Interfor Reports Q4’20 Results
Interfor Corporation (“Interfor” or the “Company”) recorded Net earnings in Q4’20 of $149.1 million, or $2.24 per share, compared to $121.6 million, or $1.81 per share in Q3’20 and Net loss of $41.7 million, or $0.62 per share in Q4’19. Adjusted net earnings in Q4’20 was $164.7 million compared to $140.0 million in Q3’20 and Adjusted net loss of $17.4 million in Q4’19.
Adjusted EBITDA was a record $248.6 million on sales of $662.3 million in Q4’20 versus $221.7 million on sales of $644.9 million in Q3’20.
Interfor recorded Net earnings of $280.3 million, or $4.18 per share, in 2020, compared to Net loss of $103.8 million, or $1.54 per share in 2019. Adjusted EBITDA was $549.7 million on sales of $2.2 billion.
Notable items in the quarter:
Strong Free Cash Flow Generation
– Interfor generated $205.0 million of cash flow from operations before changes in working capital, or $3.07 per share, and an additional $24.9 million of cash from reduced working capital.
– Capital spending was $36.0 million, including $21.7 million on high-return discretionary projects primarily in the U.S. South. US$96.1 million has been spent on the Company’s Phase II strategic capital plan through December 31, 2020.
– Net debt ended the quarter at $(75.4) million, or (7.5)% of invested capital, resulting in available liquidity of $787.5 million.
Seasonally Robust Lumber Market
– Interfor’s average selling price was $842 per mfbm, down $68 per mfbm versus record levels in Q3’20. Movements in key benchmark prices were mixed compared to Q3’20 as the SYP Composite and Western SPF Composite benchmarks decreased by US$145 and US$59 to US$603 and US$652 per mfbm, respectively, while the KD H-F Stud 2×4 9’ benchmark increased by US$43 to US$807 per mfbm.
Production Increased to Meet Demand
– Total lumber production in Q4’20 was 687 million board feet, representing an increase of 45 million board feet quarter-over-quarter. The U.S. South and U.S. Northwest regions accounted for 361 million board feet and 136 million board feet, respectively, compared to 331 million board feet and 118 million board feet in Q3’20. Production in the B.C. region decreased to 190 million board feet from 193 million board feet in the preceding quarter.
– Total lumber shipments were 683 million board feet, including agency and wholesale volumes, or 65 million board feet higher than Q3’20.
Softwood Lumber Duties Rate Adjustment
– In Q4’20, the U.S. Department of Commerce published the final rates for countervailing (“CV”) and anti-dumping (“AD”) duties based on the results of its first administrative review of shipments for the years ended December 31, 2017 and 2018. The final combined rates for 2017 and 2018 were 8.83% and 8.99% respectively, compared to the cash deposit rate of 20.23%. To reflect lower amended final rates, Interfor recorded a $38.4 million reduction to duties expense in Q4’20. Effective December 2020, the final rate of 8.99% was applied to new lumber shipments.
– Cumulative duties of US$134.0 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
Normal Course Issuer Bid (“NCIB”)
On November 5, 2020, the Company announced a NCIB commencing on November 11, 2020 and ending on November 10, 2021, for the purchase of up to 5,981,751 common shares. During Q4 2020, Interfor purchased 1,327,420 common shares under the Company’s NCIB for total consideration of $24.4 million.
The Company believes that, from time to time, the market price of its common shares may be attractive and their purchase would represent a prudent allocation of capital.
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 demand ahead of the 2021 home building and renovation season 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.
Interfor’s Net debt at December 31, 2020 was $(75.4) million, or (7.5)% of invested capital, representing a decrease of $300.3 million from the level of Net debt at December 31, 2019.
As at December 31, 2020 the Company had net working capital of $563.4 million and available liquidity of $787.5 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 full fourth quarter results, click here.
Interfor is a growth-oriented forest products company with operations in Canada and the United States. The Company has annual production capacity of approximately 3.0 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.
Richard Pozzebon – Senior Vice President & CFO – (604) 689-6800
Source: Interfor Corporation