Acadian Timber : Annual Report (Acadian Annual Report 2024 VF)

2024 ANNUAL REPORT

Acadian Timber Corp. ("Acadian" or the "Company") is one of the largest timberland owners in Eastern Canada and the Northeastern U.S. and has a total of approximately 2.4 million acres of land under management. Acadian owns and manages approximately 775,000 acres of freehold timberlands in New Brunswick and approximately 300,000 acres of freehold timberlands in Maine and provides timber services relating to approximately 1.3 million acres of Crown licensed timberlands in New Brunswick.

Acadian's primary business is forest management and the production of timber products, including softwood and hardwood sawlogs, pulpwood, and biomass by-products, sold to approximately 90 regional customers. Acadian also generates income through other operations, including real estate and environmental solutions.

Acadian's business strategy is to maximize cash flows from its existing timberland assets through sustainable forest management and other land use activities while growing its business by acquiring assets and actively managing these assets to drive improved performance.

ACADIAN'S LOCATIONS

FOREST AREAS		ACRES	HECTARES
MAINE TIMBERLANDS		300,000	121,000
NEW BRUNSWICK TIMBERLANDS		775,000	313,000
CROWN LANDS UNDER MANAGEMENT		1,326,000	537,000
AREA UNDER MANAGEMENT	2,401,000	971,000

ACADIAN'S TIMBER PRODUCT MIX BY END USE*

Acadian sells a wide variety of timber products to a broad group of customers. Acadian's greatest exposure is to softwood sawlogs; however, markets for hardwood sawlogs, hardwood and softwood pulpwood, and biomass diversify our sales.

SOLID WOOD	ENGINEERED WOOD
65%	PRODUCTS
7%
Softwood Dimension Lumber 51%
Hardwood Lumber 10%
Hardwood Specialty Products 4%	PULP
	5%
PACKAGING, TISSUE &	FUEL
SPECIALTY PAPER	3%
20%

*Percentage of log sales by value for the year ended December 31, 2024

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2024 HIGHLIGHTS

• Sold 752,100 voluntary carbon credits related to our first carbon credit project for gross proceeds of $24.6 million
• Generated total sales of $116.2 million, Adjusted EBITDA1 of $38.9 million, Free Cash Flow1 of $29.7 million and net income of $21.7 million, despite challenging timber markets
• Declared dividends to shareholders of $20.3 million, or $1.16 per share
• Advanced real estate activities and acquired 16,000 acres of timberlands in New Brunswick at value
• Developed renewable energy opportunities and installed a meteorological wind data tower
• Successfully renewed Sustainable Forestry Initiative® certification

FINANCIAL HIGHLIGHTS

Years Ended December 31		2024
(CAD thousands, except where indicated)			2023		2022
Timber sales volume (000s m3)		977.2		894.2		917.8
Carbon credit sales volume (000s credits)		752.1		1.5		-
Timber sales and services	$	91,597	$	93,440	$	90,473
Carbon credit sales	$	24,588	$	37	$	-
Adjusted EBITDA1	$	38,893	$	20,586	$	18,194
Free Cash Flow1	$	29,733	$	14,999	$	12,151
Net income	$	21,738	$	29,434	$	35,507

1. Adjusted EBITDA and Free Cash Flow are key performance measures in evaluating Acadian's operations and are important in enhancing investors' understanding of the Company's operating performance. Adjusted EBITDA is indicative of the underlying profitability of Acadian's operating segments and is used to evaluate operational performance. Free Cash Flow is used to evaluate Acadian's ability to generate sustainable cash flows from operations that are available for dividends, repurchases of common shares, debt reduction, acquisitions, and other capital allocation activities. Acadian's management defines Adjusted EBITDA as net income before interest, income taxes, fair value adjustments, non-cash cost of sales related to carbon credits, recovery of or impairment of land and roads and depreciation and amortization. Free Cash Flow is defined as Adjusted EBITDA less interest paid, current income tax expense, and capital expenditures excluding acquisitions of timberlands, plus net proceeds from the sale of timberlands and other fixed assets (proceeds less gains or losses). As these performance measures do not have standardized meanings prescribed by International Financial Reporting Standards, they may not be comparable to similar measures presented by other companies. Please refer to Management's Discussion and Analysis for further details.

