Greenfirst Forest Products (GFP) Q3 2024 earnings summary

Executive summary

• Completed the spin-out of Kap Paper/Kap Corporation, making the company a pure-play lumber business focused on sawmill growth and classifying paper operations as discontinued.

• Q3 2024 marked by challenging market conditions, with lowest lumber prices in July but steady improvement and record production performance at sawmills.

• Strategic CapEx plan underway, targeting cost reduction, capacity increase, and operational productivity improvements.

• A new duties rate of 14.40% was applied in August 2024, and a $26.5 million group annuity buy-out transferred defined benefit obligations.

• Rights offering launched post-quarter, with up to $97 million targeted and $20 million already committed, alongside a 10-to-1 share consolidation.

Financial highlights

• Q3 2024 net income from continuing operations was $14.8 million, up from a loss of $9.9 million in Q3 2023; net sales were $70.8 million, up from $69.6 million in Q2 2024 and $68.0 million in Q3 2023.

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

• Duty recovery of $14.2 million USD (CAD 19.2 million) plus $2.3 million USD (CAD 3.1 million) in interest recognized in Q3.

• Cost of sales in lumber segment decreased to $69.8 million from $72.5 million in Q2 2024; gross margin improved due to higher sales and lower costs.

• Cash provided by operating activities in Q3 2024 was $5.8 million; working capital at September 28, 2024 was $27.9 million.

Outlook and guidance

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

• Strategic CapEx projects expected to reduce costs by 10%, increase capacity by 20%, and lower EBITDA break-even by 15%, with payback in 2.8 years and $18 million/year projected EBITDA increase.

• Company expects average lumber prices to increase in late 2024 and is executing productivity improvement plans to enhance cash flows.

• Rights offering proceeds will support CapEx, working capital, and strategic opportunities.

• Long-term fundamentals remain positive, with strong Q4 2024 momentum and a focus on operational improvements.