Canfor Q2 2024 Earnings Report

Canfor EPS Results

• Actual EPS: -C$1.42
• Consensus EPS: -C$0.17
• Beat/Miss: Missed by -C$1.25
• One Year Ago EPS: N/A

Canfor Revenue Results

• Actual Revenue: $1.38 billion
• Expected Revenue: $1.42 billion
• Beat/Miss: Missed by -$33.50 million
• YoY Revenue Growth: N/A

Canfor Announcement Details

• Quarter: Q2 2024
• Date: 7/25/2024
• Time: N/A
• Conference Call Date: Friday, July 26, 2024
• Conference Call Time: 11:00AM ET

Canfor (TSE:CFP) Corp is a global leader in the manufacturing of high-value low-carbon forest products including dimension and specialty lumber, engineered wood products, pulp and paper, wood pellets and green energy. Proudly headquartered in Vancouver, British Columbia, Canfor Corp produces renewable products from sustainably managed forests, at more than 50 facilities across its diversified operating platform in Canada, the United States and Europe. Canfor Corp has a 77% stake in Vida AB, Sweden's largest privately owned sawmill company and also owns, approximately, a 54.8% interest in Canfor Pulp.

Canfor Q2 2024 Earnings Call Transcript

Key Takeaways

• Canfor permanently closed its Polar sawmill, suspended reinvestment in a new Houston facility and cut summer schedules by 90 million board feet in British Columbia due to fiber constraints and depressed markets, with further rate adjustments planned to mitigate ongoing losses.
• In the U.S. South, Canfor closed its Jackson, Alabama mill, is on track to start up the new Access, Alabama greenfield project in Q4 (with Mobile’s mill closing upon commissioning) and expects to close its El Dorado, Arkansas acquisition imminently before investing US $50 million to expand capacity to 175 million board feet.
• European lumber operations delivered strong earnings in Q2, benefiting from improved pricing, solid activity and a focus on specialty products that leverage market optionality.
• Canfor Pulp saw global pulp pricing rise (up 9% in China) and achieved a US $16 million quarter-over-quarter improvement in cash earnings before restructuring, despite an 18% drop in production due to planned and unplanned outages.
• The U.S. softwood lumber dispute remains a headwind with preliminary duties set to increase in August and cumulative deposits of US $956 million paid to date, leading Canfor to expect challenging lumber markets for the remainder of 2024.

Presentation

[Operator]

Good morning. My name is Dina, and I will be your conference operator today. Welcome to Canfor and Canfor Pulp's second quarter analyst call. All lines have been muted to prevent any background noise. During this call, Canfor and Canfor Pulp's Chief Financial Officer will be referring to a slide presentation that is available in the investor relations section of the company's website. Also, the companies would like to point out that this call will include forward-looking statements, so please refer to the press releases for the associated risks of such statements. I would now like to turn the meeting over to Mr. Don Kayne, Canfor Corporation's President and Chief Executive Officer. Please go ahead, Mr. Kayne.

[Don Kayne, CEO at Canfor Corporation]

Thank you, operator, and good morning, everyone. Thank you for joining the Canfor and Canfor Pulp Q2 2024 Results Conference Call. I'm going to make a few comments before I turn things over to Kevin Edgson, Canfor Pulp's President and Chief Executive Officer, and Pat Elliott, our Chief Financial Officer of Canfor Corporation and Canfor Pulp, and our Senior Vice President of Sustainability. In addition, we are joined by Kevin Pankratz, Senior Vice President of Sales and Marketing, and David Trent, our SVP of Supply Chain, Transportation, and Digital. Before touching on markets, I'll share a few Q2 business updates. As you know, over the past decade, Canfor has been focused on building its globally diversified operating platform by increasing our footprint in Alberta, the US South, and Europe, while working towards a smaller but stronger presence in British Columbia.