TABLE OF CONTENTS

3	LETTER TO SHAREHOLDERS	63	CORPORATE GOVERNANCE
6	MARKET OVERVIEW	64	BOARD AND MANAGEMENT
7	MANAGEMENT'S DISCUSSION AND ANALYSIS	64	CORPORATE AND SHAREHOLDER INFORMATION

34 CONSOLIDATED FINANCIAL STATEMENTS

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LETTER TO SHAREHOLDERS

Overview

The year ended December 31, 2024 for Acadian Timber Corp. ("Acadian", the "Company" or "we") was marked by several notable achievements. We realized our first significant sale of voluntary carbon credits, expanded our real estate activities and achieved solid results from our timber operations despite challenging end use markets.

Demand for our timber products remained stable, reflecting the favourable attributes of Northeast regional log markets. We met this demand and increased our volumes over the prior year through the hard work by the Acadian team to improve contractor availability, particularly in New Brunswick.

Timber pricing was impacted by changes in product mix and weak end use markets resulting in lower overall timber sales.

Continued Commitment to Safety and the Environment

Acadian's commitment to health and safety is our top priority as we believe that emphasizing and achieving a good safety record is a leading indicator of success in the broader business.

During 2024, there were eight recordable safety incidents among employees and contractors. These were mostly minor incidents that resulted in minimal lost time. Incident reduction will be a primary focus for 2025.

Both the New Brunswick and Maine operations completed annual surveillance audits under the 2022 Standard of the Sustainable Forest Initiative® with no non-conformances; a testament to the sustainability of our operations.

Financial Performance

Total sales were $116.2 million in 2024, compared to $93.5 million in the prior year. Timber sales and services contributed $91.6 million to sales and the sale of voluntary carbon credits contributed an additional $24.6 million.

The Company's Adjusted EBITDA2 totaled $38.9 million in 2024, compared to $20.6 million during 2023. Acadian declared dividends to its shareholders of $20.3 million, or $1.16 per share, and generated Free Cash Flow2 of $29.7 million.

Timber sales and services

Demand for softwood sawlogs was steady in the regions in which Acadian operates. A favourable change in customer mix shifted harvesting volumes from Crown licensed

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timberlands to our freehold timberlands, increasing our freehold sales and decreasing our timber services revenue, as compared to 2023. Softwood sawlog pricing was impacted by changes in product mix and softwood lumber pricing, which remained below historical averages for much of the year. Softwood pulpwood demand started strong early in the year but was curbed in the second half of the year by abundant regional sawmill residuals. Softwood pulpwood pricing remained stable.

Weakness in hardwood lumber markets put downward pressure on hardwood sawlog prices, but demand for Acadian's hardwood sawlogs remained stable. Hardwood pulpwood demand was steady through 2024, while pricing decreased as a result of shorter hauling distances, as compared to the prior year.

Greater softwood sawlog hauling distances and higher contractor rates increased variable costs but were partially offset by changes in product mix and lower fuel adjustment costs.

Voluntary carbon credit sales

During 2024 Acadian sold nearly all of the first tranche of registered voluntary carbon credits related to our ongoing carbon credit project in Maine. The sales were comprised of 752,100 voluntary carbon credits at an average price of approximately U.S.$24/credit.

Real Estate1

We continue to see a multitude of possibilities to maximize cash flows from our timberland assets through increased real estate activity.

Land Acquisitions

In March 2024, Acadian completed the acquisition of approximately 16,000 acres of timberland in New Brunswick for $9.0 million. These timberlands are in close proximity to Acadian's existing operations and customer base. The property is well stocked, benefiting from historical silviculture investments, which will allow Acadian to expand its harvesting operations. The property also presents significant potential for revenue diversification through other land use opportunities.

