Q4 2023 Canfor Corp Canfor Pulp Products Inc Earnings Call
Sure.
Operator: Good morning, my name is Joanna, and I will be your conference operator today. Welcome to Canfor and Canfor Pubs' fourth quarter analysis. All lines have been placed on mute to prevent any back-and-forth, During this call, Canfor and Canfor Pulp's Chief Financial Officer will be referring to a slide that is available in the investor relations section. Also, the companies would like to point out that this call will be recorded. Thank you for joining us. The Associate
Good morning, My name is Joana and that will be your conference operator today welcome to Canfor and Canfor pulp fourth quarter analyst call. All lines have been placed on mute to prevent any background noise.
During this call Canfor and Canfor pulp 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.
Operator: I would now like to turn the meeting over to Mr. President. Go ahead, Mr. Kayne. All right. Thank you, operator. And good morning, everyone.
I would now like to turn the meeting over to Mr. Don Kayne Canfor Corporation, President and Chief Executive Officer. Please go ahead, Mr. Ken Great. Thank you.
Thank you operator, and good morning, everyone.
Donald B. Kayne: Thank you for joining the Canfor and Canfor PULT Q4 2023 results conference call. I'm going to make a few comments before I turn things over to Kevin Edgson, Canfor's PULT President, Chief Executive Officer, and Pat Elliott, Chief Financial Officer of Canfor Corporation and Canfor PULT, and our Senior Vice President of Sustainability. In addition, we are joined by Kevin Pankratz, our Senior Vice President of Sales and Marketing.
Thank you for joining the cat foreign Count for Q4 2023 results conference call.
Make a few comments before I turn things over to Kevin Edson.
Pulp President Chief Executive Officer, and Todd Elliott, Chief Financial Officer of Canfor Corporation, and Canfor pulp.
And our senior Vice President of sustainability. In addition, we are joined by Kevin Pankratz, Our senior Vice President sales and marketing before talking about our results I would like to begin by acknowledging our dedicated employees around the globe.
Donald B. Kayne: Before talking about our results, I'd like to begin by acknowledging our dedicated employees around the globe who have worked relentlessly to navigate the challenging marketing or market environment of 2023 to continue to improve our competitiveness and to deliver on our strategic priorities. Canfor's achievements are only possible through the abilities and commitment of our people, and I'm extremely proud of the resilience they demonstrate every day. 2023 was a year of significant volatility.
Relentlessly to navigate the challenging marketing market environment of 2023 to continue to improve our competitiveness and to deliver on our strategic priorities to enforce achievements are only possible through the abilities.
People and I'm extremely proud of the resilience demonstrated.
2023 was a year of significant volatility.
Donald B. Kayne: In addition to very difficult lumber markets, we also experienced extremely high log costs, reduced shipping volumes, and an extremely difficult operating environment, particularly in British Columbia, where conditions were further exacerbated by a lack of access to economic fiber. This led to a series of difficult decisions taken to create a more sustainable operating footprint by optimizing and aligning our manufacturing capacity in British Columbia with the available long-term supply of economic fiber. Production at our BC operations was reduced by a total of 750 million board feet in 2023 through the permanent closure of our Chetwyn sawmill and temporary closure of our Houston sawmill as we look to firm up plans going forward. Late in 2023, we also announced a fiber-driven temporary curtailment at our polar sawmill, which began in January of 2024.
In addition to very difficult lumber markets. We also experienced extremely high log costs reduced shipping volumes at an extremely difficult operating environment, particularly in British Columbia, where conditions have been further exacerbated by a lack of access to economic fiber.
This led to a series of difficult decisions.
To create a more sustainable operating footprint by optimizing and aligning our manufacturing capacity in British Columbia with the available long term supply backdrop of fiber production at our BC operations was reduced by a total of 750 million board feet in 2023 through the permanent closure of our chart, one sawmill and temporary closure of our.
Houston.
As we look to firm up plans going forward late in 2023, we also announced a fiber driven temporary curtailment at our Polish saw mill, which began in January 2024.
Donald B. Kayne: The reconfiguration of Canfor's operating portfolio in British Columbia underscores our commitment to fulfill our smaller but stronger operating footprint. We regret the impact that these closures and curtailments have had on our employees, our First Nations partners, small businesses, contractors, and communities. I'd also like to thank the United Steelworkers Union for their partnership in supporting our employees through the transition. 2023 was also a devastating wildfire season, with both BC and Alberta setting wildlife or wildfire severity records. First and foremost, we recognize the lives tragically lost and extend our appreciation to the BC and Alberta wildfire services, emergency responders, and the many volunteers who kept people, communities, and infrastructure safe while helping to preserve provincial forest resources. The impact of wildfires on available timber supply is best mitigated by expedited salvage harvesting.
The reconfiguring of <unk> operating portfolio, and British Columbia underscores our commitment to fulfill our smaller with stronger operating footprint.
We regret the impact that these closures and curtailments have had on our employees. Our first nations partners small businesses contractors and communities I'd also like to thank the United Steelworkers Union for their partnership supporting our employees through the transition two.
2023 was also a devastating wildfire season, both BC and Alberta, setting wildlife or wildfires severity records first and foremost we recognized our lives tragically lost and extend our appreciation to the BC and Alberta wildfire services emergency responders and the many volunteers kept people communities and infrastructure.
We're helping to preserve provincial forest resources.
The impact of wildfires on available timber supply is best mitigated by expedited salvage harvesting we have had solid success with this at our Alberta operations, while in British Columbia slow approval process has resulted in a slower salvage operation.