[Don Kayne, CEO at Canfor Corporation]

To that end, during Q2, we made some difficult decisions with respect to our BC operations, including the permanent closure of our Polar Sawmill in the Prince George area and the suspension of plans to reinvest in a new Houston sawmill. Operating conditions in British Columbia remain extremely challenging as we continue to face persistent and significant constraints accessing economically viable fiber. Coupled with current market conditions, we have taken steps to reduce our summer operating schedules by 90 million board feet. Despite BC's challenges, our Kootenay operations have performed well as they support our high-value product focus, serving geographically diversified markets. With BC's high-cost operating environment, depressed North American lumber markets, and expected increases in export duties next month, we will continue to evaluate and adjust our BC operating rates to mitigate ongoing losses.

[Don Kayne, CEO at Canfor Corporation]

In Alberta, we continued to generate positive operating income in Q2, supported by favorable log costs and strong operating results. We continue to see progress in productivity, uptime, and great improvement there. In the US South, in April, we announced a decision to permanently close our aging Jackson, Alabama mill, which was completed mid-June. This action was taken as part of our continued focus on restructuring, consolidating, and expanding our production at modern facilities in regions with strong fiber baskets. Our Axis, Alabama Greenfield project is proceeding well as we work towards startup in the fourth quarter. On commissioning of this facility, our existing sawmill in Mobile, Alabama, will close. These investments and strategic consolidation of our Alabama operations will strengthen our long-term position at well-capitalized, highly efficient facilities that are positioned to be competitive for the long term.

[Don Kayne, CEO at Canfor Corporation]

Our pending acquisition of El Dorado, Arkansas, is expected to close imminently and after a planned U.S. $50 million capital investment, will grow to a 175 million board feet facility over the next several years. Complementing our existing assets in the region, this acquisition will create synergies and vertical integration opportunities as we grow our footprint with top-quartile operations. I also want to highlight our European operations, which continue to deliver strong earnings this quarter, largely tied to solid activity and improved market pricing. Our Vida operations benefit from market optionality and with their focus on specialty products, are able to differentiate themselves from competitors in commodity markets. I'll also touch on two issues that we're closely watching and preparing for.

[Don Kayne, CEO at Canfor Corporation]

The first is disruption to our supply chains, particularly with the shutdown of CN's mainline due to the Jasper wildfire, as well as the potential for a Canadian rail strike involving both Canadian National and Canadian Pacific Kansas City. With rail making up approximately 50% of Canfor and Canfor Pulp's combined transportation capacity, the stability and reliability of Canada's two major railways is of significant concern. We're planning mitigating actions to ensure that our businesses are in the best possible position should a rail labor disruption occur. The second is the ongoing softwood lumber dispute and the increased duty environment. In February this year, the US Department of Commerce announced preliminary rates for the fifth period of review, which we will anticipate will rise considerably when they go into effect in August.

[Don Kayne, CEO at Canfor Corporation]

As of the end of Q2, Canfor has paid cumulative cash deposits of $956 million. This quarter posed considerable challenges for our lumber business. While we continue to believe market fundamentals remain solid for the medium to long term, we anticipate lumber markets to remain challenging for the balance of the year. Notwithstanding current lumber market dynamics, solid results in Europe and Alberta highlight the value of our diversification strategy. We have started to see improvements in our underlying cost structure following recent capital investments and the difficult, but necessary, decisions to restructure our lumber platform. We believe these decisions will allow us to capitalize on solid market fundamentals for the long term and provide a stronger platform going forward. I will now turn it over to Kevin to provide an overview of Canfor Pulp.

[Kevin Edgson, CEO at Canfor Pulp Products Inc.]

Thank you, Don, and good morning, everyone. Canfor Pulp generated solid financial results in the second quarter, with strong global pulp pricing more than offsetting the impact of lower production.

[Kevin Edgson, CEO at Canfor Pulp Products Inc.]

