Canfor Corporation (market cap: $1.18 billion) reported its Q1 2025 earnings, surpassing analyst expectations with an actual earnings per share (EPS) of -$0.32 against a forecast of -$0.332. The company also exceeded revenue forecasts, posting $1.42 billion compared to the anticipated $1.26 billion. Despite this earnings beat, Canfor’s stock fell by 3.01% to close at $13.96, reflecting investor concerns over future guidance and market conditions. According to InvestingPro data, the company has generated $3.67 billion in revenue over the last twelve months, though it remains unprofitable during this period.
Key Takeaways
- Canfor beat EPS and revenue forecasts for Q1 2025.
- Stock price declined by 3.01% following the earnings release.
- The company reported significant improvements in its lumber and pulp business EBITDA.
- Strategic initiatives led to increased production and diversification.
- Market outlook remains cautious with expected volatility in lumber pricing.
Company Performance
Canfor Corporation demonstrated robust performance in Q1 2025, driven by strategic transformations in its lumber platform and increased production efficiencies. The company reported a substantial rise in adjusted EBITDA for both its lumber and pulp businesses, reflecting improved operational productivity and strategic investments.
Financial Highlights
- Revenue: $1.42 billion, up from the forecasted $1.26 billion.
- Earnings per share: -$0.32, better than the forecasted -$0.332.
- Lumber business adjusted EBITDA: $61 million, up $44 million from the previous quarter.
- Pulp business adjusted EBITDA: $21 million, up $9 million from the prior quarter.
Earnings vs. Forecast
Canfor’s Q1 2025 earnings report showed a positive surprise, with EPS exceeding expectations by $0.012 and revenue surpassing forecasts by $160 million. This performance marks a notable improvement compared to previous quarters, highlighting effective cost management and strategic initiatives.
Market Reaction
Despite the positive earnings results, Canfor’s stock price fell by 3.01% in the wake of the earnings announcement, closing at $13.96. The stock’s decline may be attributed to investor apprehensions about future market conditions and guidance, as well as broader market volatility. Trading near its 52-week low, InvestingPro analysis suggests the stock is currently undervalued. Investors seeking deeper insights into company valuations can explore the comprehensive Pro Research Report, available for Canfor and 1,400+ other top stocks, offering expert analysis and actionable intelligence for smarter investment decisions.
Outlook & Guidance
Looking ahead, Canfor anticipates continued volatility in lumber pricing throughout 2025, influenced by supply rationalization and geopolitical factors. The company is preparing for an elevated duty environment later in the year and potential trade disruptions affecting pulp pricing in Q2. While InvestingPro data shows the company is currently burning through cash, with negative free cash flow of $251 million, two analysts have recently revised their earnings expectations upward for the upcoming period. Canfor’s diversified global platform and balance sheet strength, evidenced by a healthy current ratio of 1.77, position it to navigate these challenges.
Executive Commentary
CEO Susan Yerkovich stated, "We’re positioned to navigate the current environment," emphasizing the company’s strategic readiness. COO Stephen Mackie added, "We continue to focus on operational performance," highlighting ongoing efforts to enhance productivity. Yerkovich also noted the potential impact of high duty amounts, underscoring the importance of strategic flexibility.
Risks and Challenges
- Volatile lumber pricing could impact revenue stability.
- Trade disruptions and potential tariffs pose risks to pulp pricing.
- Elevated duties may affect competitiveness in key markets.
- Currency fluctuations, particularly the weak Canadian dollar, could influence sales realizations.
- Macro-economic pressures and geopolitical tensions may affect supply chain dynamics.
Q&A
During the earnings call, analysts inquired about potential mergers and acquisitions, with management emphasizing a disciplined approach. Discussions also covered pricing trends between SPF and Southern Pine, and the company’s strategies to mitigate duty impacts. Canfor confirmed sufficient fiber supply for its pulp operations through 2026, addressing concerns about resource availability.
Full transcript - Canfor Corporation (CFP) Q1 2025:
Joanna, Conference Operator: Good morning. My name is Joanna, and I will be your conference operator today. Welcome to Canfor and Canfor Pulp’s First Quarter Analyst Call. All lines have been placed on mute to prevent any background noise. During this call, Canfor and Canfor Pulp’s Chief Financial Officer will be referring to a slide presentation that is available in the Investor Relations section of the company’s website.
