Conifex reports loss in Q3
Nov. 6, 2013, Vancouver - Conifex Timber reported a net loss of $0.1 million or $0.01 per share for the third quarter of 2013 compared to net income of $2.4 million or $0.12 per share for the previous quarter and a net loss of $3.7 million or $0.19 per share for the third quarter of 2012. Net income for the first nine months of 2013 was $8.5 million or $0.41 per share compared to a net loss of $12.6 million or $0.68 per share over the same period last year.
Revenues totalled $65.2 million in the third quarter of 2013 compared to $64.4 million in the previous quarter and $54.4 million in the third quarter of 2012. Lumber shipments totalled approximately 147 million board feet during the third quarter of 2013 and included wholesale lumber shipments of approximately 18 million board feet. An increase in shipments of Conifex produced lumber of approximately 8% over the previous quarter largely reflects the intentional finished goods inventory build late in the previous quarter in anticipation of heightened activity and relatively favourable mill net realizations expected from offshore markets during the third quarter of 2013.
Shipments to exports markets represented approximately 67% of total shipment volumes during the third quarter of 2013 compared to 42% during the previous quarter and 32% during the third quarter of 2012. Shipments to Japan represented 9% of total shipments and contributed 15% of total mill net realizations. Shipments to China increased to 58% of total shipments in response to relatively higher unit mill net realizations available on certain products compared to the North American market and the increase of wholesale lumber shipments to normalized levels. Shipments to the U.S. represented 22% of total shipment volumes, compared to 44% during the previous quarter.
Benchmark lumber prices (expressed in Canadian dollars) remained flat compared to the previous quarter and increased by 14% over the third quarter of 2012. Compared to the second quarter of 2013, average unit mill net realizations improved on shipments to Canada and Japan by 4% and 6% respectively but declined by 10% on shipments to China and the U.S. Overall unit mill net realizations declined by 10% from the previous quarter and improved by 8% from the third quarter of 2012.
Lumber production totalled 123 million board feet in the third quarter of 2013 compared to 136 million board feet in the previous quarter and 103 million board feet in the third quarter of 2012. Production volumes during the third quarter of 2013 were impacted primarily by disruptions from capital projects undertaken at both mills which were concentrated in the last month of the quarter. The upgrades did not involve any shutdowns but hourly productivity levels were reduced as a result of operating under test conditions and the measured ramp up to normal production levels. Hourly production at both mills returned to expected levels following the completion of the upgrades. Current year to date production totalled 383 million board feet, an increase of 21% over the same period last year. Average hourly production over the first nine months of 2013 increased by 15% compared to the same period last year.
Overall unit log costs increased by 2% compared to the previous quarter and 14% over the third quarter of 2012. The effects of a considerable increase in stumpage rates during the third quarter of 2013 were not reflected until late in the quarter generally due to the lag between harvesting of the logs and delivery to the mill sites. The company expects the impact of higher third quarter stumpage rates to be reflected in the fourth quarter. Compared to the third quarter of 2012, an increase in unit log costs of 23% was offset by an improvement of 9% in lumber recovery. The increase in delivered log costs is generally attributable to costs associated with increased stumpage rates, contractor rates and purchased log costs.
Unit cash conversion costs during the third quarter of 2013 increased by only 2% over the previous quarter despite a 10% reduction in production levels. Unit cash conversion costs improved by 14% compared to the third quarter of 2012 with the improvement largely attributable to productivity gains.
Third quarter 2013 net loss of $0.1 million was comprised of lumber segment net income of $1.9 million offset by bioenergy segment net loss of $0.1 million and corporate costs and other items of $1.9 million. Third quarter lumber segment EBITDA of $4.0 million was offset by negative bioenergy segment EBITDA of $0.1 million and corporate costs and other items of $1.1 million.
Compared to the second quarter of 2013, the decline in lumber segment net income of $2.8 million was primarily attributable to lower mill net realizations and, to a lesser extent, to modest increases in log costs and unit cash conversion costs. Compared to the third quarter of 2012, lumber segment net income increased by $3.1 million as the benefits of an 8% improvement in unit mill net realizations from higher lumber prices and a lower export tax rate, and a 14% reduction in unit cash conversion costs more than offset higher log costs.