July 22, 2010 / 5:20 PM / 7 years ago

Canfor Pulp ups FY10 capex to fund green energy projects

* Raises 2010 capex by C$34 million

* Sees uncertainty in China market

* Q2 earnings per unit C$0.62 vs C$0.12 year ago

* Units up 2 pct

July 22 (Reuters) - Canfor Pulp Income Fund CFX_u.TO said Thursday it was raising capital expenditure for 2010 to fund its green energy projects, a day after it posted a five-fold increase in quarterly income.

Canfor expects to spend about C$70 million ($66.79 million) on capital expenditures for the full year, up C$34 million from its previous outlook, resulting from advancing its green transformation spending.

In October last year, Canfor was one among the 24 pulp producers in Canada, including Mercer International MRIu.TO and Catalyst Paper CTL.TO, which qualified for credits under the Canadian government’s Green Transformation Program.

The program aims at improving the environmental performance and energy efficiency of Canada’s pulp and paper industry by financing capital projects with environmental benefits.

Canfor, which was awarded credits of C$122.2 million, recently got a nod from the government to proceed with two green transformation program projects totaling C$15.6 million.

Chief Financial Officer Terry Hodgins, on a conference call with analysts, attributed the increase in capital expenditure to detailed engineering and equipment procurement requirements, in order to meet the March 31, 2012 funding deadline for the program.

The fund, which has a 49.8 percent ownership in Canfor Pulp Ltd Partnership, said Wednesday it earned C$22.1 million or 62 Canadian cents per unit, compared with C$4.4 million or 12 Canadian cents per unit a year ago, driven by higher pulp prices.

Canfor, however, reduced price by US$30 to US$990 per ton, effective August 1, citing a fall in pulp consumption from China and Asia coupled with a typical seasonal slowdown during the summer months.

“We have mixed signals...there is recent downward pressure on pricing primarily coming from China, and we expect to settle down US$50 to US$840 per ton in Asia in July,” Chief Executive Joe Nemeth said in the call.

The fund also increased monthly distribution to 22 Canadian cents per unit from 20 Canadian cents per unit starting July, for payment on August 13.

Units of the Vancouver-based company touched a high of C$14.76, before paring some gains to trade up 2 percent at C$14.33 Thursday on the Toronto Stock Exchange. (Reporting by Gowri Jayakumar in Bangalore; Editing by Vyas Mohan)

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