...On the back of global supply disruptions and producer downtime, pulp pricing in China was up 9% in the second quarter, with more pronounced increases seen in North America and Europe. While a portion of this price increase will be realized in our third quarter results, improved pricing contributed to a CAD 16 million improvement in cash earnings quarter-over-quarter, before taking into consideration restructuring costs. Turning to our operating performance, our results reflected the impact of a scheduled maintenance outage at Intercontinental, combined with the unplanned downtime to accommodate repairs to Intercontinental's recovery boiler. While pulp production was down 18% quarter-over-quarter, operating rates improved in June and have returned to normalized levels in July. In May, we announced the decision to indefinitely curtail one production line at our Northwood NBSK pulp mill due to a lack of economically available fiber in northern B.C.

[Kevin Edgson, CEO at Canfor Pulp Products Inc.]

The curtailment is anticipated t.o commence in August. We regret the impact these decisions have on our employees, their families, and the local community, and I'd like to thank our employees for their unwavering commitment and perseverance as we respond to the external pressures facing our business. I will now turn it over to Pat to provide an overview of our financial results.

[Patrick Elliott, CFO & Senior Vice President, Sustainability at Canfor Corporation]

Thanks, Kevin, and good morning, everyone. The Canfor Pulp results were released yesterday afternoon. In my comments this morning, I'll speak to our financial highlights, a summary of which is included in our overview slide presentation, located in the investor relations section of Canfor's website. Our lumber business generated an operating loss of CAD 231 million in the second quarter, which included a CAD 51 million write down of inventory, a non-cash duty expense of CAD 40 million related to our antidumping accrual rate, a CAD 32 million asset impairment charge, and a CAD 33 million restructuring expense in connection with several sawmill closures announced in the quarter. Adjusting for these non-cash items, our lumber business generated an operating loss of CAD 75 million in the second quarter, compared to a similarly adjusted loss of CAD 72 million in the quarter.

[Patrick Elliott, CFO & Senior Vice President, Sustainability at Canfor Corporation]

These results reflect sustained weakness in North American lumber markets and losses associated with certain BC operations due to constraints in accessing the fiber normally available. European operations contributed $45 million in cash earnings in the quarter and approximately $76 million year to date, highlighting the importance of our diversification strategy. European results reflect the benefit of improved lumber sales and realizations, and to a lesser extent, increased production and shipping volumes. Canfor pulp generated an operating loss of $6 million, including a restructuring charge of $6 million related to the upcoming Northwood one line indefinite curtailment. This compares to an operating loss of $16 million in the first quarter. As Kevin mentioned, improved results largely reflected the benefit of higher pulp pricing, which more than offset the impact of reduced production and shipping volumes associated with downtime at Intercontinental.

[Patrick Elliott, CFO & Senior Vice President, Sustainability at Canfor Corporation]

At the end of the second quarter, Canfor Pulp had net debt of CAD 79 million and CAD 154 million of available liquidity, of which CAD 80 million is restricted for use towards a potential reinvestment in Northwood's recovery boiler number one. Canfor, excluding Canfor Pulp, ended the quarter with net cash of approximately CAD 139 million. On a consolidated basis, capital expenditures were approximately CAD 170 million, including approximately CAD 14 million for Canfor Pulp. We anticipate capital spend of approximately CAD 450 million in the lumber segment in 2024, including remaining spend on our Alabama greenfield, various growth initiatives in the US South and Sweden, and planned capital investments at the new El Dorado facility.

[Patrick Elliott, CFO & Senior Vice President, Sustainability at Canfor Corporation]

We anticipate a significant reduction in our capital spend in 2025, following the completion of the three major projects in the US South in this year. For Canfor Pulp, we are currently forecasting capital spend of approximately CAD 50 million in 2024, including capitalized maintenance. Consistent with prior quarters, we anticipate Canfor will allocate a modest amount of capital to opportunities to purchase shares throughout the year. With that, Don, I'll turn it back to you.

[Don Kayne, CEO at Canfor Corporation]

Thanks, Pat. So, operator, we're now ready to take questions from Analysts.

