Q2 2020 Canfor Corp Earnings Call
Good morning, ladies and gentlemen, welcome to the Tam for Corporation and can pour Paul second quarter analyst call recording and transcript optical will be available on campus website. During this call Kemper Corporation and camp for pulp Chief Financial officer will be referring to.
Slide presentation is available in the Investor Relations section.
Company's website also what companies I would like to point out but this call will include forward looking statements. So please refer to the press releases for the associated risks such statements I would now like turn the meeting over to Mr. Dong chain I cant poor Corporation, and tempore Pulps, Chief Executive Officer.
Please go ahead Mr. Karen.
Thanks, colon and good morning, everyone and thank you very much for joining the cared for in cat.
Order to 2020 results conference call I'll make a few comments before I turn things over to nickel, our executive Vice president of cap or pulp operations, and our Chief Financial Officer, Boscastle Corporation and capital pulp.
And we'll provide a more detailed overview I work for much in quarter two.
In addition to Alan and I, we're joined by Kevin and Crotch was our senior Vice President sales and marketing.
I would like to start by snacking incredible employees for their continued dedication and perseverance as we navigate the unprecedented challenges a cold like GE.
As we've adopted to new working conditions, our employees have continued to perform extremely well, which contributed significantly to our positive results. This quarter. In addition, our new systems have worked very well with majority of our corporate employees continuing to work from home, which has been the case since mid March.
An organization, we've demonstrated that we can work well and types of crisis in uncertainty.
Talk to priorities continue to be protecting the health and safety of our employees and executing on our strategy to support our valued customers and sustain the business for the long term.
As a result, or the pandemic, we we have to make a series of difficult decision to take extended downtime across all of our operating regions with our operations in British Columbia being impacted most.
In addition, due to insufficient supply of economically viable timber we made the decision to permanently close our LPR sawmill and made.
The timing of this decision was expedited by the impacts of the pandemic on our overall business.
We deeply regret the impacts the is very difficult decisions are having our employees on our contractors in the local communities I want to thank our valued customers for their understanding and support through this difficult period.
Since the onset of the pandemic, we have been working closely with federal provincial municipal and state governments and appreciate their willingness to work in partnership with cared for and our industry.
Turning to our markets and beginning with lumber conditions were extremely volatile during the second quarter.
April global lumber demand declined sharply in the wake up closures of non essential businesses and locked down in many parts of North America, Europe and Asia.
Unprecedented demand from the repair and remodeling segment lean inventories across the supply chain and reduce lumber supply resulted in dramatic increases in north American and European lumber pricing as the quarter progressed.
Lumber prices have continued to increase early in the third quarter, reflecting strong demand fundamentals and limited available supply combined with some challenges on the transportation projects.
Well lumber demand has been encouraging there remains significant uncertainty over the long term.
Oh sure lumber demand was relatively stable during the quarter with prices seeing more modest increases.
During the second quarter, we completed the 100% ownership Toby Elliott Sawmilling company, which increases our capacity in the U.S. So by a further 210 million board feet you.
In addition, Vito entered into an agreement to purchase that reached almost in Sweden Brumberg timber. This transaction is anticipated to close in the third quarter and is supported by Buda strong performance and solid balance sheet.
These two acquisitions are a further step in our goal to diversify our business globally.
In particular, the strong local relationships of our co owners and BITA allowed us to identify and complete the birch timber transaction at very attractive pricing.
You're taking account of these acquisitions, our regional production mix is 43% British Columbia, 31%, the U.S., so 22% in Europe and 4% in Alberta.
Her to 2013, what our business was 88% Canadian based we believe this more regionally diversified operating portfolio provides a more stable earnings platform for the future.
Business was significantly impacted by reduced residual fiber supply and increased fiber costs due to the extensive sawmill curtailments in British Columbia during the second quarter. In addition, we experienced challenging global pulp prices as the quarter progressed in response to a much lower demand for printing and writing papers.
Oh markets are anticipated to remain under pressure through the third quarter as a result of higher inventories and ongoing weakness in demand.