Land Sales

In October 2024, Acadian entered into an agreement to sell approximately 2,100 acres of timberland. The land included in the disposition is composed of smaller parcels of relatively low operational or strategic value to Acadian. The sale of approximately 1,800 acres closed in November 2024 for gross proceeds of $1.1 million and a net gain of $0.3 million. The remainder of the transaction is expected to close in the first half of 2025.

Renewable Energy

In February 2024, Acadian executed an agreement for the option to lease approximately 10,000 acres of its Maine timberlands for the purpose of the development, construction, operation, and maintenance of a solar powered electric generating facility. The agreement includes inspection, development, construction, and commercial operations terms with escalating leasing fees. The incremental cash flows attributable to the inspection and development terms are modest. However, should the project reach the construction term, which is not expected to occur for several years, the incremental cash flows may become material to Acadian.

In November 2024, Acadian installed a meteorological tower to collect wind data on the New Brunswick land base. This investment enables further exploration of the opportunities available to Acadian to participate in the renewable energy sector.

Environmental Solutions1

After selling nearly all of our currently registered voluntary carbon credits in 2024, our inventories are expected to be replenished in the near term. The registration process for the second and third tranches of carbon credits for the ongoing project is expected to result in approximately 0.4 million credits in total and is expected to be completed in the first quarter of 2025.

Acadian's project is registered on the ACR under the name Anew - Katahdin Forestry Project, and requires balancing

harvest and growth, long-term planning, periodic carbon inventory verification, and maintenance of Acadian's sustainable forestry certification. The project is expected to generate an additional 0.8 million credits related to reporting periods four through ten.

This project has provided valuable experience to the Acadian management team and has formed the foundation for potential further carbon credit developments in the future.

Internal Harvesting Operations1

With the goal of expanding our harvesting capacity in Maine and reducing operating costs, Acadian has established its own internal harvesting operation.

In January 2025, subsequent to year end, Acadian purchased several pieces of harvesting equipment and hired equipment operators, who have begun harvesting on our Maine timberlands.

On February 10, 2025, Acadian signed an agreement to purchase certain logging and related assets of A & A Brochu, LLC ("A & A Brochu") and its affiliates for a total price of U.S. $4.8 million to further expand its internal harvesting operations. The assets include harvesting, trucking and road working equipment and related real estate which, combined with an established workforce, constitute a portion of A & A Brochu's logging operation in Maine. A & A Brochu has provided contractor services to Acadian for many years. The transaction is expected to close in the second quarter of 2025.

Outlook1

Near-term pressures on end use markets persist and potential tariffs are causing concern among forest products companies in both the US and Canada. However,

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North American interest rates and inflation are showing signs of easing, and the consensus forecast for U.S. housing starts is steady at approximately 1.36 million starts in 2025, as compared to 1.35 million in 2024. We therefore remain confident that the stability of the northeastern forestry sector, combined with long-term demand for new homes and repair and remodel activity, will support the long-term demand for our products as has been demonstrated in recent years.

Labour markets remained tight in Maine, but we maintained sufficient contractor availability in New Brunswick through the fourth quarter, which is expected to continue into 2025. Subsequent to year end, we started increasing harvesting capacity in Maine through the establishment of our own harvesting operations. We do not expect an immediate significant impact on our financial results, but we do expect to increase production and reduce operating costs in Maine over the course of 2025.

Demand for Acadian's sawlogs is mainly driven by regional supply and demand. Near-term sawlog demand is expected to remain stable while pricing may remain challenged until end-use markets improve. Demand and pricing for softwood pulpwood is expected to remain at reduced levels in the near term due to abundant regional sawmill residuals and hardwood pulpwood is expected to be steady.

With respect to voluntary carbon credits, demand and pricing are expected to remain stable. The protocol for developing compliance market carbon credits from managed forests in Canada was finalized during the year. Acadian is evaluating the opportunities to develop eligible carbon credits that the compliance protocol may present, in conjunction with the opportunities that exist under the current protocols.

