Markets
Aug. 15, 2017 - Builder confidence in the market for newly-built single-family homes rose four points in August to a level of 68 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI).
Aug. 11, 2017 - Wood costs for the pulp industry in Europe were generally lower in the 1Q/17 than in the previous quarter, continuing a downward trend that, depending on the country, has lasted for four to six years. The biggest price declines for pulplogs and sawmill residues in early 2017 occurred in Germany and France, according to the Wood Resource Quarterly (WRQ). The price reductions occurred mainly because of an oversupply of pulplogs, unchanged demand for wood fiber from the pulp industry, and reduced usage of raw-material by the competing wood pellet sector.
Aug. 10, 2017 - Conifex Timber Inc.'s has posted second quarter results that show record earnings due to an improved lumber segment in spite of U.S. countervailing duties and seasonally low revenues for its bioenergy segment.
Aug. 9, 2017 - Interfor Corporation has posted an increase of net earnings in the second quarter compared to last year, attributing it to higher lumber prices for western wood, increased production and progress on the company's optimization initiative. 
Aug. 8, 2017 - In the 1Q/17, pine sawlog prices in Brazil increased in both U.S. dollars and in the Brazilian Real quarter-over-quarter. Over the last 12 months, sawlog prices have gone up by 26 per cent, according to the Wood Resource Quarterly.
Aug. 3, 2017 - Western Forest Prodcuts reported adjusted EBITDA of $47.1 million in the second quarter of 2017, compared to adjusted EBITDA of $43.0 million in the second quarter of 2016, and $34.0 million reported in the first quarter of 2017. Western leveraged its flexible operating platform to mitigate US softwood lumber duties, overcome log supply challenges and capitalize on improved market pricing.

Net income of $25.6 million ($0.06 per diluted share) was reported for the second quarter of 2017, as compared to $23.8 million ($0.06 per diluted share) for the second quarter of 2016 and $16.2 million ($0.04 per diluted share) in the previous quarter. Adjusted EBITDA and net income were reduced by $9.2 million of export duties expensed in the second quarter of 2017.

Q2 2017 HIGHLIGHTS
  • Delivered Company record second quarter adjusted EBITDA of $47.1 million
  • Achieved Company record quarterly average realized lumber price of $1,069 per thousand board feet
  • Consolidated secondary processing at the modernized Duke Point planer facility
  • Returned $7.9 million to shareholders via the Company's quarterly dividend program
  • Increased cash balance to $51.1 million and grew liquidity to $285.1 million
The company delivered revenue of $287.4 million in the second quarter of 2017, as compared to $301.8 million in the second quarter of 2016, and $287.7 million in the first quarter of 2017. Record second quarter average realized lumber pricing offset reduced log and lumber shipments which were constrained due to reduced coastal harvest and a low opening log inventory.

"We successfully targeted sales to mitigate US lumber duties and capitalize on global softwood lumber market opportunities. I'm encouraged by our positioning and the positive supply-demand market dynamics leading into the second half of the year," said Don Demens, President and Chief Executive Officer. "We are focused on managing log supply challenges, and realizing incremental cost reductions from margin improvement initiatives and the consolidation and optimization of our operating platform."

Western announced earlier today that it has received approval to purchase and cancel up to 19,778,383 common shares through a Normal Course Issuer Bid, beginning on or after Aug. 8, 2017. The company will purchase shares based on market conditions and share price to enhance value for Western's shareholders. 

Second Quarter 2017
We generated $47.1 million of adjusted EBITDA in the second quarter of 2017, a 10% increase from the same quarter of 2016, as we successfully levered our flexible operating platform to mitigate US softwood lumber duties by redirecting lumber production and sales to non-US markets. This strategy enabled Western to capitalize on improved lumber pricing and overcome log supply challenges.

Second quarter operating income prior to restructuring items and other income was $37.7 million compared to $33.7 million in the same period last year. Operating income and adjusted EBITDA were reduced by $9.2 million of export duties expensed in the second quarter of 2017.