Donald B. Kayne: We have had solid success with this in our Alberta operations, while in British Columbia, the slow approval process has resulted in a slower salvage operation. We will continue to work collaboratively with the BC government, First Nations, and other stakeholders in an effort to increase the supply of economic fiber. The challenges of 2023 underscore the importance and value of Canfor's globally diversified supply and customer base, which has an operating footprint in the US, Europe, and Alberta, while maintaining a smaller but stronger presence in BC. Our diversified business portfolio creates resilience to changing market dynamics and fluctuations in demand, giving us access to new global markets and the resources, flexibility, and reliability to consistently provide our customers with competitive, high-quality products. Despite the down cycle we are currently experiencing, we have made considerable progress on several strategic initiatives in 2023. For example, construction was completed on our first state-of-the-art greenfield facility in Derrida, Louisiana.
We will continue to work collaboratively with the BC government first nation support stakeholders in an effort to increase the supply of economic fiber.
The challenges of 2023, underscoring the importance and value of customers globally diversified supply and customer base through our operating footprint in the U S Europe, and Alberta, while maintaining a smaller but stronger presence in BC.
Our diversified business portfolio creates resilience to changing market dynamics and fluctuations in demand.
Giving us access to new global markets, and the resources flexibility and reliability to consistently provide our customers with competitive high quality products.
Despite the down cycle, we are currently experiencing.
We have made considerable progress on several strategic initiatives in 2023 construction was complete on our first date on the yard Greenfield facility on Deridder, Louisiana began operation in Q1, 2023 and continues to outperform our startup expectations.
Donald B. Kayne: It began operation in Q1 2023 and continues to outperform our startup expectations. Development of our Access Alabama second greenfield project is on budget and scheduled to start up in Q4 2024. Similarly, our brownfield project at the Urbana-Arkansas facility is progressing well.
Development of our access Alibaba second Greenfield project is on budget and scheduled to start up at Q4 of 2020 or similarly, our brownfield project at Europe at our Arkansas facility is progressing well with $130 million investment increased production capacity, thereby 115 million board feet and <unk>.
Donald B. Kayne: The $130 million investment will increase production capacity by $115 million per feet and improve manufacturing flexibility to accommodate additional high-value products. At our European operations in October, we closed on the strategic acquisition of a small value-added facility in Ingarp and announced an investment of approximately $85 million at Vita's Prusa sawmill, which will expand production from $175 million per foot to $240 million per foot. Turning to our financial results, and due to the ongoing affordability issues related to overall inflation and interest rate levels, our industry experienced a sharp decline in global lumber prices in 2020. Notwithstanding market dynamics and challenges in British Columbia, we generated solid financial results in Europe and the US South, again highlighting the value of our diversification strategy. Despite the significant capital investment made in 2023, our balance sheet remains strong with over $350 million of net cash at the end of December, supporting continued reinvestment in our operations over the next several years.
<unk> manufacturing flexibility to accommodate additional high value products.
At our European operations in October we closed on this strategic acquisition of a small value added facility and GARP and announced an investment of approximately $85 million beat us proves a saw mill, which will expand production of 175 million board feet to $240 million.
Turning to our financial results and due to the ongoing affordability issues related to overall inflation interest rate levels, our industry experienced a sharp decline in global lumber prices in 2023, notwithstanding market dynamics and challenges in British Columbia, We generated solid financial results in Europe and the U S.
So in 2020 again, highlighting the value of our diversification strategy.
Despite the significant capital investment made in 2023, our balance sheet remains strong with over $350 million of net cash at the end of December supporting continued reinvestment in our operations over the next several years.
Donald B. Kayne: With our smaller but stronger footprint in British Columbia and the organic growth initiatives in the US and Sweden, we anticipate a significant reduction in our performance cost structure, increased production capacity, and increasing geographic diversification. While lumber prices are anticipated to remain under pressure in the short term, our strategy is supported by strong underlying market fundamentals over the medium to long term. While we are prepared to remain patient until the right opportunities present themselves, our balance sheet strength will support various external growth initiatives as we look to further grow our lumber business globally. Thank you, Don. And good morning, everyone.
With a smaller but stronger footprint in British Columbia, and the organic growth initiatives in the U S and Sweden, we anticipate a significant reduction in our cost structure increase production capacity and increasing.
Geographic diversification.
However prices are anticipated to remain under pressure in the short term our strategy is supported by the strong underlying market fundamentals over the medium to long term, while we are prepared to remain patient until the right opportunities present themselves or our balance sheet strength will support various external growth initiatives as we look to further grow our lumber business.
Globally.
And with that I will now turn it over to Kevin to provide an overview of Calvert.
Thank you Don and good morning, everyone 2023 was a challenging year for Canfor pulp with our results, reflecting weak global pulp pricing and the impact of extensive sawmill curtailments due to weak lumber market conditions.
Kevin Edgson: 2023 was a challenging year for Canfor Pulp, with our results reflecting weak global pulp prices and the impact of expensive sawmill curtailments due to weak lumber market conditions and the lack of economically available fiber. As a result of persistent fiber supply challenges, we permanently closed our Taylor facility in 2023 and made the difficult decision to close the pulp line at our Prince George pulp and paper mill in April of the year. I'd like to thank our employees for their dedication, perseverance, and commitment to safety as we responded to the external pressures facing our business. While these decisions were not taken lightly, they were required to support the long-term sustainability of Canfor Pulse.
Economically available fiber.
As a result of persistent fiber supply challenges, we permanently closed our tailored facility in 2023 and made the difficult decision to close the pulp line at our Prince George pulp and paper mill in April of the year.
