The Company recorded a foreign exchange translation loss on its US dollar denominated debt of $3.8 million for the first quarter of 2013, as a result of the weakening of the Canadian dollar against the US dollar, which fell by just over 2% between the respective quarter ends. In the fourth quarter of 2012, the Company recorded a translation loss of $2.0 million, while the first quarter of 2012 showed a gain of $4.0 million.
The Company uses a variety of derivative financial instruments as partial economic hedges against unfavourable changes in foreign exchange rates, energy costs, lumber prices and interest rates. For the first quarter of 2013, the Company recorded a net gain of $3.3 million related to derivative financial instruments, largely reflecting the settlement of lumber future contracts held at December 31, 2012 and unrealized gains on foreign exchange collars put in place during the quarter.
The following table summarizes the gains (losses) on derivative financial instruments for the comparable periods:
Q1 Q4 Q1(millions of Canadian dollars) 2013 2012 2012--------------------------------------------------------------------------Foreign exchange collars and forward contracts $ 1.4 $ (1.0) $ 2.9Energy derivatives $ 0.1 $ (0.3) $ 1.2Lumber futures $ 2.2 $ (7.5) $ 3.0Interest rate swaps $ (0.4) $ 0.1 $ 0.3-------------------------------------------------------------------------- $ 3.3 $ (8.7) $ 7.4--------------------------------------------------------------------------
Other income, net for the first quarter of 2013 of $1.7 million included a $0.5 million positive fair value adjustment related to a royalty agreement associated with the 2010 sale of the operating assets of Howe Sound Pulp and Paper Limited Partnership compared to a small adverse fair value adjustment in the fourth quarter of 2012. Contributing to other income in the first quarter of 2013 were favourable exchange movements on US dollar denominated cash, receivables and payables of Canadian operations of $1.4 million, compared to $0.7 million in the previous quarter, while the strengthening of the Canadian dollar in the first quarter of 2012 resulted in a loss of $1.2 million. Other expense in the comparable periods also included a $0.6 million loss recorded on the sale of land and timber in the fourth quarter of 2012 and a $1.3 million gain relating to the change in fair value of the Company's investment in asset-backed commercial paper in the first quarter of 2012.
Other Comprehensive Income (Loss)
The following table summarizes Canfor's Other Comprehensive Income (Loss) for the comparable periods(23):
Q1 Q4 Q1(millions of Canadian dollars) 2013 2012 2012--------------------------------------------------------------------------Foreign exchange translation differences for foreign operations $ 3.5 $ 1.9 $ (3.6)Defined benefit actuarial gains (losses), net of tax $ 5.8 $ (3.6) $ (3.3)--------------------------------------------------------------------------Other comprehensive income (loss), net of tax $ 9.3 $ (1.7) $ (6.9)--------------------------------------------------------------------------(23) Certain prior period amounts have been restated due to the adoption ofamended IAS 19, Employee Benefits. Further details can be found in theCompany's unaudited interim consolidated financial statements.