In response to reduce fiber availability and challenging market conditions can't work Paul took a three week curtailment at north what in the second quarter and is currently taking a four week or tailwind at PG Intercon pulp mills.
As a result of the challenges and uncertainty caused by Cobot 19, both can't bore and can't work bulk have taken a number of steps to further enhance our already sold that liquidity liquidity position I will now turn it over to Alan nickel to talk about the core.
Yes, Thank you Don and good morning, everyone. All the Council in Council <unk> quarterly results were released yesterday afternoon has come together with an overview slide presentation in the Investor Relations section of the respective companies' websites in my comments. This morning, I'll briefly speak to quarterly financial highlights some real somebody which is included in there.
A few slide presentation.
Our lumber segment reported operating income of $107 million for the second quarters compared to a loss of $89 million for the previous quarter or Q2 results included a net Judy expenses $19 million restructuring costs of $14 million under nearly 1 billion dollar recovery of a previously we call.
Good inventory write down provision, reflecting the steep increase in lumber prices that we saw towards the analyst at quarter end into July.
After adjusting for these items the lumber segment generated operating income of $60 million.
Notwithstanding the disruptive impacts of covert 19, which resulted in its extensive plus production curtailments across or all the for operating regions. During the quarter improves lumber segment results reflected a marked improvement in lumber demand and prices since the quarter progressed.
Companies U.S. sites operations benefited from a strong picked up in southern yellow pine lumber prices in May and June which translated into improved sales realizations and operating results. Despite a 12% pulls it really had its decline of production quarter over quarter.
Our European lumber business continued to perform well in the quarter also generating improved yourselves Christmas quarter, one against a backdrop with minimal <unk> production disruption on solid demand, particularly some of the repair and remodeling sector during the quarter.
The business continues to meet our initial expectations with earnings so far in 2020 tracking ahead of 2019.
In Western Canada operating results were impacted by extensive production curtailments as western Sps lumber prices remained under pressure from most of the quarter.
Over the sharp increase in western SPF prices supporters are returned to more normal operating lifts in June and a strong finished the quarter was a major factor in improved quarter over quarter operating results for that region.
Our pulp business reported an operating loss of $6 million that second quarter compared to operating income as Jim amine reported for the previous quarters.
For the quarters the benefits of a weaker Canadian dollar an increase BCG M.T. prices right weighed by increased fiber costs, resulting from the truly lower fiber volumes available as well as the million dollar inventory write on at the end of June the selecting the weaker prices [noise].
Pulp shipments were down 14% in the quarter, reflecting a 13% in pulp production related to production curtailments of Northwood combined with a sensible slippage over quarters.
Hope unit manufacturing costs reflected increased.
For mentioned increase in fiber costs as well as the impact would be just production volumes, but were largely offset by seasonally lower energy costs and we just mentioned spending.
At the end of the second quarter Council, Excluding council pulp had net debt of approximately $860 million unassailable liquidity of approximately 655 million.
Liquidity improved by approximately $255 million during the quarter, reflecting higher cash earnings Cecil unwind of working capital that's tax refund various cash conservation measures in response to cope with 19 as well as increased on extended banking facilities.
Count for pulp ended the second quarter with net cash a $6 million and available liquidity of approximately 150 million.
Liquidity improved by approximately $50 million during quarter supported by a draw the line of appliance receivable balances and partial insurance proceeds related to the north with recovery Blenders unscheduled outage and the goal of 20 at team.
Excluding capitalized major him incidence. We currently anticipate the 2020 capital spending will be approximately $100 billion for the lumber segment on $45 million come for pulp.
The aforementioned insurance proceeds for pulp will be reinvested and not seem a coffee bought a joining an extended shut scheduled maintenance outage in the fall.
Without Donald turning the call back over to you.
Yes, thanks, Alan So operator, we're now.
Ready to take take questions from from the Atlas. Thank you.
Thank you.
Okay. We will now take questions from financial analysts if you have any questions.
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Please press Star one now if you have a question there will be a brief pause while participants register for questions.