I'd like to thank our employees for their dedication and perseverance and commitment to safety as we responded to the external pressures facing our business.
These decisions were not taken lightly they were required to support the long term sustainability of chemical pulp.
Kevin Edgson: Looking ahead, we remain focused on improving our operating performance and cost structure while optimizing the available fiber supply. Turning to our financial results, following the restart of Northwood in October, we saw significant improvements in productivity rates that address our problems, which support improved results in the fourth quarter. As previously mentioned, we have identified a significant capital reinvestment plan at all our mills to further support productivity and reliability. Though we remain committed to this recapitalization, the timing and magnitude of the spend are still to be determined and will be completed as market financial circumstances allow. As such, capital spending in 2024 will likely remain modest.
Looking ahead, we remain focused on improving our operating performance and cost structure, while optimizing the available fiber supply.
Turning to our financial results following the restart of north towards in October we saw significant improvements in productivity rates at both our pulp mills, which support improved results in the fourth quarter.
As previously mentioned, we have identified a significant capital reinvestment plan and all of our mills to further support productivity reliability.
<unk> committed to this recapitalization, the timing and magnitude of spend is still to be determined and will be completed its market financial circumstances allow.
Capital spending in 2024 will likely remain modest.
Patrick A. J. Elliott: I will turn it over to Pat to provide an overview of our financial results. Thanks, Kevin. Good morning.
Turning it over to Pat to provide an overview of our financial results.
Kevin and good morning, the Canfor and Canfor pulp fourth quarter in 2023 annual results were released yesterday afternoon.
Patrick A. J. Elliott: The Canfor and Canfor Pulse fourth quarter and 2023 annual results were released yesterday afternoon. In my comments this morning, I'll speak to the fourth quarter financial highlights, a summary of which is included in our overview slide presentation, located in the after-relations section on Canfor's website. Our lumber business generated an operating loss of $162 million in the first quarter, which included a $30 million recovery on a previously recorded write-down inventory in Western Canada and a non-cash duty expense of $82 million related to our anti-dumping duty accrual rate. Adjusting for these non-cash items, our lumber business generated an operating loss of $111 million in court.
This morning, I'll speak to the fourth quarter financial highlights summary of which is included in our overview slide presentation.
Relations section of <unk> website.
Our lumber business generated an operating loss of $162 million in the first quarter, which included a $30 million recovery previously recorded write down inventory in Western Canada.
Noncash duty expense $82 million from the Detroit dumped into the accrual rate.
For these noncash items lumber business generated an operating loss of $111 million.
Sure.
Patrick A. J. Elliott: These results reflect significant losses associated with our BC operations due to weak lumber pricing and persistently high log costs, as we continue to be faced with challenges accessing economically viable fiber. Our US health operation saw a sharp decline in earnings in the fourth quarter, led principally by an 18% decline in the Southern Yellow Pine two by six benchmark lumber price quarter over quarter. Our European operations contributed $16 million in cash earnings in the fourth quarter, with increased production and shipments partly offsetting the impact of lower prices. In 2023, our European operations are expected to contribute approximately $150 million in cash, reinforcing the value of our diversification efforts over the last several years. Canfor generated an operating loss of $15 million in the fourth quarter, which included an $11 million company recorded inventory. On an adjusted basis, Canfor Pulse generated an operating loss of $26 million in the fourth quarter, an improvement of $25 million quarter over quarter.
These results reflect significant losses associated with our PC operations due to weak lumber pricing persistently high log costs as we continue to be faced with challenges accessing economically viable fiber.
Our U S health operations saw a sharp decline in earnings in the fourth quarter led principally by an 18% decline in the southern yellow pine to buy six benchmark lumber price quarter over quarter.
Our European operations contributed $16 million in cash earnings in the fourth quarter with increased production and shipments partly offsetting the impact of lower pricing.
In 2023, our European operations contributed approximately $150 million in cash earnings reinforcing the value of our diversification efforts over the last several years.
Canfor pulp generated an operating loss of $15 million in the fourth quarter, which included an $11 million.
We recorded inventory write down.
On an adjusted basis <unk> operating loss of $26 million in the fourth quarter, an improvement of $25 million quarter over quarter.
Patrick A. J. Elliott: These results largely reflect a moderate improvement in global pulp prices and a 20% increase in pulp production in the fourth quarter. As Kevin mentioned, following Northwood's challenging restart in October, our pulp mills benefited from an improved operating rate through the balance of Q4. At the end of the fourth quarter, Canfor Pulp had a net debt of $86 million and $147 million in available liquidity, of which $80 million is restricted for use towards future reinvestment in Northwood's recovery board on October 1.
These results largely reflect a moderate improvement in global pulp pricing at a 20% increase in coal production in the fourth quarter as Kevin mentioned following north Woods challenging restarting October our pulp mills benefited from improved operating rates through the balance of Q4 at the end of the fourth quarter Canfor pulp had net debt of $86 million.
And $147 million of available liquidity of which $80 million restricted for use towards future reinvestment in north suites recovery for that.
Operator: On a consolidated basis, capital expenditures were approximately $172 million in the fourth quarter, including approximately $22 million for Canfor Corp. Capital spending totaled $587 million in 2023, of which $61 million was for capital. We anticipate capital spending of approximately $400 million in the lumber segment in 2024, including remaining expenditure on our Alabama, Alabama greenfield, and various organic growth initiatives in the U.S. South. For Canfor Pulp, we are currently forecasting capital expenditure of $40 million in 2024, including capital expenditure. In addition, we anticipate Canfor will continue to allocate a modest amount of capital to opportunities to re-purchase shares throughout the year. With that, Don, I'll turn the call back. All right. Thanks, Pat. And with that, Operator, we're now ready to take questions from the audience. We will now take questions from financial analysts. If you have a question, please press star 1 on your telephone keypad. If you are using a speakerphone, please lift your receiver and then press star 1.
