Interfor Reports Q1’24 Results
Adjusted EBITDA loss of $22 million and Net Loss of $73 million BURNABY, British Columbia, May 09, 2024 (GLOBE NEWSWIRE) -- INTERFOR CORPORATION (“Interfor” or the “Company”) (TSX: IFP) recorded a Net loss in Q1’24 of $72.9 million, or $1.42 per share, compared to a Net loss of $169.0 million, or $3.29 per share in Q4’23 and a Net loss of $41.3 million, or $0.80 per share in Q1’23. Adjusted EBITDA was a loss of $22.3 million on sales of $813.2 million in Q1’24 versus a loss of $51.4 million on sales of $785.9 million in Q4’23 and Adjusted EBITDA of $26.1 million on sales of $829.9 million in Q1’23. Notable items: Ongoing Weak Lumber Market Lumber prices continued to reflect an imbalance of lumber supply and demand, with demand continuing to be impacted by the elevated interest rate environment and ongoing economic uncertainty. Lumber prices improved slightly during Q1’24 as reflected in Interfor’s average selling price of $610 per mfbm, up $9 per mfbm versus Q4’23.Lumber production totalled 1.1 billion board feet, representing a 33 million board feet decrease over Q4’23. This decrease reflects the indefinite curtailment of the Philomath, OR sawmill and temporary production curtailments at the Company’s B.C. operations during Q1’24, primarily related to the ongoing weak lumber market conditions and low log inventory levels. Lumber shipments were 1.1 billion board feet, or 54 million board feet higher than Q4’23.On April 30, 2024, Interfor announced plans to reduce its lumber production by approximately 175 million board feet between May and September of 2024, representing just under 10% of its normal operating stance. Strategic Capital Investments Capital spending was $26.0 million, including $15.8 million of discretionary investment focused on the multi-year rebuild of the Thomaston, GA sawmill. Ongoing Monetization of Coastal B.C. Operations The Company sold Coastal B.C. forest tenures totalling approximately 205,000 cubic metres of allowable annual cut (“AAC”) and related assets and liabilities for proceeds of $31.5 million and a gain of $31.2 million. Interfor held approximately 1,187,000 cubic metres of AAC for disposition at March 31, 2024, subject to approvals from the Ministry of Forests. Financial Position Net debt at quarter-end was $897.4 million, or 34.7% of invested capital, with available liquidity of $299.7 million.On March 26, 2024, the Company issued US$33.3 million of Senior Secured Notes, bearing interest at 6.37% with principal repayment due at final maturity on March 26, 2030. The proceeds were used to settle US$33.3 million of principal under the Company’s existing Senior Secured Notes due on March 26, 2024. Interfor’s Senior Secured Notes now have a weighted average interest rate of 5.46% with laddered maturities spanning 2025-2033.Liquidity is expected to benefit over the course of 2024 from the collection of income taxes receivable totalling $64.3 million and the ongoing monetization of Coastal B.C. operations. Softwood Lumber Duties Interfor expensed $7.5 million of duties in the quarter, representing the full amount of countervailing (“CV”) and anti-dumping (“AD”) duties incurred on shipments of softwood lumber from its Canadian operations to the U.S. at a combined rate of 8.05%.On February 1, 2024, the U.S. Department of Commerce issued its preliminary combined all others rate of 13.86% for its fifth administrative review covering shipments for the year ended December 31, 2022. The preliminary rate is subject to change until the final rate determinations, which are expected in mid-2024. At such time, the final combined rate will be applied to new lumber shipments. No adjustments have been recorded in the financial statements as of March 31, 2024 to reflect the preliminary all others duty rate announced.Interfor has cumulative duties of US$560.0 million, or approximately $10.77 per share on an after-tax basis, held in trust by U.S. Customs and Border