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spk01: Good day, and thank you for standing by. Welcome to the Acadian Timber Q4 2023 Analyst Conference Call-In Webcast. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that this conference is being recorded. I would now like to hand the conference over to your speaker today. Susan Wood, please go ahead.
spk10: Thank you, Operator. Good afternoon, everyone, and welcome to Acadian Timber's fourth quarter conference call. With me on the call today is Adam Schaparsky, Acadian's president and chief executive officer. Before discussing Acadian's results, I'll first remind everyone that in discussing our fourth quarter and full year financial and operating performance, the outlook for 2024, and responding to your questions, we may make forward-looking statements. These statements are subject to known and unknown risk, and future results may differ materially. For further information on our known risk factors, I encourage you to review our news release and MD&A, which are available on CDAR and on our website at AcadianTimber.com. I'll begin by outlining the financial and operational highlights for our fourth quarter ended December 31st, 2023. Adam will then comment on our results for the year and our outlook for 2024. Acadian experienced solid fourth quarter results as a result of improved contractor availability and increased volumes in New Brunswick. However, contractor availability remained a significant challenge in Maine and resulted in decreased volumes in that region. Overall, sales for the fourth quarter were $23.8 million, consistent with the prior year period. Sales volume, excluding biomass, increased 4% over the prior year. Weighted average selling price, excluding biomass, decreased 3% year over year, mainly due to decreased softwood saw log prices in Maine as a result of changes in product mix and decreased hardwood saw log prices in both regions caused by weak hardwood lumber markets. Overall pricing for softwood saw logs decreased 4% and hardwood saw log pricing decreased 12% as compared to the prior year period. Softwood pulpwood pricing increased 18% compared to the prior year period as a result of strong demand in New Brunswick, while hardwood pulpwood prices decreased 5% overall from the same period in the prior year when regional inventories were particularly low, driving increased pricing. Biomass pricing increased 4% compared to the fourth quarter of 2022. However, sales volume decreased 17% due to limited processing capacity combined with fiber availability as biomass represents a byproduct of our harvesting operations. Operating costs and expenses were $19.5 million during the fourth quarter compared to $19.8 million during the fourth quarter of 2022 as a result of lower weighted average variable costs. Weighted average variable costs excluding biomass decreased 3% due to lower hauling and fuel costs, partially offset by higher contractor rates compared to the prior year period. Adjusted EBITDA was $4.4 million during the fourth quarter compared to $4.1 million in the prior year period. An adjusted EBITDA margin for the quarter was 19% compared to 17% in the prior year period as a result of these lower variable costs. Our net income for the fourth quarter was $11.6 million compared to $22 million in the prior year period. The decrease in net income was largely due to the impact of lower gains on non-cash fair value adjustments in 2023 compared to 2022. Cadian generated $2.8 million of free cash flow and declared dividends of $5 million to our shareholders during the fourth quarter, or 29 cents per share. I'll now move into the fourth quarter results for our New Brunswick operations. Sales for our New Brunswick timberlands were $19.8 million compared to $18.6 million during the prior year period. Sales volume excluding biomass increased 10%, primarily attributable to increased pulpwood volumes resulting from increased market demand and contractor availability. With regards to softwood and hardwood saw logs, demand remained steady with similar sales volumes as compared to the prior year. Softwood saw log pricing increased 8% as compared to the prior year period. However, hardwood saw log pricing decreased 13% as a result of weakness in hardwood lumber markets. Increased regional demand and improved contractor availability drove a volume increase of 20% and 22% for softwood and hardwood pulpwood volumes, respectively, as compared to the fourth quarter of 2022. Pricing increased 26% for softwood pulpwood and remained steady for hardwood pulpwood. Operating costs and expenses were $14.9 million during the fourth quarter, consistent with the prior year period, with increased volumes offset by lower variable costs. Weighted average variable costs, excluding biomass, decreased 5%, reflecting lower hauling and fuel costs, partially offset by higher contractor rates compared to the prior year period. New Brunswick's adjusted EBITDA for the quarter was $4.9 million compared to $3.7 million in the prior year period. Adjusted EBITDA margin was 