Thank you for your patience.
Okay. So your first question comes from a few EMIR Patel from.
You see capital markets.
Please go ahead.
<unk>.
Can't hear the question Oh, one second your here just one moment.
I don't hear me.
I can hear you know America, okay, great. Thanks, Hi, Don This is lumber alleys getting a lot of comparisons to 2018, what do you think it's a different this time.
The lumber rally compared to 2018.
What's the difference yeah, I don't know.
Yes, I mean, I think that you know as you look forward you're clearly we know after the call that night team started to Oh impact. This year I think we certainly we saw obviously a significant retreat everywhere as people try to get a try to understand just the severity of things and I think that you know compared to which we of course in 2000.
18 was a completely different situation. So I think there with the all the reductions in production that we've seen during that period and now they're recovery that we've seen just to some degree I mean, it's just it's I think it's just been a you know quite a bit different situation in 2018, I mean, we're still obviously I'm here looking forward here, we still got lots.
The challenges ahead of us, but but you know I think that some of the fundamentals, particularly on the retail side continue to look up pretty pretty decent frankly, and a better than what we would have expected and so I think you know really.
Going forward here, while we're certainly being very very cautious it'll be on a this quarter Oh, you know right now we're seeing.
The result, so oh that right now so you know that I guess, that's what I would maybe comment on that right right. This right now.
Okay. No. Thanks, that's helpful Gone and just you know when you look at the capacity that's come out of British Columbia over the last 18 months.
In this higher pricing environment, what do you see that sort of maybe risk that some of that stuff gets restarted.
And you know as you can speak maybe how much but that was removed or do you think this was taken out permanently.
Yeah, well I think the you know there's been a fair bit removed already I mean I think.
Some of the numbers that we've heard you know are upwards around 2 billion board feet right. That's out there and that's where you got to remember most of the production is commodious due to the <unk> mountain time butyl right in and what the what the log supplies will look like you're going forward. We still believe ourselves. There's another billion board feet that a that still has to come out and whether that's you know all of that this year or that's.
Over the next couple of years I'm you know that's we still believe that that's you know has to happen and you know where that's going to happen in terms of British Columbia at this point, that's probably still up for debate, but that's a that's how we would look at that rate though.
Great. Thanks, that's helpful. So last question for me on Diane we've seen the U.S. delayed. These the next duty revision now by it by another 60 days.
The rest of Commerce, just continuing to issue these extensions as as we progressed.
Hi, Yes, absolutely I mean, I think that we're in a period of time here, where theres not a lot of certainty there at all and I think that the risk of further delays for sure is is is at risk.
Yes for sure.
Have you.
Great. That's that's all I had I'll turn it over next time.
Thanks.
Your next question comes from Sean Stewart of TD Securities. Please go ahead.
Thanks, Good morning, everyone.
Following on some years question.
Don and I'm wondering if you can comment on.
Your ability to squeeze extra production out of your sawmills or I guess potentially initially adding extra shifts across your portfolio.
And any broader thoughts you have on how quickly or slowly the industry supply response might come in light of how strong margins are in the sector right now.
Yes, I think you know for from our standpoint, we're basically now running other than.
The Mckenzie saw mill in British Columbia, which is which is currently down it definitely all the rest in British Columbia, certainly in Europe, and certainly in the U.S. So there are essentially running now at 100% already so were up you know in terms of well you know ability to increase over beyond that whatever over and above that will be.
Some degree of just based on some of the capital that we spend to maybe get a bit more out of it but for the most part Sean I would say that we're pretty close to two or two our maximum at this stage right. So and what was your second question was.
Hi, broader thoughts on how the industry might respond with extra supply I mean, there's doesn't look like as any greenfield coming at this point, but buttons for brownfield expansion go sorts of things yeah, there might be a little bit here and there are still been some capital being spent I'm sure everywhere right, but I would say right now based on pricing.
I would say that.
You wouldn't be that pretty much everybody is running.
Pretty hard now in running close to capacity.