Protection as at March 31, 2024. Except for US$161.8 million recorded as a receivable in respect of overpayments arising from duty rate adjustments and the fair value of rights to duties acquired, Interfor has recorded the duty deposits as an expense. Outlook North American lumber markets over the near term are expected to remain depressed as the economy continues to adjust to inflationary pressures, elevated interest rates, labour shortages and geo-political uncertainty, and industry-wide lumber production continues to adjust to match demand. Interfor expects that over the mid-term, lumber markets will continue to benefit from favourable underlying supply and demand fundamentals. Positive demand factors include the advanced age of the U.S. housing stock, a shortage of available housing and various demographic factors, while growth in lumber supply is expected to be limited by extended capital project completion and ramp-up timelines, labour availability and constrained global fibre availability. Interfor’s strategy of maintaining a diversified portfolio of operations in multiple regions allows the Company to both reduce risk and maximize returns on capital over the business cycle. In the event of a sustained lumber market downturn, Interfor maintains flexibility to significantly reduce capital expenditures and working capital levels, and to proactively adjust its lumber production to match demand. Financial and Operating Highlights1 For the three months ended Mar. 31Mar. 31Dec. 31 Unit202420232023 Financial Highlights2 Total sales$MM813.2829.9785.9Lumber$MM670.7642.5628.5Logs, residual products and other$MM142.5187.4157.4Operating loss$MM(80.9)(36.3)(174.2)Net loss$MM(72.9)(41.3)(169.0)Net loss per share, basic$/share(1.42)(0.80)(3.29)Adjusted EBITDA3$MM(22.3)26.1(51.4)Adjusted EBITDA margin3%(2.7%)3.1%(6.5%) Total assets$MM3,426.33,695.13,400.3Total debt$MM980.7946.2897.7Net debt3$MM897.4880.0842.7Net debt to invested capital3%34.7%30.7%32.8%Annualized return on capital employed3%(9.1%)(5.0%)(28.0%) Operating Highlights Lumber productionmillion fbm1,0691,0311,102U.S. Southmillion fbm480473485U.S. Northwestmillion fbm141142157Eastern Canadamillion fbm288250275B.C.million fbm160166185Lumber salesmillion fbm1,1001,0041,046Lumber - average selling price4$/thousand fbm610639601 Key Statistics Benchmark lumber prices5 SYP CompositeUS$ per mfbm383442373KD H-F Stud 2x4 9’US$ per mfbm455428423Eastern SPF CompositeUS$ per mfbm489474461Western SPF CompositeUS$ per mfbm416399374 USD/CAD exchange rate6 Average1 USD in CAD1.34861.35251.3624Closing1 USD in CAD1.35501.35331.3226 Notes: Figures in this table may not equal or sum to figures presented elsewhere due to rounding.Financial information presented for interim periods in this release is prepared in accordance with IFRS and is unaudited.Refer to the Non-GAAP Measures section of this release for definitions and reconciliations of these measures to figures reported in the Company’s unaudited condensed consolidated interim financial statements.Gross sales including duties and freight.Based on Random Lengths Benchmark Lumber Pricing.Based on Bank of Canada foreign exchange rates. Liquidity Balance Sheet Interfor’s Net debt at March 31, 2024 was $897.4 million, or 34.7% of invested capital, representing an increase of $54.7 million from the level of Net debt at December 31, 2023. As at March 31, 2024 the Company had net working capital of $352.7 million and available liquidity of $299.7 million, based on the available borrowing capacity under its $600.0 million Revolving Term Line (“Term Line”). The Term Line and Senior Secured Notes are subject to financial covenants, including a net debt to total capitalization ratio and an EBITDA interest coverage ratio. Management believes, based on circumstances known today, that Interfor has sufficient working capital and liquidity to fund operating and capital requirements for the foreseeable future. For the three months ended