Interfor Reports Q1’20 Results

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EBITDA1 of $37 million on Sales of $480 million
Net Debt to Invested Capital1 of 27%; Liquidity of $431 million

INTERFOR CORPORATION (“Interfor” or the “Company”) (TSX: IFP) recorded net earnings in Q1’20 of $6.3 million, or $0.09 per share, compared to net losses of $41.7 million, or $0.62 per share in Q4’19 and $15.3 million, or $0.23 per share in Q1’19. Adjusted net earnings were $0.7 million in Q1’20 compared to Adjusted net losses of $17.4 million in Q4’19 and $12.7 million in Q1’19.

Adjusted EBITDA was $36.6 million on sales of $479.6 million in Q1’20 versus $17.6 million on sales of $456.8 million in Q4’19.

Net debt ended the quarter at $322.0 million, or 26.7% of invested capital, resulting in available liquidity of $430.9 million.

Effects of COVID-19 and Interfor’s Response

On March 11, 2020 the World Health Organization declared the COVID-19 outbreak a pandemic and to date, the pandemic and related government-imposed restrictions and quarantines have had an unprecedented impact on the global economy.

As a result, industry-wide demand for lumber products has declined substantially. Benchmark lumber prices weakened significantly through early April and have since found a level of support from industrywide production curtailments that began in the second half of March.

Considerable uncertainty remains as to the duration and extent of the economic impact and in turn, the magnitude of impact on Interfor’s operations, demand for its products and financial outlook. However, Interfor is well positioned for this uncertainty with a strong balance sheet and significant available liquidity.

The Company has taken the following proactive measures to protect the health of its employees, balance its lumber production with reduced demand and safeguard its financial position in response to COVID-19:

  • Interfor has modified its operational procedures, suspended all non-essential travel and adopted work-from-home measures in accordance with public health authority directives.
  • On March 18, 2020 Interfor announced a temporary reduction in lumber production by approximately 35 million board feet per week across its operations in British Columbia, the U.S. Northwest and the U.S. South for an initial two-week period, representing approximately 60% of Interfor’s production capacity. On March 26, 2020 the Company announced a further production curtailment, resulting in a total reduction of approximately 50 million board feet for the week of March 30, 2020. The Company will continue to evaluate and adjust its operating schedule on a regular basis with consideration given to employee safety, market pricing and demand, and inventory levels.
  • Cash conservation actions have been implemented to significantly reduce non-essential operating expenses and discretionary capital expenditures. On March 18, 2020 the Company announced a reduction of approximately $140 million of its capital expenditures planned for 2020 and 2021. With this reduction, Interfor’s capital expenditures are expected to be approximately $100 million in 2020 and substantially below $100 million in 2021.
  • Interfor has modified components of its previously announced US$240 million Phase II strategic capital plan. The rebuild of the sawmill operation at Thomaston, GA has been postponed while the sawmill portion of the rebuild at the Eatonton, GA operation has been deferred with completion now planned for 2022. US$66.1 million has been spent on the Phase II plan through March 31, 2020. Interfor will re-evaluate its capital expenditures as market conditions continue to evolve and maintains significant flexibility to modify the rate of spending.

The Company will continue to be proactive in taking measures to safeguard the Company’s financial position, while remaining alert to opportunities that may become available.

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Source: Interfor