Interfor Reports Q2’19 Results

8/8/2019, 11:11 PM (Source: GlobeNewswire)



EBITDA1 of $13 million on Sales of $481 million 
Net Debt to Invested Capital1 of 18%; Liquidity of $392 million

VANCOUVER, British Columbia, Aug. 08, 2019 (GLOBE NEWSWIRE) -- INTERFOR CORPORATION (“Interfor” or the “Company”) (TSX: IFP) Interfor recorded a net loss in Q2’19 of $11.2 million, or $0.17 per share, compared to a net loss of $15.3 million, or $0.23 per share in Q1’19 and net earnings of $63.7 million, or $0.91 per share in Q2’18.  Adjusted net loss in Q2’19 was $16.2 million compared to an Adjusted net loss of $12.7 million in Q1’19 and Adjusted net earnings of $68.9 million in Q2’18.

Adjusted EBITDA was $12.6 million on sales of $481.3 million in Q2’19 versus $16.3 million on sales of $451.2 million in Q1’19. 

Notable items in the quarter included:

  • Lower Lumber Prices

    • The key benchmark prices decreased quarter-over-sequential-quarter with the SYP Composite, Western SPF Composite and KD H-F Stud 2x4 9’ falling by US$23, US$36 and US$19 per mfbm, respectively.  Interfor’s average lumber selling price dropped $10 from Q1’19 to $603 per mfbm.    

  • Higher Shipments and Reduced Inventories

    • Total lumber production was 647 million board feet, consistent with the prior quarter.  Production in the U.S. South increased slightly to 320 million board feet from 316 million board feet in the preceding quarter as capital project-related downtime at the Monticello sawmill was more than offset by higher operating rates at most mills in the region.  The B.C. and U.S. Northwest regions accounted for 187 million board feet and 140 million board feet, respectively, compared to 195 million board feet and 135 million board feet in Q1’19.  Production was influenced by the curtailments taken in the B.C. Interior in response to weak lumber prices and continuing high log costs.

    • Total lumber shipments were 674 million board feet, including agency and wholesale volumes, or 53 million board feet higher than Q1’19.

    • Lumber inventories at June 30, 2019 were 211 million board feet, down from 229 million board feet at March 31, 2019.

    • Interfor’s operating costs were negatively impacted by an increase in its net realizable value provision for log and lumber inventories of $10.3 million in Q2’19. 

  • Continued Strong Financial Position

    • Net debt ended the quarter at $198.2 million, or 17.9% of invested capital, resulting in available liquidity of $392.5 million.

    • The Company generated $9.9 million of cash flow from operations before changes in working capital, or $0.15 per share. 

    • Capital investments of $64.6 million in Q2’19 included $51.4 million primarily on U.S. South focused high-return discretionary projects, with the remainder related to maintenance capital and woodlands projects.

    • On June 28, 2019, the Company received compensation of $7.7 million from the Government of B.C. as settlement for the 2017 cancellation of two timber licences on the B.C. Coast, which is excluded from Adjusted EBITDA.

  • Softwood Lumber Duties

    • Interfor expensed $10.8 million of duties in the quarter, representing the full amount of countervailing (“CV”) and anti-dumping (“AD”) duties incurred on its Canadian shipments of softwood lumber into the U.S. at a combined rate of 20.23%.

    • Cumulative duties of US$76.5 million have been paid by Interfor since the inception of the current trade dispute and are held in trust by the U.S.  Except for US$3.3 million in respect of overpayments arising from duty rate adjustments, Interfor has recorded the duty deposits as an expense.

1 Refer to Adjusted EBITDA and Net debt to invested capital in the Non-GAAP Measures section

Strategic Capital Plan Update

  • Interfor continues to make progress on its previously announced Phase I and II strategic capital projects in the U.S. South. 

  • The Phase I projects at the Meldrim, Georgia and Monticello, Arkansas sawmills were completed before quarter-end and are now in the ramp-up phase.  Total project costs are expected to be US$70.1 million versus the original budget of US$62.5 million.  The spending overage was due to vendor delays, additional steel costs and labour issues with contractors.  As of June 30, 2019, US$67.7 million has been capitalized.

