Canfor Corp's (CFPZF) CEO Don Kayne on Q1 2016 Results - Earnings Call Transcript

| About: Canfor Corp. (CFPZF)

Canfor Corp. (OTCPK:CFPZF) Q1 2016 Earnings Conference Call April 28, 2016 11:00 AM ET

Executives

Don Kayne - CEO

Alan Nicholl - SVP of Finance and CFO

Brett Robinson - President, Canfor Pulp

Wayne Guthrie - SVP, Sales and Marketing

Peter Hart - VP, Pulp and Paper Sales and Marketing

Stephen Mackie - SVP, Canadian Operations

Analysts

Anojja Shah - BMO Capital Markets

Sean Stewart - TD Securities

Paul Quinn - RBC Capital Markets

Unidentified Analyst - Raymond James

Hamir Patel - CIBC Capital Markets

Operator

Good morning, ladies and gentlemen. And welcome to the Canfor and Canfor Pulp's First Quarter Analyst Call. A recording and transcript of the call will be available on the Canfor and Canfor Pulp websites. During this call Canfor and Canfor Pulp's Chief Financial Officer will be referring to a slide presentation that is available in the Investor Relations section of each company's website. Also the companies would like to point out that this call will include forward-looking statements, so please refer to the press releases for the associated risks of such statements.

I would now like to turn the meeting over to Mr. Don Kayne, Canfor and Canfor Pulp's Chief Executive Officer. Please go ahead, Mr. Kayne.

Don Kayne

Thank you, operator and good morning. And thank you for joining the Canfor and Canfor Pulp Q1 2016 results conference call this morning. I'll make a few brief opening comments about the quarter, before I turn things over to Alan Nicholl, our Chief Financial Officer for both Canfor Corporation and Canfor Pulp Products Incorporated. Alan will provide a more detailed overview of our performance in Q1 after which we will take questions. In addition to Alan with me today are Brett Robinson, our President of Canfor Pulp; Peter Hart our Vice President of Pulp Sales; Wayne Guthrie our Senior Vice President of Lumber Sales and Marketing; and Stephen Mackie, our Senior Vice President of Operations.

Canfor Pulp had another strong quarter with solid operational performance. Markets for pulp were steady in the quarter and our higher grade premium reinforcing pulp continues to see solid demand. Looking ahead we see modest price improvements for the second quarter as the industry goes through their annual maintenance shutdowns. Looking forward we are cautious about the back half of the year with additional tonnage expected to enter the market in both softwood and hardwood pulp. However we expect our solid operational performance and high value PRP focus to continue to benefit us.

Turning to the lumber side of our business, in the first quarter we continue to see the benefits of our U.S. South acquisitions. Pricing was solid for our unique high value specialty products and spreads for a wider width improved during the quarter, a trend we expect to continue in Q2 and Q3. Our Canadian mill has continued to perform well in quarter one with solid productivity gains, cost improvements, as well as increased recovery of higher value products. Additionally the weaker Canadian dollar improved realizations also contributing to improved profitability in the quarter. In early April we completed our purchase of Wynndel Lumber in South Eastern BC and as with our recent U.S. South purchases Wynndel produces high quality specialty products.

Looking at markets briefly, in China we are seeing continuing improvements in underlying demand, order files are increasing, pricing is moving higher, and inventories are decreasing. We are confident we will achieve our targets in China in 2016. In the U.S. we continue to see solid demand. As mentioned previously we expect to see the usual seasonal improvement in spreads for southern yellow pine wide or widths in Q2 and Q3, a clear trend that has occurred in each of the last four years. Inventories overall appeared balanced and we expect supply to grow slowly during the year in line with demand. We expect pricing to slowly improve throughout the year.

With that I’ll turn the call over to Alan Nicholl to provide an overview of our financial results.

Alan Nicholl

Well thanks Don and good morning everyone. As usual my comments this morning will focus principally on our financial performance for the first quarter of 2016 by reference to the previous quarter. Full details of our results are contained in the Canfor Pulp and Canfor news releases both of which were issued yesterday morning. As always, you will find an overview slide presentation on both the Canfor and Canfor Pulp websites in the Investor Relations section under Webcasts. The presentation highlights consolidated unsegmented results that I will be referring to in this presentation during my comments.