At basis capital expenditures were approximately $172 million in the fourth quarter, including approximately $22 million for Gaslog.
Capital spending totaled $587 million in 2023 of which $61 million plus for example.
We anticipate capital spending of approximately $400 million in the lumber segment 2024, including our remaining spend on our Alabama, Alabama, Greenfield and various organic growth initiatives can be use cells.
For Canfor pulp, we are currently forecast to capital spend of $40 million in 2024, including capitalized leases.
In addition, we anticipate camera will continue to allocate a modest amount of capital to opportunistically repurchase shares throughout the year.
And with that Don I'll turn the call back to you.
Thanks, Pat and with that operator I'll.
We're now ready to take questions from the App.
Okay.
Thank you.
We will now take questions from financial analysts and you have a question. Please press star one on your telephone keypad.
Speaker phone please lift your receiver and then press star one.
Operator: If at any time you wish to cancel your question, please press star. Please press star 1 now if you have a question. There will be a brief pause while participants register for questions. Thank you for your patience. The first question comes from Ketan Mamtora at BMO. Please go ahead. Thank you. Morning, Don, Pat, and Dean.
Anytime you wish to cancel your question. Please press star two please.
Please press Star one now if you have a question there will be a brief pause for all participants register for questions. Thank you for your patience.
First question comes from kits had montara at BMO. Please go ahead.
Thank you good morning, Don and.
Kevin Pankratz: First question, on the European lumber business, can you talk about, you know, trends you are seeing thus far in 2024? You know, we saw a pretty big drop in Q4 lumber EBITDA. Can you talk about sort of the price trends that you're seeing in Europe? Hi Ketan, it's Kevin here.
And the first question.
On the European lumber business can you talk about trends you are seeing.
Thus far in 2024, we saw a pretty big drop in Q4 lumber EBITDA.
Guinea doctors, all the price trend.
You are seeing in Europe.
Sure.
I think that it's Kevin here.
Kevin Pankratz: Actually, I was just over in Europe there last week. So your timing is good. And actually, for the first quarter, we're actually seeing improved pricing for a lot of the European markets and in other markets as well, like the MENA markets and the Asian markets in which they serve. A lot of it in Europe is not necessarily predicated on increased demand, like increased construction activity, but rather very low inventories in the field and the need to replenish them. So we are actually seeing improved pricing, and we're just waiting to see how that will continue into Q2. One thing, maybe we might say two, Kevin, because I know you've been working on this too. One thing it's worth mentioning is that in Europe, where we don't have it everywhere else, you don't have it to the same degree in North America, is flexibility on markets. And so you look at, Kevin talked about the Middle East, North Africa, you got Australia, you got Asia, and you got North America and a number of other areas as well. So that's one of the advantages that we do have in Europe that we don't see to the same degree anyway in North America.
Actually it was just over in Europe last week. So your timing is good.
And actually for the first quarter, we're actually seeing improved price.
Pricing.
For a lot of our European markets and in other markets as well like in the Mena markets in the eastern markets in which they serve.
A lot of it in Europe is not necessarily predicated on increased demand like increased construction activity, but rather very low inventories in the field and the need to replenish. So we are actually seeing improved pricing and we're just waiting to see how it will continue into Q2.
One thing, maybe we say to Kevin because I know you've been working on those two the one thing worth mentioning is that in Europe, where we don't have everywhere else you don't hubs. Similarly in North America is flexibility to other markets and so if you look at it Kevin talked about Middle East North Africa, Australia, You've got Asia, and North America in a number of other.
Areas as well so that's one of the advantages that we do have in Europe that we don't see the same degree anywhere in North America.
Donald B. Kayne: And having those kind of options really allows you to continue to maximize revenue as you look forward. And we're seeing that and will continue to see that.
And it would have on those kind of options. It really allows you to do.
The revenue as you look forward.
We're seeing that and continue to see that.
Just wanted to add that.
Kevin Pankratz: Right now, that's very helpful. So, Kevin, you know, given what you just said in terms of low inventories and a pickup in activity, how do you expect that to impact imports into the US? Would you expect it to kind of be at the levels that we've seen here in the last little bit? Do you expect it to go up, or go down? Any thoughts there? Yeah, I would say that we're definitely seeing lower shipments for the first quarter; you're seeing less inventory at the docks in Europe, as Don expressed, and I mentioned to you, there are actually pretty good options for them currently. And it also takes them a bit of a lead time.
Great No that's very helpful.
Given what you just said in terms of low inventories and pick up in activity, how do you expect that.
In fact import into the U S would you expect it to kind of be at the levels that <unk> seen here in the last little bit do you expect it to go up go down any thoughts there.
Yes.
I would say that we're definitely seeing for the first quarter of lower shipments youre seeing less inventory at the talks in Europe as Don expressed and I mentioned to you there is actually pretty good options for them currently in the quarter and it also takes them a bit of a lead time it sounds like North America, where you can react pretty quick they have to plan their supply chains.
Kevin Pankratz: It's not like North America, where you can react pretty quick; they have to plan their supply chains, get stock available to compare to the docks, and ship. So if we're going to see any kind of increased shipments, it's probably going to be more of a Q2 play, but a lot's going to have to develop by then to see what's going on with currencies and with demand and pricing and other options. But overall, I would just say I would argue with that we'd be trending lower than last year on European shipments into North America. Got it. No, that's very helpful.