Fleet, maybe the only the only caveat might be a theres been some log supply issues and parts of British Columbia, potentially but we're not seeing that ourselves but.
Perhaps others, but for the most part I would say that were most there's not a lot of upside here in terms of production levels order book and certainly that would be.
[music].
Okay.
A question maybe for Alan.
Yes, and looks like you're opening up on Capex, a little bit this year versus the initial.
Sort of austerity spending I guess you guys are guiding to any initial wake it depends on it you have any sense in house spending might trends into 2021, I imagine there's room to take it even higher.
And then can you give us a bit more detail on the the boiler spending program at Northwood <unk>.
Is that rebuilds still in the cards longer term or is what you're doing now just extending the life not much more and you don't have to think about a larger capex spend down the road.
Okay, no. Thanks, and good morning, Sean So with respect to your first question or ride opening up was also a little bit on a on capital I think that's fair to say, but Vicki keywords are little bit. We are focused on a couple of very attractive high returning projects.
The most notable of which is a second phase out or Camden move, which is a fairly high performing mill in the U.S. sites.
And the in the in the post spin is or expanded capital.
In large part reflects some targeted spend on our besides which you may recall was deployed or is that a cost day without the upset in June 20. It teen so what we're doing there in essence is taking the part the insurance proceeds that we were seized with respect to that paid thus far.
Focusing on extending the useful life of stops also RV side.
Today, we're thinking we'll be able to get between four and six years more like how does that based on what we know today well have a much better census out here before the end of the year well. The intent is to just to be clear to extend useful I suppose that particular recovery boiler in terms of the long term, we still have we live.
Real option search on one of which is a brand new.
Recovery board, replacing the tunes other there today.
The other option is extensive refurbishment of course RV want an ARPU slowness there today. So both softer merits. One obviously comes with a higher sticker price per se, but we had no firm decision with respect to either option at this point.
Okay. Thanks, very much for that I'll I'll get back in Q.
Alright, thank you.
Your next question comes from Paul Quinn of RBC capital markets. Paul. Please go ahead.
Yeah. Thanks, so much money.
<unk>.
It seems like we had lower lumber inventory coming in at 2020, and then Ur cobot hit and people retrenched and it seemed like it you know inventory in the channel that even lower where are we at right now in terms of Oh versus this time last year or just started here.
Yeah, I would say Paul I mean, let Kevin talked a little more but I would say, we would still think that inventory levels are lower lower than they were last year and are continuing relatively low because it take away spend.
Good and so I think we're still in that situation. It will remain in that situation here for a while <unk> and so that's probably what I would say Kevin what do you. What are you seeing out there really when you look around the world Yeah, No. So Don that for sure in a in North America lumber inventories are low the if you look at <unk>.
Like the ordinary market segment, there they had that huge demand throughout Q2 and so.
I think you're still seeing some really strong demand signals there that are really putting pressure on inventory and then on the new home construction side. There I think our folks going into Q2, you know inventories are relatively balanced and then as people were going to I know situation with cold it and the impact on housing demand there was I would draw working inventory.
And then and it didnt replenish sufficiently when we saw recovery may So North America is still quite lean I think in Asia, a inventories are little bit or a little bit hiring valley and Europe again, very tight inventories and strong order files. So that would be my assessment on on the inventory situation.
Kevin I think also wouldn't you say Kevin that the goal as well I mean, you talked a lot about this but the home center demand has been slow strong compared yet, but we anybody would have expected combined with the industrial side with the treaters that.
It's probably pretty much unprecedented maybe a strong too stronger word, but it's been extremely strong and much stronger than we ever would've expected and that which is really allowed us to extend our order files cabinet correct. They pretty much yep Yep, absolutely and then under that hold our in our home Center type segment, it's not.
Just the do it yourself a traditional customer base. It's also that customer base like that pro that pro that contractor, that's coming in there and you're seeing more and more investment to people in their homes and into a into rural environments and so we think that's going to continue to drive demand and keep pressure on inventories.
Okay, and then just talking about order files I mean, we've got pretty strong pricing here.
How far does your order Fargo a discipline.