Mar. 31Dec. 31Mar. 31Millions of Dollars202420232023 Net debt Net debt, period opening$842.7$777.7$720.4Term Line net drawings60.939.9149.5(Increase) decrease in cash and cash equivalents(27.6)43.910.8Foreign currency translation impact on U.S. Dollar denominated cash and cash equivalents and debt21.4(18.8)(0.7)Net debt, period ending$897.4$842.7$880.0 On March 26, 2024, the Company issued US$33.3 million of Series I Senior Secured Notes, bearing interest at 6.37% with principal repayment due at final maturity on March 26, 2030. The proceeds were used to settle US$33.3 million of principal under the Company’s existing Series C Senior Secured Notes due on March 26, 2024. Capital Resources The following table summarizes Interfor’s credit facilities and availability as of March 31, 2024: RevolvingSenior TermSecured Millions of DollarsLineNotesTotalAvailable line of credit and maximum borrowing available$600.0$655.5$1,255.5Less: Drawings325.2655.5980.7Outstanding letters of credit included in line utilization58.4-58.4Unused portion of facility$216.4$ -216.4Add: Cash and cash equivalents 83.3Available liquidity at March 31, 2024 $299.7 Interfor’s Term Line matures in December 2026 and its Senior Secured Notes have maturities in the years 2025-2033. As of March 31, 2024, the Company had commitments for capital expenditures totaling $48.8 million for both maintenance and discretionary capital projects. Non-GAAP Measures This MD&A makes reference to the following non-GAAP measures: EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, Net debt to invested capital and Annualized return on capital employed which are used by the Company and certain investors to evaluate operating performance and financial position. These non-GAAP measures do not have any standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other issuers. The following table provides a reconciliation of these non-GAAP measures to figures as reported in the Company’s audited consolidated financial statements (unaudited for interim periods) prepared in accordance with IFRS: For the three months ended Mar. 31Mar. 31Dec. 31Millions of Dollars except number of shares and per share amounts1 202420232023 Adjusted EBITDA Net loss $(72.9)$(41.3)$(169.0)Add: Depreciation of plant and equipment 46.745.148.9Depletion and amortization of timber, roads and other 10.912.211.4Finance costs 11.910.910.6Income tax recovery (10.8)(11.5)(66.4)EBITDA (14.2)15.4(164.5)Add: Long-term incentive compensation expense (recovery) (1.7)2.64.6Other foreign exchange loss (gain) 16.6-(15.0)Other expense (income) excluding business interruption insurance (25.7)6.565.6Asset write-downs and restructuring costs 2.71.657.9Adjusted EBITDA $(22.3)$26.1$(51.4)Sales $813.2$829.9$785.9Adjusted EBITDA margin (2.7%)3.1%(6.5%) Net debt to invested capital Net debt Total debt $980.7$946.2$897.7Cash and cash equivalents (83.3)(66.2)(55.0)Total net debt $897.4$880.0$842.7Invested capital Net debt $897.4$880.0$842.7Shareholders' equity 1,689.71,985.21,730.4Total invested capital $2,587.1$2,865.2$2,573.1Net debt to invested capital2 34.7%30.7%32.8% Annualized return on capital employed Net loss $(72.9)$(41.3)$(169.0)Add: Finance costs 11.910.910.6Income tax recovery (10.8)(11.5)(66.4)Loss before income taxes and finance costs $(71.8)$(41.9)$(224.8)Capital employed Total assets $3,426.3$3,695.1$3,400.3Current liabilities (332.3)(343.0)(336.2)Less: Current portion of long-term debt 45.252.444.1Current portion of lease liabilities 20.514.817.2Capital employed, end of period $3,159.7$3,419.3$3,125.4Capital employed, beginning of period 3,125.43,316.03,293.5Average capital employed $3,142.6$3,367.7$3,209.5Loss before income taxes and finance costs divided by average capital employed (2.3%)(1.2%)(7.0%)Annualization factor 4.04.04.0Annualized return on capital employed (9.1%)(5.0%)(28.0%) Notes: Figures in this table may not equal or sum to figures presented elsewhere due to rounding.Net debt to