Demand boosts Acadian’s Q3 results
In reporting its third quarter results, Acadian Timber Corp. said it benefited from strong demand from local customers and higher realized selling prices for its two main products, softwood sawlogs and hardwood pulpwood.
“The markets for softwood and hardwood sawlogs and hardwood pulpwood were relatively stable during the third quarter”, said Reid Carter, CEO of Acadian. “Acadian’s major softwood sawmill and structural panel customers operated continuously throughout the quarter and most regional pulp and paper mills continued to run at full capacity.”
Acadian generated net sales of $17.5 million during the third quarter of 2012. While the sales volume during the quarter fell to 319,000 m3 from 341,000 m3 in the same quarter of 2011, a 3% year-over-year increase in the weighted average selling price across all log products kept net sales consistent with the third quarter of 2011.
Adjusted EBITDA of $4.4 million for the third quarter of 2012 was $0.6 million higher than in the third quarter of 2011, while Adjusted EBITDA margin increased to 25% from 22% in the same period of last year.
For the nine months ended September 29, 2012, Acadian generated net sales of $50.4 million on sales volume of 976 thousand m3 as compared to net sales of $51.0 million on sales volume of 1,010,000 m3 in the comparable period of 2011. Adjusted EBITDA of $11.3 million during the nine months ended September 29, 2012 is $0.3 million lower than the comparable period of 2011.
Softwood, hardwood and biomass shipments were 95,000 m3, 106,000 m3 and 54,000 m3, respectively, for the third quarter of 2012. Approximately 41% was sold as sawlogs, 38% as pulpwood and 21% as biomass. This compares to 34% sold as sawlogs, 44% as pulpwood and 22% as biomass in the third quarter of 2011.
Net sales for the third quarter of 2012 were $13.7 million (2011 – $14.3 million) with an average selling price across all log products of $56.39 per m3, which compares to an average log selling price of $55.18 per m3 during the third quarter of 2011. This year-over-year increase in the average selling price reflects the higher percentage of sawtimber in the sales mix, higher prices for hardwood pulpwood due to strong demand and a greater proportion of sales made to more distant markets. Net sales for the nine months ended September 29, 2012 were $39.3 million, a decrease of $3.5 million over the comparable period of 2011 primarily as a result of decreased sales volume.
Acadian’s outlook for the remainder of 2012 and into 2013 remains cautiously optimistic as demand for spruce-fir sawlogs continues to be reasonably strong with most of Acadian’s softwood sawmilling customers maintaining active operations. Markets for hardwood sawlogs remain stable and appear to have a similar outlook for the foreseeable future.
Markets for hardwood pulpwood are reasonably strong with Acadian’s major hardwood pulp customers all operating and actively competing for deliveries suggesting prices will remain relatively stable through the remainder of 2012. After several quarters of excess supply, softwood pulpwood markets improved slightly in the third quarter, but we expect demand for softwood pulpwood to remain soft as a result of recent capacity closures. As pointed out in the past, this is not expected to significantly affect Acadian’s financial performance as softwood pulpwood typically accounts for less than 6% of total sales and an even smaller proportion of free cash flow.
Biomass demand and pricing is expected to continue to face challenges owing to depressed prices for electricity and decade-low prices for natural gas. Despite this challenging market environment, Acadian continues to be able to sell all of its biomass with a stable outlook for gross margins generated from sales of this product.