25%, compared to 20% in the prior year period. Switching over to Maine. Sales during the fourth quarter totaled $4 million compared to $5.2 million in the same period last year. Sales volume, excluding biomass, decreased 13%, reflecting continued limited contractor availability. Softwood and hardwood saw log volumes decreased by 16% and 9%, respectively, as compared to the prior year. Softwood pulpwood volumes were negligible in May due to the extended shutdown of a major softwood pulpwood customer. Hardwood pulpwood volumes increased 25% due to steady demand. The weighted average selling price, excluding biomass in US dollar terms, decreased 18% compared to the prior year due to a combination of changes in product mix and decreased prices due to unfavorable markets. Operating costs totaled $4.2 million in the quarter compared to $4.5 million during the same period last year as a result of lower harvesting activity offset by higher variable costs. Weighted average variable costs, excluding biomass, increased 5%, primarily as a result of higher contractor rates and longer hauling distances, partially offset by lower fuel costs. Adjusted EBITDA for the quarter was negative $0.1 million compared to $0.8 million during the prior year period, and adjusted EBITDA margin was negative 3% compared to 15% in the prior year period. With respect to Acadian's financial position at the end of the quarter, it remains strong, ending with a net liquidity position of $14.8 million, including a cash balance of $1.8 million. and our revolving credit facilities, which remain undrawn. As we enter our busiest season, we expect cash reserves to be replenished. With that, I'll turn the call over to Adam.
spk06: Thank you, Susan, and good afternoon, everyone. As Susan mentioned, I will first comment on our 2023 results and then move into our outlook for 2024. As always, Acadian remains committed to health and safety as our number one priority. We are very pleased with our results for 2023, which included only one recordable safety incident among employees, which was a minor slip and fall, and none among our contractors. As we have said before, we believe that emphasizing and achieving an excellent safety record is a leading indicator of success in the broader business. With respect to fiscal 2023, it was an operationally challenging year, particularly for our main operations. While weather conditions were generally favorable in New Brunswick, Maine experienced difficulties caused by weather at various times throughout the year. The first quarter brought unseasonably warm and wet weather, which prevented the ground from freezing, and excessive rainfall in the third quarter made for extremely muddy conditions, which continued into the fourth quarter. Similarly, while New Brunswick was able to make considerable progress increasing contractor availability and finish the year in an improved position in this regard, harvest volumes in Maine continued to be hindered. And although capacity increased as we exited the quarter, management remains focused on expanding our contractor base and decreasing our variable costs. As we have discussed previously, the favorable attributes of the Northeast region continues to provide stability on demand and pricing of our products. Sales were $93.5 million in 2023, compared to $90.5 million in the prior year. And our weighted average selling price, excluding biomass, increased 5%. Softwood lumber pricing returned to more typical historical ranges, and demand and pricing for softwood saw logs remained stable in the regions in which Acadian operates. Demand for softwood pulpwood continued with steady volumes and increased pricing over the prior year. Weakness in hardwood lumber markets put downward pressure on hardwood saw log prices, but demand for Acadian's hardwood saw logs remained stable. Decreased regional roundwood inventories early in the year led to increased volumes and pricing for hardwood pulpwood compared to the prior year. Variable costs remain at elevated levels due to inflationary pressures on harvesting and hauling rates. However, Acadian experienced an increase of only 2% compared to 2022 due to the continued efforts of the management team in controlling these costs. As I mentioned in Q3, we do not usually spend much time talking about our land sales. However, during 2023, we accumulated more than what has been experienced in recent years with total proceeds of $675,000 on the sale of 21 acres of land. We will continue to evaluate the land base in both New Brunswick and Maine, and although we do not expect it to become a significant generator of cash flows for the business in the short term, we do believe that we will be able to continue to unlock potential in the future. In 2023, the company's adjusted EBITDA totaled $20.6 million, compared to $18.2 million during 2022. and adjusted EBITDA margin was 22% compared to 20% in the prior year. We generated free cash flow of $15 million for 2023 compared to $12.2 million last year and declared dividends of $19.8 million to our shareholders. Turning to