Lumber revenue was $212.8 million, a decrease of 4% from the second quarter of 2016. Improved lumber price realizations largely offset a 15% decline in sales volumes. Average realized lumber pricing was $1,069 per thousand board feet, an increase of 13% from the same period in 2016, despite a higher proportion of commodity lumber sales. We directed lumber shipments to a strong China market, and focused our sales in the US market on targeted products where pricing largely offset softwood lumber duties.

Second quarter log revenue was $57.2 million in 2017, a decrease of $7.0 million from the same period in 2016. Improved log pricing offset a 16% decrease in log sales volumes. Lower log shipment volumes were due to reduced harvest volumes, combined with a lower opening log inventory and prioritizing internal log consumption.

By-product revenue was $17.4 million in the second quarter of 2017, as compared to $16.6 million in the same period in 2016. A 16% increase in chip price realizations more than offset reduced sales volumes, resulting from reduced lumber production.

Revenues were positively affected by a weaker Canadian dollar ("CAD"), which was 4% lower on average against the United States dollar ("USD") as compared to the same quarter of 2016.

Lumber production was 207 million board feet, 11% lower than the second quarter of 2016 as limited coastal log supply impacted lumber production. We more than offset the margin impact of lower total lumber production by further consolidating our operating platform, increasing commodity production and reducing secondary processing. Since the second quarter of 2016, we have closed both the South Island Remanufacturing operation and Saltair planer, consolidating our secondary processing at the modernized Duke Point planer. We have also continued to internalize custom cut production at our modernized Duke Point sawmill. In February 2017, we temporarily curtailed production at the Somass sawmill, our highest cost manufacturing facility, and we have recently announced the indefinite curtailment of that operation.

Timberlands log production was 1,091,000 cubic metres, 17% lower than in the same period last year. Our log harvest was impacted by prolonged snow pack that limited access to higher elevation harvest areas, and the aforementioned train accident. Log harvest costs per cubic metre were comparable to the second quarter of 2016, as reduced helicopter logging and lower silviculture expense offset the impacts of lower production on fixed costs per unit. Log supply was supplemented by saw log purchases of 249,000 cubic metres, a decrease from 497,000 cubic metres in the same quarter last year as reduced coastal supply limited market log availability.

Freight expense increased by $2.8 million as compared to the second quarter of 2016, as we leveraged our flexible operating platform to drive higher lumber shipments to a strong China market. This strategy partly mitigated the impact of export duties on our margins. A weaker CAD period-over-period negatively impacted our shipping rates.

Second quarter selling and administration expense increased to $8.4 million in 2017, from $7.6 million in the same period of 2016. A significant increase in the company's common share price resulted in an incremental $0.7 million mark-to-market adjustment on outstanding share units. The company's common share price appreciated by 8%, as compared to depreciating by 12% in the second quarter last year.

Net income for the second quarter of 2017 was $25.6 million, as compared to $23.8 million for the same period of 2016. Improved operating income and lower finance costs were partially offset by increased tax expense.

Year to Date, June 30, 2017
Adjusted EBITDA for the first six months of 2017 was $81.1 million, an improvement of 3% from the same period in 2016. Rising log and lumber pricing and stable production costs per unit period-over-period more than offset lower sales volumes and the imposition of export duties in 2017.

Lumber revenue grew by 3% to $438.4 million in the first half of 2017, while shipments declined by 7%. By maintaining our specialty product mix and selling targeted products to selected customers, we more than overcame the challenge of reduced log inventories.

First half log revenue decreased by 7% in 2017 to $102.7 million as reduced harvest volume and lower opening log inventory limited log availability. Sales volumes have also decreased as we have prioritized internal log consumption over external sales. A decline in log sales volumes of 17% was partly offset by significantly higher saw log pricing. Pulp log prices remained flat period-over-period.

Lumber production in the first half of 2017 was 421 million board feet, down from 453 million board feet in 2016, as constrained log supply limited production. Manufacturing costs have decreased due to lower secondary processing volumes and the continued consolidation and modernization of our operations.

Coastal log production was significantly impacted by prolonged winter conditions in the first half of 2017, which limited our timberlands harvest and market log availability. We also experienced a temporary production capacity reduction from the aforementioned train accident. Timberlands log production was 1,999,000 cubic metres, a decrease of 15% from the first half of 2016, while overall coastal log production fell by 14% as reported by the Province of BC's Harvest Billing System. A stumpage rate increase which became effective March 1, 2016, contributed to a 3% increase in log production costs period over period.

