Canfor reported stronger third-quarter earnings in its lumber and pulp operations, while outlining plans to sharply reduce capital spending in 2027 as it remains cautious about demand.
On the company’s third-quarter 2026 earnings call, executives also discussed the closure of the Northwood pulp mill, an issue for Canfor Pulp Products (TSE:CFX), and the impact of lower lumber duties. The financial figures presented on the call were for Canfor and its businesses.
President and Chief Executive Officer Susan Yurkovich said the lumber business benefited from better sales realizations, modest reductions in European log costs and higher southern yellow pine shipments. She said market conditions remained subdued but that changes to Canfor’s asset portfolio had improved its competitiveness.
Lumber and pulp earnings improve
Chief Financial Officer Pat Elliott said the lumber business generated adjusted earnings before interest, taxes, depreciation and amortization, or EBITDA, of CAD 108 million in the third quarter. The figure excluded CAD 36 million in one-time items, including restructuring and impairment charges, net of a recovery of a previously recorded inventory write-down.
European lumber operations contributed CAD 20 million in adjusted EBITDA, supported by lower log costs and improved pricing despite scheduled July downtime. Elliott said the business had generated CAD 280 million in adjusted EBITDA year to date despite relatively muted lumber demand.
The paper and pulp business generated CAD 2 million in adjusted EBITDA in the third quarter, an improvement of CAD 14 million from the preceding quarter. Elliott attributed the increase to higher production and continued strength in paper, which generated CAD 26 million of EBITDA in the first nine months of 2026.
The pulp and paper result excluded CAD 38 million in one-time items, including impairment and restructuring costs related to the announced Northwood closure, net of an inventory write-down recovery.
Capital spending set to fall
Canfor expects capital spending of approximately CAD 210 million in 2026, including CAD 40 million for its pulp business. It anticipates spending CAD 100 million in 2027 as it completes a major strategic investment program and moves to a lower level of sustaining capital.
Elliott said the company had invested heavily over the past five years and was satisfied with its operations, but remained cautious about 2027. He said spending would eventually rise from the projected level, although ongoing maintenance spending should be lower because Canfor has fewer and improved operations.
Canfor ended the quarter with approximately CAD 1.1 billion in available liquidity and CAD 364 million in net debt, excluding its duty loan. Liquidity fell about CAD 70 million during the quarter following the PinkWood acquisition and spending at the Iron Mountain sawmill in Arkansas, Elliott said.
Yurkovich said the Iron Mountain rebuild was completed in October, while the PinkWood acquisition was finalized early in the third quarter. Canfor also closed three sawmills, including two in Sweden, as part of its portfolio changes.
Demand outlook remains cautious
Yurkovich said Canfor’s duty rate had fallen to 31% from 47.6% following the finalization of the seventh period of review. Even with lower duties, she said she did not expect a major increase in Canadian lumber exports to the United States because production capacity that had been removed was permanently out.
Senior Vice President of Sales and Marketing Kevin Pankratz said North American lumber supply and demand were relatively balanced for much of the third quarter. More recently, a rise in the 30-year U.S. mortgage rate had tempered demand expectations and prompted major customers to take a more cautious view of the remainder of 2026 and 2027, he said.
Chief Operating Officer Stephen Mackie said PinkWood was meeting expectations, though Canfor would not disclose its financial contribution. He also said the operation was not currently experiencing an impact from recently announced tariffs, while noting that the tariff environment continued to change.
About Canfor Pulp Products (TSE:CFX)
Canfor Pulp Products Inc produces and sells northern bleached softwood kraft pulp, or NBSK pulp and paper. The company also generates and sells electricity from biomass out of its pulp plants in Western Canada. The firm organizes itself into two segments based on product: pulp and paper. The pulp segment generates most of the revenue. Canfor Pulp’s NBSK pulp customers are typically manufacturers of tissue paper, specialty paper, and printing and writing paper. Most of Canfor Pulp’s revenue comes from Asia.