For the first quarter of 2016, Canfor reported shareholder net income of $26 million or $0.20 a share, up from a net income of $2 million or $0.01 a share reported for the fourth quarter of 2015 and down from net income of $29 million or $0.22 a share reported for the first quarter of 2015. On slide 3 of our presentation, we highlighted the various non-operating items net of tax and non-controlling interest, which affect the comparability of our results between the quarters. In the first quarter of 2016 the foreign exchange gain on long-term debt had a positive impact of $7 million or $0.05 a share which more than offset a negative mark-to-market adjustment on derivative instruments of $2 million or $0.01 a share.

After taking account of these adjustments, the first quarter adjusted shareholder net income was $21 million or $0.16 a share compared to similarly adjusted net income of $8 million or $0.06 a share for the previous quarter. Results for the lumber segment are highlighted on slide 5, of our presentation. The lumber segment recorded operating income of $33 million, a $32 million increase from the $1 million reported for the previous quarter after taking a kind of onetime adjustments in Q4. The increase reflected a full quarter of earnings from Anthony Forest Products our most recent acquisition in the U.S. side as well as a modest improvement in lumber market conditions and a solid improvement in productivity particularly at our Western Canadian saw mills.

Unit sales realizations were slightly higher in Canada reflecting a weaker Canadian dollar and a slightly higher U.S. dollar prices. In the U.S., higher benchmark pricing and improving prices for wider dimensions increased realizations in that region as well. Overall unit manufacturing cost were in line with the previous quarter reflecting the impact from the aforementioned productivity gains which largely offset a modest increase in unit low cost in Western Canada. Lumber shipments were flat compared to the fourth quarter but were up 16% compared to the first quarter of 2015 reflecting our growth in the U.S. side during 2015 and to a lesser extent productivity gains.

Canfor’s pulp and paper segment comprises the results of Canfor Pulp Products, Inc. As you can see on slide 6, Canfor Pulp reported net income of $23 million or $0.34 a share compared to net income of $30 million or $0.43 a share for the fourth quarter and net income of $28 million or $0.40 per share for the first quarter of 2015. As you’ll see on slide 6, Canfor Pulp had no adjusting items in the first quarter.

In the fourth quarter of 2015, adjusted net income was $29 million or $0.42 a share and in the first quarter of 2015 adjusted net income was $35 million or $0.50 per share. The lower income on an adjusted basis in the first quarter reflected principally foreign exchange losses on U.S. dollar working capital balances in contrast to gains in both of the comparative periods.

Canfor Pulp's operating results are summarized on slide 7. The solid performance in the current quarter reflected a relatively balanced softwood pulp market as increased customer restocking absorbs additional supply during the quarter. Pulp sales realizations were slightly lower reflecting lower transaction prices and a lower proportion of North American shipments partially offset by the weaker Canadian dollar.

Total Pulp shipments were 10% lower than the previous quarter reflecting a return to more normalized sales levels following a draw-down of inventory in the previous quarter. Unit manufacturing costs were moderately lower principally reflecting lower fiber and maintenance cost. The sales in the paper segment were up from the previous quarter by $2 million largely reflecting the positive impact of the weaker Canadian dollar on paper sales realizations as well as an increase proportion of higher price prime product shipments in the current quarter. Looking ahead to the second quarter, the scheduled major maintenance shut times at Intercon and Northwood will reduce production by around 38,000 tons and will have a related impact on shipments and earnings in the second quarter.

Turning to capital spending, capital spending in the first quarter of 2016 totaled $47 million of which 33 million was in the lumber business and $13 million was for Canfor Pulp. 2016 capital spend is projected to be around $150 million for Canfor and $75 million for Canfor Pulp.

During the first quarter, Canfor Pulp repurchased approximately 413,000 of its common shares at an average price of $11.87 per share. There were no shares repurchased for Canfor recognizing that the company is prioritizing debt reduction in 2016 after the significant growth that we’ve undertaken in 2015.

For the first quarter, Canfor Pulp’s Board of Directors approved the continuance of a quarterly dividend of $6.25 per share. And at the end of the first quarter, Canfor is splitting Canfor Pulp a net debt of $485 million with available liquidity of a 145 million. Canfor Pulp had net debt of $27 million with available liquidity of $121 million. Net debt to total capitalization excluding Canfor Pulp was 26%, for Canfor Pulp it was 5%, and on a consolidated basis 24%. And with that Don, I’ll turn the call back over to you.

Don Kayne

Alright thanks Alan and operator we’ll now turn the call over to questions.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions]. Your first question comes from Anojja Shah from BMO. Please go ahead.