our carbon credit project, as we have previously noted, the first 770,000 carbon credits associated with this project were registered on the American Carbon Registry in June under the name A New Katahdin Forestry Project. Our focus is now on the marketing and sale of these credits, as well as the registration of future tranches. We completed our first sale at the end of December 2023, and while the volume sold was modest at 1,500 credits, the sale demonstrated solid pricing of just under $25 US per credit. The team is currently working on the second and third reporting periods, which is expected to produce approximately 215,000 and 144,000 credits respectively. We are in regular contact with our third-party developer and understand that the volumes of carbon credit sales have slowed somewhat over the last few quarters as a result of a number of factors. However, pricing for voluntary improved forest management credits appears to be stable as evidenced by our first sale. And as buyers gravitate toward quality, we remain optimistic with regards to the monetization of our credits. As included in our press release, since year end, we have entered into our first long-term agreement related to renewable energy. On February 6th, Acadian executed an agreement for the option to lease approximately 10,000 acres of its main timberlands for the purpose of the development and operation of a solar-powered electric generating facility. The agreement includes multiple leasing terms with escalating fees if progress is made on the project. The incremental cash flows attributable to the initial terms are modest. However, should the project reach the construction term, which will take several years, the incremental cash flows may become material to Acadia. The agreement is not only appealing from a business perspective. We are also excited to participate in a project that leverages our timberlands to produce cleaner and greener energy. As we look forward to 2024, North American interest rates remain elevated and near-term pressure on end-use markets persists. Inflation has begun to show signs of easing. The consensus forecast for U.S. housing starts is approximately 1.37 million starts in 2024 as compared to 1.4 million in 2023. We remain confident that the stability of the Northeastern forestry sector, combined with the long-term demand for new homes and repair and remodel activity, will support the demand for our products. Although labour markets remain tight, we continue to experience increased contractor availability in New Brunswick as we close out the year. Management will continue to focus on further increasing our harvesting capacity through 2024, most importantly in Maine, while at the same time continuing our focus on variable costs to improve our margins. In the short to medium term, inflation is expected to continue to impact our financial results through elevated contractor rates and fuel surcharges. offset by pricing of primary forest products like saw log and pulpwood the stable demand experience during 2023 is expected to continue into 2024 pricing for softwood saw timber is expected to remain stable but pricing for hardwood saw timber may be challenged reflecting weaknesses in hardwood lumber pricing however we have some seen some stability of pricing as we exited the quarter Demand for hardwood pulpwood is expected to be steady, and softwood pulpwood markets are expected to remain at the improved levels experienced in 2023 for the foreseeable future. In closing, as we enter our busiest season with favorable weather conditions, our priority will remain on actively working with our contractors and finding innovative solutions to meet the delivery demands of our customers. The solar land lease agreement demonstrates our focus on growth and through 2024, we will continue to explore and advance other opportunities to grow following a disciplined and prudent approach in both Maine and New Brunswick. With both the province of New Brunswick and NB Power declaring their support to increase renewable energy in the province, we are encouraged by potential opportunities that this might present. At Acadian, we have the team, structure, and balance sheet to successfully weather challenging operating and market conditions as they arise. And our incredible Timberlands provide a wealth of possibilities. With that, we are now available to take your questions. Operator?
spk01: Thank you, ladies and gentlemen. If you have a question or a comment at this time, please press star 1-1 on your telephone. If your question has been answered and you wish to move yourself from the queue, please press star 1-1 again. We will pause for a moment while we compile our Q&A roster. Our first question comes from Arianna Millen with CIBC Capital Markets. Your line is open.
spk09: Hello. Good afternoon. So my first question relates to your solar land lease agreement. Are you able to provide us with an estimate of the potential incremental cash flows if the project reaches the construction term and when you would expect these cash flows to be realized?
