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Introduction & Market Context
Canfor Corporation (TSX:CFP) released its second quarter 2025 financial results on August 1, showing a significant deterioration in performance compared to the previous quarter. The company reported substantial asset write-downs and widening losses amid challenging market conditions, particularly in North America, while its European operations provided some stability.
The presentation, delivered by CFO Pat Elliott, comes as Canfor’s stock trades near its 52-week low of $12.60, closing at $13.58 on July 31, 2025. This represents a challenging market position for the forestry products company, which continues to navigate volatile lumber pricing and ongoing trade disputes.
Quarterly Performance Highlights
Canfor reported a shareholder net loss of $202.8 million (or $1.71 per share) in Q2 2025, a substantial decline from the $31.0 million loss ($0.26 per share) in Q1 2025. After adjusting for non-operating items, the net loss was $67.0 million ($0.56 per share), compared to $38.1 million ($0.32 per share) in the previous quarter.
The company’s Q2 results were heavily impacted by $188.6 million in asset write-downs and impairments, along with $12.1 million in inventory write-downs. These significant one-time charges reflect ongoing challenges in certain segments of Canfor’s operations.
As shown in the following earnings comparability breakdown:
Total (EPA:TTEF) sales for the quarter reached $1,379.4 million, a slight decrease from $1,417.5 million in Q1 2025. The company’s adjusted operating loss widened to $50.7 million from $32.2 million in the previous quarter, while total operating income before amortization, as adjusted, declined to $51.7 million from $68.9 million.
Detailed Financial Analysis
The company’s lumber segment, which accounts for approximately 87% of total sales, posted an operating loss of $229.2 million as reported. However, after excluding the significant asset write-downs of $188.6 million and inventory write-downs of $9.2 million, the adjusted operating loss was $31.4 million, slightly worse than the $29.2 million loss in Q1.
When further adjusted to exclude restructuring costs and before amortization, the lumber segment showed a modest improvement in cash earnings, reaching $67.9 million in Q2 compared to $60.1 million in Q1.
The pulp and paper segment, operated through Canfor Pulp Products Inc., experienced a shift from a $10.8 million operating income in Q1 to a $5.3 million operating loss in Q2. This decline was attributed to softening global pulp markets and lower production volumes.
Segment Performance
Canfor’s lumber operations showed divergent regional performance in Q2. European operations delivered strong results, helping to offset weakness in North American markets. Western Canadian lumber realizations were moderately lower, while U.S. South lumber sales showed a slight decline. In contrast, European lumber sales were moderately higher.
The presentation highlighted varying price trends across different lumber products. Western SPF 2x4 #2&Btr prices declined from CDN$706 to CDN$651, while SYP East 2x4 #2 prices increased from US$448 to US$481. However, SYP East 2x6 #2 prices fell significantly from US$404 to US$325.
As illustrated in the lumber segment performance breakdown:
The pulp segment faced challenges from softening global markets, resulting in lower realized prices and reduced production and shipment volumes compared to Q1. This market deterioration contributed significantly to the segment’s shift from profitability to loss in Q2.
Trade Duties Impact
Countervailing and anti-dumping duties continue to affect Canfor’s U.S. lumber shipments. The company paid $19.0 million in cash deposits during Q2 at a combined CVD and ADD deposit rate of 16.58%, down from $23.4 million in Q1.
The presentation noted that final ADD and preliminary CVD results for the sixth period of review (POR6) have been announced. Canfor has now paid a total of $1,039.3 million in cumulative cash deposits as of June 30, 2025, with no refunds expected until litigation regarding these duties is settled.
The following slide details the ongoing duty situation:
Forward-Looking Statements
While the presentation did not provide explicit forward guidance, the company’s Q1 2025 earnings call had anticipated continued volatility in lumber pricing throughout 2025, influenced by supply rationalization and geopolitical factors. The Q2 results appear to confirm this volatility, with mixed price movements across different lumber products and markets.
The significant asset write-downs suggest Canfor is adjusting to a challenging medium-term outlook in certain segments of its business. Meanwhile, the company continues to benefit from its geographic diversification, with European operations providing stability amid North American market weakness.
Investors will be watching closely to see if Canfor can narrow its losses in the coming quarters, particularly as it navigates ongoing trade disputes and volatile market conditions. The company’s ability to leverage its stronger European operations while addressing challenges in North America and its pulp business will be critical to its performance through the remainder of 2025.
Full presentation:
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