Interfor (IFP) Q3 2024 earnings summary

Executive summary

• Reported a net loss of $105.7 million in Q3'24, with an adjusted EBITDA loss of $22 million on sales of $692.7 million, reflecting weak lumber pricing and challenging market conditions.

• Production was reduced, including indefinite closures at two US South mills and the announced exit from Quebec, selling three facilities and closing the Montreal office.

• Interfor is a top three North American softwood lumber producer, operating 31 facilities with a focus on the US South, Eastern, and Atlantic Canada, and a 10-year production CAGR of 6%.

• The company maintains a balanced capital allocation strategy, disciplined growth, and a strong ESG focus.

• Industry-wide, about 10% of capacity has been removed, with significant curtailments in the US South and British Columbia.

Financial highlights

• Q3'24 sales were $692.7 million, down from $771.2 million in Q2'24, with a net loss of $105.7 million and adjusted EBITDA margin of -3.2%.

• Net loss included $91 million in non-cash impairments related to Quebec operations and Summerville mill.

• Operating cash flow was $38 million, supported by $55 million in tax refunds and $7 million working capital release.

• Financial leverage was 36% at quarter-end, with available liquidity of approximately $353 million.

• Book equity totaled $1.5 billion, and invested capital was $2.36 billion.

Outlook and guidance

• Lumber prices have improved over 20% since early July, with further gains expected as supply-demand balance improves.

• Near-term markets remain volatile due to economic uncertainty and high interest rates, but mid-term outlook is positive, supported by US housing stock age and shortages.

• Capital expenditures for 2024 and 2025 are planned at $70 million and $75 million, respectively.

• Targeting around 4 billion board feet of lumber production in 2025, adjustable based on market strength.

• Near-term leverage is expected to benefit from non-operating cash flows, including proceeds from the disposition of the Coastal BC business.