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Interfor Reports Record Q1’21 Results

Nachrichtenquelle: globenewswire
06.05.2021, 23:32  |  141   |   |   

EBITDA1 of $392 million on Sales of $849 million
Net Cash Position and Available Liquidity of $944 million

BURNABY, British Columbia, May 06, 2021 (GLOBE NEWSWIRE) -- INTERFOR CORPORATION (“Interfor” or the “Company”) (TSX: IFP) recorded Net earnings in Q1’21 of $264.5 million, or $4.01 per share, compared to $149.1 million, or $2.24 per share in Q4’20 and $6.3 million, or $0.09 per share in Q1’20. Adjusted net earnings in Q1’21 was $270.6 million compared to $164.7 million in Q4’20 and $0.7 million in Q1’20.

Adjusted EBITDA was a record $392.1 million on sales of $849.3 million in Q1’21 versus $248.6 million on sales of $662.3 million in Q4’20.

Notable items in the quarter:

  • Strong Free Cash Flow Generation
    • Interfor generated $377.7 million of cash flow from operations before changes in working capital, or $5.73 per share. Working capital investment increased by $92.6 million, primarily related to higher trade receivables driven by lumber prices and seasonally higher log inventories in B.C.
    • Net debt ended the quarter at $(236.0) million, or (21.7)% of invested capital, resulting in available liquidity of $943.6 million.
  • Strategic Capital Investments
    • Capital spending was $29.2 million, including $18.7 million on high-return discretionary projects. The majority of this discretionary spending was focused on a new kiln at the Adams Lake, BC sawmill and the ongoing multi-year rebuild of the Eatonton, Georgia sawmill.
    • The new kiln installed at our Adams Lake sawmill was fully operational by mid-February and allows for increased site-wide production and a significantly improved grade mix. This project was complementary to Interfor’s Q1’20 acquisition of 349,000 cubic metres of annual cutting rights from Canfor Corporation which solidified Adams Lake’s long-term log supply and operational platform.
    • The major rebuild of our Eatonton, Georgia sawmill is on-track for completion in Q4 of 2021, with full ramp-up expected to take approximately nine months thereafter. This project will add approximately 110 million board feet of annual production capacity and result in lower cash conversion costs and improved grade mix. Inclusive of this project, US$108 million has been spent on the Company’s Phase II strategic capital plan through March 31, 2021.
    • The Company has received Board approval to proceed with strategic capital investments at its sawmills in Castlegar, BC, and Perry, Georgia of approximately $35 million and US$30 million, respectively. These investments will provide a combination of benefits in the form of higher production, improved lumber recovery and grade mix, and lower conversion costs. Completion of both projects is expected in Q3 of 2022.
    • Interfor’s total capital expenditures are expected to be approximately $150 million in 2021 and in the range of $150 - $180 million in 2022, as the Company continues to execute on its strategic capital plans with attractive returns at conservative lumber prices.
  • Acquisition of Summerville sawmill
    • On March 12, 2021, Interfor concluded the acquisition of sawmill operations in Summerville, South Carolina from WestRock Company for total consideration of US$58,618,000 ($73,630,000).
  • Normal Course Issuer Bid (“NCIB”)
    • During Q1’21, Interfor purchased 774,420 common shares under the Company’s NCIB for total consideration of $20.3 million.
  • Record Lumber Market
    • Interfor’s average selling price was $1,143 per mfbm, up $301 per mfbm versus Q4’20. The key benchmark prices rose significantly quarter-over-quarter with the SYP Composite, Western SPF Composite and KD H-F Stud 2x4 9’ benchmarks increasing by US$312, US$283 and US$355 per mfbm to US$915, US$935 and US$1,162 per mfbm, respectively.
  • Continued Strong Production
    • Total lumber production in Q1’21 was 687 million board feet, which was consistent with Q4’20 and only 1 million board feet below Interfor’s production record for a quarter. The U.S. South and U.S. Northwest regions accounted for 338 million board feet and 141 million board feet, respectively, compared to 361 million board feet and 136 million board feet in Q4’20. Production in the B.C. region increased to 208 million board feet from 190 million board feet in the preceding quarter.
    • Total lumber shipments were 666 million board feet, including agency and wholesale volumes, or 17 million board feet lower than Q4’20.
  • Softwood Lumber Duties
    • Interfor expensed $12.4 million of duties in the quarter, representing the full amount of countervailing and anti-dumping duties incurred on its Canadian shipments of softwood lumber into the U.S. at a combined rate of 8.99%.
    • Cumulative duties of US$143.1 million have been paid by Interfor since the inception of the current trade dispute and are held in trust by the U.S. Except for US$32.9 million in respect of overpayments arising from duty rate adjustments, Interfor has recorded the duty deposits as an expense.