Anojja Shah

Hi there, we were hoping to get an update on the U.S. Canadian lumber trade negotiations if possible?

Don Kayne

For sure. Its Don, I’d be happy to do that although it will be pretty brief. But overall I mean from our understanding, the USTR in the United States and the FEDS are continuing to talk, continue to drive our figure out if there is a deal to be done here. Of course we’ve been supportive and we will continue to support that. We were hopeful of course that we’ll be able to do something although there is lots of challenges. Time is running out, we think that we are getting -- we don’t have a lot of time left here to try to get a deal. But we’re certainly hopeful that that’s what will occur. But on the same -- I guess on the same vain we also prefer for other outcomes if they were also to occur. So that’s really all I can say at this point. Probably hopefully we will know more here over the next two to four weeks.

Anojja Shah

Right, okay, thank you. And then do you think Canadian producers would ever accept that quota based approach?

Don Kayne

Well, I can’t speak for anybody else other than ourselves. But, I mean I think that in terms of Canfor’s view on that we would not -- quota is a very challenging option for us for sure and we would have a difficult time agreeing to anything to do with the quota.

Anojja Shah

Okay, thank you for that. And then if we could just get a quick update on the Chinese market, I am not sure if I missed it and your volumes into China?

Don Kayne

Yes, for sure or maybe I’ll pass it on to Wayne to give you some comments on that Wayne?

Wayne Guthrie

Excuse me, on the lumber side its steady. It kind of bottomed out in late 2015 and it’s been steadily improving ever since. I think we are not going back to the hay days of 2013 but I think lumber shipments out of Canada into China for 2016 will be about on par with last year. It’s a little bit better than we expected, it has improved better than we expected. Inventory levels are in good shape in China. And I think the consumption of our lumber over there has changed a little bit from a pure construction play to a lot more consumption in manufacturing, in industrial packaging, and in furniture. So I think that evolution is continuing here. Our volume will actually be off a little bit we think by the end of 2016 but only because with a little bit better log we’re producing less low grades. So that’s going to impact our volume, but the market is steady there.

Don Kayne

Peter maybe on the pulp side you got to few comments you can make around China as well.

Peter Hart

Thank you Don. Yes, right now we’re seeing positive production in China through the second quarter particularly as the industry goes through its spring maintenance. And overall China buys approximately 30% of the worlds softwood and that typically goes up every year. So we expect that to continue.

Anojja Shah

Great, thank you very much. And if I could just ask one last one, any impact from the recent strengthening of the Canadian dollar on your lumber and pulp businesses, just some specifics on that?

Don Kayne

I think our view on that is the dollar is going to do what the dollar is going to do period. And I mean we are really more focused on what we can control and that’s really around the controllables at our saw mills and our pulp mills making sure that we’re getting the maximum utilization out of everything and the best recovery and productivity we can possibly get. And we’re certainly seeing that and that’s where we are really heavily focused on. And first we’d like to see a lower dollar maybe but at the end the day it is going to do what it is going to do. So…

Anojja Shah

Okay, thank you very much.

Don Kayne

Okay.

Operator

Thank you. Your next question comes from Sean Stewart from TD please go ahead.

Sean Stewart

Thanks, good morning everyone. Couple of questions, at the Canfor level you weren't active on your buyback in Q1 despite the weaker average share price through the quarter. Wondering Don if you can comment on capital allocation priorities, you have levered up the balance sheet a little bit to facilitate some of your recent growth. And I guess what I am wondering is, is there a bias to preserving liquidity in events of potential softwood lumber trade action, does that factor into your short-term capital allocation decisions?

Don Kayne

Yes, for sure. Maybe Alan you can talk first on that.

Alan Nicholl

Good morning Sean, I made the point about our debt reduction focus and I think you touched on it in your initial comments. Clearly we’ve grown quite significantly in the last couple of years. We are very, very pleased with our U.S. acquisitions all running very well. But as you've noted our debt-to-cap has risen somewhat and we have typically guided before to wanting more a 10% 20% debt-to-cap or something in that neighborhood and we’ve always I think been on record to say that’s one of our top priorities. So what you are seeing there is really more of our focus on having a strong balance sheet. It is not being driven by what you indicated maybe or thought might have been the case in your other comments there.

Sean Stewart

Got it and second question is on cost [ph] in BC, your largest competitors is expecting $46 per cubic meter inflation come July, is that consistent with what you guys are expecting for your BC interior mills?

