Canfor Corporation recently reported a significant operating loss of $251 million for the second quarter of 2025, with a shareholder net loss reaching $203 million, or $1.71 per share. These challenging results highlight a difficult period for the integrated forest products company, particularly within its North American operations, despite some positive performance from its European ventures. The underlying issues stem from a confluence of sustained weakness in lumber benchmark pricing and broader global economic uncertainties impacting demand, clearly reflected in Canfor’s earnings.
The company’s North American lumber segment faced considerable headwinds, primarily due to persistent weak market conditions in the US South. This challenging environment necessitated the difficult decision to permanently close Canfor’s Estill and Darlington sawmills, leading to substantial asset write-downs and impairment charges of $189 million, alongside restructuring costs totaling $7 million. These closures underscore the severe pressures felt within this critical lumber industry market, further compounded by ongoing affordability concerns and trade policy uncertainties impacting forest products.
While North American operations struggled, Canfor’s European segment demonstrated resilience, contributing solid earnings during the quarter. This performance was largely attributed to improved market pricing in that region and a favorable exchange rate, specifically a 6% weaker Canadian dollar against the Swedish Krona. This regional diversification proved crucial in mitigating some of the severe impacts from the weaker North American demand and pricing environment, as detailed in the Q2 2025 results.
The global pulp market also experienced downward pressure in Q2 2025, particularly from dampened demand in key regions like China. Global economic uncertainty, coupled with specific trade policy concerns between China and the US, slowed pulp purchasing activity. Consequently, global pulp producer inventories escalated significantly, climbing well above the balanced range to 46 days of supply by May, indicating an oversupply in the pulp and paper sector.
Despite the overall losses, strategic movements were observed, such as Vida AB’s agreement to acquire AB Karl Hedin Sågverk (“Hedin”) for $164 million, including approximately $39 million of working capital. This acquisition is projected to boost Vida’s annual production capacity by 230 million board feet, bringing its total estimated capacity to 2.1 billion board feet upon completion. Such expansions aim to strengthen future operational capabilities amidst fluctuating market conditions, a key aspect of financial reporting for growth.
Looking ahead, Canfor anticipates continued weakness in North American lumber demand through the third quarter of 2025. Factors like affordability challenges, dampened consumer confidence, and potential tariff-related concerns are expected to keep pressure on prices early in the quarter. However, a gradual price improvement is tentatively forecast for later in Q3, particularly for Western SPF products, as producers seek to recover higher duties coming into effect, impacting future forest products revenue.
The pulp and paper segment also projects persistent challenging conditions into Q3 2025. Purchasing activity from China is expected to remain soft during the traditionally slower summer period, maintaining global pulp producer inventories well above balanced levels. Canfor Pulp Product Inc. (CPPI) is actively monitoring trade relationships and has mitigation strategies in place to largely offset potential tariff impacts on US pulp and paper shipments, focusing on disciplined cost management and leveraging its diversified global operating platform for better Canfor earnings.