Looking Ahead1

We are energized by the startup of our own harvesting operation in Maine and look forward to a productive year ahead. In New Brunswick, we will continue actively working with our contractors to meet our harvesting goals and the delivery demands of our customers for 2025.

Through 2025, we will remain focused on safety and environmental performance, while obtaining the highest margins available for our products and making improvements throughout the business to maximize cash flows.

At Acadian, we have a remarkable asset base and outstanding people. Guided by the principles of sustainable forest management, we will continue to advance opportunities to deliver long-term value to our shareholders.

On behalf of the Board of Directors and management of Acadian, I would like to thank all our shareholders for their ongoing support.

Adam Sheparski

President and

Chief Executive Officer

February 12, 2025

1. This Letter to Shareholders contains forward-looking information within the meaning of applicable Canadian securities laws that involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Please refer to the section entitled "Cautionary Statement Regarding Forward-Looking Information and Statements" in Management's Discussion and Analysis for further details.
2. Adjusted EBITDA and Free Cash Flow are key performance measures in evaluating Acadian's operations and are important in enhancing investors' understanding of the Company's operating performance. Adjusted EBITDA is indicative of the underlying profitability of Acadian's operating segments and is used to evaluate operational performance. Free Cash Flow is used to evaluate Acadian's ability to generate sustainable cash flows from operations that are available for dividends, repurchases of common shares, debt reduction, acquisitions, and other capital allocation activities. Acadian's management defines Adjusted EBITDA as net income before interest, income taxes, fair value adjustments, non-cash cost of sales related to carbon credits, recovery of or impairment of land and roads and depreciation and amortization. Free Cash Flow is defined as Adjusted EBITDA less interest paid, current income tax expense, and capital expenditures excluding acquisitions of timberlands, plus net proceeds from the sale of timberlands and other fixed assets (proceeds less gains or losses). Please refer to the section entitled "Non-IFRS Measures" in Management's Discussion and Analysis for further details.

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TIMBER MARKET OVERVIEW

Softwood Sawlogs - 51% of Freehold Timber Sales

Softwood sawlogs accounted for 51% of Acadian's freehold sales and 49% of freehold sales volume for the year ended December 31, 2024. Demand for softwood sawlogs was steady in the regions in which Acadian operates. Pricing was impacted by changes in product mix and softwood lumber pricing, which remained below historical averages for much of the year. Acadian's weighted average selling price per m³ decreased 7% during 2024.

Hardwood Sawlogs - 11% of Freehold Timber Sales

Hardwood sawlogs accounted for 11% of Acadian's freehold sales and 6% of freehold sales volume for the year ended December 31, 2024. Demand for Acadian's hardwood sawlogs remained stable. However, weakness in hardwood lumber markets put downward pressure on hardwood sawlog prices. Hardwood sawlog prices decreased 10% during 2024.

Hardwood and Softwood Pulpwood- 36% of Freehold Timber Sales

Hardwood and softwood pulpwood shipments accounted for 29% and 7%, respectively, of Acadian's freehold sales, and 29% and 9% of freehold sales volume, respectively, for the year ended December 31, 2024. Hardwood pulpwood demand remained stable while pricing decreased 2% from the prior year as a result of shorter hauling distances. Softwood pulpwood demand was strong in the first half of the year but abundant regional sawmill residuals later in the year reduced demand in the second half of 2024. Softwood pulpwood pricing increased 5% compared to the prior year.

Biomass - 2% of Freehold Timber Sales

Biomass accounted for 2% of Acadian's freehold sales and 7% of sales volume for the year ended December 31, 2024. Compared to 2023, volumes decreased 38% due to limited processing capacity and pricing decreased 43% as a result of roadside sales instead of delivered sales.