Selling and administration expenses in the first six months of 2017 increased to $16.8 million from $14.4 million in the same period of 2016. Appreciation of the company's common share price as well as a greater outstanding share unit balance resulted in a relative increase of $1.5 million in share-based compensation expenses, including mark-to-market adjustment, over those periods. Also reflected in 2017 are increased legal and related expenses arising from the US softwood lumber trade dispute.

Finance Costs
Second quarter finance costs were $0.7 million in 2017, a decrease from $1.1 million in the same quarter of 2016. All drawings on the Company's debt facilities were fully repaid in the first quarter of 2017, resulting in lower interest expense.

Other Income (Expense)
Included in other income of $0.5 million in the first quarter of 2017 was a $1.8 million gain on sale of non-core property in Sarita, BC to the Huu-ay-aht First Nation.

We incurred, and have recognized through other expense, $1.2 million in non-operating expenses, including compassionate pay, security, and other costs, related to the aforementioned train accident.

In June 2017, we closed the planer facility at our Saltair sawmill and recognized $0.2 million in related impairment through other expense. The success of the Duke Point planer modernization has enabled Western to meet its secondary lumber processing requirements without the Saltair planer. All Saltair planer employees affected by this closure have been offered roles as part of increased shifting at the Saltair sawmill.

Other Restructuring Items
On July 27, 2017, the company announced the indefinite curtailment of its Somass sawmill, located in Port Alberni, BC. The Somass sawmill was temporarily curtailed in February 2017, prior to which it was operating on a single shift basis.

Included in operating restructuring items for the quarter ended June 30, 2017, are Somass curtailment related impairments of $2.0 million to property, plant and equipment and $0.5 million to supplies inventory.

We intend to offer voluntary severance to certain salaried and all hourly employees of the Somass sawmill. The total severance liability is estimated to be $8.0 million, and we will recognize a severance provision in operating restructuring items in the third quarter of 2017.

We are leveraging recently completed and activated strategic capital investments to consolidate our coastal manufacturing platform. We expect to deliver further cost reductions through consolidation.

Income Taxes
During the second quarter of 2017, current income tax recovery of $0.1 million and deferred income tax expense of $8.3 million were recognized in net income, primarily relating to operating earnings.

Strategy and Outlook
Western's long-term business objective is to create superior value for shareholders by building a margin-focused log and lumber business of scale to compete successfully in global softwood markets. We believe this will be achieved by maximizing the sustainable utilization of our forest tenures, operating safe, efficient, low-cost manufacturing facilities and producing high-value softwood lumber and logs for global markets. We seek to manage our business with a focus on operating cash flow and maximizing the value of our fibre resource through the production cycle, from the planning of our logging operations to the production, marketing and sale of our log and lumber products.

Market Outlook
We remain encouraged by the ongoing recovery in US lumber consumption, driven by improved US new home construction and growth in the repair and renovation markets. Over the mid- to long-term, we expect that growing demand from both the United States and China, combined with reduced supply from the BC Interior as a result of Mountain Pine Beetle, will deliver an improved pricing environment for our products. In the near-term we expect continued price volatility in the US, as rumours of a softwood lumber agreement and the upcoming countervailing duty gap period combine to increase market uncertainty.

The introduction of countervailing and anti-dumping duties in the US was expected to deliver reduced prices for commodity lumber in China; however, strong demand for softwood lumber in China and reduced supply from the BC Interior have delivered the strongest pricing for our products in that market in three years. Global demand trends should support firm commodity lumber prices for the balance of the year, despite the usual seasonal slowdown in China in the third quarter. Price realizations are likely to be impacted by the recent strength in the Canadian dollar.

Demand for our Western Red Cedar (WRC) products remains strong despite the uncertainty caused by the US softwood lumber trade dispute. Limited WRC log supply and low inventory in the distribution channel will continue to support WRC prices. We expect WRC lumber supply to remain tight through the remainder of the year. Price realizations are likely to be positively impacted by the countervailing duty gap period and that may be partly mitigated by the recent strength in the Canadian dollar.

