Interfor: lower prices, higher costs
By press release
Nov. 7, 2013, Vancouver - INTERNATIONAL FOREST PRODUCTS LIMITED (Interfor) reported a net loss of $0.1 million or $0.00 per share in the third quarter of 2013 compared to net earnings of $15.8 million or $0.28 per share in the second quarter and $0.9 million or $0.02 per share in the third quarter of 2012.
EBITDA, adjusted to exclude the effects of share-based compensation and other items, was $24.6 million compared with $36.1 million in the second quarter of 2013 and $17.1 million in the third quarter last year.
Share-based compensation amounted to $6.1 million or $0.11 per share in the third quarter.
Lumber production in the third quarter was a record 447 million board feet, up 7% from the second quarter of 2013, in spite of a number of weather-related curtailments at the Company's operations in the US South. Lumber sales, including wholesale and agency volumes, were a record 446 million board feet, up 3% versus the prior quarter.
The company's results in the third quarter were negatively impacted by a decline in commodity lumber prices and higher log costs in the B.C. Interior.
In the quarter, SPF 2x4 in the US market averaged US$328, down US$7 versus the second quarter. Hem-Fir studs were particularly hard hit, averaging US$333, down US$40 versus the prior quarter, while SYP 2x4 East was up US$1 at US$393.
Export taxes on shipments to the US averaged 5% in the third quarter of this year versus 0% in the second quarter and an average of 8% in the third quarter last year.
In the third quarter, Interfor generated $20.1 million in cash from operations before working capital changes and $15.2 million after working capital changes. Capital spending, including timber additions, amounted to $15.8 million during the quarter.
During the quarter, Interfor completed the purchase of the sawmill operations of Keadle Lumber Enterprises for $33.8 million, including working capital.
On September 30, 2013 the Company closed a public offering of 7,187,500 Class A Subordinate Voting Class Shares at a price of $12.00 per share for net proceeds of $82.4 million.
Net debt closed the quarter at $150.3 million or 23% of invested capital.
The U.S. housing market is projected to continue its gradual recovery and lumber prices are expected to remain volatile through the balance of 2013 with some improvement expected in 2014. Export tax rates will decrease to 0% in November as lumber prices in September moved above the relevant benchmark price.
Although Japan is expected to continue its growth into 2014, prices for traditional products have adjusted down in competition with domestic species. Demand and pricing in China is expected to remain stable.
As always, Interfor will maintain its disciplined approach to production, cost control, inventory management and capital spending to help position the company to deliver above average returns on invested capital as conditions improve. At the same time, Interfor will remain alert to opportunities to position the company for long-term success.