spk06: It's a bit early for us to do that, Arianna, at this point in time. but there's still a lot to be determined as far as the project is concerned. The first few phases of the project are going to take several years, as we mentioned, but as we progress through that time, we'll be sure to give you updates as we feel comfortable.
spk09: Okay, great. Thank you. And then, in your commentary, you had mentioned a few times that main harvests are still limited due to regional contractor capacity. Is there a reason why your contractor availability efforts have been more successful in New Brunswick than Maine so far?
spk06: Yeah, we look at that. We have been looking at it significantly. I think it's less about Maine and more about New Brunswick. The New Brunswick forest industry is really advanced on a lot of fronts. And most importantly, on the investment it's making into the forestry sector. We have a lot of contractors investing in new equipment, new contractors getting into the business because of that overarching, I would say, stability of the New Brunswick forestry sector. So I think it's more of a, you know, if you think about New Brunswick, it's, you know, on a very high level from a professional perspective. And in Maine, We're continuing to work through it, and hopefully we'll get some more traction here in 2024.
spk09: Okay, thanks. That's helpful. That's all I have for now, so I'll get back in the queue. Great, thank you.
spk01: One moment for our next question.
spk02: Our next question comes from Matthew McKellar with RBC.
spk01: Your line is open.
spk03: Hi, good afternoon. Thanks for taking my questions. First, are you able to disclose who the buyer was for the carbon credits he sold in the quarter, or at least give us a sense of the profile of the buyer? And then, is there any color that you're able to provide on that buyer's approach for procuring carbon credits? For example, if they're only in the market for the $1,500 they purchased from you, or if they maybe purchased a modest amount of credits from several different sellers?
spk06: We don't have much, Matthew, on the buyer. It was a small purchase. We don't expect it to be a large purchaser of credits. We're constantly working with the third-party developer and hoping to see more credits monetized here in the not-too-distant future.
spk03: Okay, thank you. Maybe just sticking with the carbon credits, now that you're at least through monetizing a small first batch, Just taking a broader kind of perspective on it, could you share any sort of key lessons that you've learned through undertaking this first project and maybe talk about how those lessons will influence your approach to developing any future projects you undertake?
spk06: Yeah, thanks. It's a great question. As we worked our way through the last two or three years, I think we went through a market that was sort of developing and continues to develop in some ways. And we went through labor shortages across North America, to be frank, but certainly in the sector. So I think there's something to be learned from as far as making sure you're well-planned and well-strategized to get ahead of impacts such as that. I think we've more recently over the last six to nine months certainly learned that The future is bright for these credits that we have, voluntary improved forest management credits. As we talked about before, the buyers are going to start gravitating to quality, and these projects are going to be viewed as quality into the future. So I think that's another lesson that we learned, is that this is going to be a market that's going to be around forever. volumes are probably going to increase as we move forward.
spk03: Great. Thanks for that. And last one for me, just saw you renewed your NCIB. Any change in how you're thinking about buybacks, particularly, I mean, given your significant shareholder intending to increase its participation in the drip and then potentially, you know, cashflow stepping up a bit with some carbon credit sales?
spk06: Yeah, we haven't. Obviously, we put the NCIB in place for a particular reason, especially as it relates to potential large influxes of cash. I would say there's no new thinking associated with it. It is there as a tool from a capital perspective, and we'll use it as we see fit, when we see fit.
spk03: Thanks. That's all for me. I'll turn it back.
spk06: Great. Thanks.
spk01: Again, ladies and gentlemen, if you have a question or a comment at this time, please press star 1-1 on your telephone. And I'm not showing any further questions at this time. I'd like to turn the call back over to Adam for any closing remarks.
spk06: Great. Thank you. On behalf of the board and management of Acadian, I would like to thank all of our shareholders for their ongoing support. Thank you. Stay safe. And we look forward to you joining us for our virtual annual general meeting and first quarter of 2024 conference call, both on May 8th. Goodbye.
