Record setting year for Interfor
Feb. 12, 2015 – Interfor achieved a number of significant milestones in 2014 with record sales of $1.4 billion and Adjusted EBITDA of $169.3 million. The achievements were announced as part of the company’s 2014 financial results.
Lumber production in the fourth quarter of 2014 was 578 million board feet, up 11 million board feet or 1.9% compared to Q3'14 and up 108 million board feet or 23.0% compared to Q4'13. The production growth from Q4'13 primarily reflects the addition of two sawmills with the Tolleson acquisition and higher operating rates. For fiscal 2014, lumber production exceeded 2.2 billion board feet, which was also a new Interfor record.
In the fourth quarter of 2014, Interfor recorded a net loss of $5.2 million, or $0.08 per share. The net loss was impacted by an increase in the accrual for long-term incentive compensation expense of $13.9 million in the fourth quarter compared with an expense of $3.6 million in the third quarter. The long-term incentive compensation programs are directly tied to Interfor's share price performance and are therefore marked-to-market at each quarter end. In the fourth quarter of 2014, Interfor's share price increased by 35.9%.
Interfor generated $25.0 million of cash from operations before working capital changes and $35.1 million after considering working capital changes. Capital spending amounted to $24.7 million during the quarter.
The Company reduced its net debt during the quarter to $202.6 million or 24.1% of invested capital, leaving $235.6 million of availability under its credit facilities.
On December 18, 2014, Interfor announced the acquisition of four sawmills from Simpson Lumber Company, LLC. Subsequent to the quarter end, Interfor announced the closing of a $66.3 million offering of subscription receipts, with the use of proceeds to partially finance the Simpson acquisition. The acquisition is expected to close on March 1, 2015. Refer to the Company's news release dated January 27, 2015, for further information.
Average commodity lumber prices were modestly down across the board in the fourth quarter of 2014 as demand adjusted to reflect seasonal factors. The benchmark prices for Western SPF 2x4, SYP East 2x4 and HF Stud 2x4 9' declined US$17, US$11 and US$18, respectively, as compared to the prior quarter. Demand for lumber in China softened in the fourth quarter due to the combination of credit tightening and slowing real estate activity.
The U.S. dollar strengthened against the Canadian dollar during Q4'14, closing up 3.5% over September 30, 2014. The average rate of 1.1350 in Q4'14 was 8.2% higher than in the comparable quarter of 2013, which positively impacted Interfor's net earnings reported in Canadian dollars.
The near term outlook for commodity lumber prices will be impacted by North American and overseas demand as well as supply side shifts within North America. With respect to demand, Interfor anticipates a gradual upward trend in U.S. housing starts for 2015 on positive gains in employment and consumer confidence while demand in China is expected to reflect a moderated real estate market. Log supply constraints in certain parts of British Columbia are anticipated to continue, which may lead to reductions in available lumber industry production from that region. By contrast, modest increases in industry capacity and utilization rates are anticipated in the U.S. South region.