EBITDA1 of
Net Debt to
Chief Financial Officer Appointment
Adjusted EBITDA was
Notable items in the quarter included:
• Strengthened Financial Position
- Net debt ended the quarter at
$239.1 million , or 21.6% of invested capital, resulting in available liquidity of$496.9 million . Interfor generated$37.6 million of cash flow from operations before changes in working capital, or$0.56 per share. Working capital investment decreased by$65.4 million from efforts to optimize lumber and log inventory levels in response to the COVID-19 pandemic.- Capital spending was
$23.6 million , including$18.9 million on high-return discretionary projects, primarily in theU.S. South.US$76.1 million has been spent on the Company’s Phase II strategic capital plan throughJune 30, 2020 . - With its strengthened financial position,
Interfor has increased its planned capital expenditures for 2020 by$20 million to a total of approximately$120 million .
• Lumber Production Decline Due to COVID-19 Related Curtailments
- Total lumber production in Q2’20 was 421 million board feet, down 206 million board feet quarter-over-quarter. This decline reflects Interfor’s previously announced plan to temporarily reduce production across its operations in response to the COVID-19 pandemic. By the end of Q2’20, the Company’s lumber production had returned to rates typical for the period preceding the pandemic.
- Production in the B.C. region declined to 115 million board feet from 186 million board feet in the preceding quarter. The
U.S. South andU.S. Northwest regions accounted for 230 million board feet and 76 million board feet, respectively, compared to 311 million board feet and 130 million board feet in Q1’20. - Lumber inventory levels decreased 68 million board feet over the course of Q2’20.
• Mixed Lumber Price Movements
- Movements in the key benchmark prices were mixed quarter-over-quarter with the Western SPF Composite and KD H-F Stud 2x4 9’ benchmarks decreasing by
US$30 andUS$16 per mfbm toUS$350 andUS$415 per mfbm, respectively, while the SYP Composite increased byUS$77 per mfbm toUS$428 per mfbm. Interfor’s average lumber selling price increased$53 from Q1’20 to$646 per mfbm. - While lumber prices fell sharply in the initial stages of COVID-19, industry-wide production curtailments and growing demand have contributed to the strengthening price environment since
mid-April 2020 .
• Softwood Lumber Duties
Interfor expensed$7.4 million of duties in the quarter, representing the full amount of countervailing and anti-dumping duties incurred on its Canadian shipments of softwood lumber into theU.S. at a combined rate of 20.23%. Cumulative duties ofUS$106.7 million have been paid byInterfor since the inception of the current trade dispute and are held in trust byU.S. Customs and Border Protection.- On
February 3, 2020 theU.S. Department of Commerce issued preliminary revised combined rates of 8.37% for 2017 and 8.21% for 2018. These rates remain preliminary, with final rate determinations not expected untilNovember 2020 . At such time, the final rates will be applied to new lumber shipments. No adjustments have been recorded in the financial statements as ofJune 30, 2020 to reflect the preliminary revised duty rates.
1 Refer to Adjusted EBITDA and Net debt to invested capital in the Non-GAAP Measures section
Outlook
Near-term lumber demand is expected to remain strong, as repair and renovation lumber demand continues to be robust and
Interfor’s strategy of maintaining a diversified portfolio of operations allows the Company to both reduce risk and maximize returns on invested capital over the business cycle.