spk01: Ladies and gentlemen, that concludes today's presentation. You may now disconnect and have a wonderful day. you Thank you. Thank you. Good day and thank you for standing by. Welcome to the Acadian Timber Q4 2023 Analyst Conference Call-In Webcast. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that this conference is being recorded. I would now like to hand the conference over to your speaker today. Susan Wood, please go ahead.
spk10: Thank you, operator. Good afternoon, everyone, and welcome to Acadian Timber's fourth quarter conference call. With me on the call today is Adam Schaparsky, Acadian's president and chief executive officer. Before discussing Acadian's results, I'll first remind everyone that in discussing our fourth quarter and full year financial and operating performance, the outlook for 2024, and responding to your questions, we may make forward-looking statements. These statements are subject to known and unknown risk, and future results may differ materially. For further information on our known risk factors, I encourage you to review our news release and MD&A, which are available on CDAR and on our website at AcadianTimber.com. I'll begin by outlining the financial and operational highlights for our fourth quarter ended December 31st, 2023. Adam will then comment on our results for the year and our outlook for 2024. Acadian experienced solid fourth quarter results as a result of improved contractor availability and increased volumes in New Brunswick. However, contractor availability remained a significant challenge in Maine and resulted in decreased volumes in that region. Overall, sales for the fourth quarter were $23.8 million, consistent with the prior year period. Sales volume, excluding biomass, increased 4% over the prior year. Weighted average selling price, excluding biomass, decreased 3% year over year, mainly due to decreased softwood saw log prices in Maine as a result of changes in product mix and decreased hardwood saw log prices in both regions caused by weak hardwood lumber markets. Overall pricing for softwood saw logs decreased 4% and hardwood saw log pricing decreased 12% as compared to the prior year period. Softwood pulpwood pricing increased 18% compared to the prior year period as a result of strong demand in New Brunswick, while hardwood pulpwood prices decreased 5% overall from the same period in the prior year when regional inventories were particularly low, driving increased pricing. Biomass pricing increased 4% compared to the fourth quarter of 2022. However, sales volume decreased 17%, due to limited processing capacity combined with fiber availability as biomass represents a byproduct of our harvesting operations. Operating costs and expenses were $19.5 million during the fourth quarter compared to $19.8 million during the fourth quarter of 2022 as a result of lower weighted average variable costs. Weighted average variable costs excluding biomass decreased 3% due to lower hauling and fuel costs, partially offset by higher contractor rates compared to the prior year period. Adjusted EBITDA was $4.4 million during the fourth quarter compared to $4.1 million in the prior year period. An adjusted EBITDA margin for the quarter was 19% compared to 17% in the prior year period as a result of these lower variable costs. Our net income for the fourth quarter was $11.6 million compared to $22 million in the prior year period. The decrease in net income was largely due to the impact of lower gains on non-cash fair value adjustments in 2023 compared to 2022. Cadian generated $2.8 million of free cash flow and declared dividends of $5 million to our shareholders during the fourth quarter, or 29 cents per share. I'll now move into the fourth quarter results for our New Brunswick operations. Sales for our New Brunswick timberlands were $19.8 million compared to $18.6 million during the prior year period. Sales volume excluding biomass increased 10%, primarily attributable to increased pulpwood volumes resulting from increased market demand and contractor availability. With regards to softwood and hardwood saw logs, demand remains steady with similar sales volumes as compared to the prior year. Softwood saw log pricing increased 8% as compared to the prior year period. However, hardwood saw log pricing decreased 13% as a result of weakness in hardwood lumber markets. Increased regional demand and improved contractor availability drove a volume increase of 20% and 22% for softwood and hardwood pulpwood volumes, respectively, as compared to the fourth quarter of 2022. Pricing increased 26% for softwood pulpwood and remained steady for hardwood pulpwood. Operating costs and expenses were $14.9 million during the fourth quarter, consistent with the prior year period, with increased volumes offset by lower variable costs. Weighted average variable costs, excluding biomass, decreased 5%, reflecting lower hauling and fuel costs, partially offset by higher contractor rates compared to the prior year period. New Brunswick's adjusted EBITDA for the quarter was $4.9 million compared to $3.7 million in