  • The Phase II projects at the Thomaston and Eatonton sawmills in Georgia and the Georgetown sawmill in South Carolina are on track for completion in various stages over the period of 2019 to 2022.  As of June 30, 2019, US$32.0 million has been capitalized and the projects remain on budget.

Acquisition of B.C. Interior Cutting Rights from Canfor

On June 3, 2019, Interfor entered into a purchase agreement with Canadian Forest Products Ltd.  to acquire two replaceable timber licences with annual cutting rights of approximately 349,000 cubic metres, an interest in a non-replaceable forest licence and other related forestry assets in the Adams Lake area of the B.C. Interior (the “Forestry Assets”), and assume certain liabilities relating to the Forestry Assets.  The cash purchase price of $60 million will be financed from Interfor’s available cash balance and/or borrowings under its existing bank credit facility.

The transaction is subject to various consents, including that by the Government of B.C. and is targeted to close in the third quarter, 2019.

By acquiring the Forestry Assets, Interfor will solidify its long-term log supply at its Adams Lake sawmill, supporting the continuation of a two-shift operating configuration at the mill in the face of declining allowable annual cuts in the region.  The Forestry Assets are located adjacent to Adams Lake’s woodlands operations, with log production flowing logically to the sawmill from a transportation and logistics standpoint.

Upon closing the transaction, Interfor will pursue a follow-on, high return investment opportunity by adding a new dry kiln to support additional value-added processing at the Adams Lake mill.

Interfor Appoints New Director

At its meeting today, the Interfor Board appointed Christopher Griffin of Chicago, Illinois as a director of the Company.  Mr. Griffin, who is 57, is the President & CEO of USG Corporation, a global manufacturer of gypsum wallboard and other building products.  Mr. Griffin’s appointment increases the number of directors from ten to eleven and was made in line with the Company’s Board succession plan.

Financial and Operating Highlights 1 

  For the 3 months ended For the 6 months ended
  Jun. 30Jun. 30Mar. 31 Jun. 30Jun. 30 
 Unit201920182019 20192018 
   (restated)2   (restated)2 
Financial Highlights3        
Total sales$MM481.3619.9451.2 932.51,147.5 
Lumber$MM406.9527.0380.5 787.4972.9 
Logs, residual products and other$MM74.492.970.7 145.1174.6 
Operating earnings (loss)$MM(18.2)86.4(16.8) (35.0)133.0 
Net earnings (loss)$MM(11.2)63.7(15.3) (26.5)96.4 
Net earnings (loss) per share, basic$/share(0.17)0.91(0.23) (0.39)1.38 
Adjusted net earnings (loss)4$MM(16.2)68.9(12.7) (28.9)105.4 
Adjusted net earnings (loss) per share, basic4$/share(0.24)0.98(0.19) (0.43)1.50 
Operating cash flow per share (before working  capital changes)4$/share0.151.800.25 0.402.92 
Adjusted EBITDA4$MM12.6126.716.3 28.9210.2 
Adjusted EBITDA margin4%2.6%20.4%3.6% 3.1%18.3% 
Total assets$MM1,459.81,573.31,491.5 1,459.81,573.3 
Total debt$MM261.7263.4267.3 261.7263.4 
Net debt4$MM198.234.4172.7 198.234.4 
Net debt to invested capital4%17.9%3.4%15.6% 17.9%3.4% 
Annualized return on invested capital4%4.6%49.9%6.1% 5.4%42.6% 
Operating Highlights        
Lumber productionmillion fbm647688646 1,2931,354 
Total lumber salesmillion fbm674700621 1,2951,348 
Lumber sales - Interfor producedmillion fbm664689610 1,2741,324 
Lumber sales - wholesale and commissionmillion fbm101111 2124 
Lumber - average selling price5$/thousand fbm603753613 608722 
Average USD/CAD exchange rate61 USD in CAD1.33771.29111.3295 1.33361.2781 
Closing USD/CAD exchange rate61 USD in CAD1.30871.31681.3363 1.30871.3168 


  1. Figures in this table may not equal or sum to figures presented elsewhere due to rounding.
  2. Financial information has been restated for implementation of IFRS 16, Leases.
  3. Financial information presented for interim periods in this release is prepared in accordance with IFRS and is unaudited.
  4. Refer to the Non-GAAP Measures section of this release for definitions and reconciliations of these measures to figures reported in the Company’s consolidated financial statements. 
  5. Gross sales before duties.
  6. Based on Bank of Canada foreign exchange rates.


