Interfor reports record Adjusted EBITDA in Q4 2020
By Interfor Corporation
By Interfor Corporation
Interfor Corporation recorded net earnings in Q4’20 of $149.1 million, or $2.24 per share, compared to $121.6 million, or $1.81 per share in Q3’20 and net loss of $41.7 million, or $0.62 per share in Q4’19. Adjusted net earnings in Q4’20 was $164.7 million compared to $140.0 million in Q3’20 and adjusted net loss of $17.4 million in Q4’19.
Adjusted EBITDA was a record $248.6 million on sales of $662.3 million in Q4’20 versus $221.7 million on sales of $644.9 million in Q3’20.
Interfor recorded net earnings of $280.3 million, or $4.18 per share, in 2020, compared to net loss of $103.8 million, or $1.54 per share in 2019. Adjusted EBITDA was $549.7 million on sales of $2.2 billion.
Notable items in the quarter:
Strong free cash flow generation
- Interfor generated $205.0 million of cash flow from operations before changes in working capital, or $3.07 per share, and an additional $24.9 million of cash from reduced working capital.
- Capital spending was $36.0 million, including $21.7 million on high-return discretionary projects primarily in the U.S. South. US$96.1 million has been spent on the company’s Phase II strategic capital plan through Dec. 31, 2020.
- Net debt ended the quarter at $(75.4) million, or 7.5 per cent of invested capital, resulting in available liquidity of $787.5 million.
Seasonally robust lumber market
- Interfor’s average selling price was $842 per mfbm, down $68 per mfbm versus record levels in Q3’20. Movements in key benchmark prices were mixed compared to Q3’20 as the SYP Composite and Western SPF Composite benchmarks decreased by US$145 and US$59 to US$603 and US$652 per mfbm, respectively, while the KD H-F Stud 2×4 9’ benchmark increased by US$43 to US$807 per mfbm.
Production increased to meet demand
- Total lumber production in Q4’20 was 687 million board feet, representing an increase of 45 million board feet quarter-over-quarter. The U.S. South and U.S. Northwest regions accounted for 361 million board feet and 136 million board feet, respectively, compared to 331 million board feet and 118 million board feet in Q3’20. Production in the B.C. region decreased to 190 million board feet from 193 million board feet in the preceding quarter.
- Total lumber shipments were 683 million board feet, including agency and wholesale volumes, or 65 million board feet higher than Q3’20.
Softwood lumber duties rate adjustment
- In Q4’20, the U.S. Department of Commerce published the final rates for countervailing (CV) and anti-dumping (AD) duties based on the results of its first administrative review of shipments for the years ended Dec. 31, 2017 and 2018. The final combined rates for 2017 and 2018 were 8.83 per cent and 8.99 per cent, respectively, compared to the cash deposit rate of 20.23 per cent. To reflect lower amended final rates, Interfor recorded a $38.4 million reduction to duties expense in Q4’20. Effective December 2020, the final rate of 8.99 per cent was applied to new lumber shipments.
- Cumulative duties of US$134.0 million have been paid by Interfor since the inception of the current trade dispute and are held in trust by the U.S. Except for US$32.9 million in respect of overpayments arising from duty rate adjustments, Interfor has recorded the duty deposits as an expense.
North American lumber markets over the near term are expected to remain robust and above historical trends, albeit volatile, as relatively low levels of lumber inventories industry-wide combined with demand ahead of the 2021 home building and renovation season put pressure on available lumber supply from manufacturers.
Interfor expects lumber demand to continue to grow over the mid-term, as repair and renovation activities and U.S. housing starts benefit from favourable underlying economic fundamentals and trends.
Interfor’s strategy of maintaining a diversified portfolio of operations allows the company to both reduce risk and maximize returns on invested capital over the business cycle.
While uncertainty remains as to the duration and extent of the economic impact from the COVID-19 pandemic, Interfor is well positioned with its strong balance sheet and significant available liquidity.