Also, the companies would like to point out that this call will include forward looking statements, so please refer to the press releases for the associated risks of such statements. I would now like to turn the meeting over to Susan Yerkovich, Chief Executive Officer and President of Canfor Corporation. Please go ahead.
Susan Yerkovich, Chief Executive Officer and President, Canfor Corporation: Thank you, Joanna, and good morning, everyone. Thanks for joining the Canfor and Canfor Pulp Q1 results conference call. I’m gonna start by making a few remarks before I turn things over to Stephen Mackie, Canfor’s Chief Operating Officer and CEO of Canfor Pulp and Pat Elliott, Chief Financial Officer of Canfor and Canfor Pulp. In addition, in the room today, we’re joined by Kevin Pankratz, our Senior Vice President of Sales and Marketing for Canfor and Brian Ewan, our Vice President of Sales and Marketing for Canfor Pulp. Following the completion of several strategic initiatives in recent years, Canfor is entering 2025 with a lower cost globally diversified lumber platform and a strong balance sheet.
While there remains significant uncertainty with respect to the broader economic landscape with the ongoing trade disputes, we are positioned to navigate the current environment supported by the transformation of our lumber business in recent years. With this uncertainty, we expect demand to remain tepid in the short term, but continue to believe that global market fundamentals remain strong for our lumber business and we’re well positioned to capitalize on improved demand over the medium to long term. Although lumber pricing is anticipated to remain volatile through 2025, significant supply rationalization contributed to higher pricing to start the year, supporting improved results in the first quarter. In addition, we’ve started to see the benefits of our significant capital investments in our U. S.
Southern operations and the improvements in our underlying cost structure, 40% of our volume now produced in The U. S. South this quarter. While it will take some time to fully ramp these investments, the transformation of our business in recent years has set us up to be
Pat Elliott, Chief Financial Officer, Canfor and Canfor Pulp: more
Susan Yerkovich, Chief Executive Officer and President, Canfor Corporation: resilient, better able to mitigate market related pressures and deliver more stable returns over the cycle. And while we expect to enter into an elevated duty environment later this year and there remains significant uncertainty around tariffs and the ongoing section two thirty two investigation, less than 20% of our total sales revenue is exposed to duties or trade disputes. In these challenging times, Canfor continues to maintain a strong balance sheet with significant financial flexibility to manage the current headwinds facing our industry. And this balance sheet strength also allows us to continue to pursue strategic growth initiatives should the right opportunity arise. Although we will continue to maintain a disciplined approach given the current economic conditions.
Finally, a more modest capital plan in 2025 and significantly improved asset base, we expect Canfor to opportunistically repurchase shares through the year under our normal course issuer bid. I’d now like to turn it over to Steve Mackey to provide an overview of Campor Pulp.
Stephen Mackie, Chief Operating Officer and CEO of Canfor Pulp, Canfor Corporation: Thanks Susan, and good morning everyone. Campor Pulp generated solid financial results in the first quarter, supported by improved productivity, modestly higher pulp sales realizations and another strong quarter for our paper business. Our sales realizations benefited from a weak Canadian dollar and a strong pulp pricing in China to start the year, although momentum weakened towards the end of the first quarter, given rising global economic and trade uncertainty. We anticipate lower pricing in the second quarter as trade disruptions weigh on market conditions. Notwithstanding current macroeconomic conditions, Amphibulp is well positioned to manage volatile markets given our unique high strength fibre characteristics, market diversification efforts and specialty product focus.
In terms of our operating performance, we’ve seen improved operating results in the last couple of quarters, with higher productivity contributing to a 6% increase in pulp production and a lower unit cost structure in the first quarter. While we have made progress in stabilizing our operations, and currently have adequate chip inventories, there remains uncertainty with respect to fibre supply later this year due to elevated softwood lumber duties and the current trade environment. As an organization, we continue to focus on operational performance, while closely managing our cost structure and optimizing the economically available fibre supply. I’ll now turn it
Pat Elliott, Chief Financial Officer, Canfor and Canfor Pulp: over to Pat to provide an overview of our financial results. Thanks, Stephen, and good morning, everyone. In my comments this morning, I’ll speak to our first quarter financial highlights, a summary of which is included in our overview slide presentation located in the Investor Relations section of Canfor’s website. Our lumber business generated adjusted EBITDA of $61,000,000 in the first quarter, up $44,000,000 from the previous quarter, reflecting the benefit of increased lumber prices in North America, continued steady earnings in Europe and an improvement in our underlying geographic mix and cost structure. Our results benefited from an 18% increase in southern yellow pine production driven by the ongoing ramp up of our recently completed greenfield sawmill in Alabama and brownfield investment in Arkansas.