the prior year period. Adjusted EBITDA margin was 25%, compared to 20% in the prior year period. Switching over to Maine. Sales during the fourth quarter totaled $4 million compared to $5.2 million in the same period last year. Sales volume, excluding biomass, decreased 13%, reflecting continued limited contractor availability. Softwood and hardwood saw log volumes decreased by 16% and 9%, respectively, as compared to the prior year. Softwood pulpwood volumes were negligible in May due to the extended shutdown of a major softwood pulpwood customer. Hardwood pulpwood volumes increased 25% due to steady demand. The weighted average selling price, excluding biomass in US dollar terms, decreased 18% compared to the prior year due to a combination of changes in product mix and decreased prices due to unfavorable markets. Operating costs totaled $4.2 million in the quarter compared to $4.5 million during the same period last year as a result of lower harvesting activity offset by higher variable costs. Weighted average variable costs, excluding biomass, increased 5%, primarily as a result of higher contractor rates and longer hauling distances, partially offset by lower fuel costs. Adjusted EBITDA for the quarter was negative $0.1 million compared to $0.8 million during the prior year period, and adjusted EBITDA margin was negative 3% compared to 15% in the prior year period. With respect to Acadian's financial position at the end of the quarter, it remains strong, ending with a net liquidity position of $14.8 million, including a cash balance of $1.8 million. and our revolving credit facilities, which remain undrawn. As we enter our busiest season, we expect cash reserves to be replenished. With that, I'll turn the call over to Adam.
spk06: Thank you, Susan, and good afternoon, everyone. As Susan mentioned, I will first comment on our 2023 results and then move into our outlook for 2024. As always, Acadian remains committed to health and safety as our number one priority. We are very pleased with our results for 2023, which included only one recordable safety incident among employees, which was a minor slip and fall, and none among our contractors. As we have said before, we believe that emphasizing and achieving an excellent safety record is a leading indicator of success in the broader business. With respect to fiscal 2023, it was an operationally challenging year, particularly for our main operations. While weather conditions were generally favorable in New Brunswick, Maine experienced difficulties caused by weather at various times throughout the year. The first quarter brought unseasonably warm and wet weather, which prevented the ground from freezing, and excessive rainfall in the third quarter made for extremely muddy conditions, which continued into the fourth quarter. Similarly, while New Brunswick was able to make considerable progress increasing contractor availability and finish the year in an improved position in this regard, harvest volumes in Maine continued to be hindered. And although capacity increased as we exited the quarter, management remains focused on expanding our contractor base and decreasing our variable costs. As we have discussed previously, the favorable attributes of the Northeast region continues to provide stability on demand and pricing of our products. Sales were $93.5 million in 2023, compared to $90.5 million in the prior year. And our weighted average selling price, excluding biomass, increased 5%. Softwood lumber pricing returned to more typical historical ranges, and demand and pricing for softwood saw logs remained stable in the regions in which Acadian operates. Demand for softwood pulpwood continued with steady volumes and increased pricing over the prior year. Weakness in hardwood lumber markets put downward pressure on hardwood saw log prices, but demand for Acadian's hardwood saw logs remained stable. Decreased regional roundwood inventories early in the year led to increased volumes and pricing for hardwood pulpwood compared to the prior year. Variable costs remain at elevated levels due to inflationary pressures on harvesting and hauling rates. However, Acadian experienced an increase of only 2% compared to 2022 due to the continued efforts of the management team in controlling these costs. As I mentioned in Q3, we do not usually spend much time talking about our land sales. However, during 2023, we accumulated more than what has been experienced in recent years, with total proceeds of $675,000 on the sale of 21 acres of land. We will continue to evaluate the land base in both New Brunswick and Maine, and although we do not expect it to become a significant generator of cash flows for the business in the short term, we do believe that we will be able to continue to unlock potential in the future. In 2023, the company's adjusted EBITDA totaled $20.6 million, compared to $18.2 million during 2022. and adjusted EBITDA margin was 22% compared to 20% in the prior year. We generated free cash flow of $15 million for 2023 compared to $12.2 million last year and declared dividends of $19.8 million to our