Terry Hodgins, CFO of Vancouver-based Canfor Pulp Income Fund told Business in Vancouver July 21 that world pulp prices are the biggest variable in whether his company can continue its recent phenomenal success in light of its most recent quarterly results.
The income fund posted record sales of $247.6 million and net income of $43.1 million in the quarter that ended June 30.
Back when the entire pulp market was caught up in the global economic downturn, sales were $205 million and profit was a mere $1.5 million in the same quarter in 2009.
Speaking after market close, Hodgins believes most investors prefer to focus on the distributable cash because that determines how much the fund can pay to unitholders.
The company grew the amount of distributable cash it generated in the quarter to $0.88 per unit. That’s 44 times the $0.02 per unit it generated in the same quarter in 2009.
“The reason is pulp prices,” Hodgins said. “Pulp markets are stronger than they were a year ago.”
The fund owns a 49.8% stake in Canfor Pulp LP – a company in which Canfor Corp. (TSX:CFP) owns the remaining 50.2%.
Hodgins said that while there is downward pressure on pulp prices in China, there is currently a tight world supply. Producers currently have about 22 days supply of pulp, he said, instead of the more conventional 27 to 29 days.
“Generally, analysts are suggesting that maybe the market has peaked and it’s just a matter of where it will settle out.”