Interfor Reports Q2’24 Results

BURNABY, British Columbia, Aug. 08, 2024 - INTERFOR CORPORATION (“Interfor” or the “Company”) (TSX: IFP) recorded a Net loss in Q2’24 of $75.8 million, or $1.47 per share, compared to a Net loss of $72.9 million, or $1.42 per share in Q1’24 and a Net loss of $14.1 million, or $0.27 per share in Q2’23.  

Adjusted EBITDA was a loss of $16.7 million on sales of $771.2 million in Q2’24 versus a loss of $22.3 million on sales of $813.2 million in Q1’24 and Adjusted EBITDA of $41.9 million on sales of $871.8 million in Q2’23.

Notable items:

• Production Curtailments to Reflect Ongoing Weak Lumber Market

• In Q2’24, lumber production totalled 1.0 billion board feet, representing a 35 million board foot decrease over the prior quarter. This decrease partially reflects the temporary production curtailments announced on April 30, 2024 and the indefinite curtailment of the Philomath, OR sawmill.
• Lumber prices continue 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 decreased slightly during Q2’24 as reflected in Interfor’s average selling price of $602 per mfbm, down $8 per mfbm versus Q1’24.
• In response to the ongoing market weakness, Interfor plans to temporarily reduce its total lumber production by approximately 280 to 350 million board feet between August and December of 2024, representing 15 to 18% of its normal operating stance. The Company will continue to monitor market conditions across all its operations and adjust its plans accordingly.

• Financial Position

• Interfor’s net debt to invested capital ratio was 35.0% at quarter-end, which was comparable to the preceding quarter-end ratio of 34.7%.
• The Company’s financial position benefited in the second quarter from $48.0 million of positive operating cash flow, including a $72.0 million reduction of working capital. This reduction of working capital was due in part to seasonal factors as well as the realization of sustainable operational efficiencies.
• The Company’s available liquidity improved $30.8 million quarter-over-quarter to $330.5 million at June 30, 2024.
• The collection of income tax refunds of approximately $59.0 million and the ongoing monetization of Coastal B.C. operations continue to be expected in the second half of 2024.

• Ongoing Monetization of Coastal B.C. Operations

• The Company sold Coastal B.C. forest tenures totalling approximately 50,000 cubic metres of allowable annual cut (“AAC”) and related assets and liabilities for proceeds of $8.3 million and a gain of $8.2 million. Interfor held approximately 1,137,000 cubic metres of AAC for disposition at June 30, 2024, subject to approvals from the Ministry of Forests.
• Subsequent to quarter-end on July 29, 2024, Interfor sold 104,689 cubic metres of AAC for cash proceeds of $13.2 million.

• Sale of Property and Assets of the former Philomath, OR sawmill

• On June 27, 2024, the Company sold property and assets of the former Philomath, OR sawmill for cash consideration of US$15.0 million. A net non-cash charge of $4.3 million was recorded in conjunction with the disposition.

• Capital Investments

• Capital spending was $17.9 million, including $6.6 million of discretionary investment focused mainly on the multi-year rebuild of the Thomaston, GA sawmill.
• Total capital expenditures for 2024 are now estimated to be approximately $70.0 million, reduced by $20.0 million from prior guidance. This reduction is the result of a review of project returns considering the ongoing lumber market weakness.

• Softwood Lumber Duties

• Interfor expensed $10.8 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%.
• Interfor has cumulative duties of US$569.1 million, or approximately $11.05 per share on an after-tax basis, held in trust by U.S. Customs and Border Protection as at June 30, 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 as 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.

Link to full report

Source: Interfor