Canfor Corp's (TSE:CFP) shares dropped on Friday after the company reported second quarter earnings well short of last year's results as it continues to struggle with lower lumber prices while production was hit by a strike in Vancouver earlier this year.
For the three months to June 30, the forest products company reported net income of $54.3 million, or 39 cents per share, compared to $110.3 million, or 77 cents per share, in the same period last year.
After adjusting for special items, net profit was 41 cents per share, meeting analysts' estimates, but down from 61 cents a year ago.
Sales grew, however, to $907.3 million from $843.2 million in the second quarter of 2013, and from $741.9 million in the first three months of the year. While lumber production was down 2 percent from the previous quarter due in large part to the closure of its Quesnel sawmill in B.C. and the sale of a Quebec sawmill, lumber shipments increased 33 percent from the first quarter due to improved demand.
The company said it saw improved shipments across all segments in the period, resulting from better railcar availability and the resolution of the truckers' strike at the Vancouver port in the first quarter. This was offset somewhat by lower sales realizations in both the lumber and pulp and paper units on account of reduced prices, as well as maintenance outages at its pulp and paper facilities.
"After the various logistical challenges experienced in the first quarter, we were pleased to see the transportation pressures across our lumber and pulp businesses ease somewhat in some regions in the second quarter," said president and CEO Don Kayne.
"We continue to make good headway with our capital upgrades at our lumber business and anticipate a steady increase in production over the balance of the year and into 2015."
Looking ahead, the company said North American lumber consumption is forecast to improve with "steady demand in the residential construction market and continued strength from the repair and remodeling sector." In the U.S., housing starts averaged 980,000 units, based on a seasonally adjusted annual rate, up 6 percent from the previous quarter.
There is nevertheless a risk of pulp price weakness for the second half of the year, said Canfor, due in part to reduced global consumption during the historically slow summer months and new hardwood pulp capacity projected to flow into markets.
Shares of Canfor were down 0.4 percent on Friday, at C$22.74. Since the beginning of the year, the stock is down more than 14 percent.