The average North American benchmark Western SPF 2x4 #2&Btr price rose US$56, or 17%, to US$391 per Mfbm, and ended the quarter at US$408 per Mfbm, the highest level since early 2005. Most other dimensions and grades saw solid, but slightly lower, gains during the quarter. Offshore prices also trended higher with prices on shipments to China reaching new record-highs. Prices for SYP products saw strong increases through the quarter as well, with the benchmark SYP 2x4 #2 average price moving up US$66, or 17%, to US$452 per Mfbm. Western SPF sales realizations also reflected the positive impact of no export taxes on U.S. bound shipments and a weaker average Canadian dollar, down 2 cents, or 2% from the previous quarter.
Lumber production, at just under 1.2 billion board feet, was up 8%, or 92.5 million board feet, from the previous quarter, reflecting a full quarter of production from the Company's recently restarted Radium mill and overall improved productivity, as well as the impact of the Christmas period in the previous quarter. Lumber unit manufacturing costs were in line with the previous quarter, with a reduction in unit conversion costs reflecting higher production levels offset by a modest increase in unit log costs largely resulting from higher market-related stumpage and increased hauling costs.
Global softwood pulp pricing saw modest price increases through the current quarter with Northern Bleached Softwood Kraft ("NBSK") average list prices up US$15 to US$30 per tonne in all regions. The average list price for North America was up US$34, or 4%, to US$897 per tonne for the quarter. Overall sales realizations did not, however, match the full list price increases due to increased volume to lower-margin regions, principally China, but were favourably impacted by the 2% weaker average Canadian dollar.
The Company's pulp shipments were up 5% from the previous quarter, principally reflecting higher shipments to China. Pulp production was up slightly from the previous quarter, for the most part reflecting an improvement in operating rates during the quarter. Reduced pulp unit manufacturing costs in the current quarter were largely the result of lower maintenance costs coupled with the increased production levels, partially offset by seasonally higher energy costs and slightly higher fibre costs.
Compared to the first quarter of 2012, operating income was up $118.4 million, driven by an increase of $108.7 million in the lumber segment, principally reflecting significantly improved markets, and lower export taxes partially offset by increased unit manufacturing costs. The pulp and paper segment was also well up largely the result of increased energy sales and largely unchanged unit manufacturing costs.
OPERATING RESULTS BY BUSINESS SEGMENT
Lumber
Selected Financial Information and Statistics - Lumber(7)
(millions of Canadian dollars Q1 Q4 Q1unless otherwise noted) 2013 2012 2012----------------------------------------------------------------------------------------------------------------------------------------------------Sales $ 542.3 $ 469.9 $ 343.7Operating income before amortization $ 115.7 $ 69.1 $ 2.9Operating income (loss) $ 88.4 $ 42.5 $ (20.3)----------------------------------------------------------------------------------------------------------------------------------------------------Negative (positive) impact of inventory valuation adjustments(8) $ - $ (0.4) $ (10.2)Costs related to Tembec acquisition $ - $ - $ 2.5--------------------------------------------------------------------------Operating income (loss) excluding impact of inventory valuation adjustments and unusual items $ 88.4 $ 42.1 $ (28.0)----------------------------------------------------------------------------------------------------------------------------------------------------Average SPF 2x4 #2&Btr lumber price in US$(9) $ 391 $ 335 $ 266Average SPF price in Cdn$ $ 395 $ 332 $ 266Average SYP 2x4 #2 lumber price in US$(10) $ 452 $ 386 $ 298Average SYP price in Cdn$ $ 456 $ 383 $ 298--------------------------------------------------------------------------U.S. housing starts (thousand units SAAR)(11) 969 904 715--------------------------------------------------------------------------Production - SPF lumber (MMfbm) 1,065.1 985.5 903.7Production - SYP lumber (MMfbm) 134.7 121.8 114.3Shipments - SPF lumber (MMfbm)(12) 1,004.2 1,007.9 852.3Shipments - SYP lumber (MMfbm)(12) 123.3 133.5 117.6Shipments - wholesale lumber (MMfbm) 7.1 8.0 24.5--------------------------------------------------------------------------(7) Certain prior period amounts have been restated due to the adoption ofamended IAS 19, Employee Benefits and IFRS 11, Joint Arrangements. Furtherdetails can be found in the Company's unaudited interim consolidatedfinancial statements.(8) In accordance with IFRS, Canfor records its log and finished productinventories at the lower of cost and net realizable value ("NRV"). Changesin inventory volumes, market prices, foreign exchange rates and costs overthe respective reporting periods can all affect inventory valuationadjustments, if any, required at each period end.(9) Western Spruce/Pine/Fir, per thousand board feet (Source - RandomLengths Publications, Inc.).(10) Southern Yellow Pine, Eastside, per thousand board feet (Source -Random Lengths Publications, Inc.).(11) Source - U.S. Census Bureau, seasonally adjusted annual rate ("SAAR").(12) Canfor-produced lumber, including lumber purchased for remanufacture.