[Operator]

Thank you. We will now take questions from financial analysts. If you have a question, please press star one on your telephone keypad. If you are using a speakerphone, please lift your receiver and then press star one. If at any time you wish to cancel your request, please press star two. Please press star one if you have a question. There will be a brief pause while participants register for question. Thank you for your patience. Your first question comes from the line of Ben Isaacson from Scotiabank. Please go ahead.

[Ben Isaacson, Managing Director and Equity Research Analyst at Scotiabank]

Thank you very much, and good morning, everyone. Just two quick ones for me. First, can you just run through your capital spending plan over the next three years? And specifically, how much flexibility is there to pull back if needed? I mean, we've seen the announcement out of Houston, and you've mentioned your commitment to the El Dorado facility as well? Thank you.

[Patrick Elliott, CFO & Senior Vice President, Sustainability at Canfor Corporation]

Hey, Ben, it's Pat. I'll go ahead. So yeah, I wouldn't say we have a publicly available capital plan for the next three years. Obviously, the team's got lots of ideas. I think our strategy, and that we've talked about a lot over the last couple of years, is this major reinvestment in US South, which is kind of coming to its conclusion this year. Our goal is sort of to arrive at the end of this year with a very strong balance sheet, which we'll do. As I mentioned in my comments, we still have $140 billion in net cash. So beyond that, we have not made any major commitments. We have the ability to go kind of however we want.

[Patrick Elliott, CFO & Senior Vice President, Sustainability at Canfor Corporation]

I would say at this point, we will read the market, and we'll look at sort of how we ramp up our new facilities, and then we'll make decisions on that basis. But we're not committed to a major capital program beyond the end of this year.

[Ben Isaacson, Managing Director and Equity Research Analyst at Scotiabank]

... That's helpful. Thank you. And then just my second question is on the European business. Can you just tie together how you see Europe doing, in conjunction with, exports coming into the U.S. market as well? Like, do you expect that to continue slowing down as well as, as Europe starts to pick up? Thank you.

[Don Kayne, CEO at Canfor Corporation]

For sure. That maybe I'll just make a quick comment on that, maybe, Kevin, you can add to it. But in terms of—thanks, Ben, first of all, for the question. Like, I think in terms of the our Swedish mills and shipping into the United States, I mean, clearly, we've been pretty consistent there over the years, and it still is running around 10%, maybe at some point, 15%. But basically, the real advantage of Sweden, and we that we're able to capitalize on the fact that we've got so much optionality in terms of where our products go from Sweden because of the high-value focus that we have there. So we got lots of choices in from Middle East, North Africa, to Australia, to Japan, basically all markets.

[Don Kayne, CEO at Canfor Corporation]

you know, as we look forward, we don't see a real big change in terms of what we're doing there. If anything, it'll probably be kind of similar to where it's at or a bit less.

[Ben Isaacson, Managing Director and Equity Research Analyst at Scotiabank]

Great. Thank you very much. Appreciate it.

[Don Kayne, CEO at Canfor Corporation]

Thanks.

[Operator]

Thank you. And, your next question comes from the line of Sean Steuart from TD Cowen. Please go ahead.

[Sean Steuart, Managing Director at TD Cowen]

Thank you. Good morning, everyone. Couple questions. Pat, I'll start with you, or Don, if you wanna take it, as well. The slow buyback activity, and, you know, this has been a trend for you guys and, you know, arguably you were wise to wait when others were buying back stock at higher levels. I guess, you know, what, given the balance sheet strength, even as, you know, especially as CapEx is set to moderate here, what do you guys wait for in terms of the signal to get more aggressive? Is it a clear floor in the commodity market, transparency on earnings bottoming out? Just updated thoughts on how you're thinking about the NCIB?

[Patrick Elliott, CFO & Senior Vice President, Sustainability at Canfor Corporation]

Sure, Sean, I'll take that. Yeah, I think fair point, we've... You know, we have, I think, been fairly clear the last couple of years that we saw our strategic imperative for us was to continue to pursue our business through capital investment in US South and in Sweden. We've, you know, we've committed to that. We've done that at the same time, preserving that balance sheet optionality that I just spoke about on the prior question here. And so I think as we think about where we arrive at the end of 2024, we're very comfortable with our balance sheet, and frankly, we're not going to stretch it. We're not, I think when you talk about market outlook, we're still cautious about 2025.

