Interfor Reports Q1’22 Results

Interfor Corporation (“Interfor” or the “Company”) (TSX: IFP) recorded Net earnings in Q1’22 of $397.0 million, or $6.69 per share, compared to $69.7 million, or $1.15 per share in Q4’21 and $264.5 million, or $4.01 per share in Q1’21. Adjusted net earnings in Q1’22 were $392.5 million compared to $78.2 million in Q4’21 and $270.6 million in Q1’21. Adjusted EBITDA was $570.1 million on sales of $1.3 billion in Q1’22 versus $149.5 million on sales of $675.9 million in Q4’21.

Notable items in the quarter:
• Acquisition of EACOM Timber Corporation
o On February 22, 2022, the Company completed the transaction to acquire 100% of the equity interests of EACOM Timber Corporation (“EACOM”) from an affiliate of Kelso & Company. The acquisition includes seven sawmills with a combined lumber production capacity of 985 million board feet, an I-Joist plant with annual production capacity of 70 million linear feet, and a value-added remanufacturing plant with annual production capacity of 60 million board feet (the “Acquired Eastern Canada Operations”). The Company paid total consideration of $731.2 million which was funded from cash on hand and drawings on the Revolving Term Line.
o The Acquired Eastern Canada Operations contributed $5.1 million of Adjusted EBITDA to Interfor’s first quarter results, which is net of $68.0 million recorded in production costs related to fair value adjustments recognized at the acquisition date.
• Record Lumber Production
o Total lumber production in Q1’22 was 921 million board feet, representing an increase of 163 million board feet quarter-over-quarter and setting an Interfor production record. The U.S. South and U.S. Northwest regions accounted for 452 million board feet and 173 million board feet, respectively, compared to 409 million board feet and 166 million board feet in Q4’21. Production in the B.C. region increased to 196 million board feet from 183 million board feet in Q4’21. The Acquired Eastern Canada Operations accounted for 100 million board feet in Q1’22.
o Total lumber shipments were 860 million board feet, or 141 million higher than Q4’21.
o The 61 million board feet shortfall of lumber shipments compared to production was the result of ongoing logistics constraints across the U.S. and Canada.
• Strengthening Lumber Prices
o Interfor’s average selling price was $1,410 per mfbm, up $588 per mfbm versus Q4’21. The SYP Composite, Western SPF Composite and KD H-F Stud 2×4 9’ price benchmarks increased quarter-over-quarter by US$475, US$506 and US$560 per mfbm to US$1,119, US$1,159 and US$1,293 per mfbm, respectively, with the majority of these increases occurring early in the quarter.
• Strong Free Cash Flow Generation
o Interfor generated $378.8 million of cash flow from operations before changes in working capital, or $6.38 per share. This was partially offset by a $97.6 million investment in working capital, primarily related to higher trade receivables driven by lumber prices and seasonally higher log inventories in B.C.
o Net debt ended the quarter at $340.2 million, or 15.8% of invested capital, resulting in available liquidity of $483.3 million.
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