VANCOUVER - Canfor Corp. (TSX:CFP) said Thursday it will spend $40 million on capital improvement projects at its sawmills in B.C.'s Kootenay region.
The company plans to spend $38.5 million on a new planer, a biomass energy system and modifications to the existing sawmill in Radium Hot Springs, B.C.
The balance will be invested at the company's Canal Flats sawmill to improve drying capacity.
"These investments are critical to support the restart of our Radium division, which was indefinitely closed in May 2009," Canfor president and chief executive Don Kayne said.
The work at the Radium mill will start next month with start up at the operation expected in the fourth quarter.
The mill upgrades follow the company's first-quarter results which were weaker than expected due to a soft quarter for its pulp and paper business.
"The shortfall was primarily due to lower profits at Canfor Pulp and lower selling prices for residual chips," BMO Capital Markets analyst Stephen Atkinson wrote in a note to clients.
The company reported late Wednesday a loss of $16.2 million or 11 cents per share for the quarter compared with a profit of $7 million or five cents per share per share a year ago.
Revenue totalled $607.6 million, down from $624 million.
After adjusting for one-time items, Canfor said it lost $22.3 million or 16 cents per share in its latest quarter, compared with a profit of $100,000 or a year ago.
While North American lumber markets improved, high inventories resulted in weaker demand and prices for low grade lumber in China.
"Looking ahead, the North American lumber market is projected to continue its modest recovery, while low grade prices to China are projected to see a marked improvement in the second quarter," Canfor said.
"The global softwood pulp market is anticipated to improve modestly through the second quarter."
RBC Capital Markets analyst Paul Quinn noted the results were weaker than expected, but Canfor's balance sheet remains strong "putting the company in a comfortable position to make more acquisitions."
Canfor cuts timber and produces and supplies lumber, plywood, veneer, oriented strandboard, bleached softwood kraft pulp and other products.
It also owns just over half of the Canfor Pulp Limited Partnership, a major pulp and paper producer.
Canfor has operations in B.C., Alberta, Quebec, Washington state, and North and South Carolina.