Demand for our Niche products remains strong however Niche product shipments may be lower in the second half of 2017 as we divert production capacity to capitalize on other market opportunities.

Improved housing starts has supported lumber demand in Japan and should maintain stable pricing through the remainder of the year.

Export and domestic saw log market demand remains strong which will support pricing through the second half of 2017. We anticipate modest improvements in the pulp log market as pulp log inventories remain low.

Export and domestic saw log market demand remains strong which will support pricing through the second half of 2017. We anticipate modest improvements in the pulp log market as pulp log inventories remain low.

Updated on Softwood Lumber Dispute
On November 25, 2016, a petition was filed by a coalition of US lumber producers to the US Department of Commerce ("DoC") and the US International Trade Commission ("ITC") requesting an investigation into alleged subsidies provided to Canadian lumber producers. On January 6, 2017, the ITC announced a preliminary determination that there is reasonable indication the US industry is materially injured by imports of softwood lumber products from Canada. The Canadian forest products industry and Canadian Federal and Provincial governments strongly deny these assertions which have previously been disproven in international courts.

On April 24, 2017, the DoC announced a preliminary countervailing duty of 19.88% for "all other" Canadian lumber producers including Western, effective April 28, 2017, and on June 26, 2017, the DoC announced a preliminary "all other" anti-dumping duty rate of 6.87% effective June 30, 2017. Western's results for the second quarter of 2017 include countervailing duty expense of $9.1 million and anti-dumping duty expense of $0.1 million.

The DoC also made preliminary determinations on critical circumstances in April that resulted in 90-day retroactive application of countervailing duty from January 28 to April 27, 2017, and anti-dumping duty from April 1 to June 29, 2017. Western's 90-day retroactive duty obligation is USD $8.8 million of countervailing duty and USD $2.9 million of anti-dumping duty. As we expect the preliminary critical circumstance determination to be reversed, consistent with the results of past softwood lumber disputes, we will recognize the retroactive duties as a deposit only upon payment.

The preliminary countervailing and anti-dumping duties are applicable until August 25, 2017 and December 26, 2017, respectively, after which duties are suspended pending final determinations by the DoC and the ITC. We expect revised duty rates to be applied following final determinations in the second half of 2017.

The final duty determinations may differ from the preliminary determinations and, as such, may change our duty obligations. Adjustments to our duty obligations resulting from changes in applicable rates or the critical circumstances determination will be made prospectively.

We intend to maintain our strong balance sheet and diversified product and geographic sales mix as we await the outcome of the trade discussions.

Strategic Capital Program Update
We are implementing a strategic capital program that is designed to position Western as the only company on the coast of BC capable of sustainably consuming the complete profile of the coastal forest and competitively manufacturing a diverse product mix for global markets.

Our strategic capital program is focused on the installation of proven technology that will deliver top quartile performance and improve our ability to manufacture the products that yield the best margin. In addition to investments in our manufacturing assets, we also allocate capital to strategic, high-return projects involving our information systems, timberlands assets, and forest inventories.

In the second quarter of 2017, we continued strategic investments at our Chemainus sawmill and Duke Point planer. The Chemainus sawmill timber deck expansion and Duke Point planer modernization are scheduled for completion in 2017. The success of recent strategic capital investments enabled us to continue to consolidate and rationalize our operating platform in the second quarter of 2017.

We have announced plans for $101.9 million of our $125 million strategic capital program. Through the second quarter of 2017, we have implemented and capitalized $91.8 million under that program. Uncertainty arising from the softwood lumber trade dispute has caused us to defer the commencement of additional potentially significant capital projects plans, however a number of high-return, low-cost strategic capital projects are in the late stages of planning or ready for implementation.

Non-Core Assets Update
On May 17, 2017, we completed the sale of three properties, including Western's dry land sort, located in Sarita Bay, BC to the Huu-ay-aht First Nation for a gross purchase price of $3.0 million. The transaction also involved a 99-year lease back of the dry land sort to Western, an agreement to harvest 200,000 cubic metres of timber from Huu-ay-aht lands, and an employment and training agreement. A gain on disposition of $1.8 million was recognized in other income in the second quarter of 2017.