While uncertainty remains as to the duration and extent of the economic impact from the COVID-19 pandemic,
Chief Financial Officer Appointment
At its meeting earlier today, the Company’s Board of Directors confirmed the appointment of
Financial and Operating Highlights1
For the 3 months ended | For the 6 months ended | ||||||
Unit | 2020 | 2019 | 2020 | 2020 | 2019 | ||
Financial Highlights2 | |||||||
Total sales | $MM | 396.8 | 481.3 | 479.6 | 876.4 | 932.5 | |
Lumber | $MM | 322.1 | 406.9 | 379.3 | 701.4 | 787.4 | |
Logs, residual products and other | $MM | 74.7 | 74.4 | 100.3 | 175.0 | 145.1 | |
Operating earnings (loss) | $MM | 13.3 | (18.2) | 14.6 | 27.9 | (35.0) | |
Net earnings (loss) | $MM | 3.2 | (11.2) | 6.3 | 9.5 | (26.5) | |
Net earnings (loss) per share, basic | $/share | 0.05 | (0.17) | 0.09 | 0.14 | (0.39) | |
Adjusted net earnings (loss)3 | $MM | 10.6 | (16.2) | 0.7 | 11.4 | (28.9) | |
Adjusted net earnings (loss) per share, basic3 | $/share | 0.16 | (0.24) | 0.01 | 0.17 | (0.43) | |
Operating cash flow per share (before working capital changes)3 | $/share | 0.56 | 0.15 | 0.57 | 1.13 | 0.40 | |
Adjusted EBITDA3 | $MM | 42.8 | 12.6 | 36.6 | 79.4 | 28.9 | |
Adjusted EBITDA margin3 | % | 10.8% | 2.6% | 7.6% | 9.1% | 3.1% | |
Total assets | $MM | 1,538.8 | 1,459.8 | 1,569.5 | 1,538.8 | 1,459.8 | |
Total debt | $MM | 408.8 | 261.7 | 425.6 | 408.8 | 261.7 | |
Net debt3 | $MM | 239.1 | 198.2 | 322.0 | 239.1 | 198.2 | |
Net debt to invested capital3 | % | 21.6% | 17.9% | 26.7% | 21.6% | 17.9% | |
Annualized return on invested capital3 | % | 14.8% | 4.6% | 12.9% | 14.7% | 5.4% | |
Operating Highlights | |||||||
Lumber production | million fbm | 421 | 647 | 627 | 1,047 | 1,293 | |
Total lumber sales | million fbm | 499 | 674 | 641 | 1,140 | 1,295 | |
Lumber sales - | million fbm | 488 | 664 | 632 | 1,120 | 1,274 | |
Lumber sales - wholesale and commission | million fbm | 11 | 10 | 9 | 20 | 21 | |
Lumber - average selling price4 | $/thousand fbm | 646 | 603 | 592 | 616 | 608 | |
Average USD/CAD exchange rate5 | 1.3862 | 1.3377 | 1.3449 | 1.3651 | 1.3336 | ||
Closing USD/CAD exchange rate5 | 1.3628 | 1.3087 | 1.4187 | 1.3628 | 1.3087 | ||
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 consolidated financial statements.
- Gross sales before duties.
- Based on
Bank of Canada foreign exchange rates.
Liquidity
Balance Sheet
Interfor’s net debt at
In response to COVID-19, the Company has taken steps to significantly reduce its working capital through balancing inventory levels with demand and reducing discretionary spending and commitments. The Company also continues to actively review the evolving Canadian and
As at
The Revolving Term Line and Senior Secured Notes are subject to financial covenants, including net debt to total capitalization ratios, and an EBITDA interest coverage ratio that could affect the Company’s borrowing capacity under the Revolving Term Line.
Management believes, based on circumstances known today, that
For the 3 months ended | For the 6 months ended | |||||||
Thousands of Dollars | 2020 | 2019 | 2020 | 2019 | ||||
Net debt | ||||||||
Net debt, period opening | ||||||||
Issuance of Senior Secured Notes | - | - | 140,770 | - | ||||
Term Line net drawings (repayments) | - | - | (59) | 750 | ||||
Impact on | (16,770) | (5,520) | 8,370 | (11,850) | ||||
Decrease (increase) in cash and cash equivalents | (71,640) | 30,028 | (140,624) | 98,918 | ||||
Decrease in marketable securities | - | - | - | 41,766 | ||||
Impact on | 5,488 | 955 | 5,798 | 4,800 | ||||
Net debt, period ending |
On
Capital Resources
The following table summarizes Interfor’s credit facilities and availability as of
Revolving | Senior | ||
Term | Secured | ||
Thousands of Canadian Dollars | Line | Notes | Total |
Available line of credit and maximum borrowing available | |||
Less: | |||
Drawings | - | 408,840 | 408,840 |
Outstanding letters of credit included in line utilization | 22,849 | - | 22,849 |
