Canfor Pulp Products Inc. Announces Second Quarter 2018 Results and Quarterly Dividend - 25.07.18 - News

VANCOUVER, July 25, 2018

Highlights

Third consecutive record-high quarterly operating income of $85 million
Record-high Q2, 2018 sales of $396 million, reflecting strong shipments and sales realizations
Net income of $63 million, or $0.97 per share

Financial Results

The following table summarizes selected financial information for the Company for the comparative periods:

Q2

Q1

YTD

ARIVA.DE Börsen-Geflüster

Kurse

CANFOR PULP PRODUCTS INC.

1,13 $

-6,15%

Q2

YTD

(millions of Canadian dollars, except per share amounts)

2018

2017

Sales

$

396.4

$

359.7

$

756.1

$

280.9

$

590.1

Operating income before amortization

$

105.1

$

104.3

$

209.4

$

50.0

$

104.0

Operating income

$

85.4

$

85.1

$

170.5

$

31.5

$

66.7

Net income

$

63.0

$

64.3

$

127.3

$

20.2

$

44.3

Net income per share, basic and diluted

$

0.97

$

0.99

$

1.95

$

0.31

$

0.67

The Company reported operating income of $85.4 million for the second quarter of 2018, an increase of $0.3 million from the $85.1 million reported for the first quarter of 2018 reflecting favourable Northern Bleached Softwood Kraft ("NBSK") pulp unit sales realizations, increased shipments following major weather-related transportation disruptions experienced in the first quarter of 2018 and to a lesser extent, improved NBSK pulp mill productivity. These factors more than offset the impact of scheduled maintenance outages and market-related fibre cost increases in the quarter.

Global softwood pulp markets remained strong through the second quarter of 2018, with near-record high US-dollar NBSK pulp list prices to China reflecting tighter supply during the traditional spring maintenance period as well as healthy global demand. Average NBSK pulp unit sales realizations were moderately higher than the previous quarter reflecting a 2 cent, or 2%, weaker Canadian dollar combined with rising US-dollar NBSK pulp list pricing in other regions, particularly North America. Average Bleached Chemi-Thermo Mechanical Pulp ("BCTMP") unit sales realizations showed a moderate decrease quarter-over-quarter, with lower US-dollar pricing more than offsetting the weaker Canadian dollar.

Pulp shipments were up 6% from the previous quarter, reflecting strong market demand and an unwinding of inventory resulting from the transportation challenges in the previous quarter. Pulp production was down 5% from the previous quarter following scheduled maintenance outages at the Company's Prince George NBSK pulp mill, as well as at its Taylor BCTMP mill, which reduced NBSK pulp production by approximately 4,000 tonnes and BCTMP production by approximately 17,000 tonnes, offset in part by improved productivity at the Company's NBSK pulp mills. The scheduled maintenance outage at the Prince George pulp mill was completed ahead of schedule. The Taylor BCTMP mill's reduced production included extended downtime in connection with the commissioning of its previously announced energy project, which is now achieving anticipated operating rates.

Pulp unit manufacturing costs were moderately higher than the previous quarter, with seasonally lower energy prices and usage partly offsetting market-driven increases in fibre costs and higher unit costs associated with the aforementioned scheduled outages.

Operating income in the Company's paper segment at $1.5 million was down $1.4 million from the first quarter of 2018, as increased slush pulp costs linked to higher Canadian dollar NBSK market pulp prices more than offset improved paper unit sales realizations and a weaker Canadian dollar.

Commenting on the Company's second quarter of 2018 results, CPPI's Chief Executive Officer, Don Kayne said, "We continue to be encouraged by the strength of the global pulp markets. Our solid operating performance in the second quarter enabled us to capitalize on these favourable market fundamentals, and set new record-high operating earnings".

Notwithstanding some seasonal weakness in China during the traditionally slower summer months, global softwood kraft pulp markets are projected to be balanced through the third quarter of 2018. For the months of July and August 2018, the Company announced NBSK pulp list price increases in North America of US$40 per tonne and US$30 per tonne, respectively. Results in the third quarter of 2018 will include a scheduled maintenance outage at Northwood, the Company's largest NBSK pulp mill, with a projected 28,000 tonnes of reduced NBSK pulp production, combined with higher associated maintenance costs and lower projected shipment volume. Bleached kraft paper demand is anticipated to remain stable through the third quarter of 2018.

On July 25, 2018, the Board of Directors declared a quarterly dividend of $0.0625 per share, payable on August 14, 2018 to the shareholders of record on August 7, 2018.

Additional Information and Conference Call
A conference call to discuss the second quarter's financial and operating results will be held on Thursday, July 26, 2018 at 8:00 AM Pacific time. To participate in the call, please dial Toll-Free 1-888-390-0546. For instant replay access until August 9, 2018, please dial Toll-Free 1-888-390-0541 and enter participant pass code 063665#. The conference call will be webcast live and will be available at www.canfor.com. This news release, the attached financial statements and a presentation used during the conference call can be accessed via the Company's website at http://www.canfor.com/investor-relations/webcasts.