Stock available to compared to the docks and ships. So if we're going to see any kind of increased shipments is probably going to be more of a Q2 plates, but a lot's going to have to develop by then to see what's going on with currencies and with demand and pricing and other options, but overall I would just say our view was that we'd be trending lower than last year European.
Shipments in North America.
Got it that's very helpful I'll jump back in the queue. Thank you.
Patrick A. J. Elliott: I'll jump back in the queue. Thank you. Thank you. The next question comes from Sean Steuart from TD. Please go ahead. Thanks. Good morning, everyone.
Yes.
Thank you. The next question comes from Sean Stewart from TD. Please go ahead.
Thanks, Good morning, everyone.
Patrick A. J. Elliott: Question on the CapEx plan for 2024. You guys referenced the Alabama, Arkansas, and Swedish sawmill projects but didn't reference the Houston rebuild. Just any updated thoughts on that project and whether or not the BC Land Act legislation, Transcripts provided by Transcription Outsourcing, LLC. Yeah, for sure, Sean, maybe I'll take that one just just quickly here.
And on the.
The Capex plan for 2024.
You guys referenced the Alabama, Arkansas, and Swedish sawmill projects, but didnt referenced.
Houston rebuild just any updated thoughts on on that project and whether D. C Land Act legislation.
Broader regulatory friction in the province.
Has any bearing on your commitment to reinvesting in NBC any comments they are done.
Yeah for sure Shawn maybe I'll take that one.
Quickly here, so just to start with in terms of Houston.
Patrick A. J. Elliott: So just to start with, in terms of Houston, I guess what I would say at this point is that it's still progressing. At this point, we're working through some of the environmental permitting that has to happen and some engineering. So we'll see what happens down the road here, so that's maybe all I can say at this point. Okay, just maybe more to the point if the 400 million of CapEx allocated to lumber in the plan is any indication, how much of that would be for Houston? Yeah, very little, if any, just a small amount, just the engineering part, which is minuscule, not even worth talking about. Okay, and then more broadly on the capex plan, you know, the overall guidance is a 25% reduction year-over-year. Given the balance sheet strength, you have no liquidity constraints.
What I would say at this point is still progressing.
At this point, we're working through some of the environmental permitting that has to happen.
Some engineering.
<unk> also done at the same time I guess, the second part of your comments there.
We're also growing in conjunction with top at the same time and partly because of the Atlanta, but partly just.
Overall, our British Columbia, and some of the uncertainties.
We spoke about before we're just continuing to monitor the policies by our RPC and we'll continue to do that.
And as we as we look forward in terms of the land Act I mean.
As you know that was council will be amendments that they were closing it at least at this time any way castle.
<unk>.
So we'll see what happens down the road here. So that's maybe all I can say at this point.
Okay, just maybe more to the point of the $400 million capex allocated to lumber.
Plan is any how much of that would be for Houston.
Patrick A. J. Elliott: Some of your competitors have noted pressure on organic project returns as being a, um, concern and a reason for them curbing their capex plans. Any directional commentary on the lower spend this year? Is it just a function of some of the bigger projects already being wrapped up? Any any broader thoughts on CapEx. Thank you. No, not really.
Yes, very little if any just a small amount of just the engineering part of which was miniscule.
We're talking about.
Okay.
And then more broadly on the Capex plan.
Overall guidance.
25% reduction year over year.
Given the balance sheet strength, you have no liquidity constraints.
Patrick A. J. Elliott: I mean, I think the main points that you might be interested in are the strategic projects that we have identified, and we've been clear about I think from day one, they're all on schedule, we haven't tempered them whatsoever. So, you know, there's, I think there's always things you need to look at all the time, and you get opportunities to adjust. And we've sort of done that. But in terms of any impact on what we're trying to accomplish here, from a strategic standpoint, in growth and modernizing our sawmills, there's been no change whatsoever. And, you know, if we need further flexibility down the road, we've got it, we've talked about that before, and that still exists. Okay, Don, that's all I have for now. Thank you very much. All right. Thanks a lot.
Are your competitors have noted pressure on organic project returns as being a.
Our concern and a reason for them curbing their capex plans any any.
Directional commentary on the lesser spend this year or is it just a function of.
Some of the bigger projects already being wrapped up.
Any any broader thoughts on the Capex plan.
No not really I mean, I think the main points.
Might be interested in is the strategic projects that we have identified and we've been clear about I think from day, one barrel on they're on schedule, we haven't got a temper them whatsoever.
I think there's always things you need to look at all the time, but you've got opportunities to adjust and we've sort of done that but in terms of any impact on what we're trying to accomplish from a strategic standpoint and growth and modernize our sawmills no change whatsoever.
And if we need further flexibility down the road, we've got it we've talked about before and that still exists today.
Okay understood.
Okay Thats all I have for now thank you very much.
Operator: Take care. Thank you. The next question comes from Hamir Patel at CIBC Capital Markets. Go ahead. Hi, good morning.
Alright, thanks for that to occur.
Thank you next question comes from Amit <unk> at CIBC capital markets. Please go ahead.
Good morning.
Kevin Edgson: Don, given the various projects you have underway in the south and the current lumber markets, would you still anticipate shipment growth out of the southern platform in 2024? Did you say shipment growth, Hamir? Yes, lumber shipments.
Don given the of various projects you have underway in the south and current lumber markets.
Would you still anticipate shipment growth out of the southern platform in 2024.