shareholders. Turning to our carbon credit project, as we have previously noted, the first 770,000 carbon credits associated with this project were registered on the American Carbon Registry in June under the name A New Katahdin Forestry Project. Our focus is now on the marketing and sale of these credits, as well as the registration of future tranches. We completed our first sale at the end of December 2023, and while the volume sold was modest at 1,500 credits, the sale demonstrated solid pricing of just under $25 US per credit. The team is currently working on the second and third reporting periods, which is expected to produce approximately 215,000 and 144,000 credits respectively. We are in regular contact with our third party developer and understand that the volumes of carbon credit sales have slowed somewhat over the last few quarters as a result of a number of factors. However, pricing for voluntary improved forest management credits appears to be stable as evidenced by our first sale. And as buyers gravitate toward quality, we remain optimistic with regards to the monetization of our credits. As included in our press release, since year end, we have entered into our first long-term agreement related to renewable energy. On February 6th, Acadian executed an agreement for the option to lease approximately 10,000 acres of its main timberlands for the purpose of the development and operation of a solar-powered electric generating facility. The agreement includes multiple leasing terms with escalating fees if progress is made on the project. The incremental cash flows attributable to the initial terms are modest. However, should the project reach the construction term, which will take several years, the incremental cash flows may become material to Acadia. The agreement is not only appealing from a business perspective. We are also excited to participate in a project that leverages our timberlands to produce cleaner and greener energy. As we look forward to 2024, North American interest rates remain elevated and near-term pressure on end-use markets persists. Inflation has begun to show signs of easing. The consensus forecast for U.S. housing starts is approximately 1.37 million starts in 2024 as compared to 1.4 million in 2023. We remain confident that the stability of the Northeastern forestry sector combined with the long-term demand for new homes and repair and remodel activity will support the demand for our products. Although labour markets remain tight, we continue to experience increased contractor availability in New Brunswick as we close out the year. Management will continue to focus on further increasing our harvesting capacity through 2024, most importantly in Maine, while at the same time continuing our focus on variable costs to improve our margins. In the short to medium term, inflation is expected to continue to impact our financial results through elevated contractor rates and fuel surcharges. offset by pricing of primary forest products like saw log and pulpwood. The stable demand experience during 2023 is expected to continue into 2024. Pricing for softwood saw timber is expected to remain stable, but pricing for hardwood saw timber may be challenged, reflecting weaknesses in hardwood lumber pricing. However, we have seen some stability of pricing as we exited the quarter. Demand for hardwood pulpwood is expected to be steady, and softwood pulpwood markets are expected to remain at the improved levels experienced in 2023 for the foreseeable future. In closing, as we enter our busiest season with favorable weather conditions, our priority will remain on actively working with our contractors and finding innovative solutions to meet the delivery demands of our customers. The solar land lease agreement demonstrates our focus on growth and through 2024, we will continue to explore and advance other opportunities to grow following a disciplined and prudent approach in both Maine and New Brunswick. With both the province of New Brunswick and NB Power declaring their support to increase renewable energy in the province, we are encouraged by potential opportunities that this might present. At Acadian, we have the team, structure, and balance sheet to successfully weather challenging operating and market conditions as they arise. And our incredible timberlands provide a wealth of possibilities. With that, we are now available to take your questions. Operator?
spk01: Thank you, ladies and gentlemen. If you have a question or a comment at this time, please press star 1-1 on your telephone. If your question has been answered and you wish to move yourself from the queue, please press star 1-1 again. We will pause for a moment while we compile our Q&A roster. Our first question comes from Arianna Millen with CIBC Capital Markets. Your line is open.
spk09: Hello. Good afternoon. So my first question relates to your solar land lease agreement. Are you able to provide us with an estimate of the potential incremental cash flows if the project reaches the construction term and when you would expect these cash flows to be realized?