Forward Looking Statements
Certain statements in this press release constitute "forward-looking statements" which involve known and unknown risks, uncertainties and other factors that may cause actual results to be materially different from any future results, performance or achievements expressed or implied by such statements. Words such as "expects", "anticipates", "projects", "intends", "plans", "will", "believes", "seeks", "estimates", "should", "may", "could", and variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are based on management's current expectations and beliefs and actual events or results may differ materially. There are many factors that could cause such actual events or results expressed or implied by such forward-looking statements to differ materially from any future results expressed or implied by such statements. Forward-looking statements are based on current expectations and the Company assumes no obligation to update such information to reflect later events or developments, except as required by law.

CPPI is a leading global supplier of pulp and paper products with operations in the central interior of British Columbia ("BC") employing approximately 1,300 people throughout the organization. Canfor Pulp owns and operates three mills in Prince George, BC with a total capacity of 1.1 million tonnes of Premium Reinforcing Northern Bleached Softwood Kraft Pulp and 140,000 tonnes of kraft paper, as well as one mill in Taylor, BC with an annual production capacity of 220,000 tonnes of Bleached Chemi-Thermo Mechanical Pulp ("BCTMP"). Canfor Pulp is the largest North American, and one of the largest global producers of market NBSK pulp. CPPI shares are traded on the Toronto Stock Exchange under the symbol CFX.

Canfor Pulp Products Inc.
Second Quarter 2018
Management's Discussion and Analysis

This interim Management's Discussion and Analysis ("MD&A") provides a review of Canfor Pulp Products Inc.'s ("CPPI" or "the Company") financial performance for the quarter ended June 30, 2018 relative to the quarters ended March 31, 2018 and June 30, 2017, and the financial position of the Company at June 30, 2018. It should be read in conjunction with CPPI's unaudited interim consolidated financial statements and accompanying notes for the quarters ended, June 30, 2018 and 2017, as well as the 2017 annual MD&A and the 2017 audited consolidated financial statements and notes thereto, which are included in CPPI's Annual Report for the year ended December 31, 2017 (available at www.canfor.com). The financial information in this interim MD&A has been prepared in accordance with International Financial Reporting Standards ("IFRS"), which is the required reporting framework for Canadian publicly accountable enterprises.

Throughout this discussion, reference is made to Operating Income before Amortization which CPPI considers to be a relevant indicator for measuring trends in the Company's performance and its ability to generate funds to meet its debt service and capital expenditure requirements, and to pay dividends. Reference is also made to Adjusted Net Income (calculated as Net Income less specific items affecting comparability with prior periods) and Adjusted Net Income per Share (calculated as Adjusted Net Income divided by the weighted average number of shares outstanding during the period). Operating Income before Amortization, Adjusted Net Income and Adjusted Net Income per Share are not generally accepted earnings measures and should not be considered as an alternative to net income or cash flows as determined in accordance with IFRS. As there is no standardized method of calculating these measures, CPPI's Operating Income before Amortization, Adjusted Net Income and Adjusted Net Income per Share may not be directly comparable with similarly titled measures used by other companies. Reconciliations of Operating Income before Amortization to Operating Income and Adjusted Net Income to Net Income reported in accordance with IFRS are included in this MD&A. Throughout this discussion reference is made to the current quarter which refers to the results for the second quarter of 2018.

Factors that could impact future operations are also discussed. These factors may be influenced by both known and unknown risks and uncertainties that could cause the actual results to be materially different from those stated in this discussion. Factors that could have a material impact on any future oriented statements made herein include, but are not limited to: general economic, market and business conditions; product selling prices; raw material and operating costs; currency exchange rates; interest rates; changes in law and public policy; the outcome of labour and trade disputes; and opportunities available to or pursued by CPPI.

All financial references are in millions of Canadian dollars unless otherwise noted. The information in this report is as at July 25, 2018.

Forward Looking Statements

Certain statements in this MD&A constitute "forward-looking statements" which involve known and unknown risks, uncertainties and other factors that may cause actual results to be materially different from any future results, performance or achievements expressed or implied by such statements. Words such as "expects", "anticipates", "projects", "intends", "plans", "will", "believes", "seeks", "estimates", "should", "may", "could", and variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are based on management's current expectations and beliefs and actual events or results may differ materially. There are many factors that could cause such actual events or results expressed or implied by such forward-looking statements to differ materially from any future results expressed or implied by such statements. Forward-looking statements are based on current expectations and the Company assumes no obligation to update such information to reflect later events or developments, except as required by law.

SECOND QUARTER 2018 OVERVIEW
Selected Financial Information and Statistics

(millions of Canadian dollars, except per share amounts)

Q2

2018

Q1

2018

YTD

2018

Q2

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