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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:

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. 31 Mar. 31 Dec. 31
  Unit 2024 2023 2023
         
Financial Highlights2        
Total sales $MM 813.2 829.9 785.9
Lumber $MM 670.7 642.5 628.5
Logs, residual products and other $MM 142.5 187.4 157.4
Operating 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 $MM 3,426.3 3,695.1 3,400.3
Total debt $MM 980.7 946.2 897.7
Net debt3 $MM 897.4 880.0 842.7
Net debt to invested capital3 % 34.7% 30.7% 32.8%
Annualized return on capital employed3 % (9.1%) (5.0%) (28.0%)
         
Operating Highlights        
Lumber production million fbm 1,069 1,031 1,102
U.S. South million fbm 480 473 485
U.S. Northwest million fbm 141 142 157
Eastern Canada million fbm 288 250 275
B.C. million fbm 160 166 185
Lumber sales million fbm 1,100 1,004 1,046
Lumber – average selling price4 $/thousand fbm 610 639 601
         
Key Statistics        
Benchmark lumber prices5        
SYP Composite US$ per mfbm 383 442 373
KD H-F Stud 2×4 9’ US$ per mfbm 455 428 423
Eastern SPF Composite US$ per mfbm 489 474 461
Western SPF Composite US$ per mfbm 416 399 374
         
USD/CAD exchange rate6        
Average 1 USD in CAD 1.3486 1.3525 1.3624
Closing 1 USD in CAD 1.3550 1.3533 1.3226

Notes:

  1. Figures in this table may not equal or sum to figures presented elsewhere due to rounding.
  2. Financial information presented for interim periods in this release is prepared in accordance with IFRS and is unaudited.
  3. 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.
  4. Gross sales including duties and freight.
  5. Based on Random Lengths Benchmark Lumber Pricing.
  6. 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. 31 Dec. 31 Mar. 31
Millions of Dollars 2024 2023 2023
       
Net debt      
Net debt, period opening $842.7 $777.7 $720.4
Term Line net drawings 60.9 39.9 149.5
(Increase) decrease in cash and cash equivalents (27.6) 43.9 10.8
Foreign currency translation impact on U.S. Dollar denominated cash and cash equivalents and debt 21.4 (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:

  Revolving Senior  
  Term Secured  
Millions of Dollars Line Notes Total
Available line of credit and maximum borrowing available $600.0 $655.5 $1,255.5
Less:      
Drawings 325.2 655.5 980.7
Outstanding letters of credit included in line utilization 58.4 58.4
Unused portion of facility $216.4 $       – 216.4
Add:      
Cash and cash equivalents     83.3
Available 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. 31 Mar. 31 Dec. 31
Millions of Dollars except number of shares and per share amounts1     2024 2023 2023
           
Adjusted EBITDA          
Net loss     $(72.9) $(41.3) $(169.0)
Add:          
Depreciation of plant and equipment     46.7 45.1 48.9
Depletion and amortization of timber, roads and other     10.9 12.2 11.4
Finance costs     11.9 10.9 10.6
Income tax recovery     (10.8) (11.5) (66.4)
EBITDA     (14.2) 15.4 (164.5)
Add:          
Long-term incentive compensation expense (recovery)     (1.7) 2.6 4.6
Other foreign exchange loss (gain)     16.6 (15.0)
Other expense (income) excluding business interruption insurance     (25.7) 6.5 65.6
Asset write-downs and restructuring costs     2.7 1.6 57.9
Adjusted EBITDA     $(22.3) $26.1 $(51.4)
Sales     $813.2 $829.9 $785.9
Adjusted EBITDA margin     (2.7%) 3.1% (6.5%)
           
Net debt to invested capital          
Net debt          
Total debt     $980.7 $946.2 $897.7
Cash and cash equivalents     (83.3) (66.2) (55.0)
Total net debt     $897.4 $880.0 $842.7
Invested capital          
Net debt     $897.4 $880.0 $842.7
Shareholders’ equity     1,689.7 1,985.2 1,730.4
Total invested capital     $2,587.1 $2,865.2 $2,573.1
Net 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     11.9 10.9 10.6
Income 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 $3,400.3
Current liabilities     (332.3) (343.0) (336.2)
Less:          
Current portion of long-term debt     45.2 52.4 44.1
Current portion of lease liabilities     20.5 14.8 17.2
Capital employed, end of period     $3,159.7 $3,419.3 $3,125.4
Capital employed, beginning of period     3,125.4 3,316.0 3,293.5
Average capital employed     $3,142.6 $3,367.7 $3,209.5
Loss before income taxes and finance costs divided by average capital employed     (2.3%) (1.2%) (7.0%)
Annualization factor     4.0 4.0 4.0
Annualized return on capital employed     (9.1%) (5.0%) (28.0%)

