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Conifex reports increased Q3 earnings, anticipates further improvements


November 15, 2019
By Conifex

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Conifex Timber Inc. is reporting improved earnings for the third quarter of 2019 compared to the previous quarter.

Adjusted EBITDA from continuing operations was negative $9.2 million for the quarter, which represented an improvement of $4.0 million over the second quarter of 2019, primarily attributable to increased operating earnings. A decrease in EBITDA from continuing operations of $12.8 million compared to the previous quarter was primarily attributable to a quarter-over-quarter negative variance on the company’s gain from the sale of duty refunds. Compared to the second quarter of 2019, adjusted EBITDA for the lumber segment increased by $2.9 million, for the bioenergy segment increased by $1.2 million and for corporate and other unallocated items declined by $0.1 million. Lumber segment adjusted EBITDA included softwood lumber duties expense of $1.3 million in the third quarter of 2019, $2.5 million in the second quarter of 2019 and $6.3 million in the third quarter of 2018.

“While we are encouraged by the $4.0 million improvement in Adjusted EBITDA we recorded over the second quarter of 2019, we anticipate greater sequential improvement in the current quarter primarily due to cost elimination at our Fort St. James mill and cost reduction at our El Dorado mill”, said Ken Shields, chairman and CEO. Shields added: “We made considerable progress reducing our borrowings through the first nine months of 2019, and have a number of initiatives underway designed to generate cash and further improve our balance sheet. ”

Consolidated net earnings

During the third quarter of 2019, Conifex incurred a net loss of $16.6 million, or $0.35 per share, compared to a net loss of $9.1 million or $0.19 per share in the previous quarter and net income of $4.3 million or $0.09 per share in the third quarter of 2018.

Continuing operations

Conifex’s revenues totalled $65.2 million in the third quarter of 2019, a decline of 32 per cent from the prior quarter and 59 per cent from the same quarter last year. The lower revenues were largely attributable to the lumber segment, which recorded reduced shipments reflecting lower operating rates at the company’s B.C. and Arkansas mills and a decline in sales realizations, particularly compared to the third quarter of 2018. The fluctuation in bioenergy segment revenues were mainly due to planned downtime in the previous quarter, seasonality in rates and variability in plant dispatch periods in the comparative quarters.

Conifex recorded operating losses of $15.0 million in the lumber segment in the third quarter of 2019, $19.1 million in the previous quarter and operating earnings of $10.3 million in the third quarter of 2018. Lumber segment operating results included CV and AD duties expense of $1.3 million in the third quarter of 2019, $2.5 million in the second quarter of 2019 and $6.3 million in the third quarter of 2018. Bioenergy segment operating earnings declined by 13 per cent year-over-year and contributed operating earnings of $5.4 million in the first nine months of 2019 and $6.2 million in the same period of last year. Corporate costs of $1.8 million in the third quarter of 2019 reflected reductions of 9 per cent from the prior quarter and 12 per cent from the same quarter last year.

Net income from continuing operations included a foreign exchange loss on long-term debt of $2.4 million in the third quarter of 2019 and gains of $4.4 million in the previous quarter and $2.5 million in the third quarter of 2018. Finance costs were $7.1 million in the third quarter of 2019, $7.4 million in the previous quarter and $6.3 million in the third quarter of 2018. Conifex recorded gains on the sale of duty refunds of $2.6 million in the third quarter of 2019 and $12.6 million in the prior quarter as other income. Corporate and other unallocated items included $2.1 million related to acquisition costs in the third quarter of 2018.

Lumber segment

Shipments of Conifex produced lumber totalled 105 million board feet in the third quarter of 2019. Lumber shipments outpaced production by 11 per cent in the current and previous quarters as shipments were continued during periods of production curtailments. Shipments of Conifex produced lumber declined by 30 per cent from the previous quarter and by 44 per cent from the third quarter of 2018.

Read the full report here.