Greenfirst Forest Products (GFP) Q2 2024 earnings summary

Executive summary

• Announced and advancing the planned spin-out of Kap Corporation to deconsolidate paper operations and focus on core lumber business, expected to complete by Q4 2024.

• Kap Paper secured a CAD 24 million ($24 million) term loan from the Province of Ontario to support its standalone strategy and long-term competitiveness.

• Purchased a $26.5 million group annuity to transfer defined benefit pension obligations, reducing future liabilities.

• Q2 2024 net loss from continuing operations was $14.5 million, with both lumber and paper segments posting negative contributions due to weak market conditions.

• Improvements in paper production and operational efficiency, though lumber pricing continues to impact results.

Financial highlights

• Q2 2024 net loss was $14.5 million; adjusted EBITDA was negative $12.1 million, down from negative $3.5 million in Q1 2024.

• Q2 2024 total net sales were $94.4 million, with lumber net sales at $66.3 million and paper net sales at $28.1 million.

• SG&A expenses were $4.5 million in Q2, higher than Q1 and up from $2.5 million year-over-year.

• Finance costs for Q2 were $1.1 million, mainly from interest on outstanding debt.

• Operating loss from continuing operations was $16.3 million in Q2 2024, compared to $7.4 million in Q1 2024.

Outlook and guidance

• Management remains confident in long-term lumber market fundamentals, citing under-supplied housing, immigration, and projected U.S. housing starts of 1.55 million.

• Kap Paper spin-out expected to complete by Q4 2024.

• Anticipate cost benefits from higher production and cost-saving initiatives in coming quarters.

• All major newsprint producers announced a $50/ton price increase effective September 1, supporting positive EBITDA outlook for paper.

• Near-term prospects remain challenging due to high interest rates and macroeconomic concerns.