Unused portion of facility | $ - | 327,151 | |
Add: | |||
Cash and cash equivalents | 169,726 | ||
Available liquidity at |
Interfor’s Revolving Term Line matures in
As of
Non-GAAP Measures
This release makes reference to the following non-GAAP measures: Adjusted net earnings (loss), Adjusted net earnings (loss) per share, EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, Net debt to invested capital, Operating cash flow per share (before working capital changes), and Return on invested capital 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 3 months ended | For the 6 months ended | |||||
Thousands of Canadian Dollars except number of shares and per share amounts | 2020 | 2019 | 2020 | 2020 | 2019 | |
Adjusted Net Earnings (Loss) | ||||||
Net earnings (loss) | ||||||
Add: | ||||||
Capital asset write-downs and restructuring costs | 115 | 87 | 371 | 486 | 1,752 | |
Other foreign exchange loss (gain) | 4,963 | 321 | 849 | 5,812 | (19) | |
Long term incentive compensation expense (recovery) | 5,629 | (851) | (8,946) | (3,317) | 1,132 | |
Other (income) expense | (586) | (6,487) | 115 | (471) | (6,323) | |
Income tax effect of above adjustments | (2,712) | 1,866 | 2,043 | (669) | 991 | |
Adjusted net earnings (loss) | ||||||
Weighted average number of shares - basic ('000) | 67,260 | 67,252 | 67,260 | 67,260 | 67,300 | |
Adjusted net earnings (loss) per share | ||||||
Adjusted EBITDA | ||||||
Net earnings (loss) | ||||||
Add: | ||||||
Depreciation of plant and equipment | 15,601 | 19,410 | 20,061 | 35,662 | 39,132 | |
Depletion and amortization of timber, roads and other | 8,108 | 12,201 | 10,530 | 18,638 | 21,938 | |
Capital asset write-downs and restructuring costs | 115 | 87 | 371 | 486 | 1,752 | |
Finance costs | 5,185 | 3,324 | 4,096 | 9,281 | 7,500 | |
Other foreign exchange loss (gain) | 4,963 | 321 | 849 | 5,812 | (19) | |
Income tax expense (recovery) | 563 | (4,196) | 3,205 | 3,768 | (9,704) | |
EBITDA | 37,770 | 19,988 | 45,421 | 83,191 | 34,138 | |
Add: | ||||||
Long term incentive compensation expense (recovery) | 5,629 | (851) | (8,946) | (3,317) | 1,132 | |
Other (income) expense | (586) | (6,487) | 115 | (471) | (6,323) | |
Adjusted EBITDA | ||||||
Sales | ||||||
Adjusted EBITDA margin | 10.8% | 2.6% | 7.6% | 9.1% | 3.1% | |
Net debt to invested capital | ||||||
Net debt | ||||||
Total debt | ||||||
Cash and cash equivalents | (169,726) | (63,531) | (103,574) | (169,726) | (63,531) | |
Total net debt | ||||||
Invested capital | ||||||
Net debt | ||||||
Shareholders' equity | 869,443 | 911,409 | 882,917 | 869,443 | 911,409 | |
Total invested capital | ||||||
Net debt to invested capital1 | 21.6% | 17.9% | 26.7% | 21.6% | 17.9% | |
Operating cash flow per share (before working capital changes) | ||||||
Cash provided by (used in) operating activities | ||||||
Cash used in (generated from) operating working capital | (65,439) | (22,443) | 19,103 | (46,336) | 52,992 | |
Operating cash flow (before working capital changes) | ||||||
Weighted average number of shares - basic ('000) | 67,260 | 67,252 | 67,260 | 67,260 | 67,300 | |
Operating cash flow per share (before working capital changes) | ||||||
Annualized return on invested capital | ||||||
Adjusted EBITDA | ||||||
Invested capital, beginning of period | ||||||
Invested capital, end of period | 1,108,557 | 1,109,618 | 1,204,953 | 1,108,557 | 1,109,618 | |
Average invested capital | ||||||
Adjusted EBITDA divided by average invested capital | 3.7% | 1.1% | 3.2% | 7.3% | 2.7% | |
Annualization factor | 4.0 | 4.0 | 4.0 | 2.0 | 2.0 | |
Annualized return on invested capital | 14.8% | 4.6% | 12.9% | 14.7% | 5.4% |
Note: 1 Net debt to invested capital as of the period end.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (LOSS) | ||||||
For the three and six months ended | ||||||
(thousands of Canadian Dollars except earnings per share) | Three Months | Three Months | Six Months | Six Months | ||
