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GreenFirst Announces Profitable Fourth Quarter of 2021

General News

GreenFirst Forest Products Inc. (“GreenFirst” or the “Company”) filed its audited consolidated financial statements and notes for the year ended December 31, 2021 (“Financial Statements”) and the related Management Discussion and Analysis (“MD&A”) and Annual Information Form (“AIF”) which are available on SEDAR at  All amounts are in thousands of Canadian dollars unless indicated otherwise.

Fourth Quarter of 2021 Highlights

  • The fourth quarter of 2021 (“Q4 2021”) was the Company’s first full quarter operating its newly acquired forest products business
    • Q4 2021 Adjusted EBITDA of $18.4 million (see, Reconciliation of Adjusted EBITDA)
    • Q4 2021 net earnings of $8.0 million or $0.04 earning per share
  • Lumber pricing improved in Q4 2021 and into 2022 with continued volatility expected
  • Made significant strides in reducing reliance on transitional services arrangement with key hires in human resources, IT and accounting
  • Asset backed revolving loan facility of $65.0 million was undrawn at December 31, 2021 and has remained undrawn at March 23, 2022. Cash from operations has funded the seasonal log inventory build-up
  • Invested in Boreal Carbon Corporation, an entity focused on acquiring and managing forestry projects in North America to generate carbon credits

“We reached profitability in Q4 and have successfully integrated the acquired operating mills. As cash flow permits, we intendto make strategic capital investments with the goal to reduce the cost of production and increase our production capacity” said Rick Doman, CEO of GreenFirst“We are also committed to being an employer of choice and for each of our mills to be an integral part of their community.”

Acquisition of Sawmills and Paper Mill

On August 28, 2021, the Company acquired six sawmills and one paper mill from Rayonier Advanced Materials (the “Rayonier Asset Acquisition”) for aggregate consideration of $294.1 million. The Company has measured and recorded the identifiable assets acquired and the liabilities assumed at management’s estimates of their acquisition-date fair values. As the acquisition is within the measurement period, the Company and its external valuation experts are still assessing acquisition date fair value adjustments, including fair values of property, plant and equipment and related depreciation charges, leases and estimated final purchase price adjustments related to inventory and other items. 

Financial Highlights

The following selected financial information is derived from the Company’s Financial Statements:

1) Includes net sales to external parties only.

2) Adjusted EBITDA is a Non-GAAP measure and does not have standardized meaning under GAAP or IFRS. As a result, it may not be comparable to information presented by other companies. For an explanation and reconciliation of Adjusted EBITDA to related comparable financial information presented in the Financial Statements prepared in accordance with IFRS, refer to the Reconciliation of Adjusted EBITDA section below.

The Company started operations as a forestry products business upon the closing of the Rayonier Asset Acquisition on August 28, 2021. The fourth quarter of 2021 was the Company’s first full quarter operating its newly acquired forest products business.

The Company recorded net income of $8.0 million ($0.04 per share) for the fourth quarter of 2021 and adjusted EBITDA of $18.4 million. For the year ended December 31, 2021, the Company recorded a net loss of $9.6 million ($0.12 per share) and adjusted EBITDA of $12.6 million.

The Company reported net sales of $161.6 million during the fourth quarter of 2021 and net sales of $190.5 million for the year ended December 31, 2021.

The Company reported cost of sales of $131.2 million during the fourth quarter of 2021. Upon closing the Rayonier Asset Acquisition, inventory was recognized at its fair value, which resulted in inventory values being different than would have been recorded in accordance with the Company’s accounting policy.  At December 31, 2021, $0.8 million of inventory valued at fair value remained to be recognized in future periods in cost of sales.

The Company reported selling, general and administration expenses of $5.0 million for the fourth quarter of 2021 and $8.4 million for the year ended December 31, 2021.  These expenses primarily related to personnel costs, costs related to the transitional services provided by Rayonier and costs incurred for the idled Kenora sawmill.

The Company’s softwood lumber sales to US customers are subject to countervailing and anti-dumping duties as determined by the US Department of Commerce. Duties expensed for the fourth quarter and year ended December 31, 2021 were $13.1 million and $14.9 million, respectively. The Company is initially subject to 14.19% countervailing duties and 6.04% anti-dumping duties. The Company has challenged these levels by requesting that US Department of Commerce undertake a Changed Circumstances Review. The US Department of Commerce has so far denied the Company’s request for a review. The Company is appealing this decision.

Finance costs, which includes interest and accretion on the Company’s borrowings under the senior secured term credit facility, was $4.5 million for the fourth quarter of 2021 and $6.2 million for the year ended ended December 31, 2021.