In Western Canada, production decreased by 18% following the closure of several high cost operations in British Columbia in late twenty twenty four. Overall approximately 70% of our production in the first quarter originated outside of Canada, with 40% of that in The US South. This reflects a significant transformation of our lumber platform following the completion of several strategic initiatives in recent years, with an improved geographic mix and cost structure supporting profitability despite the current challenging macro environment. Turning to our pulp business, Camphor Pulp generated adjusted EBITDA of $21,000,000 in the first quarter, up $9,000,000 from the prior quarter, reflecting the benefit of higher sales realizations and a 15% increase in shipments attributable to improved productivity and favorable timing of shipments over quarter end. At the end of the first quarter, Canfor Pulp had net debt of $72,000,000 and $82,000,000 of available liquidity, while Canfor, excluding Canfor Pulp and the duty loan, ended the first quarter with debt of approximately $94,000,000 and available liquidity of $1,300,000,000 On a consolidated basis, capital expenditures were approximately $122,000,000 in the first quarter, including approximately $9,000,000 for Canfor Pulp.
Following completion of several major capital investments in recent years, we are anticipating significantly lower capital spend in 2025 with approximately $250,000,000 of capital spend projected for our lumber business, including final payments associated with our Alabama greenfield, the planned investment at our recently acquired sawmill in El Dorado, Arkansas and an ongoing brownfield planar investment in Sweden. For Camphor pulp, we are currently forecasting capital spend of $45,000,000 in 2025, including capitalized maintenance. We also anticipate Camphor will allocate a modest amount capital to opportunistically repurchase shares throughout the year under our normal course issuer bid, which we renewed in March. And with that, I’ll turn it back to you, Joanna, for questions from the analysts.
Joanna, Conference Operator: Thank you. We will now take questions from financial analysts. Session. First question comes from Sean Steward at TD Cowen. Please go ahead.
Sean Steward, Analyst, TD Cowen: Thanks. Good morning, everyone. Susan, I’d be interested in your initial couple of months in the seat, thoughts on opportunities to optimize the portfolio and was interested in your comments with respect to having some dry powder for potential growth initiatives outside the discretionary CapEx opportunity. Any context on specific areas or product lines for M and A that might be of more interest than
Susan Yerkovich, Chief Executive Officer and President, Canfor Corporation: others? Thanks. We made some very significant changes to our platform in recent years, particularly our platform here in British Columbia, and we continue to look at that across our system. We want to make sure that we have, that we’re continuing to optimize our portfolio. In terms of what we’re looking at going forward, obviously we’re grateful that we have the balance sheet that we have to continue to evaluate opportunities.
We’re looking at expanding our product mix where we can and we want to continue to be able to invest in our business across, know, in The US, we’re looking at Europe, and we’re keeping our eyes open for those opportunities as they come. But obviously, we’re gonna be super disciplined given the environment that we’re operating in.
Sean Steward, Analyst, TD Cowen: And with the volatile capital markets and economic outlook in general, is there a sense that vendor asks for valuations to come in a little bit for potential acquisition opportunities?
Susan Yerkovich, Chief Executive Officer and President, Canfor Corporation: Maybe. I mean, I think we’re, yeah, I would just say maybe they are.
Sean Steward, Analyst, TD Cowen: Okay. One other question, we’ve seen a convergence of SPF and Southern pine prices since mid March. Thoughts on sustainability of that trend as deposit rates increase later this year and potentially get coupled with tariffs under Section two thirty two? I guess the question is, do you think this recent convergence is sustainable And what do you think about spreads going forward over the midterm?
Susan Yerkovich, Chief Executive Officer and President, Canfor Corporation: Yeah, I’m going to get Kevin to ask that.