Did you say shipment growth Samir yeah lumber shipments.
Donald B. Kayne: Yeah, for sure. And you know, as these operations become come online, we'll definitely see that from that. And also, you know, if you go back to some of the organic capital that we've spent over the last two, three years on in terms of modernizing our business, you heard us talk about Canada and a few other operations. All of that is benefiting us. So we will see more next year for this year, excuse me, for sure.
For sure.
Thanks.
Operations be called come on line, we'll definitely see that from that and also if you go back some of the organic spend over the last two three years to in terms of modernizing our business Curtis talk about cap and a few other operations.
All of that.
So look we will see more extra Fisher excuse me for sure.
Donald B. Kayne: Okay, and Don, are you able to maybe quantify what kind of uplift you might expect? So I mean, this is going to be a lot of it ramping up late in the year. So, I think we're shipping sort of in that or 3440 before, and so it'll be a little lift from there, but it's not going to be passive.
Okay, and Don are you able to maybe quantify what what kind of uplift you might expect.
We think so hasty marriage I mean, this is going to be a lot of it's wrapping up late in the year. So I mean, I think we're shipping sort of in that four 3% to 444, and so it'll be a little lift from there, but it's not going to be past the bulk of it is going to be 2025 and beyond.
Donald B. Kayne: The bulk of it's going to be 2020, five and beyond. Great. Thanks, Pat. And just the last question I had was about Europe.
Okay, great. Thanks, Pat and just a last question I had was on Europe.
Donald B. Kayne: You know, we've seen some of your peers that operate in Central Europe benefit from temporarily much lower fiber costs. Don, just given your own experience with the beetle in BC, how do you see the relative cost position of your Swedish assets playing out over the next couple of years, just as maybe fiber costs reset in Central Europe? Yeah, I mean, I think there are pretty two distinct areas to talk about in Central Europe.
We've seen some of your peers that operate in central Europe benefit from.
Temporary temporarily much lower fiber costs.
Don just given your you know your own experience with the beetle in D. C. How how do you see the.
Relative cost position of your Swedish Swedish assets, playing out over the next couple of years, just as maybe fiber costs reset in central Europe.
Yes, I mean, I think there's two distinct areas too you talked about central Europe. So they are low cost will come down to luck fill up all together nearly as good as what we see in northern Northern Europe for sure. So that's a big differentiator Starwood, however, saying that in Europe or in northern Europe, and especially in Sweden.
Donald B. Kayne: So they have a lot of cost to come down the log, and the log quality there is nearly as good as what we see in Northern Europe, for sure. So that's a big differentiating factor to start with. However, saying that, in Europe, or in Northern Europe, and especially in Sweden and Finland, too, I guess, for that matter, definitely log costs have gone up. But you know, the one thing that we also talked about on a regular basis, we've got lots of flexibility there in terms of the value added contribution that we're able to deliver in those mills, and quite significantly more than what you typically see in Central Europe. And that's a huge offset and a huge advantage, and it's the strategic reason why we've chosen Northern Europe to really focus on versus Central Europe.
Two I guess for that matter, it's definitely low cost has gone up but the one thing that we also we talked about on a regular basis.
Some flexibility there in terms of the value added contribution that we're able to.
Several two to deliver up in those mills and quite significantly more than we typically see in central Europe, and Thats, a huge offset any huge advantage in this region.
Strategic reason why we've chosen northern Europe to really focus on versus February.
Donald B. Kayne: Great. Thanks, Don. That's all I had.
Okay, great. Thanks, Don that's a that's all I had I'll turn it over.
Donald B. Kayne: I'll turn it over. All right. Thanks, Samir. See you later.
Alright, Thanks Mircea.
Thank you next question comes from Ben Isaacson from Scotiabank. Please go ahead.
Donald B. Kayne: Thank you. The next question comes from Ben Isaacson from Scotiabank. Thank you very much and good morning, everyone.
Thank you very much and good morning, everyone. Good to be on first question is on.
Kevin Pankratz: Good to be here. The first question is on European imports into the US. You talked about prices rising this quarter in Europe. How much more do they have to rise before netbacks no longer make sense to export to the US? I'm also thinking about higher freight rates as well. Kevin, do you want to take a flyer?
European imports into the U S.
You talked about <unk>.
Is rising this quarter in Europe.
How much more do they have to rise before net backs no longer makes sense to export to the U S. I'm, just also thinking about higher freight rates as well.
Yes, Kevin you want to sure.
I'll I'll take.
Kevin Pankratz: I'll take a bit of a chance there. It really varies. There have been like, it depends on exchange rates and some of the often, and not a lot of European mills 100% can actually switch and chase after the US market, whether they have the grade stamps, or they have the planning and finishing capacity. But it really does vary. I don't know, but it could be in that $50 to $100 range, potentially.
Hi, there.
Barry there Ben it depends on exchange rates and in some of the not a lot of European mill of 100% can actually switch and chase after.
The U S market, whether they have the great staffs or they have the painting, finishing capacity but.
It really does vary.
It could be in that 50 to 100 dollar range potentially.
Donald B. Kayne: Okay, that's helpful. Thank you. Second question is, given the weather that we've seen in BC so far this quarter, have there been challenges building log inventory as you think about rolling into Q2? Absolutely. And you know, for sure, the weather's been a particularly mild winter, for sure.
Okay.
That's helpful. Thank you second question is.
Given the weather that we've seen in B C. So far this quarter have there been challenges building log inventory as you think about rolling into Q2.
Absolutely.
For sure the weather has been a participant a particularly mild winter for sure and we're feeling the effects of that we've had to you of course got to which studies too. So generally speaking overall log inventories are low compared to the compared to where they ought to be properly.