Don Kayne

Yes, for sure Sean, maybe I’ll just talk about that a bit because there is a few -- there is lots of the areas around log costing, maybe we should just talk briefly on it. First of all we’ve guided before and we’re still consistent with that 4% to 5% is what we use to have in the last few quarters. And so that’s clearly still now what we feel. I think there is a bit more to it and in addition to that I think it would be safe to say from our operations standpoint for our viewpoint is that we also through that we’re seeing a better quality logs in some cases as well as we green up from the post Beatle era. Not to say we still don’t have that in some areas for sure. But definitely the quality overall has improved along with some of those increases that we’re forecasting which gives us an opportunity and we’re seeing it in terms of improving our top line growth.

And as the direct result of additional specialty products that we or have been focused on for some time but even more -- I think there is even more opportunity going forward here. And I think so there is that. The other part of it is as you are aware we spent significant dollars in capital over the last several years and we’re seeing -- we saw this quarter we saw some of the last quarter but as we now operate at full production rates we’re certainly starting to see the productivity increases at all the mills that had capital to a positive degree as well as a conversion cost as well.

So we are seeing some of that which we think will further mitigate some of the price inflation that we will see on logs overall. And I think the other part of it is we also believe in British Columbia just talking in British Columbia that we’ve taken a tough medicine ourselves. We believe our fiber position now is a result of the -- its 8 or 10 mills that we’ve shut over the last 10 years. From a fiber standpoint we believe we’re well positioned there now going forward. But on the same graph there is still we believe in the province going to need to be probably another 5 or 8 mills that are going to still have to make some of those tough decisions. So from our standpoint as the long winded answer Sean, but just want to give you a little more color there around that whole log cost piece is that something that we spent an awful lot of time on and we’ll continue to because it is pretty important right. So, hopefully that gives a little bit broader explanation there.

Sean Stewart

That's great detail, thanks very much Don.

Operator

Thank you. Your next question comes from Paul Quinn from RBC Capital Markets. Please go ahead.

Paul Quinn

Yes, thanks very much. Good morning guys.

Don Kayne

Good morning

Paul Quinn

Just a question on North American lumber markets, just where you characterize inventory levels at right now. It seems like we had a first rally a couple of months ago and now it looks like we’ve got a second rally in lumber prices, whether you think this is sustainable as well.

Don Kayne

For sure. So maybe I’ll pass it on to Wayne here. Wayne you give that a shot.

Wayne Guthrie

Sure, I think inventory levels are pretty lean here. I think most of our customers and lot of them are pretty straight buyers, I think they thought there would be a bit more of a pull back here in Q2 which is typical. But you are right, things have started to rally a little bit quicker than we thought. To us it’s very clear that business was a little bit better than they expected in Q1. If you look at the actual number of starts it was much better than the seasonally adjusted headline. I think the guys got caught by surprise with a little bit better business and they are back in buying because we are speculating with these numbers but because there is demand out there that’s maybe a little bit better than they expected. So we think inventory for ourselves our inventory is in very good shape. I don’t remember it being in such good shape going into Q2 and I think our customers are quite, I mean no one is talking about running away but they are quite bullish and need more lumber today. So, lumber prices will always be volatile so I am not sure about the word sustainable but we do think prices will be a little higher in the second half than they were in the first half this year.

Paul Quinn

Okay, great. Thanks Wayne and maybe Don you referenced the 5 to 8 saw mills coming out of BC in the future, just wondering if you see any of those mills having some tough financials, given where lumber prices are in Canadian dollar specifically now, is there -- do you see any movement in 2016 or is this going to be 2017 sort of wait to see what happens on the trade fall?

Don Kayne

Yes, I mean good question. I think the trade file issue for sure depending on the outcome there will can certainly speed up any decisions there without a doubt, right. I think that’s probably the single biggest impact we’ll see and then of course this overall pricing levels as we go through the balance of this year. If it was to stay at relatively low levels I think with some of the bidding behaviors that we’re seeing out in the marketplace and some of the pricing for particularly the purchase wood that pretty much everybody in the province has to get involved in that could also have an impact, right. But I mean there has been -- there has been several reports over the last 12 to 18 months that really articulated what I said at our view around the number of mills at least that have to at some point here go away.

Paul Quinn

Okay and then just back to the trade file, I mean you guys sound hopeful which is probably typically Canadian on getting a deal before the summer. But if that doesn’t happen can you walk us through what happens on potential litigation or action from the U.S. coalition and what the timing of potential duties would be?

