The progress of upgrades at the Grand Forks and Castlegar sawmills of International Forest Products Limited (Interfor) is one reason for optimism for as they enter a new fiscal year.
In their quarterly results announced today, president and chief executive officer Duncan Davies noted that the 2011 year ended with market improvements.
“We’re starting to see a better tone in the North American market on the basis of improving economic news,” said Davies. “This has translated into housing starts in the fourth quarter running at an annualized rate of 650,000 units, more than 20 percent higher than the fourth quarter of 2010. We’ve also seen increased interest from China in recent weeks.”
Other good news, said Davies, is that the capital upgrades in Castlegar and Grand Forks are running ahead of schedule with a revised completion date in the first quarter of 2013, six months earlier than anticipated. In order to complete the project earlier they will be moving $12 million from their capital budget of 2013 to 2012.
“Things have really gone ahead quite well,” Davies noted. “We completed the linear high grader installation in November, and by mid-December the facility was running at proforma levels, so we’re really pleased with what we’ve seen there. Moving forward with the optimized grading programs and installations, we think, is one of the keys to realizing the full value of the timber basket in that area.”
The demolition of the Grand Forks sawmill’s large log line is also well underway, and delivery dates for the new line’s equipment are set, explained Davies, which is why the timeframe has been accelerated.
Overall market conditions left Interfor with losses for the last quarter of 2011.
For the fourth quarter of the year the benchmark spruce/pine/fir price averaged U.S. $230 per 1000 feet down $ 8 or three percent as compared to the third quarter, while their key Japanese lines’ prices remained the same. Davies said that in light of these price conditions the company slowed their production down by six percent to 294 million board feet in the last quarter of the year.
Sales volumes including wholesale fell by 18 million board feet to 318 board feet in the quarter. Sales revenue in the quarter was $190 million down $10 million from the third quarter, but external log sales accounted for the biggest drop. Interfor reported a net loss for the last quarter of the year $2.5 million or 4 cents per share compared to a loss of $ .5 million or 1 cent per share in the third quarter.
Davies said they are confident that they will meet targets for sales into China for 2012 of 400 million board feet to that market. But overall production rates will not be increasing in the near future.
“The global economic market remains quite uncertain,” Davies added. “As it remains today, we expect to maintain operating rates near the current levels in the next few quarters.”
At the same time, Interfor announced the retirement of their chief operating officer, Sandy Fulton. He will continue to work with the company on a consulting basis to oversee capital projects including the rebuild of the Grand Forks mill which is currently underway. Mr. Fulton joined Interfor in 2004 as senior vice president, United States operations and was promoted in 2007 to his present position.
"Sandy has made a significant contribution to the Company over the last seven years, most significantly in the design and construction of the new mill at Adams Lake in the B.C. Interior," said Davies.