Canfor Corporation (CFPZF) Q1 2025 Earnings: Navigating Turbulence with Global Diversification

Rhys NorthwoodFriday, May 9, 2025 2:29 pm ET
3min read

Canfor Corporation’s Q1 2025 earnings reveal a mixed but cautiously optimistic picture for the lumber and pulp giant. While the company remains mired in operational losses in its core lumber business, strategic shifts toward global market diversification and cost management are starting to bear fruit. Let’s dissect the numbers and the narrative behind them.

Financial Snapshot: Progress Amid Persistent Challenges

The quarter saw an operating loss of $28.5 million, marking an improvement from the $45.9 million loss in Q4 2024. Net losses also narrowed to $0.26 per share, down from $0.53 per share the prior quarter. Sales revenue surged to $1.42 billion, a 10% increase from Q1 2024, driven by stronger pulp pricing and higher production volumes in key regions.

However, the lumber segment—a perennial pressure point—still posted an operating loss of $25.5 million, albeit a $11.1 million improvement from Q4 2024. This reflects the dual-edged sword of Canfor’s strategy: rationalizing underperforming Canadian assets while scaling up in lower-cost U.S. Southern and European operations.

Lumber: A Tale of Two Markets

Canfor’s lumber segment is caught between a strengthening North American market and lingering overcapacity in key regions.

  • North America: Supply constraints—driven by Western Canadian mill closures and U.S. South weather disruptions—boosted benchmark prices. However, reduced production in Western Canada (due to mill closures) and lower shipments dampened results.
  • Global Markets: The company is leaning into Japan, Europe, and domestic sales. Japan’s non-residential construction boom and China’s tepid demand (despite government stimulus) highlight the risks and rewards of geographic diversification.

Pulp: A Bright Spot

The pulp segment delivered an operating income of $10.8 million, nearly tripling from Q4 2024. Key factors:
- Price Recovery in China: NBSK pulp prices to China averaged $793/tonne in early Q1, up 3% from late 2024.
- Production Gains: Pulp output rose 6% quarter-over-quarter, aided by modernized mills in the U.S. South.

Strategic Priorities: Navigating Trade Uncertainty

Canfor’s outlook hinges on mitigating two existential risks: U.S. trade policies and global economic volatility.

  1. Trade Headwinds:
  2. Potential U.S. tariffs on Canadian lumber loom as a major threat. Canfor’s response? Shift more sales to tariff-exempt regions like Europe and Japan.

  3. The company is also leveraging its 54.8% stake in Canfor Pulp Products Inc. to diversify into specialty pulp, which commands premium pricing.

  4. Operational Adjustments:

  5. Maintenance Outages: Planned production cuts in Q3 and Q4 2025 will reduce pulp output by up to 10,000 tonnes, aligning with fiber supply costs.
  6. Currency Dynamics: The weaker Canadian dollar improved export competitiveness but failed to offset rising log costs in Sweden (a 4% increase).

Risks and Opportunities

  • Near-Term Risks:
  • U.S. demand for lumber could stagnate if housing affordability worsens.

  • Pulp prices may weaken if global economic growth slows, especially in China.

  • Growth Levers:

  • Vida AB’s Potential: Canfor’s 77% stake in Sweden’s Vida AB positions it to capture European demand for sustainable building materials.
  • Low-Carbon Credentials: With 50+ facilities globally, the company is emphasizing eco-friendly products—a key selling point in ESG-conscious markets.

Conclusion: A Hold with Upside for the Resilient

Canfor’s Q1 results reflect a company in transition. The lumber segment’s lingering losses underscore the industry’s structural challenges, while the pulp division’s recovery and strategic pivots to non-U.S. markets offer hope. Investors should weigh the positives:
- Adjusted metrics (non-IFRS) show a narrowing gap between revenue and losses.
- Global diversification has reduced reliance on any single market.
- Cost discipline—evident in production cuts and fiber management—suggests management is proactive.

However, the $31 million net loss and reliance on volatile pulp prices mean patience is required. If the Canadian dollar stabilizes and U.S. trade tensions ease, Canfor could rebound strongly. For now, a hold rating seems prudent, with upside potential if global construction markets stabilize and trade policies turn favorable.

Final Take: Canfor’s Q1 2025 results are a glass half-full story. The path to profitability is narrow but navigable—if the company’s diversification bets pay off and trade winds turn in its favor.