VANCOUVER, Feb. 8, 2017 /CNW/ - Canfor Pulp Products Inc. ("CPPI") (TSX: CFX) today reported net income of $10.1 million, or $0.15 per share, for the fourth quarter of 2016, compared to $22.4 million, or $0.34 per share, for the third quarter of 2016 and $29.7 million, or $0.43 per share, for the fourth quarter of 2015.  For the year ended December 31, 2016, the Company's net income was $57.8 million, or $0.86 per share, compared to $106.6 million, or $1.52 per share, for 2015.

The following table summarizes selected financial information for the Company for the comparative periods:

The Company had no items affecting comparability in the fourth quarter of 2016 or for the year ended December 31, 2016.  Adjusted net income was $29.0 million, or $0.42 per share, for the fourth quarter of 2015, and $111.8 million, or $1.59 per share, for 2015.

The Company reported operating income of $22.9 million for the fourth quarter of 2016, a decrease of $8.1 million from $31.0 million reported for the third quarter of 2016.  The decrease in operating income was largely attributable to adverse weather conditions, which impacted both shipment logistics and operations through the period.  Sales realizations for Northern Bleached Softwood Kraft ("NBSK") pulp were largely unchanged quarter-over-quarter, while Bleached Chemi-Thermo Mechanical Pulp ("BCTMP") sales realizations saw a marked improvement.  The Company's net income for the fourth quarter of 2016 included the pre-tax write-down of $7.0 million of advances made in connection with the biofuels technology initiative with Licella Fibre Fuels Pty. Ltd. ("Licella"), a subsidiary of Ignite Energy Resources Ltd.  Notwithstanding the future benefits that may result from this innovative effort, the write-down reflected the research and development nature of the advances.

Global softwood pulp markets were relatively stable through most of the fourth quarter of 2016 as evidenced by the average China US-dollar NBSK pulp list price, as published by RISI, remaining at US$595 per tonne.  NBSK pulp unit sales realizations were broadly in line with the third quarter of 2016, as a slightly weaker Canadian dollar was offset by increased pricing pressure in North America.  BCTMP unit sales realizations increased significantly, reflecting the continued improvement in BCTMP markets.  Energy revenues moderately increased during the current quarter, for the most part, reflecting increased power generation and seasonally higher energy prices. 

Pulp shipments were down 14% from the previous quarter principally reflecting weather-related impacts on shipments, including a delayed vessel shipment over the year end.  Pulp production was 3% lower than the previous quarter, primarily due to the severe weather conditions, which more than offset the impacts of scheduled maintenance outages in the previous quarter.  Pulp unit manufacturing costs were up slightly from the previous quarter, reflecting higher energy usage combined with seasonally higher energy costs, as well as the unfavourable per unit impact of lower production volumes.

Operating income in the Company's paper segment at $8.1 million for the fourth quarter of 2016 was up $0.9 million from the third quarter of 2016, largely reflecting slightly higher paper unit sales realizations in the current quarter, principally due to a 2% weaker Canadian dollar and lower manufacturing unit costs resulting from higher production volumes during the current quarter. 

Commenting on the 2016 year, CPPI's Chief Executive Officer, Don Kayne, said, "The Company delivered another solid year in 2016, maintaining steady operational performance and a strong balance sheet, despite market pressures and weather challenges in the fourth quarter".

For the month of January 2017, the Company announced an increase of US$20 per tonne for NBSK pulp list price to China, equating to US$630 per tonne, and an increase of US$10 per tonne for BCTMP.  For the month of February 2017, the Company announced a further US$20 per tonne increase to both its NBSK pulp and BCTMP list prices to China.  Global softwood markets are currently seeing positive pricing momentum, for both NBSK pulp and BCTMP, and this is anticipated to continue into the second quarter of 2017.      

On February 8, 2017, the Board of Directors declared a quarterly dividend of $0.0625 per share, payable on February 28, 2017 to the shareholders of record on February 21, 2017.

Refer to the Company's annual Management's Discussion and Analysis for further discussion on the Company's results for the fourth quarter of 2016 on page 19.