Sales | $396,778 | $481,345 | $876,424 | $932,508 | ||
Costs and expenses: | ||||||
Production | 337,134 | 448,043 | 760,362 | 861,226 | ||
Selling and administration | 9,444 | 9,808 | 18,672 | 20,373 | ||
Long term incentive compensation expense (recovery) | 5,629 | (851) | (3,317) | 1,132 | ||
7,387 | 10,844 | 17,987 | 21,962 | |||
Depreciation of plant and equipment | 15,601 | 19,410 | 35,662 | 39,132 | ||
Depletion and amortization of timber, roads and other | 8,108 | 12,201 | 18,638 | 21,938 | ||
383,303 | 499,455 | 848,004 | 965,763 | |||
Operating earnings (loss) before write-downs and | ||||||
restructuring costs | 13,475 | (18,110) | 28,420 | (33,255) | ||
Capital asset write-downs and restructuring costs | 115 | 87 | 486 | 1,752 | ||
Operating earnings (loss) | 13,360 | (18,197) | 27,934 | (35,007) | ||
Finance costs | (5,185) | (3,324) | (9,281) | (7,500) | ||
Other foreign exchange gain (loss) | (4,963) | (321) | (5,812) | 19 | ||
Other income (expense) | 586 | 6,487 | 471 | 6,323 | ||
(9,562) | 2,842 | (14,622) | (1,158) | |||
Earnings (loss) before income taxes | 3,798 | (15,355) | 13,312 | (36,165) | ||
Income tax expense (recovery): | ||||||
Current | (193) | 233 | 136 | 393 | ||
Deferred | 756 | (4,429) | 3,632 | (10,097) | ||
563 | (4,196) | 3,768 | (9,704) | |||
Net earnings (loss) | $3,235 | $(11,159) | $9,544 | $(26,461) | ||
Net earnings (loss) per share, basic and diluted | $0.05 | $(0.17) | $0.14 | $(0.39) |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) | ||||
For the three and six months ended | ||||
(thousands of Canadian Dollars) | Three Months | Three Months | Six Months | Six Months |
Net earnings (loss) | $3,235 | $(11,159) | $9,544 | $(26,461) |
Other comprehensive income (loss): | ||||
Items that will not be recycled to Net earnings (loss): | ||||
Defined benefit plan actuarial gain (loss), net of tax | (543) | (439) | (1,256) | 133 |
Items that are or may be recycled to Net earnings (loss): | ||||
Foreign currency translation differences for | ||||
foreign operations, net of tax | (16,400) | (10,728) | 29,683 | (23,601) |
Total other comprehensive income (loss), net of tax | (16,943) | (11,167) | 28,427 | (23,468) |
Comprehensive income (loss) | $(13,708) | $(22,326) | $(49,929) |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||
For the three and six months ended | ||||
(thousands of Canadian Dollars) | Three Months | Three Months | Six Months | Six Months |
Cash provided by (used in): | ||||
Operating activities: | ||||
Net earnings (loss) | $3,235 | $(11,159) | $(26,461) | |
Items not involving cash: | ||||
Depreciation of plant and equipment | 15,601 | 19,410 | 35,662 | 39,132 |
Depletion and amortization of timber, roads and other | 8,108 | 12,201 | 18,638 | 21,938 |
Deferred income tax expense (recovery) | 756 | (4,429) | 3,632 | (10,097) |
Current income tax expense (recovery) | (193) | 233 | 136 | 393 |
Finance costs | 5,185 | 3,324 | 9,281 | 7,500 |
Other assets | (450) | 304 | 486 | 321 |
Reforestation liability | (4,616) | (3,250) | (1,850) | (743) |
Provisions and other liabilities | 4,993 | (801) | (5,300) | (1,004) |
Stock options | 234 | 209 | 490 | 317 |
Write-down (recovery) of plant and equipment | (53) | 88 | (53) | 1,811 |
Unrealized foreign exchange loss | 5,350 | 216 | 5,791 | 160 |
Other income | (586) | (6,487) | (471) | (6,323) |
37,564 | 9,859 | 75,986 | 26,944 | |
Cash generated from (used in) operating working capital: | ||||
Trade accounts receivable and other | (6,164) | (5,873) | (29,577) | (20,448) |
Inventories | 65,968 | 17,605 | 67,323 | (9,565) |
Prepayments | 4,020 | (2,873) | 1,907 | (5,742) |
Trade accounts payable and provisions | 1,609 | 13,862 | 6,671 | (16,662) |
Income tax refund (payment) | 6 | (278) | 12 | (575) |
103,003 | 32,302 | 122,322 | (26,048) | |
Investing activities: | ||||