Kevin Pankratz, Senior Vice President of Sales and Marketing, Canfor: Sure, Sean. Good morning. Yeah, I think directionally, I still believe that SPF pricing is going to be at premium in the long term. I think in moments of volatility, Sean, you’re gonna see moments where it’s gonna be offset that, especially in the two by four. But if you look outside two by four, you’re already seeing pretty well established spread premiums on like the six inch eight and ten inches versus Southern Yellow Pine.
But I think directionally, and as demand normalizes and we get outside of this duty environment, I think you will see a bit more of a premium on the SPF pricing. So I think we’ll monitor that. And in a duty environment, as we’ve seen in March and April, there was a corresponding market response as far as the price appreciation. So I think there’s a lot of moving pieces on that piece, but directionally, think we’re on that path.
Sean Steward, Analyst, TD Cowen: Got it. Okay. Thanks, Kevin. That’s all I have for now, everyone.
Joanna, Conference Operator: Thanks, Sean. Thank you. The next question comes from Ketan Mamtora at BMO Capital Markets. Please go ahead.
Ketan Mamtora, Analyst, BMO Capital Markets: Thanks for taking my question. I’m just curious, just following up on Sean’s question. Can you talk about sort of what’s driving this pretty meaningful drop in SPF prices that we’ve seen over the last couple of months? We had capacity curtailments late last year as well. So, if you want to just, I mean, I’m curious, one, sort of what demand trends you’re seeing and kind of what’s driving this drop in SPF prices?
Kevin Pankratz, Senior Vice President of Sales and Marketing, Canfor: Sure. Sure, John. It’s Kevin here again. I’ll sorry, Ketan. So, on the demand side, obviously, we I think in this April, May season, we haven’t seen the traditional big spring demand that we would normally see.
So, there’s something on the demand side that’s correlating with weaker consumer confidence numbers and builder confidence numbers. And so I think that’s part of it. Also, a lot of volatility with tariff environment that we saw. I think every time they can start in March 2, April third, there’s always that element there. And I think the market’s rationalizing with that piece there that’s contributing to it.
And so I think there’s a couple of different variables there. And demand side, we’re just gonna have to see how that plays out here in Q2. And then that will help. Of course, if there’s a bit of a pickup there, that’ll help support that trend. But SPF pricing moved dramatically in December until April.
So that’s quite a lift. And so you’re coming off some pretty rapid responses. So it’s not unexpected to see some kind of moderation in the two by four SPF price.
Ketan Mamtora, Analyst, BMO Capital Markets: I see. Okay. Got it. And then, you know, I’m just curious, you know, with these deposit rates, you know, likely going up in the back half of this year, You know, you’ve obviously made, you know, a number of changes to your, you know, operating posture up in BC. But with this big jump coming, can you talk about sort of what’s your approach in managing the different regions?
So clearly you’ve got Europe, you’ve got meaningful production in The US South as well. So can you talk to kind of how you sort of think about, you know, your approach to production when duty rates go up?
Susan Yerkovich, Chief Executive Officer and President, Canfor Corporation: Yeah, so obviously we’ve made a lot of changes to be, we’ve been knowing that we’re going to be facing a higher duty rate environment for some time and that’s why we’ve made these very difficult decisions. We have less of our business operating in Canada for sure and about as we mentioned, about 20% exposed to the duty environment. I mean it’s the benefit of having a diversified operating platform. We operate in Canada, in The US and also in Europe. If you look at our European operations just for a minute, you know we have so many options around there to sell.
Have a lot of, we have great quality fiber, lots of options around product mix and also lots of markets, different markets to sell it to. So if one market is not performing we can switch to another. And so I think that’s, that’s what we’ve been doing to be able to withstand what we knew was coming in. Of course we expected the softwood lumber duties, we had not perhaps anticipated the IEEPA potential duties or the $2.32 tariffs, that’s new. But as Kevin said, you know, each time the duties have been talked about, you know, the market has responded, futures went up, some of that gets priced in and it certainly makes it more expensive for customers who want to buy our product, which of course will have an impact, it could have an impact on demand.
So we’re watching that. But I think what we have done is set ourselves up to the best extent possible to be able to withstand this volatility and this market uncertainty associated with these ongoing trade disputes. Our hope is that, you know, things will resolve and we will find a way forward and that would be advantageous not only for our industry but for many others.
Ketan Mamtora, Analyst, BMO Capital Markets: Susan, have you all done any kind of scenario planning around, you know, when duties go up and if we assume that, you know, demand slows down, and then the question becomes, you know, who bears the cost of these increased duties in the event that prices don’t rise to the same degree? Kind of what is the approach then?