1 Refer to Adjusted EBITDA in the Non-GAAP Measures section

Outlook

North American lumber markets over the near term are expected to remain robust and above historical trends, albeit volatile, as relatively low levels of lumber inventories industry-wide combined with growing demand from new housing starts and repair and remodel activity put pressure on available lumber supply from manufacturers.

Interfor expects lumber demand to continue to grow over the mid-term, as repair and renovation activities and U.S. housing starts benefit from favourable underlying economic fundamentals and trends.

Interfor’s strategy of maintaining a diversified portfolio of operations allows the Company to both reduce risk and maximize returns on invested capital over the business cycle.

While uncertainty remains as to the duration and extent of the economic impact from the COVID-19 pandemic, Interfor is well positioned with its strong balance sheet and significant available liquidity.

Financial and Operating Highlights1

      For the three months ended
   
      Mar. 31,     Mar. 31,     Dec. 31,    
  Unit   2021     2020     2020    
           
Financial Highlights2          
Total sales $MM   849.3     479.6     662.3    
Lumber $MM   762.4     379.3     575.0    
Logs, residual products and other $MM   86.9     100.3     87.3    
Operating earnings $MM   355.6     14.6     203.2    
Net earnings $MM   264.5     6.3     149.1    
Net earnings per share, basic $/share   4.01     0.09     2.24    
Adjusted net earnings3 $MM   270.6     0.7     164.7    
Adjusted net earnings per share, basic3 $/share   4.11     0.01     2.47    
Operating cash flow per share (before working capital changes)3 $/share   5.73     0.57     3.05    
Adjusted EBITDA3 $MM   392.1     36.6     248.6    
Adjusted EBITDA margin3 %   46.2 %   7.6 %   37.5 %  
           
Total assets $MM   2,159.7     1,569.5     1,843.2    
Total debt $MM   377.3     425.6     382.0    
Net debt3 $MM   (236.0 )   322.0     (75.4 )  
Net debt to invested capital3 %   (21.7 )%   26.7 %   (7.5 )%  
Annualized return on capital employed3 %   79.2 %   4.0 %   48.4 %  
           
Operating Highlights          
Lumber production million fbm   687     627     687    
Total lumber sales million fbm   666     641     683    
Lumber sales - Interfor produced million fbm   662     632     675    
Lumber sales - wholesale and commission million fbm   4     9     8    
Lumber - average selling price4 $/thousand fbm   1,143     592     842    
           
Average USD/CAD exchange rate5 1 USD in CAD   1.2660     1.3449     1.3030    
Closing USD/CAD exchange rate5 1 USD in CAD   1.2575     1.4187     1.2732    
           

Notes:

  1. Figures in this table may not equal or sum to figures presented elsewhere due to rounding.
  2. Financial information presented for interim periods in this release is prepared in accordance with IFRS and is unaudited.
  3. Refer to the Non-GAAP Measures section of this release for definitions and reconciliations of these measures to figures reported in the Company’s consolidated financial statements.
  4. Gross sales before duties.
  5. Based on Bank of Canada foreign exchange rates.

Liquidity

Balance Sheet

Interfor’s Net debt at March 31, 2021 was $(236.0) million, or (21.7)% of invested capital, representing a decrease of $160.5 million from the level of Net debt at December 31, 2020.