Balance Sheet

Interfor’s net debt at June 30, 2019 was $198.2 million, or 17.9% of invested capital, representing an increase of $163.8 million from the level at June 30, 2018 and an increase of $134.4 million from December 31, 2018.  These increases primarily reflect funding of capital projects, share repurchases and short term incentive compensation payments.

Net debt was negatively impacted by a weaker Canadian Dollar against the U.S. Dollar as all debt held was denominated in U.S. Dollars; this was partially hedged by the Company’s U.S. Dollar cash balances. 

 For the 3 months ended
Jun. 30,
 For the 6 months ended
Jun. 30,

Thousands of Dollars2019
Net debt      
Net debt, period opening$172,746$127,064 $63,825$119,300 
Net drawing (repayment) on credit facilities-- 750(1) 
Impact on U.S. Dollar denominated debt from (strengthening) weakening CAD(5,520)5,480 (11,850)12,461 
Decrease (increase) in cash and cash equivalents30,028(95,011) 98,918(92,502) 
Decrease in marketable securities-- 41,766- 
Impact on U.S. Dollar denominated cash and cash equivalents and marketable securities from strengthening (weakening) CAD955(3,118) 4,800(4,843) 
Net debt, period ending, CAD$198,209$34,415 $198,209$34,415 

On March 28, 2019, the Company completed a modernization of its credit facilities.  The new facility replaced the U.S. Operating Line, Canadian Operating Line, and Revolving Term Line with one consolidated facility.  The new facility increased credit availability to $350 million and matures in March 2024. 

As at June 30, 2019, the Company had net working capital of $253.4 million and available liquidity of $392.5 million, including cash and borrowing capacity on its term line facility. 

These resources, in addition to cash generated from operations, will be used to support working capital requirements, debt servicing commitments and capital expenditures.  We believe that Interfor will have enough liquidity to fund operating and capital requirements for the foreseeable future. 

Capital Resources

The following table summarizes Interfor’s credit facilities and availability as of June 30, 2019:

Thousands of Canadian DollarsLineNotesTotal 
Available line of credit$350,000$261,740$611,740 
Maximum borrowing available$350,000$261,740$611,740 
Drawings- 261,740261,740 
Outstanding letters of credit included in line utilization21,053 -21,053 
Unused portion of facility$328,947$-328,947 
Cash and cash equivalents  63,531 
Available liquidity at June 30, 2019  $392,478 

As of June 30, 2019, the Company had commitments for capital expenditures totaling $119.1 million for both maintenance and discretionary capital projects. 

Non-GAAP Measures

This release makes reference to the following non-GAAP measures: Adjusted net earnings (loss), Adjusted net earnings (loss) per share, EBITDA, Adjusted EBITDA, Net debt to invested capital and Operating cash flow per share (before working capital changes) which are used by the Company and certain investors to evaluate operating performance and financial position.  These non-GAAP measures do not have any standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other issuers. 

The following table provides a reconciliation of these non-GAAP measures to figures as reported in the Company’s audited consolidated financial statements (unaudited for interim periods) prepared in accordance with IFRS:

 For the 3 months ended For the 6 months ended
 Jun. 30Jun. 30Mar. 31 Jun. 30Jun. 30 
Thousands of Canadian Dollars except number of shares and per share amounts201920182019 20192018 
  (restated)¹   (restated)¹ 
Adjusted Net Earnings (Loss)        
Net earnings (loss)$(11,159)$63,732$(15,302) $(26,461)$96,397 
Capital asset write-downs and restructuring costs874,6691,665 1,7524,905 
Other foreign exchange loss (gain)321(1,880)(340) (19)(1,991) 
Long term incentive compensation expense (recovery)(851)3,9961,983 1,1328,854 
Other (income) expense(6,487)80164 (6,323)258 
Post closure wind-down costs and losses--- -4 
Income tax effect of above adjustments1,866(1,701)(875) 991(3,075) 
Adjusted net earnings (loss)$(16,223)$68,896$(12,705) $(28,928)$105,352 
Weighted average number of shares - basic ('000)67,252 70,038 67,348  67,300 70,036  
Adjusted net earnings (loss) per share$(0.24)$0.98$(0.19) $(0.43)$1.50 
Adjusted EBITDA       
Net earnings (loss)$(11,159)$63,732$(15,302) $(26,461)$96,397 
Depreciation of plant and equipment19,41020,78119,722 39,13240,802 
Depletion and amortization of timber, roads and other12,20110,8549,737 21,93822,618 
Capital asset write-downs and restructuring costs874,6691,665 1,7524,905 
Finance costs3,3243,3034,176 7,5006,714 
Other foreign exchange loss (gain)321(1,880)(340) (19)(1,991) 
Income tax expense (recovery)(4,196)21,150(5,508) (9,704)31,617 
EBITDA19,988122,60914,150 34,138201,062 
Long term incentive compensation expense (recovery)(851)3,9961,983 1,1328,854 
Other (income) expense(6,487)80164 (6,323)258 
Post closure wind-down costs and losses--- -4 
Adjusted EBITDA$12,650$126,685$16,297 $28,947$210,178 
Sales$481,345$619,893$451,163 $932,508$1,147,537 
Adjusted EBITDA margin2.6%20.4%3.6% 3.1%18.3% 
Net debt to invested capital       
Net debt       
Total debt$261,740$263,360$267,260 $261,740$263,360 
Cash and cash equivalents(63,531)(228,945)(94,514) (63,531)(228,945) 
Total net debt$198,209$34,415$172,746 $198,209$34,415 
Invested capital       
Net debt$198,209$34,415$172,746 $198,209$34,415 
Shareholders' equity911,409972,281933,509 911,409972,281 
Total invested capital$1,109,618$1,006,696$1,106,255 $1,109,618$1,006,696 
Net debt to invested capital217.9%3.4%15.6% 17.9%3.4% 
Operating cash flow per share (before working capital changes)       
Cash (used in) provided by operating activities$32,302$136,724$(58,350) $(26,048)$157,797 
Cash used in (generated from) operating working capital(22,443)(10,414)75,435 52,99246,636 
Operating cash flow (before working capital changes)$9,859$126,310$17,085 $26,944$204,433 
Weighted average number of shares - basic ('000)67,252 70,038 67,348  67,300 70,036  
Operating cash flow per share (before working capital changes)$0.15$1.80$0.25 $0.40$2.92 
Annualized return on invested capital       
Adjusted EBITDA$12,650$126,685$16,297 $28,947$210,178 
Invested capital, beginning of period$1,106,255$1,023,279$1,032,591 $1,032,591$968,852 
Invested capital, end of period1,109,6181,006,6961,106,255 1,109,6181,006,696 
Average invested capital$1,107,937$1,014,988$1,069,423 $1,071,105$987,774 
Adjusted EBITDA divided by average invested capital1.1%12.5%1.5% 2.7%21.3% 
Annualization factor4.04.04.0 2.02.0 
Annualized return on invested capital4.6%49.9%6.1% 5.4%42.6% 


  1. Financial information has been restated for implementation of IFRS 16, Leases.
  2. Net debt to invested capital as of the period end.

For the three and six months ended June 30, 2019 and 2018 (unaudited)
(thousands of Canadian Dollars except earnings per share)Three MonthsThree MonthsSix MonthsSix Months 
  Jun. 30, 2019Jun. 30, 2018Jun. 30, 2019Jun. 30, 2018 
   (restated)¹ (restated)¹ 
Costs and expenses:     
 Selling and administration9,80813,70620,37327,535 
 Long term incentive compensation expense (recovery)(851)3,9961,1328,854 
 U.S. countervailing and anti-dumping duty deposits10,84414,82721,96227,756 
 Depreciation of plant and equipment19,41020,78139,13240,802 
 Depletion and amortization of timber, roads and other12,20110,85421,93822,618 
Operating earnings (loss) before restructuring costs(18,110)91,054(33,255)137,900 
Capital asset write-downs and restructuring costs874,6691,7524,905 
Operating earnings (loss)(18,197)86,385(35,007)132,995 
Finance costs(3,324)(3,303) (7,500)(6,714) 
Other foreign exchange gain (loss)(321)1,880191,991 
Other income (expense)6,487(80)6,323 (258) 
Earnings (loss) before income taxes(15,355)84,882(36,165)128,014 
Income tax expense (recovery):     
Net earnings (loss)$(11,159)$63,732$(26,461)$96,397 
Net earnings (loss) per share     