The Company had $2.1 million of transaction related expenses for the fourth quarter of 2021 reflecting expenses for setting up and transferring cloud-based IT systems. The Company incurred $9.9 million in acquisition and transaction related costs for the year ended December 31, 2021, which in addition to the IT-related expenses, included professional fees associated with the Rayonier Asset Acquisition and non-capitalized financing expenses.

Liquidity and Borrowings

At December 31, 2021, the Company had total liquidity of $83.2 million comprised of $36.2 million cash on hand and $47.0 million, net of $13.7 million letters of credit, available under its $65.0 million revolving asset backed revolving loan (“ABL”) facility.  The ABL facility was undrawn at December 31, 2021 and as at March 23, 2022.

At December 31, 2021, the Company had $115.2 million of borrowings under its senior secured term credit facility, net of deferred financing costs. The credit agreement contains restrictive covenants that limit the Company’s ability to undertake certain actions without the lenders consent, it also includes the following financial covenant tests performed quarterly: a maximum leverage ratio; a minimum fixed charge coverage ratio and a minimum liquidity requirement, all as defined in the term loan agreement. The Company monitors its performance monthly as well as its future performance expectations, adjusting as required in relation to these covenants.  The Company was fully in compliance with its secured term loan debt covenants as of December 31, 2021.


North American home construction and repair and remodeling demand for lumber remains strong. Expected interest rate increases for 2022 may moderate this demand but we believe it will depend to what extent interest rates increase. Our order files remain strong but the Company has experienced product shipment disruptions that have increased shipping costs and impacted our shipping volumes and modes of distribution. For the first eight weeks of 2022 our average weekly lumber shipments were approximately 25% lower than our Q4 2021 volumes. Higher lumber prices for the first eight weeks of 2022  countered the revenue impact of lower shipped volumes. Our plans are to increase future shipments to make up for and offset lower volumes shipped in during the first eight weeks of 2022, but this is dependent on an easing of transportation disruptions.

On the supply side, we expect the uncertainty around COVID-19 will remain throughout 2022. In addition, disruptions to modes of transportation experienced by the industry have contributed to tightening supply of lumber to the North American market. Entering Q1 2022, increased cases of COVID-19 at our operating sites disrupted our production.  Our average weekly production for the first eight weeks of 2022 was down 3% compared to average weekly production in Q4 2021 at our sawmills,

Given the above demand and supply factors, we expect North American lumber prices to continue to be volatile but to remain above historical trends.

Lumber prices have a material impact on the earnings of the Company and in the fourth quarter, a US $10/Mfbm difference in lumber prices, assuming everything else remained constant, would have impacted the Company’s operating earnings by approximately $1.2 million.  The Company currently does not have any hedges in place for lumber prices.

Inflationary pressures in North America have increased the cost of many inputs required for our operations. Furthermore, shortages of people, materials and equipment could negatively impact the Company as well as the industry.  Many of these pressures are linked to the COVID-19 pandemic, which may still be a significant factor in 2022.

The Company has capital losses carried forward of $15.2 million, which do not expire, and non-capital losses carried forward of $28.3 million that expire at various dates up to 2041.

Reconciliation of Adjusted EBITDA

References to EBITDA in this document are earnings (loss) before interest and finance costs, income taxes, depreciation and amortization, while references to Adjusted EBITDA are EBITDA plus other non-operating costs such as acquisition and transaction related costs and the impact of foreign exchange on the Company’s long-term debt.  Management believes that certain lenders, investors, and analysts use EBITDA and Adjusted EBITDA to measure the Company’s ability to service debt and meet other payment obligations, and as a common valuation measurement. EBITDA and Adjusted EBITDA are not intended to replace net earnings (loss), or other measures of financial performance and liquidity reported in accordance with GAAP.  They are not intended to replace income (loss), or other measures of financial performance and liquidity reported in accordance with GAAP.  Please refer to the Company’s MD&A for further information on non-GAAP measures.

For the full fourth quarter results, click here.

About GreenFirst

GreenFirst Forest Products is a forest-first business, focused on sustainable forest management and lumber production. The Company owns 7 sawmills and 1 paper mill across Ontario and Quebec.  GreenFirst is a significant lumber producer in Canada having an annual lumber production capacity of 905MMfbm, with a goal to increase. GreenFirst’s mills are located in rich wood baskets proudly operating over 9.2 million hectares of FSC® certified public and private Canadian forestlands (FSC®-C167905). The Company believes that responsible forest practices, coupled with the long-term green advantage of lumber, provide GreenFirst with significant cyclical and secular advantages in building products. GreenFirst’s long-term vision is to be a leader in the global forestry industry.

Source: GreenFirst Forest Products Inc.