As at March 31, 2021 the Company had net working capital of $744.5 million and available liquidity of $943.6 million, based on the full borrowing capacity under its $350 million Revolving Term Line.

The Revolving Term Line and Senior Secured Notes are subject to financial covenants, including net debt to total capitalization ratios, and an EBITDA interest coverage ratio.

Management believes, based on circumstances known today, that Interfor has sufficient working capital and liquidity to fund operating and capital requirements for the foreseeable future.

    For the three months ended
 
    Mar. 31,
  Dec. 31,
  Mar. 31,
 
Thousands of Dollars   2021     2020     2020  
         
Net debt        
Net debt, period opening   $ (75,432 ) $ 88,705   $ 224,860  
Issuance of Senior Secured Notes     -     -     140,770  
Revolving Term Line net repayments     -     -     (59 )
Impact on U.S. Dollar denominated debt from (strengthening) weakening CAD     (4,710 )   (18,210 )   25,139  
Increase in cash and cash equivalents     (162,167 )   (165,294 )   (68,984 )
Impact on U.S. Dollar denominated cash and cash equivalents from strengthening CAD     6,343     19,367     310  
Net debt, period ending   $ (235,966 ) $ (75,432 ) $ 322,036  

On March 26, 2020, the Company issued US$50,000,000 of Series F Senior Secured Notes, bearing interest at 3.34%, and US$50,000,000 of Series G Senior Secured Notes, bearing interest at 3.25%. Each series of these Senior Secured Notes have equal payments of US$16,667,000 due on each of March 26, 2028, 2029 and on maturity in 2030.

Capital Resources

The following table summarizes Interfor’s credit facilities and availability as of March 31, 2021:

    Revolving
  Senior
   
 
    Term
  Secured
   
 
Thousands of Canadian Dollars   Line
  Notes
  Total
 
Available line of credit and maximum borrowing available   $ 350,000   $ 377,250   $ 727,250  
Less:                    
Drawings     -     377,250     377,250  
Outstanding letters of credit included in line utilization     19,613     -     19,613  
Unused portion of facility   $ 330,387   $ -     330,387  
                     
Add:                    
Cash and cash equivalents                 613,216  
Available liquidity at March 31, 2021               $ 943,603  

Interfor’s Revolving Term Line matures in March 2024 and its Senior Secured Notes have maturities principally in the years 2024-2030.

As of March 31, 2021, the Company had commitments for capital expenditures totaling $75.7 million for both maintenance and discretionary capital projects.

Non-GAAP Measures

This release makes reference to the following non-GAAP measures: Adjusted net earnings, Adjusted net earnings per share, EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, Net debt to invested capital, Operating cash flow per share (before working capital changes), and Annualized return on capital employed which are used by the Company and certain investors to evaluate operating performance and financial position. These non-GAAP measures do not have any standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other issuers.

The following table provides a reconciliation of these non-GAAP measures to figures as reported in the Company’s audited consolidated financial statements (unaudited for interim periods) prepared in accordance with IFRS:

    For the three months ended
 
    Mar. 31,
  Mar. 31,
  Dec. 31,
 
Thousands of Canadian Dollars except number of shares and per share amounts     2021     2020     2020  
         
Adjusted Net Earnings        
Net earnings   $ 264,487   $ 6,309   $ 149,148  
Add:        
Asset write-downs and restructuring costs     142     371     1,793  
Other foreign exchange loss     2,346     849     8,162  
Long term incentive compensation expense (recovery)     7,670     (8,946 )   10,254  
Other (income) expense     (1,996 )   115     92  
Post closure wind-down costs     224     -     949  
Income tax effect of above adjustments     (2,229 )   2,043     (5,652 )
Adjusted net earnings   $ 270,644   $ 741   $ 164,746  
Weighted average number of shares - basic ('000)     65,927     67,260     66,687  
Adjusted net earnings per share   $ 4.11   $ 0.01   $ 2.47  
         
