Western reports positive Q3 earnings
Improved mill productivity and increased lumber shipments into North American helped Western Forest Products record its twelfth consecutive quarter of positive earnings.
Western reported EBITDA of $8.4 million for the third quarter of 2012 compared to $15.8 million for the third quarter of 2011.
“The US recovery is underway and housing is accelerating, Japan is showing improvement and China remains a key market,” said Western chairman and CEO Dominic Gammiero. “We are continuing to position Western to take full advantage of these market improvements. Our margin focus, repositioned cost structure, and flexibility allowed us to post our twelfth consecutive quarter of positive EBITDA in the third quarter.
“Dry weather conditions impacted log supply but despite this, our sawmill productivity continued to climb and our timberlands performed well in delivering volume even with operating days being reduced significantly. The demand for our lumber products increased, our lumber order file emerged from the quarter strong, and our liquidity and debt position is still the best it has been since the Company’s inception.”
Net income for the third quarter of 2012 was $2.0 million ($nil per share), on sales of $219.4 million, which compares to a net income reported in the third quarter of 2011 of $5.3 million ($0.01 per share) and a net income reported for the second quarter of 2012 of $10.6 million ($0.02 per share).
According to the company, rising building permits for new construction and accelerating housing starts are now pointing to a recovery in the US housing industry and this is providing the opportunity for Western to redirect some of its lumber production into North American markets to take advantage of an improving demand for its lumber products. Total revenue for the third quarter of 2012 was $219.4 million, a decline of $14.1 million from the third quarter of 2011. While lumber revenue increased in the current quarter, revenues from both log and by-product sales reduced significantly, leading to the overall decline. The company says its results for the third quarter of 2012 were negatively impacted by log harvest restrictions related to higher than normal fire hazards in its timberlands operations, and reduced prices for pulp logs and by-products. As a result, Western’s timberlands operations worked fewer days, and had restricted activities for certain periods of time. Overall log harvest production in the third quarter was 285,000m3 (17%) lower than the third quarter of 2011, and 397,000m3 (22%) less than the second quarter of 2012. The reduced harvest volume led to a 19% reduction in log sales volumes and an increase in logging costs per unit, compared to the same quarter last year.
The third quarter EBITDA result of $8.4 million is a decline from the $15.8 million figure reported in the third quarter a year ago. This decline is primarily the result of lower selling prices for pulp and export logs, and a 19% reduction in the volume of logs sold compared to the third quarter of 2011. Unit log costs in the current quarter were also higher than the third quarter of 2011, driven by a combination of lower productivity and higher than anticipated repair and maintenance costs. Despite its log supply challenges, Western’s manufacturing operations saw both production and productivity increases from the same quarter a year ago.
Net income for the third quarter of 2012 was $2.0 million, a decrease of $3.3 million from the net income of $5.3 million a year earlier, and a decrease of $8.6 million from the net income in the previous quarter. The decrease in net income in the third quarter of 2012 compared to the same quarter a year ago is principally due to the reduced EBITDA of $7.4 million. This was partially offset by the inclusion of other non-operating gains this quarter of $1.1 million, compared to expenses of $1.9 million in the third quarter of 2011, a favourable fair value adjustment to the biological assets and slightly lower finance costs compared to the third quarter of last year.