[Patrick Elliott, CFO & Senior Vice President, Sustainability at Canfor Corporation]

So I think you're gonna see us just continue to pick away at the share buyback, but I don't think there's a signal that would really change that. I think we believe that the stock is undervalued, and we acknowledge that, but we think the bigger return in the long term is around this diversification strategy, and so we'll continue to focus on that and then continue to preserve that balance sheet strength as we move into really uncertain markets over the next, you know, 12-18 months.

[Sean Steuart, Managing Director at TD Cowen]

Okay, thanks for that context. Second question is just on sawmill downtime through the back half of the year. You threw out some numbers in addition to, you know, Polar going down permanently. I guess, Don, a little more clarity on how you take that downtime, whether it's in BC or the US South. How concentrated is that around a few assets? Is it broad-based shift reduction? How do you, I suppose, optimize cost structure as you continue to take these rolling curtailments?

[Don Kayne, CEO at Canfor Corporation]

For sure, me, I'll take that, Sean, as Don. So yeah, it's a good question. I think that for Q3, you can expect that, first of all, in total will be around CAD 150 million-CAD 200 million in total downtime, okay, across North America, so including the Southern Pine as well as BC, particularly. And that's probably gonna be in the neighborhood of 60-65%, something like that, in BC. And when you start to look at that, we, you know, what we try to do and we'll continue to do is just more, excuse me, is to just to match our production as best we can with what we anticipate market demand will be.

[Don Kayne, CEO at Canfor Corporation]

The downtime that we are taking in the US South, that was basically related more to some of the CapEx that we're doing down there, and obviously to some degree, markets for sure, because we're not fantastic there either, as you know. But also... But in BC, it's more related to market and then, you know, some of the challenges that we continue to face, it seems like endlessly here in terms of accessing economic fiber. And so that's the, you know, that's the decision, and that varies by mill in BC, maybe a little bit more specific to your question.

[Don Kayne, CEO at Canfor Corporation]

We have different challenges around that in different parts of the province, but overall, it's still definitely a huge issue for us like it is, I think, for everybody in British Columbia.

[Sean Steuart, Managing Director at TD Cowen]

Got it. Okay, thanks for that. I'll maybe just sneak one last one in, Don. As rates on the duty side are set to increase in August again, any broader thoughts on developments in the trade file? You know, it's my understanding the Canadian industry's been meeting regularly to try and come up with common ground to potentially go to the U.S. with. Any thoughts on a pathway towards negotiations? If so, what sort of timeframe are you thinking about?

[Don Kayne, CEO at Canfor Corporation]

Yeah. First of all, yeah, I mean, I think, you know, ultimately, we need to get a settlement at some point. I, which I've said many times, Sean, for sure. But at the end of the day, our, you know, our view, and I think it's just it keeps increasing here with some of the uncertainty that's created by the situation in the U.S. politically, same in Canada, really politically. But notwithstanding all of that, our, our view is that it's a ways away for sure. And I think I've said a few times before, but, and I don't think really anything's changed from our point of view. It's still a way out. I think it's, you know, whether it's 1, 2 years, 3 years, I'm not sure.

[Don Kayne, CEO at Canfor Corporation]

In terms of the group that's met, as you referenced, yet we've had conversations for sure, and we've had. You know, and it's good that we do those. But in terms of, you know, in terms of that, giving us any more confidence that there's an agreement here in the near term, we don't see that.

[Sean Steuart, Managing Director at TD Cowen]

Thanks for that detail. That's all I have.

[Operator]

Thank you. Once again, should you have a question, please press star one on your telephone keypad. Your next question comes from the line of Matthew McKellar from RBC. Please go ahead.

