EBITDA1 of $60.5 million (or $70.0 million excluding duties)
Free Cash Flow from Operations of $57.5 Million (or $0.82 per Share)
Net Debt to Invested Capital Ratio of 17.9%
Proceeding With Strategic Capital Plan
INTERFOR CORPORATION (“Interfor” or “the Company”) (TSX: IFP) recorded net earnings in Q3’17 of $16.8 million, or $0.24 per share, compared to $24.5 million, or $0.35 per share in Q2’17 and $15.1 million, or $0.22 per share in Q3’16. Adjusted net earnings1 (which takes into account the effects of share-based compensation expense and non-recurring items) in Q3’17 were $20.0 million or $0.29 per share, compared to $28.7 million, or $0.41 per share in Q2’17 and $20.7 million, or $0.30 per share in Q3’16.
Adjusted EBITDA1 for Q3’17 was $60.5 million (or $70.0 million excluding the impact from $9.4 million of softwood lumber duties expense), on sales of $489.2 million versus $77.4 million on sales of $511.4 million in Q2’17.
Notable items in the quarter included:
* Mixed Benchmark Lumber Prices and Stronger Canadian Dollar
* Total lumber production was 645 million board feet, or 10 million board feet fewer than the prior quarter. Accordingly, sales of Interfor–produced lumber were 650 million board feet versus 654 million board feet in Q2’17. Production in the U.S. South region decreased to 281 million board feet from 294 million board feet in the preceding quarter, as the Company took precautionary measures and temporarily suspended operations at most of its U.S. South sawmills for several days in advance of and during Hurricane Irma. Fortunately, the Company’s sawmills did not sustain any material damage and have since been operating in a normal manner. The B.C. and U.S. Northwest regions, in spite of facing fire-related log harvest constraints, produced at levels comparable to Q2’17. The B.C. and U.S. Northwest regions accounted for 225 million board feet and 139 million board feet, respectively, compared to 215 million board feet and 146 million board feet in Q2’17, respectively.
* Interfor’s average lumber selling price decreased $31 from Q2’17 to $611 per mfbm, due to a combination of factors, including a US$31 per mfbm decline in the SYP Composite benchmark price and a strengthening of the Canadian Dollar by 6.8% on average, partially offset by a US$26 per mfbm increase in the Western SPF Composite benchmark price.
* Significant Cash Flow and Lower Leverage
* Interfor generated $57.5 million of cash from operations before changes in working capital, or $0.82 per share, plus a $3.5 million reduction in working capital, for total cash generated from operations of $61.0 million.
* Capital spending was $28.9 million on a mix of high-return discretionary, maintenance and woodlands projects.
* Net debt ended the quarter at $177.8 million, or 17.9% of invested capital.
Interfor recorded $9.4 million of expense in respect of countervailing and anti-dumping duties imposed by the U.S. on its lumber shipments from Canada into the U.S. during Q3’17. Anti-dumping duties were incurred at a preliminary rate of 6.87% throughout the third quarter while countervailing duties, at a preliminary rate of 19.88%, were only applicable on shipments through August 13th. The countervailing duty ceased in August in accordance with U.S. law and is not expected to resume until late December 2017 or early January 2018, pending final rulings by the U.S. International Trade Commission. In Q3’17, Interfor shipped approximately 115 million board feet from its Canadian operations to the U.S. market, which represented approximately 17% of the Company’s total lumber sales.
On November 2, 2017, the U.S. Department of Commerce announced its final determinations. As part of its determinations, the final countervailing duty rate was lowered from 19.88% to 14.25%, while the anti-dumping duty rate was lowered from 6.87% to 6.58%. In addition, the U.S. Department of Commerce concluded that critical circumstances did not exist for countervailing duties, but did exist for anti-dumping duties.
Interfor has not yet submitted any deposits in respect of retroactive duties relating to critical circumstances, which could total approximately US$3.0 million in respect of anti-dumping. Interfor does not believe the retroactive application of such duties will stand up under final scrutiny which, in turn, should result in a full return to the Company of any related deposits.
Interfor is of the view that these duties imposed by the U.S. are without merit and are politically driven. Interfor intends to vigorously defend the Company’s and the Canadian industry’s positions through various appeal processes, in conjunction with the B.C. and Canadian Governments.
more detail at: http://www.interfor.com/sites/default/files/docs/reports/Interfor-Reports-Q3%2717-Results.pdf