Adjusted EBITDA        
Net earnings   $ 264,487   $ 6,309   $ 149,148  
Add:        
Depreciation of plant and equipment     21,474     20,061     21,947  
Depletion and amortization of timber, roads and other     6,968     10,530     10,511  
Finance costs     4,524     4,096     1,891  
Income tax expense     86,256     3,205     43,889  
EBITDA     383,709     44,201     227,386  
Add:        
Long term incentive compensation expense (recovery)     7,670     (8,946 )   10,254  
Other foreign exchange loss     2,346     849     8,162  
Other (income) expense     (1,996 )   115     92  
Asset write-downs and restructuring costs     142     371     1,793  
Post closure wind-down costs     224     -     947  
Adjusted EBITDA   $ 392,095   $ 36,590   $ 248,634  
Sales   $ 849,307   $ 479,646   $ 662,301  
Adjusted EBITDA margin     46.2 %   7.6 %   37.5 %
         
Net debt to invested capital        
Net debt        
Total debt   $ 377,250   $ 425,610   $ 381,960  
Cash and cash equivalents     (613,216 )   (103,574 )   (457,392 )
Total net debt   $ (235,966 ) $ 322,036   $ (75,432 )
Invested capital        
Net debt   $ (235,966 ) $ 322,036   $ (75,432 )
Shareholders' equity     1,322,222     882,917     1,080,312  
Total invested capital   $ 1,086,256   $ 1,204,953   $ 1,004,880  
Net debt to invested capital1     (21.7 )%   26.7 %   (7.5 )%
         
Operating cash flow per share (before working capital changes)        
Cash provided by operating activities   $ 285,080   $ 19,319   $ 229,947  
Cash used in (generated from) operating working capital     92,604     19,109     (26,514 )
Operating cash flow (before working capital changes)   $ 377,684   $ 38,428   $ 203,433  
Weighted average number of shares - basic ('000)     65,927     67,260     66,687  
Operating cash flow per share (before working capital changes)   $ 5.73   $ 0.57   $ 3.05  
         
Annualized return on capital employed        
Net earnings   $ 264,487   $ 6,309   $ 149,148  
Add:        
Finance costs     4,524     4,096     1,891  
Income tax expense     86,256     3,205     43,889  
Earnings before income taxes and finance costs   $ 355,267   $ 13,610   $ 194,928  
Capital employed        
Total assets   $ 2,159,692   $ 1,569,508   $ 1,843,187  
Current liabilities     (263,526 )   (149,748 )   (189,726 )
Less:        
Current portion of long term debt     6,811     -     6,897  
Current portion of lease liabilities     12,169     11,819     11,745  
Capital employed, end of period   $ 1,915,146   $ 1,431,579   $ 1,672,103  
Capital employed, beginning of period     1,672,103     1,214,375     1,555,212  
Average capital employed   $ 1,793,624   $ 1,322,977   $ 1,613,657  
Earnings before income taxes and finance costs divided by average capital employed     19.8 %   1.0 %   12.1 %
Annualization factor     4.0     4.0     4.0  
Annualized return on capital employed     79.2 %   4.0 %   48.4 %

Note: 1 Net debt to invested capital as of the period end.

 
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
For the three months ended March 31, 2021 and 2020 (unaudited)
(thousands of Canadian Dollars except earnings per share) Three Months
  Three Months
 
    Mar. 31, 2021
  Mar. 31, 2020
 
       
       
Sales $ 849,307   $ 479,646  
Costs and expenses:    
  Production   432,167     423,228  
  Selling and administration   12,879     9,228  
  Long term incentive compensation expense (recovery)   7,670     (8,946 )
  U.S. countervailing and anti-dumping duty deposits   12,390     10,600  
  Depreciation of plant and equipment   21,474     20,061  
  Depletion and amortization of timber, roads and other   6,968     10,530  
      493,548     464,701  
     
Operating earnings before restructuring costs   355,759     14,945  
     
Restructuring costs   (142 )   (371 )
Operating earnings   355,617     14,574  
     
Finance costs   (4,524 )   (4,096 )
Other foreign exchange loss   (2,346 )   (849 )
Other (income) expense   1,996     (115 )
    (4,874 )   (5,060 )
       