[Matthew McKellar, Vice President and Equity Research Analys at RBC Capital Markets]

Hi, good morning. Thanks for taking my questions. Maybe I'll lead off with one for, for Kevin. How do you expect the closure of, of the line at Northwood to affect your cost structure in the, in the pulp business? How do you think about the, the kind of dynamic around lower volumes and some of the fixed cost absorption issues versus, ability to source fiber from a tighter radius?

[Kevin Edgson, CEO at Canfor Pulp Products Inc.]

Thank you for the question, Matt. We'll start on the operating costs. The intent that we have is to maintain our competitiveness at that mill on a single line, commensurate or improved, on where it was with two lines. I think that's really required for us to maintain our position within the broader cost curve. That, therefore, will require reductions in our fixed costs that are proportionate with the reduction in the overall production. In terms of accessing fiber, I think as you've heard from Don, the overall structure and problem within BC is affecting pulp every bit as much as lumber. And so I don't think that there should be views of material improvements in fiber costs going forward with this reduction.

[Matthew McKellar, Vice President and Equity Research Analys at RBC Capital Markets]

Okay. Thanks very much for that help. And then just, on European lumber, it sounds like you saw a relatively solid DIY activity in Europe in Q2, and just setting aside the seasonal slowdown in Q3, do you expect that to kind of continue into Q4 in 2025? And then just, can you provide us some updated color on how you're thinking about, how Swedish log costs evolve over the next few quarters, please?

[Don Kayne, CEO at Canfor Corporation]

Maybe the first question, Kevin. You maybe talk about that. I don't have enough speed on that.

[Kevin Pankratz, Senior Vice President of Sales and Marketing at Canfor Corporation]

Yeah, you know, for sure, Matt, the DIY segment's been one of the more positive segments in the market in Europe, and expect that to continue in Q3, Q4. But all the other segments, so we are expecting a little bit more caution and challenge in the back half of the year, whereas the DIY segment close here.

[Don Kayne, CEO at Canfor Corporation]

And then the second part, Matthew, on the question around log costs in Sweden. You know, they on a year-to-date basis, they're up probably in the neighborhood of, you know, 5%-10%, you know, probably depending on the location there as well. It varies a little bit, but on average, that's probably safe to quote that number. Well, as we look forward, though, I think we've had some sequential increases here over the last number of quarters. And I think, you know, our view is that that's starting to slow down now, and as we go forward here, you know, we expect that to continue to decline and not necessarily go down, but at least stabilize for the next while.

[Don Kayne, CEO at Canfor Corporation]

Part of that's due to some of the manufacturers for sure that are more commodity-focused are more up against it than some of the specialty-focused companies. So overall, though, we would say that it's getting to a point now where it's gonna start to flatten out.

[Matthew McKellar, Vice President and Equity Research Analys at RBC Capital Markets]

All right, thanks for the help. That's all for me. I'll turn it back.

[Don Kayne, CEO at Canfor Corporation]

Okay, thanks, Matthew.

[Operator]

Thank you. Your next question comes from the line of Ketan Mamtora from BMO. Please go ahead.

[Ketan Mamtora, Director at BMO Capital Markets]

Good morning, and thanks for taking my question. You know, I'm just curious to start with, on the lumber side, can you talk to trends on the R&R side, you know, especially as the quarter progressed and, you know, as we sit here in end of July, you know, have things stabilized? Are you seeing any kind of signs of uptick or things slowing down, even from what you saw in Q2? Can you provide any additional color there?

[Don Kayne, CEO at Canfor Corporation]

Yeah.

[Don Kayne, CEO at Canfor Corporation]

Go ahead, Kevin.

[Kevin Pankratz, Senior Vice President of Sales and Marketing at Canfor Corporation]

Yeah, for sure. Good morning, Ketan. Yeah, on the R&R segment in Q2, for sure, we saw the first signs of, based on our data, it coming off from Q1. And we're tracking that data every week. And while it's off, it is still elevated above pre-COVID levels. So I think the R&R state was probably guiding to that kind of trend for the balance of the year and expecting a bigger uptick in 2025 with larger projects, but definitely trending off from the pace that we have been at, that we saw in Q1. But again, just to reiterate, above the pre-COVID levels in 2019.

