Boost in US Lumber demand takes Interfor's earnings to record high in 2016

VANCOUVER (Scrap Monster): Interfor Corporation-one of the world’s leading lumber producers has reported record earnings in 2016, backed by strong growth in lumber demand in the US. The proceeds from sale of former sawmill property in Tacoma coupled with robust cash flow has helped the company to reduce its debt by $57.4 million during the quarter. Announcing the fourth quarter financial results, the company expressed the hope that 2017 would continue to be a good year. Incidentally, Interfor is B.C’s third largest forestry company by market cap and has strong presence in the US market.

According to company press release, its adjusted earnings before tax, depreciation and amortization (EBITDA) in 2016 hit a record of $199.6 million, surpassing the previous record set in 2014. The net earnings for the year totaled $65.6 million, when compared with a loss of $30.4 million in 2015. During Q4 ’16 alone, the company recorded net earnings of $26.6 million, significantly higher when compared with the net earnings of $15.1 million reported during the quarter prior to that. It must be noted that the company had reported a net loss during the corresponding quarter in 2015. Interfor had reported net loss of $3.5 million in earnings during Q4 ’15.

The company’s adjusted net earnings in Q4 declined significantly from $20.7 million in Q3 ’16 to $17.7 million in Q4. However, the net earnings were up considerably when compared with $4.5 million during the fourth quarter of 2015. Q4 reported quarter-on-quarter decline in sales from $457.6 million to $442.3 million. The adjusted EBITDA too declined from $58.1 million to $51.3 million.

After accounting for working capital changes, Interfor generated $49.0 million in cash from operations. The quarter marked the closure of sale of the Tacoma sawmill operation. The net cash proceeds from the transaction totaled around $20.4 million, after providing for transaction costs and the payment which was due to its former owner. The capital spending during the quarter totaled $19.8 million. The net debt of the company reduced by $57.4 million to $289.6 million at the end of Q4 ’16. The net debt reduction for the whole year 2016 totaled $162.8 million.

The company’s lumber production during Q4 last year totaled 607 million board feet, marginally lower when compared with the production of 628 million board feet in the preceding quarter. The production from B.C region totaled 209 million board feet, whereas those from Northwest region totaled 137 million board feet. The highest production of 260 million board feet was reported in the South region. The drop in production is mainly on account of seasonal cut in operating schedules across several regions. In addition, extreme winter weather conditions impacted operations in B.C and the Northwest in December, thereby impacting quarterly lumber productivity.

Interfor announced that it has made significant progress in productivity and lumber recovery levels during the quarter, especially in the South region. It must be noted that the company had launched a business optimization initiative during early-2016 with special focus on the South region. The initiative had set a target of achieving $35 million in EBITDA gains from the region by 2017. The EBITDA target uplift is expected to be achieved during the course of 2017, the company press release stated.

Interfor is a growth-oriented lumber company with operations in Canada and the United States. The Company has annual production capacity of approximately 3 billion board feet and offers one of the most diverse lines of lumber products to customers around the world.