The sale of our former South Island Remanufacturing operation is expected to close on August 19, 2017. Net of closing costs, proceeds are estimated to be $3.0 million and we expect to recognize a gain on disposition in the third quarter of 2017.

We continue to pursue the marketing and disposition of certain non-core assets.
Aug. 3, 2017 - Resolute Forest Products Inc. reported a net loss for the quarter ended June 30, 2017, of $74 million, or $0.82 per share, compared to a net loss of $42 million, or $0.47 per share, in the same period in 2016. Sales were $858 million in the quarter, down $33 million, or 4 per cent, from the second quarter of 2016. Excluding special items, the company reported a net loss of $3 million, or $0.03 per share, compared to net income, excluding special items, of $2 million, or $0.02 per share, in the second quarter of 2016.
July 27, 2017 - Acadian Timber Corp. ("Acadian" or the "Company") reported on Tuesday the financial and operating results for the three months ended June 24, 2017 (the "second quarter").

"Acadian's second quarter benefited from favourable winter conditions which supported strong seasonal log production," said Mark Bishop, chief executive officer of Acadian. "Acadian continues to experience strong regional demand for hardwood logs and the outlook for softwood sawtimber continues to be supported by steady growth in U.S. housing starts and residential home improvement." 

Acadian continued to perform well and recorded solid results for the second quarter. In the quarter, we generated Adjusted EBITDA of $2.6 million, benefiting from strong seasonal demand, favorable operating conditions, and higher and better use land sales in Maine. However, this was lower than the $3.3 million generated in the prior year period. While log sales volumes and the weighted average log selling price for the quarter were largely consistent year-over-year, operating costs increased primarily due to an increase in average haul distances.

Total shareholder dividends during the first half of 2017 were $0.55 per share or $9.2 million, representing a 10% increase over the same period of 2016 and a payout ratio of 98% which is relatively consistent with our long term target of 95%.

Management Team Changes

Acadian announced today that Mr. Wyatt Hartley will be leaving the position of chief financial officer effective July 27, 2017 to take on new responsibilities within Brookfield Asset Management. Mr. Hartley has been a member of the senior management of Acadian since his initial appointment as chief financial officer in 2016. "The entire management team would like to thank Mr. Hartley for his hard work, dedication and significant contributions to Acadian and wish him the best in his new endeavors" commented Mr. Bishop. Effective July 27, 2017, Ms. Mabel Wong will replace Mr. Hartley as Acadian's senior vice-president and chief financial officer. Ms. Wong has been a key member of Brookfield's team for the past ten years and has held a number of senior finance roles within the organization. Ms. Wong is a chartered accountant and worked at one of the big four accounting firms prior to joining Brookfield.

Review of Operations

Financial and Operating Highlights

For the second quarter of 2017, Acadian generated net sales of $12.6 million compared to $13.7 million in the prior year primarily due to lower selling prices for biomass products. Total log sales volumes increased 1% compared to the prior year, driven by a 30% increase in hardwood pulpwood sales volumes resulting from favourable spring harvest conditions, which was largely offset by the impact of a softwood sawlog inventory management program at one of the operation's major customers that was not in place in the current year. The weighted average log selling price remained flat as the benefits from a favourable change in mix and foreign currency were offset by weaker pricing for hardwood products. 

Adjusted EBITDA margin decreased to 21% from 24% in the prior year as higher operating costs due to longer average haul distances were only partially offset by the contribution from higher and better use (HBU) land sales in Maine. 

Acadian traditionally experiences low levels of operating, marketing and selling activity during the second quarter of each year owing to the spring thaw period that causes much of the infrastructure to be temporarily inoperable. As a result, year to year variations in sales volumes and operating costs are less meaningful.

Net income for the second quarter totaled $4.0 million, or $0.24 per share, compared to $5.8 million, or $0.35 per share, respectively for the same period in 2016. The decrease is primarily due to lower Adjusted EBITDA as described above and a lower foreign exchange gain from the revaluation of long-term debt.