Kevin Pankratz: And we're feeling the effects of that. You know, we've had the cold spell too, which has had issues, too. So generally speaking, overall, the log inventories are low compared to where they ought to be and normally are for this time of year. So that will definitely have an impact here as we move into spring. Last one for me is visibility into the channel inventory of the whole supply chain. Can you talk about how lumber inventories have evolved quarter over quarter? to the extent that you have any visibility beyond yourself.
On a year, so that will definitely have an impact here as we move into the spring.
Last one for me is visibility into the.
And the channel inventory of the whole supply chain can you talk about how lumber inventories.
Evolve quarter over quarter.
To the extent that any visibility beyond yourselves.
Kevin Pankratz: Yeah, sure. From a customer perspective, I would say it's lower than historical norms there have been. And even when you look at inventory at the ports, like we're starting at a much lower position than this time last year. So that's going to, if we do see a little bit of pickup and demand, there's just going to be a little bit more tension than we would have had this time last year. But overall, I would say inventories are more or less balanced right now for our pros in that segment there, but they are lean and tight. And, you know, they've got a good book of business going into March and April. And so I just don't think there's any surplus inventory in the market.
Yeah sure from a customer perspective.
I'd say its lower than historical norms there.
But even when you look at inventory at the ports like we're starting to get quite so we're positioned at this time last year. So that's going to even if we do see a little bit of pickup in demand. There is just going to be a little bit more attention than we would've had that this time last year, but overall I would say inventories are more or less.
Balanced right now for like our pros in that statement, there, but they've hard lean and tight and.
<unk> got a good book of business going to March April and so I, just don't think there's any surplus inventory in the market at all.
Donald B. Kayne: Now, if you really look at it too, Ben, like if you look at overall R&D, at least from our standpoint, it's been better than we think, Kevin, for sure. Then, you know, when you look at the percentage of single-family housing, that's remained pretty strong. Actually, it's probably increased, and we know the multiplier there in terms of lumber use versus multifamily, so that's actually pretty good. And then you factor in, there's been a lot of downtime overall, and, you know, notwithstanding all those numbers recently, but there's been a significant decrease. In British Columbia, for sure, there's been some downtime; in Alberta, there's been lots of downtime, even in some parts of Europe.
If you really look at it too bad like if you look at overall R&R at least from our standpoint, it's been better than we think Kevin.
When you look at the percentage of single family housing that's remained pretty strong actually has probably increased and we know the multiplier. There in terms of number of users multifamily. So that's been actually pretty good and then you factor in there's been a lot of downtime overall.
No.
All the numbers recently, but there has been a significant decrease in British Columbia for sure. There's been some downtime in Alberta, theres been lots of downtime even in some other parts of Europe. So when you really think about it over time here logically you would think that it will create some pressure off price ensure at some point Thats certainly what we believe.
Donald B. Kayne: So, when you really think about it, over time here, logically, you'd think that it would create some pressure on prices here at some point, and that's certainly what we're seeing. The very last one for me is, oddsmakers have Trump winning the presidency, and what could that mean for Canada if we see Trump winning? in terms of what policies he's talked about.
Very last one from me is.
Automakers have trumped winning the presidency.
And what could that mean for <unk>.
If we if we see Trump.
Donald B. Kayne: I think if I hear your question correctly, we don't really see a lot of change there whatsoever. I mean, we're focused on it now, and we'll focus on the future. We don't see any change whatsoever.
<unk> and.
In terms of what policies he has talked about.
Okay.
I think if I can hear you.
Question correctly, we don't really see a lot of change there whatsoever.
Excellent.
Focus on the future, we don't see any change whatsoever at this point anyway.
Donald B. Kayne: Okay, that's helpful. Thanks so much. Appreciate it. Thank you. Before we take our last question in the queue, as a reminder, if anyone has any questions, please press star 1. This question comes from Matthew McKellar at RBC Capital. Hi, good morning.
Okay. That's helpful. Thanks, so much appreciate it.
Yes.
Thank you before we take our last question in the queue.
If anyone has any questions. Please press star one.
Next question comes from Matthew Mckellar at RBC capital markets. Please go ahead.
Hi, good morning, Thanks for taking my question.
Donald B. Kayne: Thanks for taking my question. I think you talked about seeing yourself as continuing to have the capacity to invest in some global growth here. Can you just give us an update on what you're seeing in terms of the M&A landscape at present? Yeah, for sure.
I think you talked about seeing yourselves is continuing to add capacity to investments in global growth here could you just give us an updates on.
What youre seeing in terms of the M&A landscape here present.
Yes for sure.
Donald B. Kayne: I mean, it's something we talked about kind of regularly, Matt, every quarter. We're certainly in Europe, Europe and the US are the key areas that we focus on and continue to look at. But we've been super patient, and we'll continue to be patient here. And, you know, in a lot of cases, what we looked at a couple years ago, or less today even, but right now, you know, we're just continuing to keep our eye on that at the same time. And, really, at this point, unless it's a significantly strategic opportunity for public paths right now, right?
Something.
Thoughtful kind of regular regularly every quarter.
Certainly the Europe, Europe, and the U S focused peers.
Axon and continue to look at subsequent supervision.
We will continue to be patient here and a lot of cases, when we looked at a couple of years ago or less today, even but right now we're just to continue to keep our eye on that at the same time, an annual really at this point.
Is this a significantly strategic opportunity.
Public cost right now.