[Ketan Mamtora, Director at BMO Capital Markets]

Yeah. Kevin, is there any way to sort of quantify on the R&R side, you know, kind of where your volumes are, either on a sequential basis or on a year-over-year basis, percentage basis? Any sort of ballpark sense on kind of how that, how it's trended?

[Kevin Pankratz, Senior Vice President of Sales and Marketing at Canfor Corporation]

Sure. So it really varies depending on which regions that you're in, but you know, it could be anywhere from 2%-8%, but it's in that kind of magnitude, but it is, there is quite a bit of a range depending on the regions in which you're looking at the data.

[Ketan Mamtora, Director at BMO Capital Markets]

And Kevin, are there any specific regions that are weaker, or are there product categories within R&R that are weaker, or is it more broad-based?

[Kevin Pankratz, Senior Vice President of Sales and Marketing at Canfor Corporation]

There's no one, actually, really specific one there, Ketan. It's kind of hard to quantify exactly where that's happening, but it really ranges from week to week and how they're doing their inventory replenishments. But just overall, it's just in that range that I said, about that 2%-8%.

[Ketan Mamtora, Director at BMO Capital Markets]

Understood. That's helpful. And then just on lumber inventories, you know, Kevin, just curious, kind of what is your sense of, you know, where the inventories are, both at your mills and in the channel?

[Kevin Pankratz, Senior Vice President of Sales and Marketing at Canfor Corporation]

Sure.

[Ketan Mamtora, Director at BMO Capital Markets]

Kind of where we are this time of the year?

[Kevin Pankratz, Senior Vice President of Sales and Marketing at Canfor Corporation]

Sure. Yeah, I mean, that's a great question, and it's always one where we struggle to really identify with, because when you look at the supply side, we know from our in the European markets, we're seeing quite a bit of reductions, especially in Central Europe. You've had the BC reductions, the curtailments that we've talked about already. And of course, you still have that Russia and Belarus supply disruption. So there's been quite a bit of supply out of the system. And when we're in the market talking to all of our major customers, and while demand's off, it's not horrible. So if demand's off, you know, at 8% or 5%, they're obviously, the inventories are higher than we would think.

[Kevin Pankratz, Senior Vice President of Sales and Marketing at Canfor Corporation]

I think that's. It's hard to quantify, but obviously it's a little bit higher than we would think, because otherwise we would see either price stabilization or some kind of, you know, price pickup. But that would just sort of be my comments.

[Ketan Mamtora, Director at BMO Capital Markets]

That's very helpful. I'll jump back in the queue. Good luck.

[Kevin Pankratz, Senior Vice President of Sales and Marketing at Canfor Corporation]

Thank you.

[Operator]

Thank you. Once again, should you have a question, please press star one on your telephone keypad. Thank you. There are no further questions. I'll now turn it over to Don Kayne for closing comments. Go ahead, Mr. Kayne.

[Don Kayne, CEO at Canfor Corporation]

Thanks, operator, and thanks everyone for joining the call. We appreciate your support at Canfor, and we'll look forward to talking to you at the end of the next quarter. Thank you.

[Operator]

This concludes today's call. Thank you for participating. You may all disconnect.

Participants

Executives

• Don Kayne, CEO
• Kevin Edgson, CEO
• Kevin Pankratz, Senior Vice President of Sales and Marketing
• Patrick Elliott, CFO & Senior Vice President, Sustainability

Analysts

• Ben Isaacson, Managing Director and Equity Research Analyst at Scotiabank
• Ketan Mamtora, Director at BMO Capital Markets
• Matthew McKellar, Vice President and Equity Research Analys at RBC Capital Markets
• Sean Steuart, Managing Director at TD Cowen