Greenfirst Forest Products (GFP) Q3 2024 earnings summary

Executive summary

• Q3 2024 marked a return to profitability with $14.8 million net income from continuing operations, reversing prior losses, and saw record production despite challenging lumber markets and targeted curtailments.

• The spin-out of Kap Paper was completed, making the company a pure-play lumber business, and a rights offering was launched to raise up to $97 million for strategic growth.

• Strategic CapEx initiatives are underway, targeting a 10% cost reduction, 20% capacity increase, and a 15% lower EBITDA break-even, with a projected $18 million annual EBITDA increase at 2024 pricing.

• A new duties rate of 14.40% was applied in August 2024, resulting in a $19.2 million recovery on 2022 duties plus $3.1 million in interest.

• A $26.5 million group annuity buy-out transferred defined benefit obligations, and a share consolidation (1-for-10) was completed.

Financial highlights

• Net sales were $70.8 million in Q3 2024, up from $69.6 million in Q2 2024 and up 4% year-over-year.

• Adjusted EBITDA from continuing operations was $15.9 million, up from negative $6.1 million in Q2 2024; before one-time duties recoveries, adjusted EBITDA was negative $3.5 million.

• Operating income from continuing operations was $12.1 million, compared to a loss of $9.7 million in Q2 2024.

• Basic and diluted EPS from continuing operations were $0.08, up from a loss of $0.06 in Q2 2024.

• Cost of sales in the lumber segment decreased to $69.8 million from $72.5 million in Q2 2024.

Outlook and guidance

• No further curtailments expected in Q4; positive EBITDA anticipated at current market prices, inclusive of SG&A.

• Strategic CapEx projects are expected to reduce costs by 10%, increase capacity by 20%, and lower EBITDA break-even by 15%, with a 2.8-year payback.

• Pricing is expected to improve for the rest of 2024, supported by industry curtailments and monetary policy reversals.

• North American housing market stabilization and easing mortgage rates are projected to support lumber demand.

• The company remains cautious in the short term, focusing on cost and liquidity management.