Earnings before income taxes   350,743     9,514  
       
Income tax expense    
  Current   83,173     329  
  Deferred   3,083     2,876  
    86,256     3,205  
       
Net earnings $ 264,487   $ 6,309  
     
Net earnings per share    
Basic $ 4.01    $ 0.09
 
Diluted $ 4.00   $ 0.09
 


 
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the three months ended March 31, 2021 and 2020 (unaudited)
(thousands of Canadian Dollars) Three Months
  Three Months
 
    Mar. 31, 2021
  Mar. 31, 2020
 
     
Net earnings
$ 264,487   $ 6,309  
       
Other comprehensive income:    
Items that will not be recycled to Net earnings:    
  Defined benefit plan actuarial gain (loss), net of tax   4,472     (713 )
       
Items that are or may be recycled to Net earnings:    
  Foreign currency translation differences for foreign operations, net of tax   (8,887 )   46,083  
Total other comprehensive income (loss), net of tax   (4,415 )   45,370  
     
Comprehensive income $ 260,072   $ 51,679  


 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended March 31, 2021 and 2020 (unaudited)
(thousands of Canadian Dollars) Three Months
  Three Months
 
    Mar. 31, 2021
  Mar. 31, 2020
 
     
     
Cash provided by (used in):    
Operating activities:    
  Net earnings $ 264,487   $ 6,309  
  Items not involving cash:    
    Depreciation of plant and equipment   21,474     20,061  
    Depletion and amortization of timber, roads and other   6,968     10,530  
    Deferred income tax expense   3,083     2,876  
    Current income tax expense   83,173     329  
    Finance costs   4,524     4,096  
    Other assets   (431 )   936  
    Reforestation liability   496     2,766  
    Provisions and other liabilities   495     (10,293 )
    Stock options   196     256  
    Unrealized foreign exchange loss   3,011     441  
    Other (income) expense   (1,996 )   115  
  Income taxes (paid) refunded (7,796 )   6  
      377,684     38,428  
  Cash generated from (used in) operating working capital:    
    Trade accounts receivable and other   (67,859 )   (23,413 )
    Inventories   (24,352 )   1,355  
    Prepayments   (3,348 )   (2,113 )
    Trade accounts payable and provisions   2,955     5,062  
    285,080     19,319  
     
Investing activities:    
  Additions to property, plant and equipment   (26,331 )   (24,872 )
  Additions to roads and bridges   (2,885 )   (2,704 )
  Acquisitions   (73,630 )   (56,606 )
  Proceeds on disposal of plant and equipment   5,693     162  
  Net proceeds from (additions to) deposits and other assets   157     (198 )
      (96,996 )   (84,218 )
       
Financing activities:    
  Issuance of share capital, net of expenses   1,945     -  
  Share repurchases   (20,303 )   -  
  Interest payments   (4,258 )   (3,758 )
  Lease liability payments   (3,301 )   (2,934 )
  Debt refinancing costs   -     (136 )
  Operating line net repayments   -     (59 )
  Additions to long term debt   -     140,770  
    (25,917 )   133,883  
       
Foreign exchange loss on cash and cash equivalents held in a foreign currency   (6,343 )   (310 )
Increase in cash   155,824     68,674  
     
Cash and cash equivalents, beginning of period   457,392     34,900  
     
Cash and cash equivalents, end of period $ 613,216   $ 103,574  


 
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
March 31, 2021 and December 31, 2020 (unaudited)
(thousands of Canadian Dollars)    
  Mar. 31, 2021
  Dec. 31, 2020
 
       
Assets    
Current assets:    
  Cash and cash equivalents $ 613,216   $ 457,392  
  Trade accounts receivable and other   182,436     117,371  
  Income taxes receivable   179     169  
  Inventories   191,169     160,188  
  Prepayments   21,027     17,970  
      1,008,027     753,090  
     
Employee future benefits   4,880     106  
Deposits and other assets   48,770     48,957  
Right of use assets   36,673     35,471  
Property, plant and equipment   778,831     729,163  
Roads and bridges   22,640     22,379  
Timber licences   114,059     114,953  
Goodwill and other intangible assets   145,128     138,838  
Deferred income taxes   684     230  
     
