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GreenFirst Reports Financial Results for the Fourth Quarter of 2022

General News
Green First Logo lumber mill

GreenFirst Forest Products Inc. (TSX: GFP) (“GreenFirst” or the “Company”) today announced results for the fourth quarter and year ended December 31, 2022. The Company’s annual financial statements (“Financial Statements”) and related Management Discussion and Analysis (“MD&A”) for the year ended December 31, 2022 are available on GreenFirst’s website at www.greenfirst.ca and on SEDAR at www.sedar.com. All amounts are in thousands of Canadian dollars unless indicated otherwise. 

Fourth Quarter of 2022 Highlights

  • Fourth quarter 2022 (“Q4 2022”) net loss from continuing operations was $25.9 million or a $0.15 loss per share (diluted), compared to net loss of $16.3 million or $0.09 loss per share (diluted) in the third quarter of 2022 (“Q3 2022”) on the same basis . This result reflects the sharp downturn in lumber market prices seen during the fourth quarter. Q4 2022 Adjusted EBITDA from continuing operations was negative $27.4 millioncompared to a negative $2.0 million in Q3 2022 on the same basis. Adjusted EBITDA for continuing operations before duties expensed for Q4 2022 was negative $19.6 million, compared to positive $7.2 million in Q3 2022.
  • Lumber prices dropped, reflecting economic headwinds and lower demand in Q4 2022, with an average selling price of $644/mfbm compared to $800/mfbm in Q3 2022. Steadily rising interest rates since Q2 2022, in response to high inflation, reduced US housing starts and caused flagging homebuilders’ confidence, which worsened during the fourth quarter.
  • On November 7, 2022, the Company announced the sale of its 203,000 acres of private forest land south of Kapuskasing, Ontario, to a third party for net cash proceeds of $48.7 million.
  • On December 21, 2022, the Company announced the sale of its La Sarre and Béarn sawmills and its Abitibi and Témiscamingue forestry operations, as well as their related assets and other Quebec business operations to Chantiers Chibougamau Ltée for cash proceeds of approximately $94 million, subject to final adjustments, which closed on March 14, 2023.
  • Candice Bergen was appointed to the Company’s Board of Directors, effective March 14, 2023.

“The fourth quarter presented a worsening economic backdrop, with results showing it, however the liquidity from our $49 million land sale and our recent $94 million sale of our Quebec sawmills gives us the flexibility to tackle our strategy and take advantage of opportunities”, said Paul Rivett, interim CEO and executive Chairman of GreenFirst.

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 $296.1 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. For further information on the purchase price accounting, please refer to the Company’s Financial Statements.

Financial Highlights

The following selected financial information is from the Company’s Financial Statements and MD&A:

(In thousands of CAD, except per share amounts)December 31,September 24,December 31,
For the quarter ended2022(2)2022(1)(2)2021(1)(2)
Net sales from continuing operations
Forest products(4)$            69,628$            85,444$            95,509
Paper products              30,564              26,027              18,570
Total net sales from continuing operations            100,192            111,471            114,079
Operating (loss) earnings from continuing operations            (33,747)              (5,371)              11,380
Net (loss) earnings            (43,615)            (23,259)               9,046
Net (loss) earning from continuing operations            (25,876)            (16,257)               6,108
Basic (loss) earnings per share                (0.25)                (0.13)                 0.05
Basic (loss) earnings per share from continuing operations                (0.15)                (0.09)                 0.03
Diluted (loss) earnings per share                (0.25)                (0.13)                 0.05
Diluted (loss) earnings per share from continuing operations                (0.15)                (0.09)                 0.03
Adjusted EBITDA from continuing operations(3)$           (27,385)$            (2,044)$            12,877
(In thousands of CAD, except per share amounts)December 31,December 31,
For the year ended2022(2)2021(1)(2)
Net sales from continuing operations
Forest products(4)$             398,098$             108,612
Paper products                 94,011                 24,703
Total net sales from continuing operations               492,109               133,315
Operating earnings (loss) from continuing operations                 23,778                  4,674
Net loss                   (910)                 (8,162)
Net loss from continuing operations                 (4,132)               (10,023)
Basic loss per share                    0.00                   (0.10)
Basic loss per share from continuing operations                   (0.02)                   (0.13)
Diluted earnings (loss) per share                    0.00                   (0.10)
Diluted loss per share from continuing operations                   (0.02)                   (0.13)
Adjusted EBITDA from continuing operations(3)$               39,384$                 9,177
(In thousands of CAD)December 31,December 31,
As at20222021(1)
Total assets$          371,504$          417,394
Total liabilities147,042186,778
Total shareholders’ equity$          224,462$          230,616

1Certain prior period amounts have been restated as a result of the Company finalizing its purchase price accounting related to the Rayonier Asset Acquisition, as allowed under IFRS. Please refer to Note 4 – Acquisition of Sawmills and Paper Mill, in the  Company’s Financial Statements for further information.
2Certain prior period amounts have been restated as a result of a change in presentation of the Company’s Financial Statements for continuing and discontinued operations for assets held for sale under IFRS. Please refer to Note 5 – Assets held for Sale, in the Company’s Financial Statements for further information.
3Adjusted 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 Non-GAAP Measures section in this MD&A.
4Includes net sales to external parties only.

During Q4 2022 the Company recorded a net loss from continuing operations of $25.9 million ($0.15 loss per share, diluted) and Adjusted EBITDA of negative $27.4 million. These were declines compared to Q3 2022 where net loss were $16.3 million ($0.09 loss per share, diluted) and Adjusted EBITDA was negative $2.0 million, on a comparable basis.

