Interfor reports record lumber production
Lumber production in the third quarter was the highest in Interfor's history at 350 million board feet, up 17 million board feet quarter-over-quarter, in spite of a two week curtailment at Grand Forks associated with the capital project underway at that facility.
Interfor continues to devote considerable attention to the capital project at Grand Forks and Castlegar. The Grand Forks project is well ahead of schedule, with the new line now scheduled to commence start-up procedures in mid-December.
The final stage of the Castlegar project is scheduled for completion in January.
Interfor reported net earnings of $1.1 million or $0.02 per share in the third quarter of 2012.
EBITDA for the quarter (adjusted to exclude one-time items and other income but including provisions for share-based compensation) was $14.9 million compared with $16.5 million in the second quarter and $17.2 million in the third quarter last year.
During the quarter, the company’s B.C. Interior operations benefitted from higher product prices and lower export tax rates on shipments to the U.S. These gains were offset in part by higher log costs and the curtailment at Grand Forks.
Sales values at the company’s operations in the U.S. Pacific Northwest were flat quarter-over-quarter while chip prices in that region were off 12% relative to the second quarter.
Results for the Company’s B.C. Coast operations benefitted from the drop in export tax rates but were negatively affected by a 42% drop in log production quarter-over-quarter resulting from an extended fire season.
In the quarter, SPF 2×4 in the U.S. market averaged US$300 per mfbm, up US$5 per mfbm versus the second quarter, and Hem-Fir studs were US$350 per mfbm, up US$13 per mfbm. MSR continued to show strength in the third quarter with SPF 1650f up US$18 per mfbm. The market in China remained firm during the quarter although prices continued to lag those in North America. In Japan, green hemlock squares were flat while J Grade dimension was up US$12. Cedar prices improved slightly quarter-over-quarter on limited supply.
Export taxes on shipments to the U.S. were 5% in July and 10% in August and September.
In the quarter, Interfor generated $22.0 million in cash from operations after working capital changes were considered. Capital spending amounted to $20.2 million, including $9.9 million on the Grand Forks and Castlegar projects.
Net debt closed the quarter at $117.8 million or 24 percent of invested capital.
The company achieved record volumes of quarterly lumber shipments in the third quarter, 2012 and surpassed third quarter, 2011 shipments by 9%. Compared to the same period, 2011, lumber shipments improved by 7% for the first nine months, 2012. Increases reflect the impact of stronger domestic demand driven by improved U.S. housing starts.
Shipments to North America grew rapidly in the third quarter, 2012, relative to the previous two quarters, 2012, and exceeded shipments in the same quarter, 2011 by almost a third as the Company redirected sales to North American markets to benefit from higher realizations. For the first nine months, 2012 North American shipments grew by 29% compared to the same period, 2011.
Improvements in average unit lumber sales values of $27 per mfbm, or 6% in the third quarter, 2012, and $25 per mfbm, or 6% year-to-date, over the respective periods of 2011 reflect higher North American prices. A slightly weaker average Canadian dollar quarter-over-quarter and for the first nine months of 2012 had a positive impact on sales returns as compared to the same periods of 2011.
Compared to the same period, 2011, log sales revenues declined by 26% for the third quarter, 2012, driven primarily by a reduction in log sales volume from B.C. operations of 20%. For the first nine months, 2012 log sales revenues increased by 5% in tandem with Canadian log sales volume increase of 4% vis-a-vis the same period, 2011. Curtailments in logging due to the extended fire season in the third quarter, 2012 impacted the volume of logs available for sale. Average Canadian log sales prices remained relatively constant for the third quarter and first nine months, 2012 as compared to 2011.
Pulp chip and other by-product revenues remained flat for the third quarter, 2012, but improved by 5% or $2.7 million for the first nine months, 2012, compared to the respective periods in 2011, largely driven by the effect of lower chip prices offset by higher sawmill operating rates.