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Introduction & Market Context
Canfor Corporation (TSX:CFP) reported a shareholder net loss of $202.8 million ($1.71 per share) in the second quarter of 2025, according to the company’s latest financial presentation. This represents a substantial deterioration from the $31.0 million ($0.26 per share) loss recorded in Q1 2025, primarily driven by significant asset write-downs and challenging market conditions across both lumber and pulp segments.
After adjusting for non-operating items, including $143.9 million in asset write-downs and impairments, Canfor’s net loss stood at $67.0 million ($0.56 per share), compared to an adjusted net loss of $38.1 million ($0.32 per share) in the previous quarter.
The company’s presentation, delivered by CFO Pat Elliott, highlighted persistent headwinds in North American lumber markets, while European operations showed relative resilience. Meanwhile, Canfor Pulp Products Inc . (TSX:CFX) experienced deteriorating conditions in global pulp markets, particularly in China.
Quarterly Performance Highlights
Canfor’s total sales decreased to $1,379.4 million in Q2 2025 from $1,417.5 million in Q1 2025, representing a decline of $38.1 million. The company reported a total operating loss of $251.4 million, significantly worse than the $28.5 million operating loss in the previous quarter.
As shown in the following comprehensive financial summary:
The lumber segment, which accounts for approximately 87% of total sales, reported an operating loss of $229.2 million in Q2 2025, compared to a $25.5 million loss in Q1. After adjusting for asset write-downs and inventory write-downs, the segment’s operating loss was $31.4 million, slightly worse than the $29.2 million adjusted loss in Q1.
The pulp and paper segment shifted from an operating income of $10.8 million in Q1 to an operating loss of $5.3 million in Q2, reflecting deteriorating market conditions in the global pulp industry.
Detailed Financial Analysis
A closer examination of Canfor’s Q2 2025 earnings reveals the significant impact of non-operating items on the company’s financial performance:
The most substantial factor affecting Q2 results was $143.9 million ($1.21 per share) in asset write-downs and impairments. The company also recorded a $7.3 million foreign exchange loss on term debt, partially offset by a $14.7 million foreign exchange gain on duty deposits loan.
In the lumber segment, production volumes increased across all regions compared to Q1, with Western SPF lumber production rising to 382 million board feet (MMfbm) from 367 MMfbm, Southern Yellow (OTC:YELLQ) Pine (SYP) production increasing to 511 MMfbm from 463 MMfbm, and European lumber production growing to 375 MMfbm from 369 MMfbm.
Despite higher production volumes, pricing pressures continued to impact sales realizations:
Western SPF lumber unit sales realizations declined, primarily reflecting a 4% decrease in SPF 2x4 #2&Btr prices, more pronounced pricing declines in wider-width products, and a 4% stronger Canadian dollar against the USD. In the US South, SYP lumber unit sales realizations experienced a slight decline quarter-over-quarter, as a 20% decrease in SYP East 2x6 #2 prices and notable declines in wider-width dimensions were partially offset by a 7% increase in SYP East 2x4 #2 prices.
European lumber operations continued to show resilience, with moderately higher unit sales realizations compared to Q1, benefiting from slight improvements in regional pricing and a 6% weaker Canadian dollar against the Swedish krona (SEK).
Pulp Segment Performance
Canfor Pulp Products Inc. experienced a challenging quarter, with performance deteriorating significantly from Q1:
The pulp segment reported an operating loss of $4.4 million in Q2 2025, compared to operating income of $6.8 million in Q1. After adjusting for inventory write-downs, the segment’s operating loss was $2.4 million, a $13.2 million decline from the previous quarter.
This deterioration was primarily attributed to weakening global softwood pulp market fundamentals, particularly in China amid trade uncertainties. The average Northern Bleached Softwood Kraft (NBSK) pulp list price delivered to China decreased to $734 USD per ton in Q2 from $793 USD in Q1, representing a $59 decline.
Pulp production decreased slightly to 102,000 metric tons in Q2 from 104,000 metric tons in Q1, reflecting minor operational disruptions. Shipment volumes declined more significantly, down 9% quarter-over-quarter to 102,000 metric tons from 112,000 metric tons, due to reduced production and a drawdown of inventory levels in the prior quarter.
Duties and Trade Considerations
Canfor continues to face significant challenges related to countervailing and anti-dumping duties on softwood lumber exports to the United States:
The company paid $19.0 million in cash deposits for duties in Q2 2025, down from $23.4 million in Q1. The combined countervailing duty (CVD) and anti-dumping duty (ADD) deposit rate stands at 16.58%.
Notably, Canfor has accumulated $1,039.3 million in total cash deposits paid through June 30, 2025. The company anticipates recognizing an additional $88.3 million (US$64.6 million) in combined CVD and ADD expenses upon finalization of the CVD rate for the sixth period of review, expected in early August 2025.
Strategic Initiatives & Market Outlook
While the presentation did not explicitly outline forward guidance, the company’s focus on operational efficiency and cost management is evident in its lumber segment cash earnings summary:
Canfor incurred $6.7 million in restructuring costs during Q2 2025, suggesting ongoing efforts to optimize operations amid challenging market conditions.
This aligns with information from the recent earnings call, where management indicated plans to reduce capital expenditures in 2025, with the lumber business targeting approximately $250 million and the pulp business $45 million. The company also mentioned potential opportunistic share repurchases as part of its capital allocation strategy.
The stark contrast between Canfor Pulp’s Q1 2025 performance, which exceeded analyst expectations with EPS of $0.09 versus a forecast of $0.07, and the Q2 2025 results highlighted in this presentation, underscores the volatility and deteriorating conditions in global forest products markets.
As Canfor navigates these challenging conditions, investors will be closely monitoring whether the company’s operational improvements and strategic initiatives can offset persistent market headwinds in both the lumber and pulp segments.
Full presentation:
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