  $ 2,159,692   $ 1,843,187  
     
Liabilities and Shareholders’ Equity    
Current liabilities:    
  Trade accounts payable and provisions $ 148,880   $ 150,509  
  Current portion of long term debt   6,811     6,897  
  Reforestation liability   16,551     16,181  
  Lease liabilities   12,169     11,745  
  Income taxes payable   79,115     4,394  
    263,526     189,726  
       
Reforestation liability   30,281     29,735  
Lease liabilities   29,129     28,541  
Long term debt   370,439     375,063  
Employee future benefits   9,734     11,137  
Provisions and other liabilities   27,320     26,637  
Deferred income taxes   107,041     102,036  
     
Equity:    
  Share capital   520,151     523,605  
  Contributed surplus   4,500     5,157  
  Translation reserve   40,959     49,846  
  Retained earnings   756,612     501,704  
     
      1,322,222     1,080,312  
       
  $ 2,159,692   $ 1,843,187  

Approved on behalf of the Board:

L. Sauder
Director
T.V. Milroy
Director

FORWARD-LOOKING STATEMENTS

This release contains forward-looking information about the Company’s business outlook, objectives, plans, strategic priorities and other information that is not historical fact. A statement contains forward-looking information when the Company uses what it knows and expects today, to make a statement about the future. Statements containing forward-looking information may include words such as: will, could, should, believe, expect, anticipate, intend, forecast, projection, target, outlook, opportunity, risk or strategy. Readers are cautioned that actual results may vary from the forward-looking information in this release, and undue reliance should not be placed on such forward-looking information. Risk factors that could cause actual results to differ materially from the forward-looking information in this release are described in Interfor’s first quarter and annual Management’s Discussion and Analysis under the heading “Risks and Uncertainties”, which are available on www.interfor.com and under Interfor’s profile on www.sedar.com. Material factors and assumptions used to develop the forward-looking information in this release include volatility in the selling prices for lumber, logs and wood chips; the Company’s ability to compete on a global basis; the availability and cost of log supply; natural or man-made disasters; currency exchange rates; changes in government regulations; the availability of the Company’s allowable annual cut (“AAC”); claims by and treaty settlements with Indigenous peoples; the Company’s ability to export its products; the softwood lumber trade dispute between Canada and the U.S.; stumpage fees payable to the Province of British Columbia (“B.C.”); environmental impacts of the Company’s operations; labour disruptions; information systems security; and the existence of a public health crisis (such as the current COVID-19 pandemic). Unless otherwise indicated, the forward-looking statements in this release are based on the Company’s expectations at the date of this release. Interfor undertakes no obligation to update such forward-looking information, except as required by law.

ABOUT INTERFOR

Interfor is a growth-oriented forest products company with operations in Canada and the United States. The Company has annual production capacity of approximately 3.2 billion board feet and offers a diverse line of lumber products to customers around the world. For more information about Interfor, visit our website at www.interfor.com.

The Company’s unaudited condensed consolidated interim financial statements and Management’s Discussion and Analysis for Q1’21 are available at www.sedar.com and www.interfor.com.

There will be a conference call on Friday, May 7, 2021 at 8:00 a.m. (Pacific Time) hosted by INTERFOR CORPORATION for the purpose of reviewing the Company’s release of its first quarter 2021 financial results.

The dial-in number is 1-833-297-9919. The conference call will also be recorded for those unable to join in for the live discussion and will be available until June 7, 2021. The number to call is 1-855-859-2056, Passcode 4759584.

For further information:
Richard Pozzebon, Senior Vice President and Chief Financial Officer
(604) 422-3400

 


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Interfor Reports Record Q1’21 Results EBITDA1 of $392 million on Sales of $849 millionNet Cash Position and Available Liquidity of $944 million BURNABY, British Columbia, May 06, 2021 (GLOBE NEWSWIRE) - INTERFOR CORPORATION (“Interfor” or the “Company”) (TSX: IFP) recorded Net …

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