Additional Information and Conference Call 
A conference call to discuss the fourth quarter's financial and operating results will be held on Thursday, February 9, 2017 at 8:00 AM Pacific time.  To participate in the call, please dial 416-764-8688 or Toll-Free 888-390-0546.  For instant replay access until February 23, 2017, please dial 888-390-0541 and enter participant pass code 073031#.  The conference call will be webcast live and will be available at www.canfor.com.  This news release, the attached financial statements and a presentation used during the conference call can be accessed via the Company's website at http://www.canfor.com/investor-relations/overview.

Non-IFRS Measures and Forward Looking Statements
Operating Income before Amortization and Adjusted Shareholder Net Income and Adjusted Shareholder Net Income per Share are not generally accepted earnings measures and should not be considered as an alternative to net income or cash flows as determined in accordance with IFRS. Refer to the Company's Annual Management's Discussion and Analysis for a reconciliation of Operating Income before Amortization to Operating Income and Adjusted Shareholder Net Income to Net Income reported in accordance with IFRS. 

Certain statements in this press release constitute "forward-looking statements" which involve known and unknown risks, uncertainties and other factors that may cause actual results to be materially different from any future results, performance or achievements expressed or implied by such statements.  Words such as "expects", "anticipates", "projects", "intends", "plans", "will", "believes", "seeks", "estimates", "should", "may", "could", and variations of such words and similar expressions are intended to identify such forward-looking statements.  These statements are based on management's current expectations and beliefs and actual events or results may differ materially.  There are many factors that could cause such actual events or results expressed or implied by such forward-looking statements to differ materially from any future results expressed or implied by such statements.  Forward-looking statements are based on current expectations and the Company assumes no obligation to update such information to reflect later events or developments, except as required by law.

CPPI is a leading global supplier of pulp and paper products with operations in the central interior of British Columbia ("BC") employing approximately 1,300 people throughout the organization.   Canfor Pulp owns and operates three mills in Prince George, BC with a total capacity of 1.1 million tonnes of Premium Reinforcing Northern Bleached Softwood Kraft Pulp and 140,000 tonnes of kraft paper, as well as one mill in Taylor, BC with an annual production capacity of 220,000 tonnes of Bleached Chemi-Thermo Mechanical Pulp ("BCTMP").  Canfor Pulp is the largest North American and one of the largest global producers of market NBSK Pulp.  CPPI shares are traded on the Toronto Stock Exchange under the symbol CFX.

Canfor Pulp Products Inc.
Condensed Consolidated Balance Sheets

Canfor Pulp Products Inc.
Condensed Consolidated Statements of Income

Canfor Pulp Products Inc.
Condensed Consolidated Statements of Other Comprehensive Income (Loss)

Condensed Consolidated Statements of Changes in Equity

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Condensed Consolidated Statements of Cash Flows

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Notes to the Condensed Consolidated Financial Statements
Three months and twelve months ended December 31, 2016 and 2015
(unaudited, millions of Canadian dollars unless otherwise noted)

1. Basis of Preparation

These condensed consolidated interim financial statements (the "financial statements") include the accounts of Canfor Pulp Products Inc. ("CPPI") and its subsidiary entities, hereinafter referred to as "CPPI" or "the Company."  At December 31, 2016, Canfor Corporation ("Canfor") held a 53.6% interest in CPPI, an increase of 1.7% from December 31, 2015 as a result of share purchases in 2016 (Note 3).

These financial statements do not include all of the disclosures required by International Financial Reporting Standards ("IFRS") for interim and annual financial statements. Additional disclosures relevant to the understanding of these financial statements, including the accounting policies applied, can be found in the Company's Annual Report for the year ended December 31, 2016, available at www.canforpulp.com or www.sedar.com.

These financial statements were authorized for issue by the Company's Board of Directors on February 8, 2017.

Accounting Standards Issued and Not Applied

In May 2014, the International Accounting Standards Board ("IASB") issued IFRS 15, Revenue from Contracts with Customers, which will supersede IAS 18, Revenue, IAS 11, Construction Contracts and related interpretations. The new standard is effective for annual periods beginning on or after January 1, 2018. The Company has performed a preliminary assessment of the impact of the new standard, and currently anticipates no significant impact on its financial statements.

