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Conifex announces net loss of $8.2 million in 2020 Q1


May 14, 2020
By Conifex Timber Inc.

Conifex Timber Inc. today reported results for the first quarter ended March 31, 2020. Adjusted EBITDA from continuing operations was positive $0.5 million for the quarter, which represented an improvement of $4.6 million over the fourth quarter of 2019, primarily attributable to increased operating earnings and lower selling, general and administrative costs. Adjusted EBITDA included softwood lumber duties expense of $2.0 million in the first quarter of 2020, $1.4 million in the last quarter of 2019 and $3.8 million in the first quarter of 2019.

“With $12.1 million of cash, a largely debt-free lumber business and predictable cash flows from power generation, Conifex is well positioned to withstand the economic challenges B.C. lumber producers face resulting from the COVID-19 pandemic,” said Ken Shields, Conifex Timber chairman and CEO.

Selected financial highlights

Continuing operations for the comparative periods primarily comprise operating results from our Mackenzie sawmill and power plant, our previously owned sawmill in Fort St. James, British Columbia, which was largely curtailed in May 2019 and sold in November 2019, and corporate costs and other unallocated items.

Consolidated net earnings

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During the first quarter of 2020, we incurred a net loss from continuing operations of $8.2 million, or $0.18 per share, compared to $10.2 million or $0.22 per share in the previous quarter and $7.4 million or $0.16 per share in the first quarter of 2019.

Continuing operations

Our revenues totaled $30.6 million in the first quarter of 2020, an increase of 10 per cent from the prior quarter and a decrease of 54 per cent from the first quarter of 2019. The increase in revenue compared to the prior quarter primarily consisted of higher sales realizations in the first quarter of 2020. Revenues from the first quarter of 2019 included sales from our previously owned Fort St. James sawmill which we sold in November 2019, resulting in significantly lower production and shipment volumes, which more than offset moderate increases in US-dollar Western Spruce/Pine/Fir (“WSPF”) benchmark lumber prices and a weaker Canadian dollar.

We recorded operating losses of $6.8 million in the first quarter of 2020, $11.5 million in the previous quarter and $8.5 million in the first quarter of 2019. Operating results included countervailing (“CV”) and anti-dumping (“AD”) duties expense of $2.0 million in the first quarter of 2020, $1.4 million in the last quarter of 2019 and $3.8 million in the first quarter of 2019. Selling, general and administrative (“SG&A”) costs of $1.7 million in the first quarter of 2020 reflected a decrease of 20 per cent from the prior quarter and a decrease of 51 per cent from the first quarter of last year. We significantly reduced SG&A costs in the first quarter of this year by reducing management personnel and overhead costs to better align our corporate support functions with our operating footprint. We incurred restructuring costs of $1.9 million and $2.6 million in the first quarter of 2020 and the fourth quarter of 2019, respectively, in relation to these cost reduction initiatives.

Net income from continuing operations included a foreign exchange loss on long-term debt of $2.1 million in the first quarter of 2020 compared to foreign exchange gain on long-term debt of $2.4 million and $4.5 million in the previous quarter and the first quarter of 2019, respectively. Finance costs were $3.5 million in the first quarter of 2020, $21.7 million in the previous quarter and $6.0 million in the first quarter of 2019.

Adjusted EBITDA was $0.5 million in the first quarter of 2020 and negative $3.9 million and $4.0 million in the previous quarter and the first quarter of 2019, respectively. The improvement in adjusted EBITDA was largely attributable to higher sales realizations and lower SG&A costs in the first quarter of 2020.

Read the full report here.