Go ahead.
Yeah. So.
For North America actually our order files are are well into a well into August there there Paul and in Europe cloud like I think we mentioned the opening comments there were filed into pretty much October and then of course are either order files are pretty much into lot pretty much locked into Q3 already so very very solid order files.
Compared to historical norms.
Okay and then just recent recently via made acquisitions and European would it be safe to say that that's a continued areas of interest for you guys to continue to grow that platform.
I absolutely Paul I mean, it's as as we continue to to to spend more time on on Europe, and our European business and.
From our view, there's a there's a terrific amount of upside there and we're really really pleased with that acquisition, then and you know we see a much more opportunity to grow a in the years ahead, there and the stability in Europe and business. There just continues to be positive and and so I.
Safe to say that we will continue to to grow there overtime.
Okay and then last question on just the normal on.
Hugely cost easy stumpage.
That a material change from what it what are you expecting a corridor.
Kevin do you want to picked out one terms Oh I think <unk> Pauls question is good looking forward here Q3, with the stomping read or with the reductions and so forth what do we see pricing.
Yeah, I think with Q3, we see some pretty strong pricing. We think that's going to relatively continue into into September and then beyond that I don't really have not a lot of uncertainties, but I feel that the pricing trend that we in right now in this range here is going to continue into Q3.
Whether it continues or not all but the order files that we've got done Kevin I think you get substantiate that's for sure is that we we since we've seen some of them more the longer order files than we've seen in quite some time, frankly, and and that and that's really Europe. We always have much stronger filed enough. So that's not such a big change potentially but particularly but let's say.
Only in the U.S. and in Canada, both those operations, we've seen order files that we don't typically you don't see in terms of a number of weeks right. So but again like like Kevin mentioned and I think Alan mentioned also when you get out beyond Q3, that's when we you know we're picking up more more obviously conservative approach here in terms of where.
Are we might see things go so.
Great that's all local.
Thanks, Paul.
Your next question comes from Mars, while of Bank of Montreal, Mark. Please go ahead.
Oh, good morning, Don Good morning, Alan.
Good morning <unk>.
So much different situation than we had three months ago.
Yeah. That's that's a good thing [laughter], yeah, I wanted to start off by just a kind of talking about capital allocation priorities I mean, it looks like you're going to throw a lot of lot of cash.
In the third quarter I'm just curious.
About how you're thinking about prioritizing that in terms of that reduction M&A share repurchase special dividend in all different options there.
For sure maybe up al and I know you've been we've been working a lot on this why don't you speaks about.
The marks question.
I know for sure a good morning, Mark Yeah, I think we typically have we've tried to be fairly disciplined <unk> as to how we allocate a cash and clearly the challenge is hoping more convinced in more recent times, but to answer. Your question I think it's fair to say that debt reduction will remain a key area of focus for us we except that we took a little debt.
Obviously with respect to the CDEL acquisition on to a lesser extent, the Elliot acquisition as well, but debt reduction clearly as a top priority for US I think is on the M&A front I think what do you see into that burdines going is our desire to.
Be able to take advantage of a attractive smaller acquisition targets, but we think that was will be more selective and onto dons earlier point more targeted obviously in Europe and potentially in the U.S. signs as well.
Then we have to obviously much in our focus on capital for existing operations as well Mark you will appreciate that we saw Kurdistan there this year and it's important that we are we.
We go back to more normalized targeted and disciplined spending and not arena as well. So those are the three big areas of focus I would say for us as we look as we look like over the balance of the here and indeed into 2021.
Alan I can get and al you covered it well there and I think the <unk>. The thing, though just to emphasize though was on the debt reduction piece of all of those areas. Like we you know our focus is going to continue to be because we're still uncertainty out there for sure beyond.
On the Q3 or perhaps even into Q4, but that reduction can is going to continue to be a focus for sure and then if you know if there's an attractive target as Alan mentioned comes up we'll certainly look out it very specific way, but a debt reduction clearly is our number one focus.
Yeah, I'm, just I'm kind of curious on the.