For the three and six months ended June 30, 2019 and 2018 (unaudited)
(thousands of Canadian Dollars)Three MonthsThree MonthsSix MonthsSix Months 
  Jun. 30, 2019Jun. 30, 2018Jun. 30, 2019Jun. 30, 2018 
  (restated)¹ (restated)¹ 
Net earnings (loss)
$(11,159)$63,732 $(26,461)$96,397 
Other comprehensive income (loss):     
Items that will not be recycled to Net earnings (loss):     
 Defined benefit plan actuarial gain (loss), net of tax(439)1,004133
Items that are or may be recycled to Net earnings (loss):     
 Foreign currency translation differences for     
 foreign operations, net of tax(10,728)11,121(23,601)23,954 
Total other comprehensive income (loss), net of tax(11,167)12,125(23,468)25,843 
Comprehensive income (loss)$(22,326)$75,857$(49,929)$122,240 


  1. Financial information has been restated for implementation of IFRS 16, Leases.
For the three and six months ended June 30, 2019 and 2018 (unaudited)
(thousands of Canadian Dollars)Three MonthsThree MonthsSix MonthsSix Months 
  Jun. 30, 2019Jun. 30, 2018Jun. 30, 2019Jun. 30, 2018 
  (restated)¹ (restated)¹ 
Cash provided by (used in):     
Operating activities:     
 Net earnings (loss)$(11,159)$63,732$(26,461)$96,397 
 Items not involving cash:     
  Depreciation of plant and equipment19,41020,78139,13240,802 
  Depletion and amortization of timber, roads and other12,20110,85421,93822,618 
  Income tax expense (recovery)(4,196)21,150(9,704)31,617 
  Finance costs3,3243,3037,5006,714 
  Other assets304(122)321(417) 
  Reforestation liability(3,250)(862)(743)1,427 
  Provisions and other liabilities(801)2,496(1,004)(320) 
  Stock options209209317346 
  Write-down of plant, equipment and intangibles884,6451,8114,864 
  Unrealized foreign exchange loss21644160127 
  Other expense (income)(6,487)80(6,323)258 
 Cash generated from (used in) operating working capital:     
  Trade accounts receivable and other(5,873)(13,222)(20,448)(23,970) 
  Trade accounts payable and provisions13,86221,079(16,662)13,240 
  Income taxes paid(278)(1,151)(575)(1,322) 
Investing activities:     
 Additions to property, plant and equipment(58,904)(15,126)(94,830)(27,165) 
 Additions to roads and bridges(5,661)(8,086)(13,505)(14,168) 
 Additions to timber licences and other intangible assets(20)(63)(72)(50) 
 Proceeds on disposal of property, plant and equipment and other8,032768,140185 
 Net proceeds from (additions to) marketable securities,     
 deposits and other assets(11)(13,077)46,760(13,579) 
Financing activities:     
 Issuance of share capital, net of expenses17-80143 
 Share repurchases--(7,825)- 
 Interest payments(2,837)(2,799)(5,417)(5,832) 
 Lease liability payments(2,779)(2,636)(5,765)(4,825) 
 Debt refinancing costs(172)(2)(1,191)(3) 
 Change in operating line components of long-term debt5-5(1) 
 Additions to long term debt--197,925- 
 Repayments of long term debt--(197,175)- 
Foreign exchange gain (loss) on cash and     
 cash equivalents held in a foreign currency(955)3,118(3,703)4,843 
Increase (decrease) in cash (30,983)98,129(102,621)97,345 
Cash and cash equivalents, beginning of period94,514130,816166,152131,600 
Cash and cash equivalents, end of period$63,531$228,945$63,531$228,945 


