Acadian reports positive outlook
Oct 31, 2013, Vancouver - For the third quarter of 2013, Acadian Timber generated net sales of $18.8 million on sales volume of 343 thousand m(3), which represents a $1.2 million, or 7%, increase in net sales compared to the same period in 2012.
"Acadian's operations ran well this quarter with solid demand for all our products and our customers continuing to have a positive market outlook. Business development was also a focus with development opportunities arising primarily from our proactive outreach initiatives," said Reid Carter, Chief Executive Officer of Acadian. "We are excited about Acadian's investment prospects."
Adjusted EBITDA of $3.8 million for the third quarter of 2013 was $0.6 million lower than in the third quarter of 2012, while Adjusted EBITDA margin decreased to 20% from 25% in the same period of last year.
For the nine months ended September 28, 2013, Acadian generated net sales of $52.6 million on sales volume of 1,013 thousand m(3) as compared to net sales of $50.4 million on sales volume of 976 thousand m(3) in the comparable period of 2012. Adjusted EBITDA of $11.3 million during the nine months ended September 28, 2013 is unchanged from the same period of 2012.
Further to the announced broadening of Acadian's growth strategy, management has been actively pursuing several significant value-oriented opportunities in North and South America and Australia. These growth opportunities have ranged from traditional pure-play timberland sales to monetization strategies by industrial owners that seek to redeploy capital in their operating businesses. Acadian is targeting investments that meet the long-term total return targets of 10-15% and will remain disciplined when allocating capital. Acadian's investment strategy is focused on acquiring assets on a value basis by utilizing an operations-oriented approach to drive improved performance or using its strong structuring expertise to assist partners in monetizing assets. Acadian is well positioned to benefit from Brookfield's broader platform and relationships when sourcing transactions.
Net income totaled $3.4 million, or $0.20 per share, for the third quarter, a decrease of $1.6 million, or $0.10 per share, compared to the same period of the prior year with the change attributable to increased costs as a result of harvesting in more distant stands and the timing of reforestation expenditures, as well as a non-cash $0.9 million decrease in the unrealized exchange gain on long-term debt. Operating earnings for the period at $3.6 million were down $0.6 million reflecting the aforementioned higher hauling and reforestation costs.
Acadian's operations ran well during the third quarter. Weather conditions were typical for the summer season and improved demand for biomass resulted in a 5% increase in total harvest volume compared to the same period in the prior year. Harvest volume, excluding biomass, for the third quarter was almost unchanged from the same period in 2012 at 271 thousand m. Consolidated sales volume of 343 thousand m(3) was up 8% from the third quarter of 2012 with the increase primarily coming from Acadian's operations in Maine.
Acadian's weighted average log price for the third quarter increased 3% year-over-year with product-level price increases being somewhat offset by a heavier mix of pulpwood relative to the same period last year. Stronger softwood sawlog markets, particularly in the Maine operations, resulted in a 4% increase in softwood sawlog prices relative to the third quarter of 2012. Prices for hardwood logs in both the New Brunswick and Maine operations improved with selling prices for hardwood sawlogs, which represented 10% of net sales, increasing by 5% and prices for hardwood pulpwood also climbing 5% year-over-year. Biomass markets remained stable, however, realized gross margins on this product climbed 17% year-over-year due to an increased proportion of the New Brunswick volume being sold to export markets in addition to lower costs in the Maine operations due to the recovery of volumes stored in wood yards.
New Brunswick Timberlands
Softwood, hardwood and biomass shipments were 91 thousand m(3), 103 thousand m(3) and 60 thousand m(3), respectively, for the third quarter of 2013. Approximately 33% was sold as sawlogs, 43% as pulpwood and 24% as biomass. This compares to 41% sold as sawlogs, 38% as pulpwood and 21% as biomass in the third quarter of 2012.
Net sales for the third quarter of 2013 were $13.6 million (2012 - $13.7 million) with an average selling price across all log products of $55.94 per m(3), which compares to an average selling price of $56.39 per m(3) during the third quarter of 2012. This year-over-year decrease in the average selling price reflects lower prices for softwood pulpwood and a higher proportion of that lower value product in the sales mix.
Costs for the third quarter were $10.9 million (2012 - $10.1 million). Variable costs per m(3) were 4% higher than in the third quarter of 2012 due to longer hauling distances for hardwood logs as a greater proportion of the volume was sold to export markets and in-yard sales decreased.
Adjusted EBITDA for the third quarter was $2.7 million, compared to $3.6 million in the comparable period of 2012 reflecting the timing of reforestation expenditures, higher hauling costs and decreased activity in our land management services business. Adjusted EBITDA margin decreased to 20% from 26% in the third quarter of 2012.
NB Timberlands experienced three minor recordable safety incidents among contractors and no recordable incidents involving employees during the third quarter of 2013.
The U.S. housing market has entered a period of stabilization where further improvement is expected to be based on buying interest from new homeowners rather than investors. While housing starts and pricing continue to improve year-over-year, the rate of increase and consensus expectations have moderated since the second quarter. Housing affordability declined early in the third quarter, then recovered as mortgage rates eased in response to the U.S. Federal Reserve's decision not to taper securities purchases. We remain confident that the recovery of the U.S. housing market is on track and see most of Acadian's solid wood customers sharing our outlook as they increase capital investments, increase operating shifts and ramp up log purchases.
Our outlook for the remainder of 2013 and into 2014 is positive. Softwood lumber prices have largely recovered from the weakness seen in the late spring and early summer of this year resulting in continued strong demand for spruce-fir sawlogs from Acadian's softwood sawmilling customers. Markets for hardwood sawlogs remain stable and appear to have a similar outlook for the foreseeable future.
After a modest recovery of regional softwood pulpwood markets in the second half of 2012 and early 2013, markets have softened again as there has been an ample supply of sawmill residuals and raw material at regional pulp mills. This is particularly true in our New Brunswick operations where we expect markets for softwood pulpwood to be challenging through the remainder of 2013. Demand for spruce-fir pulpwood from pulp mills in Maine remains reasonably strong.
Markets for hardwood pulpwood have continued to be reasonably strong with Acadian's major hardwood pulp customers all operating and taking deliveries suggesting that prices should remain stable through the remainder of 2013 and well into 2014.
Domestic markets for biomass remain stable and export markets are growing. As a result, Acadian continues to be able to sell all of its biomass and the outlook for gross margins is stable to modestly improving.
Acadian is pleased to announce a dividend of $0.20625 per share, payable on January 15, 2014 to shareholders of record on December 31, 2013.
Acadian Timber Corp. is a leading supplier of primary forest products in Eastern Canada and the Northeastern U.S. With a total of 2.4 million acres of land under management, Acadian is the second largest timberland operator in New Brunswick and Maine.
Acadian owns and manages approximately 1.1 million acres of freehold timberlands in New Brunswick and Maine, and provides management services relating to approximately 1.3 million acres of Crown licensed timberlands in New Brunswick. Acadian also owns and operates a forest nursery in Second Falls, New Brunswick. Acadian's products include softwood and hardwood sawlogs, pulpwood and biomass by-products, sold to approximately 90 regional customers.
October 31, 2013 By Marketwired
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