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Eacom records positive results for 2012

According to the company, the improvement in housing activity had a positive impact on lumber consumption and contributed to a much stronger pricing environment and higher mill realizations for Eacom. As a result, it recorded a positive adjusted EBITDA of $2,481,000 for the year ended December 31, 2012, against a negative adjusted EBITDA of $26,285,000 in 2011.

During the second half of 2012, the company completed capital upgrades targeted at increasing the production capacity at two of its mills, Nairn Centre and Elk Lake. These upgrades are expected to partially offset the capacity lost at Timmins and mitigate some of the damages incurred as a result of the fire. On December 12, 2012, the Company entered into an agreement with USNR Kockums Cancar Inc. to rebuild the Timmins mill. The total cost of the project is estimated at $25,000,000, of which $18,900,000 will be funded from the proceeds of insurance. Construction is expected to be completed in the third quarter of 2013.

Subsequent to year-end, Eacom concluded with its insurer the negotiation of a global settlement in the amount of $48,250,000 for the fire at its Timmins mill. The Company received advances for an aggregate amount of $30,600,000 in 2012 and, subsequent to year-end, collected the remaining proceeds of $17,400,000 (net of a $250,000 deductible).

“The company generated a positive adjusted EBITDA of $3.4 million in the fourth quarter and $2.5 million in 2012. Current lumber markets have improved due to a stronger U.S. housing market. In 2013, the Company will focus on its cost reduction efforts to increase productivity and improve recovery,” stated Rick Doman, President and CEO.

For the year ended December 31, 2012, net earnings attributable to shareholders amounted to $4,285,000 or $0.01 per common share, against a net loss of $47,412,000 or $0.10 per common share in 2011. The 2012 results include a gain of $15,183,000 on disposal of property, plant and equipment destroyed by fire whereas the 2011 results included an impairment charge of $15,000,000, partially offset by a gain of $4,339,000 on the sale of the Big River mill and a $3,769,000 recovery of income taxes.

In 2012, the Company recorded sales of $248,937,000, down 11% against sales of $279,967,000 in 2011. The Company’s sales include both lumber and by-product sales. In 2012, the Company shipped 506 million board feet of lumber (621 million board feet in 2011) and 476,000 oven-dried metric tons of by-products (568,000 oven-dried metric tons in 2011). Compared to 2011, shipments reflect lower production volumes.

Pricing has improved in 2012 with benchmark lumber prices averaging US$371/Mfbm for studs and US$395/Mfbm for random lengths delivered Great Lakes, up 17% and 15% from US$316/Mfbm and US$343/Mfbm respectively in 2011. Mill realizations also benefited from a slightly softer Canadian dollar with the exchange rate averaging 1.001 US$/Cdn$ in 2012, down 1% against an average of 1.011 US$/Cdn$ in 2011. The mix of lumber grades sold during those periods has remained similar. However the overall prices of by-products decreased during the fourth quarter as a result of Val d’Or and Matagami resuming operations within the context of a competitive by-products market generating lower chip prices.

Lumber production in 2012 was 447 million board feet of lumber, against 522 million board feet in 2011. In 2012, the Company operated at 44% of its capacity with two of its eight mills idled (53% in the corresponding period of 2011 with no change to idled mills). Operations in Val-d’Or and Matagami, which had been temporarily shut down since the second half of 2011 due to weak market conditions, resumed in the third quarter of 2012, and the Timmins mill closed on January 22, 2012 due to the fire at the mill site. The volume lost in respect of these closures has been partially offset by the additional production at Elk Lake following the acquisition of the remaining one-third interest in that mill in the third quarter of 2011, and by the addition of a third shift at Nairn at the end of the first quarter of 2012.

For the quarter ended December 31, 2012, the net loss attributable to shareholders amounted to $388,000 or $0.00 per common share, against a net loss of $964,000 or $0.00 per common share in the previous quarter and a net loss of $27,055,000 or $0.06 per common share in the corresponding quarter of 2011. In the corresponding quarter of 2011, the Company recorded an impairment charge of $15,000,000.

During the fourth quarter of 2012, housing starts in the United States averaged 898,000 units, up 16% from the previous quarter and, more significantly, 32% from the fourth quarter of 2011. In Canada, housing starts were mixed, down 8% from the previous quarter but up 2% from the corresponding quarter of 2011. The improvement in the U.S. housing activity had a positive impact on lumber consumption and contributed to a strong pricing environment. As a result, the Company recorded a positive adjusted EBITDA of $3,383,000 for the fourth quarter ended December 31, 2012, against a positive adjusted EBITDA of $1,482,000 in the previous quarter and a negative adjusted EBITDA of $8,554,000 in the corresponding quarter of 2011.

For the quarter ended December 31, 2012, the Company recorded sales of $60,360,000, down 5% against sales of $63,380,000 in the previous quarter and 11% against sales of $67,445,000 in the corresponding quarter of 2011. During the quarter, the Company shipped 120 million board feet of lumber (125 million board feet in the previous quarter and 156 million board feet in the corresponding quarter of 2011) and 110,000 oven-dried metric tons of by-products (127,000 oven-dried metric tons in the previous quarter and 129,000 oven-dried metric tons in the corresponding quarter of 2011). Compared to the previous quarter and the corresponding quarter of 2011, shipments reflect lower production volumes and inventory changes.

Pricing has improved again in the fourth quarter of 2012 with benchmark lumber prices averaging US$426/Mfbm for random lengths delivered Great Lakes, up 5% from US$404/Mfbm in the previous quarter. However, pricing for studs was somewhat mixed during the quarter, averaging US$375/Mfbm against US$394/Mfbm in the previous quarter. The Canadian dollar remained stable with the exchange rate relative to the US$ averaging 1.009 in the fourth quarter against an average of 1.005 US$/Cdn$ in the previous quarter. Compared to the corresponding quarter of 2011, random lengths and studs are trading at prices 31% and 23% above the levels achieved last year.

Lumber production in the fourth quarter of 2012 was 113 million board feet of lumber, against 112 million board feet in the previous quarter and 111 million board feet in the corresponding quarter of 2011. During the fourth quarter, the Company operated at 46% of its capacity (45% during the previous quarter and 45% in the corresponding quarter of 2011). The most significant changes include some downtime taken at Elk Lake during the fourth quarter of 2012 when the mill went through a substantial capital upgrade, the mills in Val-d’Or and Matagami resuming their operations in the third quarter of 2012, and the capacity lost at Timmins as a result of the fire