Interfor profits from optimizing log supply
By Interfor Corporation
Nov. 8, 2016 - Interfor Corporation's B.C. Interior and U.S. Northwest regions generated strong operating and financial results in Q3, reflecting the benefits from the company's multi-year capital investment programs, the company reports. Interfor's focus continues on optimizing log supply, productivity and product mix to drive further margin improvements.
By Interfor Corporation
The company recorded net earnings in Q3 of $15.1 million, or $0.22 per share, compared to $23.2 million, or $0.33 per share in Q2. Adjusted net earnings1 in Q3 were $22.8 million, or $0.33 per share, compared to $20.9 million, or $0.30 per share, in Q2.
Adjusted EBITDA1 was $58.1 million on sales of $457.6 million in Q3 of this year, versus Adjusted EBITDA of $56.9 million on sales of $458.8 million in Q2.
Interfor generated $67.7 million of cash from operations, including $12.8 million from working capital. The resulting free cash flow enabled Interfor to reduce net debt by $49.0 million during the quarter to $346.9 million, or 31.8 per cent of invested capital.
Key benchmark lumber prices were mixed in Q3’16 compared to the preceding quarter. The Western SPF Composite was up US$11 to US$311 per mfbm. However, the Southern Pine Composite and KD HF Stud 2×4 9′ benchmark, which represent the largest share of
Interfor’s production, declined US$8 to US$382 per mfbm and US$19 to US$336 per mfbm, respectively.
In spite of the drop in benchmark prices, Interfor’s average realization increased $16 to $580 per mfbm in Q3’16, reflecting a positive shift in product mix and the benefits of a lower Canadian dollar.
The U.S. South region continued to implement a series of capital and optimization initiatives focused on mill reliability, debottlenecking and product mix. A number of small capital projects were completed in the quarter, with more underway or in the planning stage. Benefits related to product mix, lumber recovery and productivity improvements were realized at a number of mills in the quarter. However, there was a short term negative impact on production volume and conversion costs in Q3’16, as a result of the projects’ impact on operating hours. The initiative remains on track to meet or exceed the targeted $35 million in annualized EBITDA gains by the end of 2017.
The monetization process for the Tacoma sawmill property is proceeding on track, with the sale expected to close in Q4’16.
Lumber production in Q3’16 was 628 million board feet versus 637 million board feet in Q2’16. Production from Canadian operations totaled 239 million board feet in Q3’16, up 21 million board feet compared to Q2’16. Production from the Company’s nine U.S. South sawmills totaled 248 million board feet, down 22 million board feet compared to Q2’16. Production from U.S. Northwest operations totaled 141 million board feet in Q3’16, a decrease of 8 million board feet over the preceding quarter.