In July 2014, the IASB issued IFRS 9, Financial Instruments. The required adoption date for IFRS 9 is January 1, 2018 and the Company does not anticipate the new standard to have a significant impact on its financial statements.

In January 2016, the IASB issued IFRS 16, Leases, which will supersede IAS 17, Leases and related interpretations. The required adoption date for IFRS 16 is January 1, 2019 and the Company is in the process of assessing the impact on the financial statements of this new standard.

2.  Income Taxes

The reconciliation of income taxes calculated at the statutory rate to the actual income tax provision is as follows:

In addition to the amounts recorded to net income, a tax expense of $1.0 million was recorded in other comprehensive income (loss) for the three months ended December 31, 2016 (three months ended December 31, 2015 - expense of $0.2 million) in relation to actuarial gains/losses on the defined benefit plans. For the twelve months ended December 31, 2016, a tax recovery of $4.0 was recorded in other comprehensive income (loss) (twelve months ended December 31, 2015 - expense of $2.0 million).

3. Earnings per Share and Normal Course Issuer Bid

Basic net income per share is calculated by dividing the net income available to common shareholders by the weighted average number of common shares outstanding during the period. 

On March 7, 2016, the Company renewed its normal course issuer bid whereby it can purchase for cancellation up to 3,446,139 common shares or approximately 5% of its issued and outstanding common shares as of March 1, 2016. The renewed normal course issuer bid is set to expire on March 6, 2017. During the fourth quarter of 2016, CPPI did not purchase any common shares. As at December 31, 2016 and February 8, 2017, there were 66,699,368 common shares of the Company outstanding and Canfor's ownership interest in CPPI was 53.6%.

4. Net Change in Non-Cash Working Capital

5. Segment Information

The Company has two reportable segments, which operate as separate business units and represent separate product lines. 

Sales between the pulp and paper segments are accounted for at prices that approximate fair value. These include sales of slush pulp from the pulp segment to the paper segment.

Information regarding the operations of each reportable segment is included in the following table.

6. Licella Pulp Joint Venture

On May 27, 2016, CPPI and Licella Fibre Fuel Pty Ltd. ("Licella") agreed to form a joint venture under the name Licella Pulp Joint Venture to investigate opportunities to integrate Licella's Catalytic Hydrothermal Reactor platform into CPPI's pulp mills to economically convert biomass into next generation biofuels and biochemicals. Licella is a subsidiary of Ignite Energy Resources Ltd. ("IER") an Australian energy technology development company.

Under IFRS 11, Joint Arrangements, the joint venture is classified as a joint operation and CPPI will recognize its assets, liabilities and transactions, including its share of those incurred jointly, in its consolidated financial statements. For the year ended December 31, 2016, the Company's share of the joint venture's expenses was $1.6 million, which has been recognized in manufacturing and product costs. The Company is required to contribute the first $20.0 million of any funding requirements, including cash and non-cash contributions, to the joint venture.

In conjunction with the joint venture agreement and CPPI's commitment to innovation and the development of potentially transforming technology, CPPI provided a convertible credit facility to IER, the parent company of Licella, which matures on June 21, 2019. The advances on this credit facility are convertible, at CPPI's option, into common shares of IER.

With regards to the convertible credit facility, during 2016, CPPI advanced $7.0 million to Licella and exercised its option to convert $3.5 million of the amount advanced into common shares of IER.  Due to the inherent nature of this type of innovation and technology development, CPPI considers these advances to be substantially research and development in nature. As a result, at December 31, 2016, CPPI has recognized losses of $7.0 million in other income (expense).  This reflects the Company's consideration of the intrinsic risk associated with these advances.

7. Subsequent Event

On February 8, 2017, the Board of Directors declared a quarterly dividend of $0.0625 per share, payable on February 28, 2017, to shareholders of record on February 21, 2017.

SOURCE Canfor Pulp Products Inc.

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