Industry News Markets
Acadian Timber posts sales increase

For the fourth quarter of 2012, Acadian generated net sales of $18.4 million on sales volume of 327 thousand m3, which represents a $3.3 million increase in net sales compared to the same period in 2011.

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $5.1 million for the fourth quarter of 2012 was $1.3 million higher than in the fourth quarter of 2011, and Adjusted EBITDA margin increased to 28% from 25% in the same period of last year. The increase in margin is attributed to higher contributions to fixed costs resulting from increased sales volume.

For the year ended December 31, 2012, Acadian generated net sales of $68.8 million on sales volume of 1,304 thousand m3 as compared to net sales of $66.2 million on sales volume of 1,293 thousand m3 in 2011. Adjusted EBITDA of $16.5 million during the year ended December 31, 2012 is $1.0 million higher than the prior year.

“Acadian benefitted from strong demand and pricing for its hardwood pulpwood and average selling prices for spruce fir sawlogs remained robust in Acadian’s Maine operations,” said Reid Carter, Chief Executive Officer of Acadian.

Market Outlook

Seasonally adjusted annualized U.S. housing starts of 954 thousand in December 2012 were 37% above year-ago levels while permits were up 29% year-over-year. For the year, housing starts climbed 28% to 780 thousand from 609 thousand in 2011 and inventories of new homes available for sale remain near 50-year record lows. U.S. home pricing has clearly moved off the early 2012 bottom with the most recent Case-Schiller 20-City Home Price Index showing a national increase of 5.5% year-over-year while the most recent statistics from CoreLogic show home prices nationwide, including distressed sales, moved up 7.4% year-over-year. This represents the biggest increase since May 2006 and the ninth consecutive increase in home prices nationally year-over-year.

Acadian management believes the recovery of home prices removes a major psychological impediment to home buyers standing on the sidelines and should support increased rates of household formation. Additionally, mortgage rates remain at record lows and housing affordability is at near-record highs with mortgage underwriting standards becoming more accommodative. While the consensus forecast is somewhat of a moving target and risks to the forecasts are expected to be on the upside, it appears a reasonable collection of estimates is now projecting 925,000 housing starts for 2013, 1.15 million in 2014 and 1.42 million in 2015 – levels expected to result in very strong markets for timber aimed at solid wood products markets. In addition, Acadian’s move to a new pricing mechanism under the fibre supply agreement with one of its major customers at the beginning of 2013 is expected to result in spruce-fir sawlog pricing becoming a better reflection of market in our New Brunswick operations.

Global pulp markets bottomed in the third quarter with strong demand late in the fourth quarter bringing markets into balance. Although pulp price increases have been announced for January and February 2013, we expect producers to have limited ability to move prices up from their current levels owing to ample global capacity. Acadian’s pulpwood customers, however, continue to have high operating rates and markets for Acadian’s hardwood pulpwood continue to be strong. Markets for softwood pulpwood, a relatively minor product for Acadian, remain adequate.

Markets for hardwood sawlogs and specialty products improved slightly or were stable through 2012 with a similar outlook for 2013. Demand for biomass is expected to be stable, but at low price levels, owing to continued low electricity prices and very low prices for natural gas.

“While there may be volatility, we expect 2013 to be an exciting year in the wood products industry. Acadian’s adeptness in identifying and accessing market opportunities will ensure returns from all opportunities that arise are maximized in what is expected to be the first full year of recovery for the industry since the economic downturn in 2008,” concluded Mr. Carter.