Don Kayne

Not to skate around that Paul, it is hard to say exactly because what we are facing this time around is kind of a lot of uncertainty around that. Literally the department of commerce can do different things, right. They are pretty flexible but what we do know was a standstill and I think it is October 15 now they are about anyway. And by the time that there is probably what we have heard and whether that’s true or not, hard to know until we are in that, but that it will be probably be three to four months after that before there is actually duties collected. And so now we will be retroactive no doubt though to back into mid-October. But we probably won't actually see any collections done until sometime in the first quarter of 2017. And in terms of trying to comment on, and I think what you are referring to is TVD versus ADD and how all that works at this point, hard to know yet. I mean we are doing a lot of our own modeling in different scenarios of course but at the end of the day I can’t really comment much more on it than that.

Paul Quinn

Great, thanks very much for the color. Best of luck.

Don Kayne

Okay, thanks Paul.

Operator

Your next question comes from Darrell [indiscernible] from Raymond James. Please go ahead.

Unidentified Analyst

Well, thanks and good morning. Don in your initial comments just on the Chinese market you mentioned that you are hopeful that you would achieve your targets for 2016. I was hoping you could share some of those, are they volume grade end user or a combination of those?

Don Kayne

I think there is a few parts to that but again maybe Wayne you are doing a lot of work on that, so maybe probably give Darrell some comments there.

Wayne Guthrie

Yes, I think it is all of those. Darrell as I mentioned our volume on an absolute basis overall might be off a little bit because of our higher grade mix which is part of the reason why we have got to push on in China to try to move up that chain a little bit. We had a really good first quarter on the high grade there, little bit slower in the second quarter, but I think over the course of the year we’ll stay on track of achieving that higher grade focused into China. Geographically, with the Russian influence you want to have a little bit of focus on the Southern half of China because you are going to get away from your biggest competitor. And we are still trying to develop some interior cities.

Last thing on China, again we’ve tried hard to get some material volumes of yellow pine going there. I think we really had too much success yet but we think over the next year or two we’ll start to move material volumes out of that region as well.

Unidentified Analyst

What sort of net profitability difference will there be to get yellow pine versus the SPF just on transportation?

Wayne Guthrie

Well we got to find -- oh, I see what you mean. So if you look at the yellow pine price matrix, right there is a huge spread between some of the discounted lengths and some of the premium lengths because that -- it is really North America focus down there. So what we are trying to do Darrell is take some of those items that are clearly over supplied in the U.S. market that we think would offer good value for our Chinese customers. And by doing that we think we can drive -- get rid of some of those discounts that we’re having to take down on America. So it will actually be positive but that will take some time to develop.

Unidentified Analyst

Okay, it makes sense. Speaking with just lumber prices and the markets, Don again you mentioned that the spread was wide narrowing in the second and third quarters as I think you said typically the case, what would normally be the drivers of that seasonal change between narrows and wider widths in the southern yellow pine?

Don Kayne

Wayne, why don’t you talk about that.

Wayne Guthrie

Yes, maybe if I could jump in there. So just to clarify Darrell, we said that actually Q2 and Q3 are positive for the spreads in wides. Historically if you go back and look at the last few years that’s been the case. Building season is part of it. What we’re seeing the bigger impact today though is that some of the weather that’s impacted the West and Central zone mills, they have not been able to get in and get the real big timber out. So there has been a lack of supply of wide often there to rail over to the east side. And if you look at east side, wide prices come up substantially here and that’s because it is just a little bit of lack of supply right now.

Now we are going into the building season, so we’ll get a little run on demand as well. So I don’t think 2 by 10 will set any records here but I think we will go back to the positive spreads for Q2 and Q3. 2 by 12 is really, really strong and that’s because it is very thinly produced. There is very few producers who can make material volume and we are lucky to be one of them. So we are enjoying that 2 by 12 premium, we expect that to continue here for a while.

Unidentified Analyst

That’s very helpful, thanks guys.

Don Kayne

Thanks Darrell.

Operator

Thank you. Your next question comes from Hamir Patel from CIBC please go ahead.

Hamir Patel

Hi, good morning. Wayne just following up on Darrell’s question there on the 2 by 12, what proportion of your southern yellow pine volumes is that?

Wayne Guthrie

We don’t actually release the actual number there. But I can tell you it is very small number on the east side which is typical of east side mills. But it’s a substantial part of our mix, the further West you go. So sorry, I don’t release the actual number but I can tell you it’s a big part of what we do on the West side.