Donald B. Kayne: And we still think there's a ways to go in terms of being more competitive on the M&A front here. So, at this point, we're just watching it super carefully, super disciplined, and super thoughtful. Great, thanks. That's all for me.
We still think there's a ways to go.
In terms of being more competitive on the M&A frontier. So we're at this point, we're just watching it super careful super disciplined Super thoughtful.
Great. Thanks, that's all from me I'll turn it back.
Kevin Pankratz: I'll turn it back. Okay, thanks. Thank you. The next question is a follow-up from Ketan Mamtora at BMO. Thank you very much. I'm just curious about what kind of demand trends you are seeing in some of your key end markets. I'm especially curious about repair and remodeling.
Okay. Thanks, Matt.
Thank you. The next question is a follow up from kitchen Montara at BMO. Please go ahead.
Thank you very much.
Just curious how you know what kind of demand trends you are seeing in some of your key end markets I'm, especially curious about <unk> modeling can you talk to sort of what kind of trends you are seeing there.
Kevin Pankratz: Can you talk about sort of what kind of, you know, trends you are seeing there? So on the R&R market there, we're still pretty optimistic with the drivers that are supporting that. The age of U.S. homes is significant, and that's driving, you know, really positive takeaway there.
Sure.
Sure, Yes, so on the R&R market, there were still pretty optimistic with the drivers that are supporting that.
<unk> outside of the U S home sales.
And Thats driving.
Really positive takeaway there.
Kevin Pankratz: And, you know, you've got to think this for the first six months of 2023, they were at a very high pace running, and then they tempered off for the back half. But when we tracked Q1 of this year, they were actually tracking at a pretty good pace like we saw in 2023. So the outlook looks very positive, and they're also well positioned. You know, they're also going after a bit more of that pro business, and they're continuing to invest in that segment there. And so I think they're well on track there. As Don mentioned there too, we're seeing our pro segments being quite active. As I mentioned earlier, most of them got a pretty good book of business into March and April.
You got it.
For the first six months of 2023, they were at a very high pace and any tempered off for the back half, but we're tracking in Q1 of this year. They were actually tracking at a pretty good pace like we saw in that 2023. So the outlook looks very positive and they are also well positioned they're also going after.
More of that <unk> business, Andrew we continue to invest in that segment, there and so I think they're well on track there as Don mentioned, there too we're seeing a pro segment being quite active as I mentioned earlier.
<unk> got a pretty good book of business into March and April January was a really tough start weatherwise.
Kevin Pankratz: January was a really tough start weather-wise, and it really did impact our R&R takeaway early in January and the Texas markets, and those are all rebounding quite strong. So I think we're seeing some positive trends. We have a long way to go to get prices where we need them to be, but we are seeing some encouraging trends. So Kevin, just for that, if I understood you correctly, Jan was off to a slower start, but you are seeing kind of activity come back as we move through kind of Feb and into March. And right now, volumes are kind of sluggish year over year. Is that the right reading? Yeah, I mean, it's generally a slower start, but we're more than making up for that start into the balance of the quarter.
Got it.
Did impact.
Our R&R takeaway early in January and the Texas markets and those are all rebounding late.
Have rebounded quite strong so I think we're seeing some positive trends along Lisa go to get prices, where we need them to be but we are seeing some encouraging trends.
Understood. So Kevin just said if I understood you correctly, John was off to a slower start but you are seeing kind of now activity come back as the move to kind of fed into March and right now volumes are kind of flattish year over year is that the right read.
Yes, I mean January was a slower start, but we're more than making up for that start into the balance of the quarter.
Donald B. Kayne: And then just one last question. Recognizing that it has been a difficult and challenging environment, how, what is your approach, you know, towards kind of managing production as we move through the first quarter? And, you know, if you can talk about any temporary curtailments you are taking, whether in terms of shifts or just the utilization rate, that will be helpful, real simple.
Understood. Okay, and then just one last question I mean, recognizing that it has been.
Difficult and challenging environment.
How what is the our approach.
What's kind of managing production.
As we move through the fourth quarter and if you can talk to sort of.
Any temporary curtailments.
Speaking with in terms of shift or just the utilization.
That would be helpful.
Real simple we just we just wanted to come we will continue to match the production levels with market demand and availability of economic fiber period and that will continue that's been the way we've been kind of operating for a while and will continue to do that and keep our eyes on that and we won't be afraid, though if we upticks downtown.
Donald B. Kayne: We just, we just wanted to, we will continue to match production levels with market demand and availability of economic fibers. And that will continue. That's been the way we've been kind of operating for a while, and we'll continue to do that and keep our eyes on it. And we won't be afraid, though, if we have to take some downtime, we will. Okay, that's very helpful, Don. I'm back in the queue.
Okay.
Okay, that's very helpful. Don.
Operator: Good luck. Okay, thanks, y'all. Take care. Thank you. There are no further questions. I'll now turn it over to Don Kayne for closing. Go ahead, Mr. Kayne.
Back in the queue good luck.
Great. Thanks, Joe take care tuck in.
Thank you there are no further questions I will now turn it over to John Kane for closing comments go ahead. Mr. Clark. Thanks, Thanks, operator, and thanks, everyone for joining the call and for your interest in Casper. We certainly appreciate that I look forward to talking to you at the end of that export.
Donald B. Kayne: Oh, thanks. Thanks, operator. And thanks to everyone for joining the call. And for your interest in Canfor, we certainly appreciate that and look forward to talking to you at the end of that exploration. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating, and we ask that you please disconnect.
Ladies and gentlemen, this concludes your conference call for today, we thank you for participating and we ask that you. Please disconnect your lines.