Higher commodity prices boost Canfor, Tech revenues

Soaring prices for lumber and copper drive earnings, stock value higher for B.C. forestry and mining giants

By
Western Investor
April 29, 2021





Don Lindsay, CEO of Tech Corp.: profits up 247 per cent. | File photo
— Don Lindsay, CEO of Tech Corp.: profits up 247 per cent. | File photo

Skyrocketing lumber and mineral prices have led to soaring evaluations for two of B.C.’s major resource firms.

Copper prices have roughly doubled since April 2020, recently hitting a 10-year high of US$4.50 per pound. This has gotten Teck Resources off to a very good start to 2021, with the company reporting first-quarter profits that were 247 per cent higher than Q1 2020.

“Strong operational performance and higher commodity prices contributed to a very solid start to 2021 and the first quarter,” Teck CEO Don Lindsay said April 29 in a first quarter earnings call.

“We achieved major milestones for our priority projects, including surpassing the half-way point at our flagship QB2 copper growth project and moving into the commissioning phase of our Neptune steelmaking coal terminal upgrade."

Teck now appears to be focused on copper, which Lindsay pointed out are now called "green metals" due to their importance in a global energy transition.

"We believe Teck is one of the best positioned companies globally to capitalize on the strong demand growth that we see for green metals and in particular, for copper."

Teck's stock (TSX:TECK.B, NYSE: TECK)has more than doubled in value since this time last year, with prices rising from $12.27 per share one year ago, on April 28, 2020, to the most recent close of $27.82.

Meanwhile, record high prices for lumber have driven Canfor Corp. earnings to unprecedented levels.

In its first quarter financials for 2021, Canfor reported sales of $1.9 billion – an increase of $771 million over Q1 2020. It netted $428 million in net income Q1, compared to a $70 million loss in Q1 2020.

The company attributed the increased profits to a residential construction and renovation boom in the U.S. and Canada, and a “lean” lumber supply that has pushed lumber prices past all-time highs. The company noted that markets for pulp have also improved.

“In the lumber segment, earnings increased $145.7 million quarter-over-quarter, to an all-time high $606.7 million,” the company stated.

Canadian housing starts were up 28 per cent from the previous quarter, averaging 308,000 units on a seasonally adjusted basis in the first quarter of 2021, largely reflecting a significant up-tick in the Western Canadian market, and reaching an all-time record of 335,000 units in March.

U.S. housing starts in March hit a 15-year high of 1.73 million units.

Canfor noted the prospects for pulp have also improved.

“During the first quarter of 2021, global pulp markets experienced a surge in US-dollar list prices in response to an uptick in demand, particularly from China.”

As of April 29 Canfor Corp. stock (TSX: CFP) was trading at $30.50 compared to a 12-month low of $9.24.

 


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