income of $10.8 million in Q1 2025, compared to $4.1 million in Q4 2024 and a loss of $15.7 million in Q1 2024. This segment benefited from higher pulp prices and increased shipments.
As illustrated in the following segment data, pulp production reached 104,000 tonnes in Q1 2025, up 6% from 98,000 tonnes in Q4 2024, while pulp shipments increased by 15% to 112,000 tonnes:
The average NBSK pulp list price delivered to China increased to US$793 per tonne in Q1 2025, up from US$767 in Q4 2024. According to the report, pulp markets experienced modest positive improvements during the first quarter of 2025, contributing to the segment’s better performance.
Financial Position and Cash Flow
Canfor’s financial position showed some deterioration in Q1 2025, with cash and cash equivalents decreasing by $142.3 million during the quarter to $128.5 million as of March 31, 2025. The company used $70.6 million in cash from operating activities, compared to generating $87.9 million in Q4 2024.
Capital expenditures remained significant at $122.1 million (net), contributing to the cash outflow. The company reported a net debt position of $498.6 million as of March 31, 2025, with a net debt to total capitalization ratio of 12.2%.
The following consolidated balance sheet provides a comprehensive view of Canfor’s financial position as of March 31, 2025:
The condensed consolidated statements of income show the company’s performance for the quarter, with sales of $1,417.5 million and a net loss of $26.0 million:
Cash flow details reveal the significant cash usage during the quarter, with negative operating cash flow and substantial investing activities:
Outlook and Forward-Looking Statements
Looking ahead, Canfor anticipates continued volatility and uncertainty in North American lumber markets throughout the second quarter of 2025, citing affordability challenges and tariff-related disruptions. The company is working to mitigate these costs through diversification strategies.
For the pulp segment, global softwood pulp markets are expected to remain subdued due to increasing economic uncertainty and potential trade disruptions. However, lumber demand and pricing in Japan are anticipated to improve through Q2 2025.
A significant concern for Canfor is the preliminary anti-dumping duty (ADD) rate for 2023 announced by the U.S. Department of Commerce at 34.61%. Upon finalization of these rates, expected in Q3 2025, the company anticipates recognizing an expense estimated at $83.1 million in its financial statements.
Despite these challenges, the sequential improvement in both the lumber and pulp segments suggests that Canfor’s operational performance is trending in a positive direction, though market uncertainties continue to pose significant headwinds for the company’s return to profitability.
Full presentation:
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