During the first half of 2017, Acadian's net sales were $35.7 million, reflecting a slight improvement over the same prior year period of $35.1 million, primarily attributed to an 11% increase in log sales volumes from favourable harvest conditions, particularly for spruce and fir stands. The impact of this increase was partially offset by a 4% decrease in the weighted average log selling price driven by a change in product mix and weaker pricing for hardwood products. Adjusted EBITDA improved to $10.7 million from $10.3 million in the first half of 2016 while Adjusted EBITDA margin improved to 30% from 29%. For the six months ended June 24, 2017, net income was $8.8 million, or $0.52 per share, which represents a decrease of $1.4 million over the same period in 2016 primarily due to lower foreign exchange revaluation gains from long-term debt, partially offset by lower deferred tax expense.

Acadian's financial position continues to be solid with $98.0 million of net liquidity as at June 24, 2017, including funds available under the Company's Revolving Facility and the stand-by equity commitment from Brookfield.

Total shareholder dividends during the first half of 2017 were $0.55 per share or $9.2 million, representing a 10% increase over the same period of 2016 ($0.50 per share or $8.4 million).

New Brunswick Timberlands

Three months ended June 24, 2017:

Net sales totaled $9.8 million compared to $11.7 million for the same period last year. Excluding biomass, log sales volumes decreased 7% to 132 thousand m3 from 142 thousand m3 in the prior year, as softwood sawlog sales were impacted by an inventory management program with one of the operation's major customers that was not in place in the current year. This was partially offset by the benefit from increased demand for hardwood pulpwood primarily reflecting the sale of inventory which was at higher than normal levels at the beginning of the quarter due to favourable winter harvest conditions.

The weighted average log selling price for the quarter was $70.13 per m3, compared to $70.84 per m3 in the prior year as strength in softwood sawlog selling prices and the benefit of sales mix was offset by weaker pricing for hardwood products.

Continued strong local demand for biomass products resulted in sales volumes remaining largely in-line with the same period of 2016. Overall, the gross margin earned on our biomass products decreased 55% compared to the second quarter of 2016 reflecting limited export markets for products.

Adjusted EBITDA and costs for the quarter were $2.0 million and $7.8 million, respectively, compared to $3.9 million and $7.8 million, respectively, in the second quarter of 2016 primarily due to the aforementioned absence of the inventory management program, as well as an increase in variable costs per m3 due to longer average haul distances. As a result, Adjusted EBITDA margin for the quarter decreased to 21% from 33% in the prior year.

Six months ended June 24, 2017:

Net sales of $26.1 million, which increased $0.4 million compared to the same period last year, benefited from a 13% increase in log sales volumes, which was partially offset by the impact of lower selling prices. Costs were $17.9 million, or $1.0 million higher than the prior year due to the aforementioned increase in sales volumes. As a result, Adjusted EBITDA was $8.2 million, a decrease of $0.6 million compared to the same period last year, while Adjusted EBITDA margin decreased to 31% from 34%.

Safety

There were no recordable safety incidents among employees and contractors during the second quarter of 2017.

Maine Timberlands

Three months ended June 24, 2017:

Net sales totaled $2.8 million compared to $1.9 million for the same period last year, as log sales volumes increased 54% to 36 thousand m3 from 23 thousand m3. This increase was driven primarily by favourable spring harvest conditions relative to the same quarter of 2016. 

The weighted average log selling price in Canadian dollar terms was $74.84 per m3, compared to $74.97 per m3 in the same period of 2016. The weighted average log selling price in U.S. dollar terms was $55.67 per m3, down 4% year-over-year as softwood sawlog prices declined 9% primarily from weak demand for our customers' softwood residuals while hardwood pulp prices stabilized as demand strengthened with customers replenishing inventories which were higher than normal during the first quarter. 

Costs for the second quarter were $2.9 million, compared to $2.1 million during the same period in 2016, due to higher sales volumes while variable costs per m3 increased due to longer average haul distances. Adjusted EBITDA for the quarter was $0.9 million, compared to a loss of $0.2 million in the prior year while Adjusted EBITDA margin increased to 32% from (9)% due primarily to the benefit of HBU land sales.

Six months ended June 24, 2017:

Net sales were $9.6 million, or $0.2 million higher than the first half of 2016, primarily from a 7% increase in log sales volumes due to favourable spring harvest conditions, while weighted average log selling prices decreased 5% due to high customer inventories earlier in the year. Costs were $8.0 million, or $0.6 million higher than during the same period of 2016 largely due to higher sales volumes and longer average haul distances . Adjusted EBITDA was $3.1 million, an increase of $1.0 million compared to the same period last year, while Adjusted EBITDA margin increased to 32% from 22% primarily driven by the benefit of HBU land sales.

