Adjusted EBITDA of $26 million and Net Loss of $41 million

BURNABY, British Columbia, May 04, 2023 (GLOBE NEWSWIRE) -- INTERFOR CORPORATION (“Interfor” or the “Company”) (TSX: IFP) recorded a Net loss in Q1’23 of $41.3 million, or $0.80 per share, compared to $72.2 million, or $1.40 per share in Q4’22 and Net earnings of $397.0 million, or $6.69 per share in Q1’22.

Adjusted EBITDA was $26.1 million on sales of $829.9 million in Q1’23 versus negative Adjusted EBITDA of $68.7 million on sales of $810.3 million in Q4’22 and Adjusted EBITDA of $570.1 million on sales of $1.3 billion in Q1’22.

Notable items in the quarter:

• Lower Lumber Prices
  • Lumber prices continued to reflect softened demand driven by the elevated interest rate environment. Interfor’s average selling price was $639 per mfbm, down $60 per mfbm versus Q4’22. The Western SPF Composite, SYP Composite, KD H-F Stud 2x4 9’ and ESPF Composite price benchmarks decreased quarter-over-quarter by US$21, US$19, US$33 and US$24 per mfbm to US$399, US$442, US$428 and US$474 per mfbm, respectively.
• Lumber Production Balanced with Demand
  • Lumber production totaled 1.0 billion board feet, representing an increase of 157 million board feet quarter-over-quarter. This growth was mostly driven by a decrease in temporary production curtailments in Q1’23 compared to Q4’22 and the first full quarter of contribution from two sawmills acquired in November 2022.
  • The U.S. South and U.S. Northwest regions accounted for 473 million board feet and 142 million board feet, respectively, compared to 404 million board feet and 135 million board feet in Q4’22. The Eastern Canada region produced 250 million board feet versus 212 million board feet in Q4’22. Production in the B.C. region increased to 166 million board feet from 123 million board feet in Q4’22.
  • Lumber shipments were 1.0 billion board feet, or 65 million board feet higher than Q4’22.
• Financial Flexibility Maintained
  • Net debt at quarter-end was $880.0 million, or 30.7% of invested capital, while available liquidity was ample at $321.4 million.
  • Liquidity is expected to be strengthened during the remainder of 2023 by the draw down of seasonally high working capital and income tax refunds totaling approximately $98.0 million related to over-installments for the 2022 tax year.
    

• Strategic Capital Investments
  • Capital spending was $63.7 million, including $45.4 million on discretionary projects. The majority of this discretionary spending was focused on the multi-year rebuild of the Thomaston, GA sawmill, a new planer at the Castlegar, B.C. sawmill and upgrades to the Perry, GA sawmill.
  • Total capital expenditures planned for 2023 have been reduced to approximately $210.0 million from $240.0 million in response to ongoing lumber market weakness. This reduction reflects the delay of certain components of ongoing strategic capital projects.
• Ongoing Monetization of Coastal B.C. Operations
  • The Company is continuing to work with the Ministry of Forests to subdivide and transfer a number of forest tenures from its 1.57 million cubic metres of annual harvesting rights. The timing remains uncertain as to when the Ministry approval and certain contractual consents may be received.
• Softwood Lumber Duties
  • Interfor expensed $10.7 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 8.59%.
  • Interfor has cumulative duties of US$520.6 million, or approximately $10.00 per share after-tax, held in trust by U.S. Customs and Border Protection as at March 31, 2023. Except for US$156.8 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 be volatile as the economy continues to adjust to inflationary pressures, elevated interest rates, labour shortages and geo-political uncertainty.

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. Interfor is well positioned with its strong balance sheet and significant available liquidity to continue pursuing its strategic plans despite ongoing economic and geo-political uncertainty globally. 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  

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. Financial information has been adjusted for a reclassification in the presentation of unrealized foreign exchange loss (gain) within cashflow from operations resulting in a $/share change of $(0.20) – Q1 2022.
6. Based on Bank of Canada foreign exchange rates.

Liquidity

Balance Sheet

Interfor’s Net debt at March 31, 2023 was $880.0 million, or 30.7% of invested capital, representing an increase of $159.6 million from the level of Net debt at December 31, 2022.

As at March 31, 2023 the Company had net working capital of $512.9 million and available liquidity of $321.4 million, based on the available borrowing capacity under its $600 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.

On December 16, 2022, the Company completed an expansion of its Term Line. The commitment under the Term Line was increased by $100 million to a total of $600 million.

On December 1, 2022, the Company issued US$200 million of Series H Senior Secured Notes, bearing interest at 7.06% with principal payments of US$66.7 million due on December 26, 2031, 2032 and on final maturity in 2033.

Capital Resources

The following table summarizes Interfor’s credit facilities and availability as of March 31, 2023:

Interfor’s Term Line matures in December 2026 and its Senior Secured Notes have maturities in the years 2023-2033.

As of March 31, 2023, the Company had commitments for capital expenditures totaling $156.9 million for both maintenance and discretionary capital projects.

Non-GAAP Measures

This release makes reference to the following non-GAAP measures: EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, Net debt to invested capital, Operating cash flow per share (before working capital changes), 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:

Notes:

1. Net debt to invested capital as of the period end.
2. Financial information has been adjusted for a reclassification in the presentation of unrealized foreign exchange loss (gain) within cashflow from operations resulting in a $/share change of $(0.20) – Q1 2022.

Approved on behalf of the Board of Directors:

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.sedar.com. Material factors and assumptions used to develop the forward-looking information in this release include volatility in the selling prices for lumber, logs and wood chips; the Company’s ability to compete on a global basis; the availability and cost of log supply; natural or man-made disasters; currency exchange rates; changes in government regulations; Indigenous reconciliation; the softwood lumber trade dispute between Canada and the United States; environmental impacts of the Company’s operations; labour availability; and information systems security. 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 5.2 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 Q1’23 are available at www.sedar.com and www.interfor.com.

There will be a conference call on Friday, May 5, 2023 at 8:00 a.m. (Pacific Time) hosted by INTERFOR CORPORATION for the purpose of reviewing the Company’s release of its first quarter 2023 financial results.

The dial-in number is 1-888-396-8049. The conference call will also be recorded for those unable to join in for the live discussion and will be available until June 4, 2023. The number to call is 1-877-674-7070, Passcode 786874#.

For further information:
Richard Pozzebon, Executive Vice President and Chief Financial Officer
(604) 422-3400