invested capital as of the period end. CONDENSED CONSOLIDATED STATEMENTS OF EARNINGSFor the three months ended March 31, 2024 and 2023 (unaudited)(millions of Canadian Dollars except per share amounts) Three MonthsThree Months Mar. 31, 2024Mar. 31, 2023 Sales $813.2$829.9 Costs and expenses: Production 808.2776.8Selling and administration 19.817.2Long-term incentive compensation expense (recovery) (1.7)2.6U.S. countervailing and anti-dumping duty deposits 7.510.7Depreciation of plant and equipment 46.745.1Depletion and amortization of timber, roads and other 10.912.2 891.4864.6 Operating loss before asset write-downs and restructuring costs (78.2)(34.7) Asset write-downs and restructuring costs 2.71.6Operating loss (80.9)(36.3) Finance costs (11.9)(10.9)Other foreign exchange loss (16.6)-Other income (expense) 25.7(5.6) (2.8)(16.5) Loss before income taxes (83.7)(52.8) Income tax expense (recovery): Current 2.6(5.5)Deferred (13.4)(6.0) (10.8)(11.5) Net loss $(72.9)$(41.3) Net loss per share Basic $(1.42)$(0.80)Diluted $(1.42)$(0.80) CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMEFor the three months ended March 31, 2024 and 2023 (unaudited)(millions of Canadian Dollars) Three MonthsThree Months Mar. 31, 2024Mar. 31, 2023 Net loss $(72.9)$(41.3) Other comprehensive income (loss): Items that will not be recycled to Net loss: Defined benefit plan actuarial gain, net of tax 2.60.6 Items that may be recycled to Net loss: Foreign currency translation differences for foreign operations, net of tax 29.5(1.5)Total other comprehensive income (loss), net of tax 32.1(0.9) Comprehensive loss $(40.8)$(42.2) CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWSFor the three months ended March 31, 2024 and 2023 (unaudited)(millions of Canadian Dollars) Three MonthsThree Months Mar. 31, 2024Mar. 31, 2023 Cash provided by (used in): Operating activities: Net loss $(72.9)$(41.3)Items not involving cash: Depreciation of plant and equipment 46.745.1Depletion and amortization of timber, roads and other 10.912.2Deferred income tax recovery (13.4)(6.0)Current income tax expense (recovery) 2.6(5.5)Finance costs 11.910.9Other assets (0.4)0.1Reforestation liability 3.14.8Provisions and other liabilities (1.2)2.5Stock option vesting 0.10.2Write-down of plant and equipment 1.11.5Unrealized foreign exchange loss 10.70.2Other expense (income) (25.7)5.6Income taxes refunded (paid) 1.6(0.4) (24.9)29.9Cash generated from (used in) operating working capital: Trade accounts receivable and other 1.8(53.9)Inventories 11.8(32.5)Prepayments 3.53.6Trade accounts payable and provisions (8.8)(31.7) (16.6)(84.6) Investing activities: Additions to property, plant and equipment (26.5)(63.1)Recoveries from (additions to) roads and bridges 0.5(0.5)Acquisitions, net of cash acquired -0.5Proceeds on disposal of property, plant, equipment and other 1.14.1Net proceeds related to B.C. Coast monetization 29.0-Net proceeds from (additions to) deposits and other assets (1.0)0.9 3.1(58.1) Financing activities: Issuance of share capital, net of expenses -0.1Interest payments (13.9)(13.1)Lease liability payments (5.9)(4.5)Debt refinancing costs -(0.1)Revolving Term Line net drawings 60.9149.5Additions to Senior Secured Notes 45.3-Repayments of Senior Secured Notes (45.3)- 41.1131.9 Foreign exchange gain (loss) on cash and cash equivalents held in a foreign currency 0.7(0.6)Increase (decrease) in cash 28.3(11.4) Cash and cash equivalents, beginning of period 55.077.6 Cash and cash equivalents, end of period $83.3$66.2 CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITIONMarch 31, 2024 and December 31, 2023 (unaudited)(millions of Canadian Dollars)Mar. 31, 2024Dec. 31, 2023 Assets Current assets: Cash and cash equivalents $83.3 $55.0Trade accounts receivable and other184.5184.4Income tax receivable64.368.4Inventories329.2339.2Prepayments23.726.9 685.0673.9 Employee future benefits17.815.5Deposits and other assets281.6274.6Right of use