Sure repurchase side I mean, it it's hard for me to imagine.
But you can make an acquisition of lumber capacity.
Cheaply is your own equity right now and any thoughts on that.
Go ahead.
Yes, Mark I think I, just echo what I said, a few minutes ago I think.
We believe there's higher priorities today and I would say just in terms of your comment on one share repurchasing I think we're encouraged by.
What we see in respect of the Bird announced acquisition, we believe that the economics of that are fairly compelling synergies are very attractive the payback period. Likewise, so one could one could discuss the merits of both for some time, mark, but we're very comfortable with.
With what we sidelined as our key priority certainly for the foreseeable future.
We just press on its just a little bit further because if I go back two years ago, you are buying your stock it almost twice the price that's that today and so I'm just curious I mean, we're kind of getting a wins unexpected windfall and I Wonder you know there isn't some merit and taking a portion of that windfall and you know being opportunistic right now about the stock.
Yeah, I think I think I mean again margin, maybe not maybe the best for him to how that conversation, but I think you know the diversification angle, but we're taking here to John's point earlier in the call is it is a key part of really driving volume across our company and.
We believe that we're seeing the benefits without sort of what not just more stable earnings but also improved earnings in many parts of our business. So.
We're comfortable with that puts us in saying that we're adopting there there's too much on certain they there's so much uncertainty out there to mark that we just do well to be mindful about as well.
Yeah, I felt like I have no problem with that I wonder if we can turn to just sort of it should think about M&A sort of how do you kind of way opportunities in the U.S. south versus kind of opportunities in Europe right now.
Yeah.
Alan you can jump in there too, but I think you don't work right now I mean, we've made we made a year ago or you're now.
Pretty significant acquisition to move into Europe, I think that's turning out to just exactly the way that we expected to and at the same time, we've done the same thing in the U.S. Oak and we're trying to take extremely disciplined approach there and try to focus on companies that is why we're focusing on the smaller companies because we can really target.
Hi, there, whether its product mix, whether its location oh, but those two areas in where there's a strong employment base I guess would be the other one those issues first and foremost right and as we as we look forward I would say that we don't I don't think we would rank Europe or the U.S. So any different their old area. So we really believe on a long term basis are going to add to this.
Ability of the company through that diversification period area and so right now I mean, there's there's clearly you know there's opportunities in both places today, whether we continually look out but I I would say that we would it we would look at them both as positive opportunities going forward and always depend on <unk>.
It's kinda comes up at the time right, but.
Clearly, we're really really pleased with what weve been able to do when do you want so from a regional point of view from a company point of view from a people point of view and exactly the same in Europe are there some opportunities that we can that we are continuing to look out we've got to we've got our very strong management team there as we do and in the U.S. So.
I'll just keep assessment as you go forward.
Okay, and then just on the South Don you know if we go back a couple of years ago.
You were looking at that Greenfield down near Athens, Georgia.
Is the is a greenfield and option for you if we look out over the next couple of years.
Yes, I think so I mean as possible for sure I mean, we were going to grow the business down on the U.S. So we were really like it down there. There. So we got our very good strong team down there. That's that a you know that were very competent in uncomfortable with and they're looking at Optum has all the time. So you know it's just you're just going to depend day, my we but we do.
No. We do think that over the next couple of couple of years as you outlined mark there there could be that opportunity, but we're not we're not there right now we're just sort of Oh, we evaluate and some some existing companies potentially but but that's where we're out today, so but down the road. It would definitely on the table. Yes. It can you Don is it possible for you guys.
Talk at all about what you're seeing.
In terms of.
Imports coming into the U.S.. So I think you know when you get lumber prices up near these levels and you've got a relatively strong U.S. dollar.
I was wondering about sort of European imports coming into the east coast of the U.S. Yeah. Good good question I'll throw it over to Kevin because I know he says spends a lot of time on that himself and those those all the players were very very well so Kevin why don't you take that.
Sure.