Hamir Patel

Fair enough, and just in terms of production growth for the year in the south, what are your expectations for volumes?

Don Kayne

In 2016 you got the –

Hamir Patel

Yes, on an annual basis and maybe we know where that trend 2017?

Alan Nicholl

I think in terms of capacity we are running probably 90% of weighted capacity, the number we typically put in our annual report, something close to that. Clearly our margin focus expresses in just pure volume but we are working on few upgrades as well and expect to get some more volume out of the couple of the mills here before the end of the year and into next year. But roughly 90% of what you see estimated capacity.

Hamir Patel

Thanks Alan and Don just a quick question on the glue lam business, its seems like there is now some assets up for sale with I guess Rosborough [ph], is that a market which you would be interested in growing in more or is there still, I mean you guys are got into it a few months ago. So…

Don Kayne

I think it is too early to tell. I mean we’re certainly pleased with it for sure with what we have seen so far was down there. I saw a couple of weeks ago as seeing both the plants in Georgia and one in Arkansas. And definitely a unique business. I think what is encouraging for us and if you look at being increased vertical integration that we’ve started to see, all the raw material that goes to those two plants which is pretty significant comes from our own saw mills. Right, so it is a real opportunity to add value. And they’ve got a great brand and the brand that power being that they manufacture which is probably familiar with is pretty solid reputation across United States, particularly in the east side. And so, so far we first of all we like what we got into there and I think we’ll have a better view of that in probably in a year's time in terms of what we may want to do further.

Hamir Patel

Thanks, that’s helpful and just following up on Sean’s question on the log prices, you talked about BC what are your expectations in the U.S. South and Alberta.

Don Kayne

In the U.S. South we see real modest inflation in terms of log cost if any. It will be mostly or probably flat but maybe the auditor might have a little bit here and there for the most part not much changed there at all. And there is and in our case anyway we have got significant available timber in every single operation that we have from South Carolina, North Carolina, and then all across the Deep South. We really, really are like the fiber position that we’re in down there. And its big fiber for the most part, it gives a lot of options, lot of flexibility which I think in these markets nowadays that something that you want to have if it is possible to have. And we really believe that’s a strength that we’ve developed over the last 10 years and going forward we should be able to capitalize on that even further.

In terms of Alberta I mean there is lots of things in Alberta. We are relatively small producer in Alberta but an important one and it is an important area for us for sure. And looking at some additional concerns here that we have that we didn’t have to consider so much and whether that’s from the species of risk, whether it’s the Caribou [ph], whether it’s the CBFA, there is lot of different issues I guess that we are facing there that we didn’t before. But still it is still a very good place to do business and we’re real pleased with that operation in Grande Prairie there with 45 million or so, Steven that we put there in capital. So that -- hopefully that answers your question.

Hamir Patel

No, it does and the final question on softwood lumber file. If duties were to hit what -- assuming you would maybe flex some of your volume more into offshore markets what would you say in 2017 is the amount of volume that would be still be crossing that border into the U.S.?

Don Kayne

You are talking just from Canfor’s point of view?

Hamir Patel

Yes, Canfor from your Canadian mills south?

Don Kayne

I mean that’s a really difficult question. What I will say, I mean it is just hard to answer at this stage but what I will tell you though is we think we’re equipped for and prepared for and its mostly from a standpoint as our growth in the South continuing. That’s been aggressive, we have got lots of options there, looking at even going forward what we might do there. The whole focus on the fiber side and the higher value and the top line concentration along with the controllable focus. And even in Canada really with the capital that we spent to make sure that notwithstanding any duties that we may be faced with at least we know that we are as competitive as we can be and have a solid fiber base on a relative basis. And that’s really all that is controllable, that’s all we can really focus on. And clearly the offshore business Wayne and his guys and Steven and his guys in the operations side in terms of lumber and then Peter and Martin and Brett on the pulp side, I mean clearly it has been our focus to diversifying it and I think is the wise thing to do and we’ll continue to do. Not only as a company but as an industry.

Hamir Patel

Okay, great. Thanks Don, that’s all I had.

Don Kayne

Okay, thank you, take care.

Operator

Thank you. There are no further questions. I will now turn the call back over to your presenters.

Don Kayne

Thank you, operator and thanks everybody for joining the call and look forward to talking to you at the end of Q2.

Operator

Ladies and gentlemen, this concludes today’s conference call. We thank you for participating and we ask that you please disconnect your lines.

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