Conifex Timber Inc. president and CEO Ken Shields says the company, a new entrant to the northern B.C. forest sector, is poised for better results in 2011.
The company, with operational headquarters in Fort St. James, posted a loss of $2.9 million in the third-quarter, a result of operating at only a fraction of its capacity.
The net loss for the first nine months of the year was $6.9 million, compared to a loss of $8.1 million during the same period last year.
The company said its low operating rate of 20 per cent continued to adversely affect its financial performance throughout the third quarter, the three months ending in September.
The company has initiatives underway that are expected to lift operating rates to 55 per cent of full two-shift capacity at its sawmills in Fort St. James and Mackenzie.
Conifex is expected to complete $30 million in upgrades at its Fort St. James sawmill by the end of the year, and then move to two shifts.
Conifex also recently started one of its two sawmill operations in Mackenzie on a one-shift basis.
The moves will increase production by nearly 80 per cent to 420 million board feet a year.
"That allows us to lower our unit cash costs and our break-even point," Shields said Monday during a discussion of the company's financial results. "All in all, we expect good results in 2011," he said.
The improvements at the Fort St. James sawmill include upgrades to log handling, dry kilns and planing.
Conifex bought the Fort St. James sawmill - formerly held by Portland, Ore.-based Pope and Talbot mill - in 2008. The mill was closed at the time, a victim of the forestry downturn led by a collapse in U.S. housing, but Conifex re-opened it on one-shift basis in early 2009.
The company then purchased AbitibiBowater's assets in Mackenzie, which included two sawmills and a shuttered newsprint mill. The newsprint mill is not being re-opened, but Conifex hopes to produce electricity from the mill's 13.8-megawatt power plant. The company is also examining opportunities in wood pellets.
Shields has said that despite the fact the lumber sector in North America is just emerging from a three-year battering, it was the perfect time to be investing in the forest sector. Lumber companies are priced below value, and the long-term prognosis for the lumber sector is positive, he argued.
Conifex has a positive long-term outlook on the lumber sector for a number of reasons: Constrained supply in Eastern Canada linked to a permanent drop in newsprint demand; the eventual rebound of the U.S. housing sector; and a potential, emerging market in China.
Shields noted that 49 per cent of its shipments in the third quarter went to China and Japan. The remaining shipments were directed to the U.S. (36 per cent) and Canada (15 per cent).
