Conifex invests in B.C. mills, posts record earnings
Conifex says it expects to spend $10 million in 2016 and early 2017 to further optimize its two B.C. sawmill complexes.
As well the company is working towards finalizing capital plans to reconstruct and modernize its currently idled El Dorado, Ark., sawmill complex. According to the company, the planned expansion into the U.S. South will provide an important source of revenue diversification and reduce cash flow volatility in its lumber segment. Conifex expects to settle on a construction schedule and budget, and subsequently the financing plan, upon completion of further engineering work and customary due diligence.
Conifex Timber Inc. reported yesterday its adjusted EBITDA in the second quarter of 2016 was a record $9 million, compared to $6.8 million in the first quarter of 2016 and negative $6.8 million in the second quarter of 2015. Compared to the previous quarter, an improvement in lumber segment adjusted EBITDA of $4.2 million or 93% was partially offset by seasonally lower bioenergy segment adjusted EBITDA and sequentially higher corporate and other costs. Compared to the second quarter of 2015, lumber segment adjusted EBITDA improved by $13.7 million and bioenergy adjusted EBITDA by $1.9 million.
The company's net income for the second quarter of 2016 was a record $35.2 million, or $1.67 per basic and $1.54 per diluted share, compared to net income of $28.5 million or $1.35 per basic share and $1.24 per diluted share in the previous quarter and net loss of $13.0 million or $0.55 per basic and diluted share in the second quarter of 2015. Net gains from non-operational and non-recurring items totalling $32.4 million and $29 million, respectively, were included in the net income of the second and first quarters of 2016. Excluding these non-operational and non-operating items, Conifex recorded a profit of $2.8 million or $0.13 per diluted share in the second quarter of 2016 and a loss of $0.5 million or $0.02 per share per basic and diluted share in the first quarter of 2016.
Conifex's lumber segment adjusted EBITDA was $8.7 million in the second quarter of 2016 compared to $4.5 million in the previous quarter and negative adjusted EBITDA of $5.0 million in the second quarter of 2015.
The company's power generation plant commenced commercial operations in May 2015. The Mackenzie Plant sold approximately 55 gigawatt hours of electricity under the 20-year Electricity Purchase Agreement (EPA) with BC Hydro in the first and second quarters of 2016, and approximately 24 gigawatt hours during the second quarter of 2015. Revenues from electricity sales were $5 million in the second quarter of 2016 compared to $7.7 million in the previous quarter and $2.6 million in the second quarter of 2015.
For the balance of 2016, in the U.S., Conifex expects modest improvements in U.S. dollar benchmark prices and Canadian dollar exchange premiums compared to the first half of 2016. Offshore demand is less robust and competition from currency advantaged alternate suppliers is more intense. Despite these market conditions, the company expects receipts from lumber shipments to China and Japan to be relatively unchanged from the first half of 2016. Conifex expects the uncertainty related to the recent expiry of the Softwood Lumber Agreement will contribute to increased market volatility.