Notes:

  1. Figures in this table may not equal or sum to figures presented elsewhere due to rounding.
  2. Net debt to invested capital as of the period end.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
For the three months ended March 31, 2024 and 2023 (unaudited)
(millions of Canadian Dollars except per share amounts)     Three Months Three Months
      Mar. 31, 2024 Mar. 31, 2023
         
Sales     $813.2 $829.9
         
Costs and expenses:        
Production     808.2 776.8
Selling and administration     19.8 17.2
Long-term incentive compensation expense (recovery)     (1.7) 2.6
U.S. countervailing and anti-dumping duty deposits     7.5 10.7
Depreciation of plant and equipment     46.7 45.1
Depletion and amortization of timber, roads and other     10.9 12.2
      891.4 864.6
         
Operating loss before asset write-downs and        
restructuring costs     (78.2) (34.7)
         
Asset write-downs and restructuring costs     2.7 1.6
Operating 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 INCOME
For the three months ended March 31, 2024 and 2023 (unaudited)
(millions of Canadian Dollars)     Three Months Three Months
      Mar. 31, 2024 Mar. 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     2.6 0.6
         
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 FLOWS
For the three months ended March 31, 2024 and 2023 (unaudited)
(millions of Canadian Dollars)     Three Months Three Months
      Mar. 31, 2024 Mar. 31, 2023
         
Cash provided by (used in):        
Operating activities:        
Net loss     $(72.9) $(41.3)
Items not involving cash:        
Depreciation of plant and equipment     46.7 45.1
Depletion and amortization of timber, roads and other     10.9 12.2
Deferred income tax recovery     (13.4) (6.0)
Current income tax expense (recovery)     2.6 (5.5)
Finance costs     11.9 10.9
Other assets     (0.4) 0.1
Reforestation liability     3.1 4.8
Provisions and other liabilities     (1.2) 2.5
Stock option vesting     0.1 0.2
Write-down of plant and equipment     1.1 1.5
Unrealized foreign exchange loss     10.7 0.2
Other expense (income)     (25.7) 5.6
Income taxes refunded (paid)     1.6 (0.4)
      (24.9) 29.9
Cash generated from (used in) operating working capital:        
Trade accounts receivable and other     1.8 (53.9)
Inventories     11.8 (32.5)
Prepayments     3.5 3.6
Trade 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     0.5
Proceeds on disposal of property, plant, equipment and other     1.1 4.1
Net 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     0.1
Interest payments     (13.9) (13.1)
Lease liability payments     (5.9) (4.5)
Debt refinancing costs     (0.1)
Revolving Term Line net drawings     60.9 149.5
Additions to Senior Secured Notes     45.3
Repayments of Senior Secured Notes     (45.3)
      41.1 131.9
         
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     55.0 77.6
         
Cash and cash equivalents, end of period     $83.3 $66.2
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
March 31, 2024 and December 31, 2023 (unaudited)
(millions of Canadian Dollars) Mar. 31, 2024 Dec. 31, 2023
     
Assets    
Current assets:    
Cash and cash equivalents $83.3 $55.0
Trade accounts receivable and other 184.5 184.4
Income tax receivable 64.3 68.4
Inventories 329.2 339.2
Prepayments 23.7 26.9
  685.0 673.9
     
Employee future benefits 17.8 15.5
Deposits and other assets 281.6 274.6
Right of use assets 40.4 37.1
Property, plant and equipment 1,610.0 1,612.9
Roads and bridges 31.9 35.9
Timber licences 168.6 170.4
Goodwill and other intangible assets 584.4 574.7
Deferred income taxes 6.6 5.3
     
  $3,426.3 $3,400.3
     
Liabilities and Shareholders’ Equity    
Current liabilities:    
Trade accounts payable and provisions $250.3 $258.9
Current portion of long-term debt 45.2 44.1
Reforestation liability 16.1 15.8
Lease liabilities 20.5 17.2
Income taxes payable 0.2 0.2
  332.3 336.2
     
Reforestation liability 31.5 28.4
Lease liabilities 22.5 23.1
Long-term debt 935.5 853.6
Employee future benefits 11.2 11.3
Provisions and other liabilities 48.8 54.6
Deferred income taxes 354.8 362.7
     
Equity:    
Share capital 408.9 408.9
Contributed surplus 6.3 6.2
Translation reserve 175.0 145.5
Retained earnings 1,099.5 1,169.8
     
  1,689.7 1,730.4
     
  $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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