The Company reported net sales for continuing operations of $100.2 million during Q4 2022, a decline of $11.3 million or 10%, compared to Q3 2022. This decrease was primarily due to declining lumber prices ($644/mfbm average realized in Q4 compared to $800/mfbm in Q3 2022).

The Company reported cost of sales of $119.6 million during Q4 2022, higher by $13.7 million or 13%, compared to Q3 2022. This increase partly reflects the $9.0 million impact of charges for inventory write-downs to their net realizable value in Q4 2022.

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 in Q4 2022 were $7.8 million, a decrease of $1.4 million or 16%, quarter-over-quarter, which reflects lower average sales prices on volumes shipped and exported compared to Q3 2022. Excluding the impact of duties expensed, Adjusted EBITDA for the fourth quarter and year ended December 31, 2022 was negative $19.6 million and positive $85.2 million, respectively.

The Company reported selling, general and administration expenses for continuing operations of $5.9 million during Q4 2022 which was an increase of $0.2 million or 3% compared to Q3 2022, this modest increase mainly reflects higher business-development  activities and expenses.

Finance costs, which include interest and accretion on the Company’s borrowings under the new Credit Facility, was $1.2 million in Q4 2022.

Liquidity and Borrowings

At December 31, 2022, the Company had total liquidity of $72.3 million comprising $25.4 million in cash on hand and $60.8 million, net of $13.9 million for standby letters of credit, available under its Credit Facility. The Company repaid $30.0 million against the Credit Facility during the fourth quarter ended December 31, 2022.

At December 31, 2022, the Company had $53.4 million of borrowings under its Credit Facility, net of deferred financing costs. The Company’s Credit Facility contains restrictive covenants that limit the Company’s ability to undertake certain actions without the lender’s consent, and it also includes the following financial covenant tests performed quarterly: a minimum fixed-charge coverage ratio (only while the term loan portion of the Credit Facility is outstanding) and a maximum annual capital expenditure amount relative to budget, all as defined in the credit agreement. The Company monitors its performance monthly as well as its future performance expectations, adjusting as required, so it remains in compliance with these covenants. The Company was in compliance with its covenants under the Credit Agreement as at  December 31, 2022.

Outlook

2022 was marked by a strong start for lumber prices that were subsequently reduced by rising interest rates in response to ongoing inflation, which softened lumber demand by mid year. This led to a decline in lumber market prices throughout the second half of 2022, with those levels being maintained in the first quarter of 2023 thus far. Further monetary tightening and interest rate rises would continue to put downward pressure on lumber market prices, which are expected to remain volatile over the near term.

Partially offsetting the negative impact is the tightening lumber supply, spurred on by the curtailment of lumber production announced by mills in the province of British Columbia and in other regions of North America.

The Company continues to experience challenges with an ongoing tight labour market, with some residual impacts of COVID-19 in early 2023. This continues to cause disruptions in the flow of production at the Company’s mills. From a logistics standpoint, disruptions in trucking and rail logistics have only been limited since the second quarter of 2022.

Inflationary pressures in North America have raised the cost of many inputs required for our operations. Ongoing shortages of people, materials or equipment could negatively impact the Company, as well as the industry. Many of these pressures arose due to the COVID-19 pandemic, and they continue to be a significant factor affecting our business.

Reconciliation of Adjusted EBITDA

(In thousands of CAD)
For the quarter endedDecember 31, 2022(2)September 24,2022(1)(2)December 31, 2021(1)(2)
Net (loss) earnings from continuing operations$          (25,876)$          (16,257)$             6,108
Adjustments:
Finance costs, net               1,162               3,986               4,527
Income taxes              (1,030)            (14,918)              (2,031)
Depreciation and amortization               6,362               3,327               2,201
EBITDA            (19,382)            (23,862)             10,805
Foreign exchange on long-term debt                    —               5,311                  (18)
Loss on extinguishment of debt                    —             11,187                    —
Other non-operating losses                    —               5,320                    —
Gain on sale of assets              (8,003)                    —                    —
Acquisition and transaction related costs                    —                    —               2,090
Adjusted EBITDA from continuing operations(3)$          (27,385)$            (2,044)$          12,877
(In thousands of CAD)
For the year endedDecember 31, 2022December 31, 2021(1)
Net loss from continuing operations$            (4,132)$           (10,023)
Adjustments:
Finance costs, net              12,796               6,173
Income taxes                (643)              (2,031)
Depreciation and amortization              15,606               4,503
EBITDA              23,627              (1,378)
Foreign exchange on long-term debt               7,896                  678
Loss on extinguishment of debt              11,187                    —
Gain on investment                (643)                    —
Other non-operating losses               5,320                    —
Gain on sale of assets              (8,003)                    —
Acquisition and transaction related costs                    —               9,877
Adjusted EBITDA from continuing operations(3)              39,384               9,177

1Certain prior period amounts have been restated as a result of the Company finalizing its purchase price accounting related to the Rayonier Asset Acquisition, as allowed under IFRS. Please refer to Note 4 – Acquisition of Sawmills and Paper Mill, in the  Company’s Financial Statements for further information.

2Certain prior period amounts have been restated as a result of a change in presentation of the Company’s Financial Statements for continuing and discontinued operations for assets held for sale under IFRS. Please refer to Note 5 – Assets held for Sale, in the Company’s Financial Statements for further information.

3Adjusted 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 Non-GAAP Measures section in this MD&A.

4Includes net sales to external parties only.

For the complete press release, click here.

About GreenFirst Forest Products

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.