spk06: It's a bit early for us to do that, Arianna, at this point in time. There's still a lot to be determined as far as the project is concerned. The first few phases of the project are going to take several years, as we mentioned, but as we progress through that time, we'll be sure to give you updates as we feel comfortable.
spk09: Okay, great. Thank you. And then, in your commentary, you had mentioned a few times that main harvests are still limited due to regional contractor capacity. Is there a reason why your contractor availability efforts have been more successful in New Brunswick than Maine so far?
spk06: We look at that. We have been looking at it significantly. I think it's less about Maine and more about New Brunswick. The New Brunswick forest industry is really advanced on a lot of fronts. And most importantly, on the investment it's making into the forestry sector. We have a lot of contractors investing in new equipment, new contractors getting into the business because of that overarching, I would say, stability of the New Brunswick forestry sector. So I think it's more of a, you know, if you think about New Brunswick, it's, you know, on a very high level from a professional perspective. And in Maine, We're continuing to work through it, and hopefully we'll get some more traction here in 2024.
spk09: Okay, thanks. That's helpful. That's all I have for now, so I'll get back in the queue. Great, thank you.
spk01: One moment for our next question.
spk02: Our next question comes from Matthew McKellar with RBC.
spk01: Your line is open.
spk03: Hi, good afternoon. Thanks for taking my questions. First, are you able to disclose who the buyer was for the carbon credits he sold in the quarter, or at least give us a sense of the profile of the buyer? And then, is there any color that you're able to provide on that buyer's approach for procuring carbon credits? For example, if they're only in the market for the $1,500 they purchased from you, or if they maybe purchased a modest amount of credits from several different sellers?
spk06: We don't have much, Matthew, on the buyer. It was a small purchase. We don't expect it to be a large purchaser of credits. We're constantly working with the third-party developer and hoping to see more credits monetized here in the not-too-distant future.
spk03: Okay, thank you. Maybe just sticking with the carbon credits, now that you're at least through monetizing a small first batch, Just taking a broader kind of perspective on it, could you share any sort of key lessons that you've learned through undertaking this first project and maybe talk about how those lessons will influence your approach to developing any future projects you undertake?
spk06: Yeah, thanks. It's a great question. As we worked our way through the last two or three years, I think we went through a market that was sort of developing and continues to develop in some ways. And we went through labor shortages across North America, to be frank, but certainly in the sector. So I think there's something to be learned from as far as making sure you're well-planned and well-strategized to get ahead of impacts such as that. I think we've more recently over the last six to nine months certainly learned that The future is bright for these credits that we have, voluntary improved forest management credits. As we talked about before, the buyers are going to start gravitating to quality, and these projects are going to be viewed as quality into the future. I think that's another lesson that we learned, is that this is going to be a market that's going to be around forever. volumes are probably going to increase as we move forward.
spk03: Great. Thanks for that. And last one for me. Just saw you renewed your NCIB. Any change in how you're thinking about buybacks, particularly, I mean, given your significant shareholder intending to increase its participation in the drip and then potentially, you know, cash flow stepping up a bit with some carbon credit sales?
spk06: Yeah, we haven't. Obviously, we put the NCIB in place for a particular reason, especially as it relates to potential large influxes of cash. I would say there's no new thinking associated with it. It is there as a tool from a capital perspective, and we'll use it as we see fit, when we see fit.
spk03: Thanks. That's all for me. I'll turn it back.
spk06: Great. Thanks.
spk01: Again, ladies and gentlemen, if you have a question or a comment at this time, please press star 1-1 on your telephone.
spk02: And I'm not showing any further questions at this time.
spk01: I'd like to turn the call back over to Adam for any closing remarks.
spk06: Great. Thank you. On behalf of the board and management of Acadian, I would like to thank all of our shareholders for their ongoing support. Thank you. Stay safe. And we look forward to you joining us for our virtual annual general meeting and first quarter of 2024 conference call, both on May 8th. Goodbye.
spk01: Ladies and gentlemen, this concludes today's presentation. You may now disconnect and have a wonderful day.
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