Safety

There were no recordable safety incidents among employees or contractors during the second quarter of 2017.

Freehold Timberlands

Maine Timberlands invested $0.5 million during the first six months of 2017 on approximately 1,200 acres of freehold timberlands to eliminate third party common and undivided ownership interests which will strengthen our regional operating position.

Market Outlook

Acadian's key markets include softwood sawtimber, hardwood sawtimber and hardwood pulpwood. Northeast North American softwood dimension sawmills represent over one third of Acadian's end-use market and are the primary market for our softwood sawtimber. While sluggish wage growth, tight construction labor markets and potential further Fed rate increases continue to represent risks to growth in U.S. housing starts, the underlying fundamental driver of pent-up household formation continues to strengthen. Economic forecasters continue to call for steady growth in housing starts, with year-over-year improvements averaging 5% for 2017 and over 8% for 2018. Residential home improvements are also expected to remain strong. As a result, demand growth expectations for North American sawtimber remain in the 3% per year range over the next few years to support expanding domestic construction needs. 

As anticipated, lumber prices continued to be volatile during the second quarter primarily reflecting anticipation and the declaration of preliminary duty levels and producer and wholesaler efforts to manage inventories during this highly uncertain period. Following the announcement in April of preliminary countervailing duties (CVD) averaging 19.9%, average preliminary anti-dumping duties (ADD) of 6.9% were announced at the end of the second quarter. Notably, the U.S. Department of Commerce (DoC) also announced at the end of the quarter that all Atlantic provinces with the exception of New Brunswick would be excluded from duty investigation, a significant departure from past disputes. Historically, Canadian Atlantic lumber producers from all provinces experienced lower relative CVD & ADD duties than the rest of Canada and were ultimately exempted in past negotiated settlements due to the significantly greater proportion of wood supply from private timberland sources.

Subsequent to the DoC ADD announcement, industry press reports revealed that a preliminary framework for a negotiated market share-based 10 year settlement has been agreed to between Canadian and U.S. government officials. At this time, however, there is little visibility on a definitive final agreement being reached and, importantly, how Canadian officials would apportion market share restrictions across Canadian provincial lumber producers, and in fact whether the entire Atlantic region will again be exempted from any final settlement as in the past. 

We highlight that in past cycles during periods of strong U.S. lumber demand, duties imposed against Canadian softwood lumber producers are more easily passed through to U.S. buyers in the form of higher prices. Despite media headlines on the softwood dispute, given the current robust U.S. housing market and positive near term drivers of housing starts and home improvements noted above, we would not anticipate any material negative impact on Acadian's business.

Hardwood sawtimber markets remain strong and stable and are unaffected by U.S. trade initiatives. We remain encouraged that hardwood pulpwood markets remain historically strong, and that Acadian continues to be a preferred partner for hardwood fibre supply to this important market segment. Acadian's domestic biomass markets appear to have stabilized, although the anticipated recovery in export shipments from our New Brunswick operations has been delayed into 2018. Additionally, we expect that the Maine recreational real estate market will remain favourable through the year and therefore anticipate conditions will support the sale of additional properties throughout the remainder of 2017.

Quarterly Dividend

Acadian is pleased to announce a dividend of $0.275 per share, payable on October 13, 2017 to shareholders of record on September 30, 2017.



Acadian Timber Corp. is a leading supplier of primary forest products in Eastern Canada and the Northeastern U.S. With a total of 2.4 million acres of land under management, Acadian is the third largest timberland operator in New Brunswick and Maine.

Acadian owns and manages approximately 1.1 million acres of freehold timberlands in New Brunswick and Maine, and provides management services relating to approximately 1.3 million acres of Crown licensed timberlands in New Brunswick. Acadian also owns and operates a forest nursery in Third Falls, New Brunswick. Acadian's products include softwood and hardwood sawlogs, pulpwood and biomass by-products, sold to approximately 100 regional customers.