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MANAGEMENT'S DISCUSSION AND ANALYSIS

(All figures in Canadian dollars unless otherwise stated)

February 12, 2025

INTRODUCTION

Acadian Timber Corp. ("Acadian", the "Company" or "we") is one of the largest timberland owners in Eastern Canada and the Northeastern U.S. and has a total of approximately 2.4 million acres of land under management. Acadian owns and manages approximately 775,000 acres of freehold timberlands in New Brunswick ("New Brunswick Timberlands" or "NB Timberlands") and approximately 300,000 acres of freehold timberlands in Maine ("Maine Timberlands") and provides timber services relating to approximately 1.3 million acres of Crown licensed timberlands in New Brunswick.

Acadian's primary business is forest management and the production of timber products, including softwood and hardwood sawlogs, pulpwood, and biomass by-products, sold to approximately 90 regional customers. Acadian also generates income through other operations, including real estate and environmental solutions.

Acadian's business strategy is to maximize cash flows from its existing timberland assets through sustainable forest management and other land use activities while growing its business by acquiring assets and actively managing these assets to drive improved performance.

Basis of Presentation

This management's discussion and analysis ("MD&A") discusses the financial condition and results of operations of the Company for the three months ended December 31, 2024 (herein referred to as the "fourth quarter") and the fiscal year ended December 31, 2024, compared to the fourth quarter and fiscal year ended December 31, 2023. The MD&A is intended to provide an assessment of our performance and should be read in conjunction with the Company's audited consolidated financial statements and notes thereto for the fiscal year ended December 31, 2024.

Our consolidated financial statements are prepared in accordance with IFRS Accounting Standards as issued by the International Accounting Standards Board ("IFRS") and are expressed in Canadian dollars ("CAD") unless otherwise stated. This MD&A has been prepared based on information available as at February 12, 2025. Additional information, including the Company's Annual Information Form, is available on Acadian's website at www.acadiantimber.comand on SEDAR+ at www.sedarplus.ca.

Non-IFRS Measures

Throughout this MD&A, reference is made to "Adjusted EBITDA", which Acadian's management defines as net income before interest, income taxes, fair value adjustments, non-cash cost of sales related to carbon credits, recovery of or impairment of land and roads and depreciation and amortization, and to "Adjusted EBITDA margin", which is Adjusted EBITDA as a percentage of sales. Reference is also made to "Free Cash Flow", which Acadian's management defines as Adjusted EBITDA less interest paid, current income tax expense, and capital expenditures excluding acquisitions of timberlands, plus net proceeds from the sale of timberlands and other fixed assets (proceeds less gains or losses). Reference made to "Payout Ratio" is defined as dividends declared divided by Free Cash Flow and "Payout Ratio with DRIP" is defined as dividends paid in cash divided by Free Cash Flow. Management believes that Adjusted EBITDA, Adjusted EBITDA margin, Free Cash Flow, and Payout Ratios are key performance measures in evaluating Acadian's operations and are important in enhancing investors' understanding of the Company's operational performance. Adjusted EBITDA and Adjusted EBITDA margin are indicative of the underlying profitability of Acadian's operating segments and are used to evaluate operational performance. Free Cash Flow is used to evaluate Acadian's ability to generate sustainable cash flows from operations that are available for dividends, repurchases of common shares, debt reduction, acquisitions, and other capital allocation activities. We have provided

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reconciliations of net income as determined in accordance with IFRS, to Adjusted EBITDA and Free Cash Flow in the "Adjusted EBITDA and Free Cash Flow" section of this MD&A. Reference is also made to "net liquidity" which includes cash and funds available under credit facilities less amounts reserved to support the minimum cash balance related to long‐term debt.

As these measures do not have a standardized meaning prescribed by IFRS, they may not be comparable to similar measures presented by other companies.

Internal Control over Financial Reporting

Management, which includes the Chief Executive Officer and Chief Financial Officer, is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in the Canadian Securities Administrators National Instrument 52-109). Internal control over financial reporting is a process designed by, or under the supervision of, the Chief Executive Officer and the Chief Financial Officer and effected by the Board of Directors, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS.