assets40.437.1Property, plant and equipment1,610.01,612.9Roads and bridges31.935.9Timber licences168.6170.4Goodwill and other intangible assets584.4574.7Deferred income taxes6.65.3 $3,426.3$3,400.3 Liabilities and Shareholders’ Equity Current liabilities: Trade accounts payable and provisions$250.3$258.9Current portion of long-term debt45.244.1Reforestation liability16.115.8Lease liabilities20.517.2Income taxes payable0.20.2 332.3336.2 Reforestation liability31.528.4Lease liabilities22.523.1Long-term debt935.5853.6Employee future benefits11.211.3Provisions and other liabilities48.854.6Deferred income taxes354.8362.7 Equity: Share capital408.9408.9Contributed surplus6.36.2Translation reserve175.0145.5Retained earnings1,099.51,169.8 1,689.71,730.4 $3,426.3$3,400.3 Approved on behalf of the Board of Directors: “L. Sauder” “T.V. Milroy” Director Director FORWARD-LOOKING STATEMENTS This release contains forward-looking information about the Company’s business outlook, objectives, plans, strategic priorities and other information that is not historical fact. A statement contains forward-looking information when the Company uses what it knows and expects today, to make a statement about the future. Statements containing forward-looking information may include words such as: will, could, should, believe, expect, anticipate, intend, forecast, projection, target, outlook, opportunity, risk or strategy. Readers are cautioned that actual results may vary from the forward-looking information in this release, and undue reliance should not be placed on such forward-looking information. Risk factors that could cause actual results to differ materially from the forward-looking information in this release are described in Interfor’s first quarter and annual Management’s Discussion and Analysis under the heading “Risks and Uncertainties”, which are available on www.interfor.com and under Interfor’s profile on www.sedarplus.ca. Material factors and assumptions used to develop the forward-looking information in this release include the timing and value of proceeds received from the disposition of Coast B.C. forest tenures; availability and cost of logs; competition; currency exchange sensitivity; environment; government regulation; health and safety; Indigenous reconciliation; information technology and cyber security; labour availability; logistics availability and cost; natural and man-made disasters and climate change; price volatility; residual fibre revenue; softwood lumber trade; and tax exposures. Unless otherwise indicated, the forward-looking statements in this release are based on the Company’s expectations at the date of this release. Interfor undertakes no obligation to update such forward-looking information or statements, except as required by law. ABOUT INTERFOR Interfor is a growth-oriented forest products company with operations in Canada and the United States. The Company has annual lumber production capacity of approximately 5.0 billion board feet and offers a diverse line of lumber products to customers around the world. For more information about Interfor, visit our website at www.interfor.com. The Company’s unaudited condensed consolidated interim financial statements and Management’s Discussion and Analysis for Q1’24 are available at www.sedarplus.ca and www.interfor.com. There will be a conference call on Friday, May 10, 2024 at 8:00 a.m. (Pacific Time) hosted by INTERFOR CORPORATION for the purpose of reviewing the Company’s release of its first quarter 2024 financial results. The dial-in number is 1-888-390-0546 or webcast URL: https://app.webinar.net/6KxkZo3ZQRB. The conference call will also be recorded for those unable to join in for the live discussion and will be available until June 10, 2024. The number to call is 1-888-390-0541, Passcode 166100#. For further information:Richard Pozzebon, Executive Vice President and Chief Financial Officer(604) 422-3400
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