Additions to property, plant and equipment | (21,116) | (58,904) | (45,988) | (94,830) |
Additions to roads and bridges | (2,439) | (5,661) | (5,143) | (13,505) |
Additions to intangible assets | - | (20) | - | (72) |
Acquisition of timber license, roads and other assets | ||||
net of assumed liabilities | - | - | (56,606) | - |
Proceeds on disposal of property, plant and equipment and other | 705 | 8,032 | 867 | 8,140 |
Net proceeds from (additions to) marketable securities, | ||||
deposits and other assets | (681) | (11) | (879) | 46,760 |
(23,531) | (56,564) | (107,749) | (53,507) | |
Financing activities: | ||||
Issuance of share capital, net of expenses | - | 17 | - | 80 |
Share repurchases | - | - | - | (7,825) |
Interest payments | (4,751) | (2,837) | (8,509) | (5,417) |
Lease liability payments | (3,074) | (2,779) | (6,008) | (5,765) |
Debt refinancing costs | (7) | (172) | (143) | (1,191) |
Operating line net drawings (repayments) | - | 5 | (59) | 5 |
Additions to long term debt | - | - | 140,770 | 197,925 |
Repayments of long term debt | - | - | - | (197,175) |
(7,832) | (5,766) | 126,051 | (19,363) | |
Foreign exchange loss on cash and | ||||
cash equivalents held in a foreign currency | (5,488) | (955) | (5,798) | (3,703) |
Increase (decrease) in cash | 66,152 | (30,983) | 134,826 | (102,621) |
Cash and cash equivalents, beginning of period | 103,574 | 94,514 | 34,900 | 166,152 |
Cash and cash equivalents, end of period | $169,726 | $63,531 | $63,531 |
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION | |||
(thousands of Canadian Dollars) | |||
Assets | |||
Current assets: | |||
Cash and cash equivalents | $169,726 | ||
Trade accounts receivable and other | 119,712 | 86,608 | |
Income taxes receivable | 1,888 | 1,995 | |
Inventories | 119,934 | 181,577 | |
Prepayments | 19,460 | 20,449 | |
430,720 | 325,529 | ||
Employee future benefits | 110 | 673 | |
Deposits and other assets | 9,988 | 9,296 | |
Right of use assets | 32,600 | 32,780 | |
Property, plant and equipment | 774,810 | 739,515 | |
Roads and bridges | 20,514 | 24,353 | |
Timber licences | 116,837 | 60,596 | |
Other intangible assets | 3,032 | 3,480 | |
145,570 | 138,734 | ||
Deferred income taxes | 4,643 | 6,961 | |
$1,341,917 | |||
Liabilities and Shareholders’ Equity | |||
Current liabilities: | |||
Trade accounts payable and provisions | |||
Current portion of long term debt | 7,381 | - | |
Reforestation liability | 16,216 | 13,021 | |
Lease liabilities | 11,210 | 10,105 | |
Income taxes payable | 134 | 163 | |
155,036 | 137,647 | ||
Reforestation liability | 29,853 | 27,401 | |
Lease liabilities | 26,023 | 27,718 | |
Long term debt | 401,459 | 259,760 | |
Employee future benefits | 13,132 | 11,843 | |
Provisions and other liabilities | 14,138 | 18,957 | |
Deferred income taxes | 29,740 | 27,609 | |
Equity: | |||
Share capital | 533,685 | 533,685 | |
Contributed surplus | 4,961 | 4,471 | |
Translation reserve | 86,442 | 56,759 | |
Retained earnings | 244,355 | 236,067 | |
869,443 | 830,982 | ||
$1,341,917 |
Approved on behalf of the Board:
“ | “Thomas 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 second quarter and annual Management’s Discussion & Analysis under the heading “Risks and Uncertainties”, which is 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; the availability of the Company’s allowable annual cut (“AAC”); claims by and treaty settlements with Indigenous peoples; the Company’s ability to export its products; the softwood lumber trade dispute between
ABOUT
The Company’s unaudited consolidated financial statements and Management’s Discussion and Analysis for Q2’20 are available at www.sedar.com and www.interfor.com.
There will be a conference call on
The dial-in number is 1-833-297-9919. The conference call will also be recorded for those unable to join in for the live discussion and will be available until
For further information:
(604) 689-6800
Source:
2020 GlobeNewswire, Inc., source