Susan Yerkovich, Chief Executive Officer and President, Canfor Corporation: Yeah, well, know, have we done scenario planning like all day every day? Yes, because it’s been a very interesting operating environment. But you know, look, has to, know, my expectation, if you look back at the history on the trade file when duties come in, there is generally a price response and it goes up usually a little bit higher and then moderates up. Now is past history going to be what happens in the future? It’s unclear, but I will say none of these regions selling into The US if there is these extremely high duty amounts, they can’t withstand it.
So there’s either going to be a price response or people are going to have to shut down or curtail and of course what we know is despite maybe some assertions that there is enough domestic supply in The US to meet demand, that’s just not the case. There is about a 14,000,000,000 board foot ish gap, give or take, between what’s produced and what is consumed in The US. So there is demand that will not be met and that means that either people won’t be able to access their products and there’ll be a slowdown and that has other implications for The US economy or there will be a price response, which also of course will have an impact on affordability. So yes, we’ve been looking at all kinds of scenarios. It’s a very interesting time to be operating and we’re doing lots of scenario planning, but what we are doing is we’re focusing on the things that we can control and working hard to make sure that our assets are running optimally and focusing on cost control and making sure that we’re delivering our products to our customers.
Ketan Mamtora, Analyst, BMO Capital Markets: Thanks Susan. That’s helpful perspective. I’ll jump back in the queue.
Joanna, Conference Operator: Thank you. Next question comes from Matthew McKellar at RBC Capital Markets. Please go ahead.
Matthew McKellar, Analyst, RBC Capital Markets: Good morning. Thanks for taking my questions. First for me, it sounds like you’re expecting an uplift in European lumber prices in Q2, but also higher log costs. Are those essentially offsetting each other so far through the quarter? Or should we be thinking about some margin compression or expansion here?
And then would you expect to modulate your production levels at all in Q2 versus maybe Q2 last year to contain those log costs a bit? Thanks.
Pat Elliott, Chief Financial Officer, Canfor and Canfor Pulp: Yeah, Matt, it’s Pat. I think it’s hard to say. I mean, we’ve seen actually pretty robust pricing opportunity in Europe, more than maybe our team there had expected. And so I’d say it’s still a little bit dynamic. I think there is an opportunity to protect the margin in the second quarter.
So as you know, the suites take a lot of downtime in July. And so there’ll be a big block of downtime in July, but at this point we don’t have any other downtime planned for the second quarter.
Matthew McKellar, Analyst, RBC Capital Markets: Okay, thanks, Matt. And then last for me, just thinking through the comments around duties and what those could potentially apply for your fiber supply for the pulp business, What kind of change in lumber production levels in the area around Prince George or however you define your procurement area would potentially create an issue for your pulp production volumes or at least drive higher input costs to the extent that you could see more pulpwood? Thanks.
Stephen Mackie, Chief Operating Officer and CEO of Canfor Pulp, Canfor Corporation: Hey, Matt, it’s Steven here. Yeah, I mean, where we’re at today is we do have sufficient supply to and reasonable sort of visibility to a line of sight of supply that will support our current operating platform in Prince George out through the balance of this year and into well into 2026. So we’re encouraged by the progress that we’ve made, certainly relying on a higher percentage of whole log chip and pulpwood than we had historically, given some of the capacity reductions in the lumber space. There’s obviously the uncertainty associated with duties and the response that may come in lumber production as a result of duty implications or implementation. But as Susan, I think articulated really well, we do anticipate a market price response we’re cautiously optimistic that we’ll have sufficient supply to support the operating capacity, but we’ll obviously respond as it’s pretty volatile and dynamic situation and we’ll respond if we’re as we see changes.
Matthew McKellar, Analyst, RBC Capital Markets: Thanks for that color. I’ll turn it back.
Joanna, Conference Operator: Thank you. We have no further questions. I’ll turn the call back over to Susan Yerkovich for closing comments.
Susan Yerkovich, Chief Executive Officer and President, Canfor Corporation: Okay. Thank you, Joanna, and thanks all for participating in the call today, and we’ll look forward to chatting to you next quarter.
Joanna, Conference Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and we ask that you please disconnect your lines.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.