Canfor Corp (CFP.T) can live with the new softwood deal struck between the US and Canada even though it’s widely viewed as a compromise deal, Chief Executive Jim Shepherd said.
“Both sides can walk away with something,” he said during a conference call to discuss first-quarter results. “Is the deal right for Canfor? We can live within it and put more effort into growing markets versus fighting over existing ones.”
If the deal manages to survive the coming months of expected political, legal and corporate wrangling, Canfor stands to receive US$760 million back from duties imposed on Canadian softwood exports into the US since 2002. Once tax is taken into account, Canfor will realize about 55 cents Canadian on the dollar - or about C$475 million, Shepherd said.
Canada and the US have squabbled for years over a perception south of the 49th parallel that Canadian wood is unfairly subsidized, which Canadian companies and politicians discount.
Shepherd declined to say what Canfor would do with the monetary windfall if and when it arrives.
“We’ll count it when we get it and figure out the best use for it then,” he said, adding that there’s currently no clarity on just how or when the funds will be paid back.
Canfor Corp. Chief Executive Jim Shepherd said the outlook for the timber company going forward in the second quarter is positive, following a capital-intensive 2005 highlighted by mill upgrades in both machinery and productivity.
“We’ve managed to stop the bleeding,” he said. “We spent a lot of money last year… so we will take a bit of time before taking the next step (in making operating improvements).”
The executive said markets overall were much stronger for the solid wood side of the business as well as the pulp and paper sector which has seen a lot of capacity stripped out of the market - a move that has pushed pulp prices higher.
Canfor reported that net income slipped to C$18.9 million in the first quarter from C$65.6 million in the same quarter last year. Nevertheless, it’s a rebound from the fourth quarter of 2005,when Canfor reported a net loss of C$12.3 million.
Shepherd linked the rebound to improving markets, higher product prices as well as improved productivity and efficiencies which have lowered production costs.
He said market demand in Asia is particularly encouraging, with Japan, China, Korea and Malaysia showing good growth. He said Canfor is even having some difficulty in keeping up with demand out of the Pacific Rim, but said a new distribution facility in Richmond, B.C. should help ease any supply and demand problems.
Shepherd said Canfor’s plan to launch a pulp and paper-based income trust - announced during fourth-quarter results - is still on track with an investors meeting scheduled for June. (Dow Jones & Company, Inc.)