Acadian's business strategy is to maximize cash flows from its existing timberland assets while growing our business by acquiring assets on a value basis and utilizing our operations-oriented approach to drive improved performance.

Acadian's shares are listed for trading on the Toronto Stock Exchange under the symbol ADN.

For further information, please visit our website at www.acadiantimber.com.
July 24, 2017 - Rayonier Advanced Materials (Rayonier) has at last received support from Tembec's two largest shareholders.

Florida-based Rayonier decided to revise its terms on Sunday and increase its offer for the acquisition of Montreal-based Tembec by 17 per cent. Oaktree Capital Management and Restructuring Capital Associates (RCA) said last week that they would not support the takeover unless Rayonier upped its price for shareholders. 

Rayonier is now offering shareholders a choice of either $4.75CAN per Tembec share from $4.05 originally or 0.2542 shares of Rayonier common stock per Tembec common share subject to proration so that approximately 67 per cent of the aggregate consideration is paid in cash and approximately 33 per cent is paid in Rayonier common stock.

“This combination will enable us to sustainably grow our business for the benefit of our customers, employees and communities. We are, of course, pleased with the opportunity to deliver even greater value to our shareholders,” said James Lopez, president and chief executive officer of Tembec.

Oaktree and RCA together make up 37 per cent of Tembec’s shares. Since the acquisition requires support from two-thirds of Tembec’s shareholders, their announcement last week caused tension as they have the power to make or break the entire deal.

“This transaction advances our growth objective to pursue strategic acquisitions where we can leverage our core competencies to provide significant long-term shareholder return,” said Paul Boynton, chairman, president and chief executive officer of Rayonier Advanced Materials. “We look forward to working with Tembec’s exceptional team, unions and other stakeholders to realize the abundant opportunities ahead.”

Rayonier and Tembec announced the friendly acquisition plan in May, promising to keep Tembec’s Canadian operations running.

Tembec shareholders will be voting at a meeting on Thursday.
July 20, 2017 - This Net Earnings Summary has been prepared by PwC based on financial statements and other sources issued by the selected companies. Earnings are reported in regional currencies, as noted.

July 19, 2017 - Builder confidence in the market for newly-built single-family homes slipped two points in July to a level of 64 from a downwardly revised June reading on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). It is the lowest reading since November 2016.

“Our members are telling us they are growing increasingly concerned over rising material prices, particularly lumber,” said NAHB chairman Granger MacDonald, a home builder and developer from Kerrville, Texas. “This is hurting housing affordability even as consumer interest in the new-home market remains strong.”

“The HMI measure of current sales conditions has been at 70 or higher for eight straight months, indicating strong demand for new homes,” said NAHB chief economist Robert Dietz. “However, builders will need to manage some increasing supply-side costs to keep home prices competitive.”

Derived from a monthly survey that NAHB has been conducting for 30 years, the NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

All three HMI components registered losses in July but are still in solid territory. The components gauging current sales conditions fell two points to 70 while the index charting sales expectations in the next six months dropped two points to 73. Meanwhile, the component measuring buyer traffic slipped one point to 48.

Looking at the three-month moving averages for regional HMI scores, the Northeast rose one point to 47. The West and Midwest each edged one point lower to 75 and 66, respectively. The South dropped three points to 67.
July 18, 2017 - Lost production at B.C. sawmills due to wildfires has resulted in a jump in lumber prices and experts say prices could continue to rise. 
July 17, 2017 - The impact of duties on Canadian lumber exports to the U.S. will be a game-changer for different producing areas in North America, and also for exporters to the U.S. from overseas.
July 17, 2017 - Wood fibre costs for pulp mills in the US Northwest have fallen faster than in other region of the U.S. the past year, resulting in a more competitive industry sector, reports the North American Wood Fiber Review. Despite the recent price reductions in Washington and Oregon, pulp manufacturers in the southern states continued to have lower wood fibre costs than pulp mills in the Northwest, Northeast and the Lake States in the 1Q/17.
July 12, 2017 - Availability of building materials, especially framing lumber is rising on the list of home builder concerns according to the May 2017 survey for the NAHB/Wells Fargo Housing Market Index. The results revealed that 21 percent of single-family builder respondents reported a shortage of framing lumber.

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