Yeah, Mark Yeah, we have seen an increase coming in especially from Germany, and that central Europe, with given their spruce beetle challenges and and and their desire to manufacture that as soon as possible. So between China and the eastern you ask those have been big markets for them and I think we're on track to be about like that one.
22 million board feet kind of annualized pace, there mark and Ah Ah, but the Europeans also have other options as well with Europe, a recovery, that's going to keep them engage especially in the UK and other parts of Europe, but definitely on the upside.
It's still within that 1.21 0.3 range is our expectation for this year.
Okay. That's it.
Okay.
One thing just wondering on sort of heart would just to add to what Kevin said, Kevin I think you would just save all that.
When that product coming out of Germany, and Austria, and so forth and a lot of cases, we don't compete with though right because of the quality of it compared to what you're getting up within north It would that mean, maybe talk to market bearable doctors quite a bit of a difference there from product coming from central Europe versus coming from Scandinavia.
Yeah, absolutely I mean, the impacts of the us through speedily and you start to see those challenges, which is why they have to ship it to different markets like China and those products don't necessarily go to Japan with higher valued markets, and that's where Scandinavia as Oh, yes. The fiber is such that it has to go to more higher valued pieces, where it's not so easy.
At least substitute a bowl so definitely this dynamic playing around with the fiber quality and you just can't say your one p. breast feeding all of Europe and there is some changes there and of course, there's some some urgency to get out that's Bruce deal before deteriorates even further.
Okay, Alright makes perfect sense. The last one for me down I wondered if you can just talk with as a little bit about where you see kind of the pulp industry in British Columbia going you know we've got a we've definitely got constraints on fiber you've talked about that and we're clearly you know heading for some refer sledding in the global.
Pulp market over the next leased the next quarter or too.
Right for sure Yeah, we've been doing a lot of work on that particularly Allen and his group there. So maybe I'll and what do you maybe you can give mark a bit of an update there in terms of how you're looking at things going forward in particular in British Columbia round up your fiber for your business excuse me.
[noise], Yeah, I know for sure Mark on <unk>.
We should the question. It's one that I think every b C. Pulp producers getting these days I mean, we're all focused on a serious challenges, but much many of which Ireland. The fiber set up here. So a lot of what we're doing today.
Is responding obviously, not just a weak markets, but to the challenges that was also in Q2 in the weaker saw mill operating rates and we are focused on making sure that we're going to be able to gone on pulp mills, our crop pulp mills in particular.
Through the winter step one and I think I think probably every BC pulp producers thinking likewise in today's market.
Clearly clearly fiber is tight and so the onus is on a per just as like ourselves to be starting mindful of targeting improved fuels looking for every onsen or do you see a fiber that we can guess, we're working very hard there I think as mentioned before that we secured additional business and the lost a 912 months our please.
Yes without part of the challenge is keeping a lid on the more expensive fiber stream, notably a whole lot chips and that's probably our major concern and I would hazard a guess so that's a major concern of many in the BC context, the price of whole loan chips deliver tripled knows is a much higher than it's ever been so we're working really hard at the and got somebody.
As to how to jump to drive costs through capital upgrades and such like but it is this a challenge no question.
Do you anticipate Alan that we're going to see kind of a contraction and pulp capacity and the interior for northern interior.
No I can't comment definitively on not Mark I think we clearly see some curtailments in a b C context.
That's not a surprise well just have to wait and see markets. It's a third question. It's just it's just hard to call. When you look like over the next two or three years and certainly if if they're curtailments in rationalizations continue to occur I think at minimum you're going to see or what do you have the potential to see more curtailments.
Would be certainly one one thing that we've seen over the last two years more curtailments.
Okay, Alright fair enough I appreciate all the feedback thanks guys.
Okay, Thanks, Mark take care.
But there are no further questions at this time. Please proceed.
Hello.
Well there are no further questions at this time. So you may proceed.
Okay, sorry, I missed you there. So that's what thanks very much then everyone that joined the call. We appreciate all your support and look forward to working with all of you and speaking with you at the end of a end of the this Q O Q3. So thanks very much and we'll talk too soon for that.
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