Release Date: March 07, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Canfor Corp (CFPZF, Financial) successfully executed strategic priorities, transforming its business structure and improving its operating cost base.
- The company has enhanced geographic diversification, with approximately 70% of its lumber business located outside of Canada.
- Lumber prices have steadily increased, supporting improved profitability, particularly in Western Canada.
- Canfor Corp (CFPZF) is well-positioned to capitalize on mid- to longer-term lumber demand fundamentals.
- The company maintains a strong balance sheet, allowing for strategic growth opportunities and share repurchases.
Negative Points
- 2024 was an extremely challenging year, with difficult decisions to close high-cost assets in British Columbia.
- The company faces ongoing challenges with elevated duties and tariffs, impacting 20% of its sales.
- Global lumber demand remains tepid, with continued volatility and market uncertainty expected.
- There is uncertainty regarding fiber supply in 2025 due to elevated softwood lumber duties and potential additional tariffs.
- Canfor Pulp experienced a reduction in shipments and adjusted EBITDA due to the wind-down of a production line.
Q & A Highlights
Q: Can you discuss the margin profile of your Canadian portfolio after recent cost structure changes?
A: Stephen Mackie, Chief Operating Officer, stated that while specific details won't be disclosed, the Canadian business has improved significantly. Alberta continues to perform well, and the closure of higher-cost mills in British Columbia has enhanced the portfolio's performance.
Q: Have you adjusted inventory levels in anticipation of tariffs?
A: Kevin Pankratz, Senior Vice President of Sales and Marketing, mentioned that there hasn't been a significant shift in inventory due to the recent announcement of tariffs. Any changes are modest and seasonal.
Q: Are you seeing any risk of buyer fatigue due to potential tariffs?
A: Kevin Pankratz noted that there is no significant long-term buying due to market uncertainty. While there is a slight increase in inquiries, it aligns with seasonal trends rather than panic buying.
Q: What are the underlying demand trends and shipment expectations for 2025?
A: Kevin Pankratz expects flat demand globally, with shipments projected at 1.6 billion board feet for SPF, 2 billion for SYP, and 1.6 billion for Europe. Retail and home builder outlooks are also flat or slightly reduced.
Q: How are you managing the impact of tariffs on your sales?
A: Susan Yurkovich, President and CEO, confirmed that 20% of sales are exposed to tariffs, based on a pro forma adjusted for capacity rationalization. This exposure is expected to decrease over time.
Q: Can you elaborate on the substitution of SPF with SYP due to tariffs?
A: Kevin Pankratz explained that substitution is occurring in specific regions and applications, such as wide-width lumber and machine stress-rated lumber. SPF pricing is expected to strengthen, maintaining a spread over SYP.
Q: What are the key components of your 2025 CapEx plan?
A: Patrick Elliott, Chief Financial Officer, outlined a $250 million spend for lumber and $50 million for pulp, with over half for maintenance. Strategic capital includes upgrades in El Dorado and other investments.
Q: Are there ongoing discussions about a softwood lumber agreement?
A: Susan Yurkovich stated that while there is activity in the US and changes in Canada, there is currently no line of sight to discussions on a new agreement. The focus remains on managing duties and tariffs.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