Management assessed the design and operation of the Company's internal control over financial reporting as of December 31, 2024, based on the criteria set forth in the Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management has determined that, as of December 31, 2024, Acadian's internal control over financial reporting is effective. Also, management determined that there were no material weaknesses in Acadian's internal control over financial reporting as of December 31, 2024.

Disclosure Controls

Management, including the Chief Executive Officer and Chief Financial Officer, have evaluated the design and operation of our disclosure controls and procedures (as defined in the Canadian Securities Administrators National Instrument 52-109). Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective as of December 31, 2024. No material weaknesses have been determined by management in Acadian's disclosure controls and procedures as of December 31, 2024.

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REVIEW OF ANNUAL OPERATIONS

Summary of Results for the Years Ended December 31

The table below summarizes operating and financial data for Acadian:

Years Ended December 31		2024
(CAD thousands, except per share data and where indicated)			2023		2022
Timber sales volume (000s m3)		977.2		894.2		917.8
Carbon credit sales volume (000s credits)		752.1		1.5		-
Timber sales and services	$	91,597	$	93,440	$	90,473
Carbon credit sales		24,588		37		-
Operating income		23,659		19,566		17,865
Net income		21,738		29,434		35,507
Total assets		608,017		567,953		547,836
Total long-term debt		114,941		105,515		107,937
Adjusted EBITDA1	$	38,893	$	20,586	$	18,194
Adjusted EBITDA margin1		33%		22%		20%
Free Cash Flow1	$	29,733	$	14,999	$	12,151
Dividends declared		20,259		19,802		19,468
Dividends paid in cash		11,488		14,868		16,002
Payout Ratio1		68%		132%		160%
Payout Ratio with DRIP1		39%		99%		132%
Per share - basic and diluted
Net income	$	1.24	$	1.72	$	2.11
Free Cash Flow1		1.69		0.88		0.72
Book value		19.18		18.56		17.99
Dividends declared per share		1.16		1.16		1.16
Common shares outstanding2	17,675,687	17,182,558	16,885,424
Weighted average shares outstanding	17,566,031	17,123,919	16,791,973

1. Non-IFRSMeasure. See "Non-IFRS Measures" on page 7 of this report.
2. As at February 12, 2025 there were 17,822,449 common shares outstanding.

Acadian generated sales of $116.2 million, compared to $93.5 million in the prior year. The sale of 752,100 voluntary carbon credits contributed $24.6 million to total sales in 2024. Timber sales volume, excluding biomass, increased 16% year-over- year primarily as a result of increased contractor availability and a favourable change in customer mix which shifted harvesting volumes from Crown licensed timberlands to our freehold timberlands, increasing sales from our freehold timberlands ("freehold sales") and decreasing our timber services revenue, as compared to 2023.

Increased timber sales volumes were offset by decreased pricing as a result of changes in product mix and weak end use markets. Acadian's weighted average selling price, excluding biomass, decreased 5% from the prior year. Lower sawlog prices stemming from changes in product mix and weakness in lumber pricing as well as lower hardwood pulpwood prices due to shorter hauling distances were partially offset by higher softwood pulpwood prices early in 2024.

Operating costs and expenses were $92.5 million during 2024, compared to $73.9 million in the prior year. The year-over- year increase reflects the addition of costs related to carbon credit sales as well as higher timber sales volumes. Weighted average variable costs, excluding biomass, increased 2% over the prior year due to greater softwood sawlog hauling distances and higher contractor rates partially offset by changes in product mix and lower fuel adjustment costs.

Adjusted EBITDA for the year ended December 31, 2024 was $38.9 million, compared to $20.6 million in the prior year for the reasons discussed above and Adjusted EBITDA margin was 33% compared to 22% in the prior year. Free Cash Flow was $29.7 million compared to $15.0 million in 2023 due to higher Adjusted EBITDA and higher proceeds from sale of timberlands, partially offset by higher current income tax expense.

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