  1. Financial information has been restated for implementation of IFRS 16, Leases.

June 30, 2019, December 31, 2018 and January 1, 2018 (unaudited)
(thousands of Canadian Dollars)    
 Jun. 30, 2019Dec. 31, 2018Jan. 1, 2018 
   (restated)¹ (restated)¹ 
Current assets:    
 Cash and cash equivalents$63,531$166,152$131,600 
 Marketable securities-42,863- 
 Trade accounts receivable and other108,06690,384112,470 
 Income taxes receivable3,0133,0081,289 
Employee future benefits820303502 
Deposits and other assets10,68516,8426,404 
Right of use assets36,76037,77838,600 
Property, plant and equipment752,194723,773669,165 
Roads and bridges30,15429,82924,092 
Timber licences61,85164,15366,589 
Other intangible assets4,0475,28814,170 
Deferred income taxes704133253 
Liabilities and Shareholders’ Equity    
Current liabilities:    
 Trade accounts payable and provisions$130,983$154,869$152,355 
 Reforestation liability14,58013,94712,873 
 Lease liabilities10,50110,1588,019 
 Income taxes payable 292356224 
Reforestation liability27,75528,23527,535 
Lease liabilities32,26833,95436,165 
Long term debt261,740272,840250,900 
Employee future benefits8,9888,6878,249 
Provisions and other liabilities15,69816,42125,808 
Deferred income taxes45,58957,08317,877 
 Share capital533,563537,534555,388 
 Contributed surplus4,1333,8518,582 
 Translation reserve60,79284,39340,733 
 Retained earnings312,921342,988244,849 


  1. Financial information has been restated for implementation of IFRS 16, Leases.

Approved on behalf of the Board:
L. Sauder”                                                        “Thomas V. Milroy
Director                                                             Director


This release contains forward-looking information about the Company’s business outlook, objectives, plans, strategic priorities and other information that is not historical fact.  A statement contains forward-looking information when the Company uses what it knows and expects today, to make a statement about the future.  Generally, statements containing forward-looking information can be identified by the use of words such as: believe, expect, intend, forecast, plan, target, budget, outlook, opportunity, risk, strategy or variations or comparable language, or statements that certain actions, events or results may, could, would, should, might, or will occur or not occur.  Readers are cautioned that actual results may vary from the forward-looking information in this release, and undue reliance should not be placed on such forward-looking information.  Risk factors that could cause actual results to differ materially from the forward-looking information in this release are described in Interfor’s annual Management’s Discussion & Analysis under the heading “Risks and Uncertainties”, which is available on and under Interfor’s profile on  Material factors and assumptions used to develop the forward-looking information in this release include assumptions regarding selling prices for lumber, logs and wood chips; the Company’s ability to compete on a global basis; the availability and cost of log supply; the effects of natural or man-made disasters; currency exchange rates; changes in government regulations; the availability of the Company’s allowable annual cut (“AAC”); claims by and treaty settlements with Indigenous peoples; the Company’s ability to export its products; the softwood lumber dispute between Canada and the U.S.; stumpage fees payable to the Province of British Columbia; environmental impacts of the Company’s operations; labour disruptions; and the efficacy of information systems security.  Unless otherwise indicated, the forward-looking information in this release is based on the Company’s expectations at the date of this release.  Interfor undertakes no obligation to update such forward-looking information, except as required by law.


Interfor is a growth-oriented lumber company with operations in Canada and the United States.  The Company has annual production capacity of approximately 3.1 billion board feet and offers one of the most diverse lines of lumber products to customers around the world.  For more information about Interfor, visit our website at

The Company’s unaudited consolidated financial statements and Management’s Discussion and Analysis for Q2’19 are available at and

There will be a conference call on Friday, August 9, 2019 at 8:00 a.m. (Pacific Time) hosted by INTERFOR CORPORATION for the purpose of reviewing the Company’s release of its second quarter 2019 financial results.

The dial-in number is 1-833-297-9919.  The conference call will also be recorded for those unable to join in for the live discussion and will be available until September 7, 2019.  The number to call is
1-855-859-2056, Passcode 7768927.

For further information:
Martin L. Juravsky, Senior Vice President and Chief Financial Officer
(604) 689-6873

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