Conifex posts $30.4M net loss in 2019 due to lower lumber shipments
The 2019 fiscal year brought a number of challenges for Conifex, leading to a net loss of $30.4 million in 2019 on revenues of $157.4 million, the company reports in its year end and Q4 report.
The company sold the following assets in 2019:
- U.S. sawmill business for US$176.0 million, including estimated working capital, which closed subsequent to year end in February 2020;
- the Fort St. James sawmill in November 2019 for $38.7 million;
- Lignum Forest Products LLP in April 2019 for US$11.5 million; and
- forward sales of interest in certain countervailing (CV) and anti-dumping duties (AD) for $17.5 million.
The company also discontinued its third party logistics business operated by a wholly-owned subsidiary.
The proceeds from the foregoing sales were used to fulfill Conifex’s goal of paying off, in full, our lumber segment credit facility. Following such repayment, Conifex had unrestricted cash of approximately $20.0 million, estimated net debt of $43.0 million and net debt to capitalization ratio of approximately 25 per cent. The company’s term loan secured against its power assets represents substantially all of its remaining long-term debt.
2019 year-end financial results
Conifex had a net loss of $30.4 million in 2019 on revenues of $157.4 million compared to a net loss of $7.3 million in 2018 on revenues of $379.1 million. The lower revenues were attributable mostly to the lumber segment which recorded reduced shipments reflecting lower operating rates at Conifex’s B.C. mills, a decline in sales realizations and a decrease in wholesale lumber shipments. Bioenergy segment revenues were 4 per cent lower due primarily to modifications in spring freshet pricing and plant dispatch periods in the comparative periods.
Conifex recorded an operating loss of $41.4 million in the lumber segment in 2019 and operating earnings of $19.1 million in 2018. Lumber segment operating results were impacted by the recognition of restructuring costs, lower operating rates and higher unit log and cash conversion costs. Shipments of Conifex produced lumber totalled 212 million board feet in 2019, representing 46 per cent of 2018 shipment volumes of 458 million board feet due to lower operating rates. Bioenergy segment operating earnings declined 7 per cent year over-year and contributed operating earnings of $8.6 million in 2019 and $9.2 million in the previous year. Corporate costs were $7.1 million in 2019, down 9 per cent from the prior year.
Adjusted EBITDA was negative $24.0 million in 2019 and positive $32.4 million in 2018 with the year-over-year variance largely attributable to the lumber segment.
Consolidated net loss for 2019 was $200.2 million and included a net loss of $169.8 million from discontinued operations, including an impairment loss allocated to goodwill of $143.1 million. Consolidated net loss for 2018 was $7.1 million, including net income of $0.2 million from discontinued operations.
2019 fourth quarter results
Conifex incurred a net loss of $10.2 million in the fourth quarter of 2019, $11.6 million in the previous quarter and $20.2 million in the fourth quarter of 2018. Revenues were $27.7 million in the fourth quarter of 2019, $22.9 million in the previous quarter and $76.0 million in the fourth quarter of 2018. The revenue variability was primarily attributable to our lumber segment as bioenergy segment revenues were generally similar in the comparative quarters. Lumber segment operating results in the fourth quarter of 2018 included shipments and production from the FSJ Mill, which was largely curtailed in May 2019 and sold in November 2019.
The company recorded operating losses of $11.5 million in the fourth quarter of 2019, $8.6 million in the previous quarter and $7.8 million in the fourth quarter last year. Production volumes at the Mackenzie Mill increased 45 per cent over the previous quarter to 38 million board feet and reflected an annualized operating rate of 63 per cent compared to an annualized operating rate of 43 per cent in the previous quarter. Increased production, shipment volumes and sales realizations led to a quarter-over-quarter revenue increase of 11 per cent for Conifex produced lumber.
Adjusted EBITDA from continuing operations was negative $3.9 million for the fourth quarter of 2019, negative $7.0 million in the previous quarter and negative $5.0 million for the fourth quarter of 2018.
Consolidated net loss in the fourth quarter of 2019 was $162.6 million and included a net loss of $152.4 million from discontinued operations. Consolidated net loss was $16.6 million in the third quarter of 2019 and included a net loss of $5.0 million from discontinued operations. In the fourth quarter of 2018, we recorded a consolidated net loss of $23.1 million, including a net loss from discontinued operations of $2.9 million.