Acadian Timber Corp.

Ladies and gentlemen, thank you for standing by. Welcome to the third quarter 2026 analyst conference call and 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 this session, you would need to press star 1 1 on your telephone, and 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 today's conference is being recorded. I would like now to turn the conference over to Susan Wood, Chief Financial Officer. Please go ahead.

Thank you, operator. Good afternoon, everyone, and welcome to Acadian Timber's third quarter conference call. With me on the call today is Malcolm Cockwell, Acadian's Chair and Interim President and Chief Executive Officer. Before discussing Acadian's results, I will first remind everyone that in discussing our third quarter financial and operating performance, the outlook for the remainder of 2026 and into 2027, and responding to your questions, we may make forward-looking statements. These statements are subject to known and unknown risks 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 Cedar Plus and on our website at AcadianTimber.com. I'll begin by outlining the financial and operational highlights for our third quarter ended September 26, 2026. Then Malcolm will review the performance of our main operations and share our outlook for the business. Results for the third quarter reflect improvements at our internal harvesting operations in Maine and increased pricing for our products. partially offset by lower sales volumes in New Brunswick where weak softwood pulpwood demand and elevated customer inventories impacted deliveries. Our performance in Maine improved significantly as compared to Q3 2025. Restructuring of our internal harvesting operations that began in Q2 resulted in more efficient and productive operations and Maine delivered positive adjusted EBITDA for the quarter. For Q3 2026, Akadian generated $5 million of adjusted EBITDA and $4.4 million of net income compared to $3.5 million of adjusted EBITDA and $2.9 million of net income in the same period last year. On a per share basis, net income was $0.23 compared to $0.16 in the same quarter last year. Revenue in Q3 2026 was $24 million compared to $23 million in Q3 2025. Timber sales were relatively flat as a 17% increase in the weighted average selling price driven by stronger end-use markets and higher fuel surcharges offset 14% lower sales volumes, both excluding biomass. Timber services revenue increased $800,000 reflecting increased activity for neighboring landowners in Maine. Operating costs and expenses increased $200,000 from Q3 2025 as increased cost of sales per cubic meter in New Brunswick, higher land management costs and higher silviculture spending were partially offset by lower total sales volumes and lower cost of sales per cubic meter in Maine. that income for the quarter reflected higher operating income, higher non-cash fair value adjustments, and higher gains on the sale of timberlands relative to Q3 2025. These impacts were partially offset by higher income tax expense. From a segment perspective, New Brunswick freehold sales volumes excluding biomass decreased 21% as compared to Q3 2025, primarily reflecting lower softwood sales volumes due to elevated customer roundwood inventories and abundant sawmill residuals in the region, partially offset by higher hardwood sales volumes. The impact of lower sales volumes was largely offset by an increase in the weighted average selling price, excluding biomass, of 19%, driven by stronger softwood lumber markets and higher fuel surcharges. Variable costs per cubic meter were 16% higher due to higher fuel adjustment costs. Total sales were $19.4 million compared to $20.5 million in Q3 2025 and adjusted EBITDA was $3.9 million compared to $4.4 million. In Maine, freehold sales volumes excluding biomass increased 54% as a result of operational improvements within our internal harvesting operations. The weighted average selling price excluding biomass increased 2% in U.S. dollar terms due to a favorable customer mix and higher fuel surcharges, partially offset by a higher proportion of roadside sales as compared to Q3 2025. Cost of sales per cubic meter decreased 39% due to reduced fixed costs and operational efficiencies. Timber services and other activity increased $800,000, and a sale of several non-core land parcels led to a gain on sale of timberland of $800,000 as compared to no land sales in Q3 2025. Total sales were $4.6 million compared to $2.5 million in Q3 2025 and adjusted EBITDA was $1.3 million compared to negative $500,000 last year. Turning to liquidity, the company ended the quarter with net liquidity of $16.4 million including cash and available credit capacity, net of required minimum balances related to long-term debt. A portion of our long-term debt, totaling $45.3 million, is scheduled to mature in March of 2027. It is our intention to refinance the debt prior to the maturity date. With that, I'll now turn the call over to Malcolm.

Thank you, Susan, and good afternoon, everyone. Similar to the last few calls, I will start by spending a few minutes on our business in Maine, where the changes that we made earlier this year are showing in our results. After that, I will share our outlook as we look ahead to the fourth quarter and into 2027. And I will then close by sharing our perspective on several recent announcements about the forestry sector in our region. With respect to our business in Maine, As a reminder, we brought harvesting in-house in early 2025 to address shrinking regional harvesting and trucking capacity, rising costs and a forest profile better suited to modern cut-to-length equipment. We have previously explained that the concept was good, but the results throughout 2025 were poor. Beginning in the second quarter of this year, we made significant changes to the scale and structure of these operations. Our focus shifted from maximizing output to lowering the cost of production. Today the operation is leaner and more efficient. The changes that we made are showing through in our results. As mentioned by Susan, compared to Q3 2025, freehold sales volumes in Maine increased 54% and at the same time cost of sales per cubic meter fell 39%. We also increased the amount of timber services activity for neighboring landowners in Maine. Maine generated $1.3 million EBITDA in Q3 2026 compared to a loss of $500,000 for the same period last year. A portion of the improvement is attributable to the build-out of our real estate segment, which contributed $0.6 million more to EBITDA than Q3 2025, but the majority of the improvement is due to the operational improvements to our internal harvesting operations. These results are better, but there's more work to be done. From here, we plan to make further improvements by adding capacity to our existing equipment, developing new markets for certain products, and optimizing block selection to facilitate efficient harvesting operations. As we pursue these opportunities, we expect our business in Maine to continue delivering stronger results in 2026 compared to 2025, and stronger results in 2027 compared to what we have achieved so far this year. Turning to our outlook for our core business. While the forestry sector across North America continues facing headwinds, we maintain a generally positive outlook for the remainder of 2026 and heading into 2027. With respect to contractor availability, we expect to retain sufficient capacity in New Brunswick through the remainder of 2026 and into the 2027 winter season, with steady volumes over the coming quarters. In Maine, as I explained a few moments ago, we plan to further improve our production levels and cost structure. With respect to markets, demand and pricing is shaped mainly by regional supply conditions. Softwood pulpwood demand continues being weak in both New Brunswick and Maine, while hardwood pulpwood demand is expected to remain steady in the short term. Demand for softwood and hardwood saw timber is expected to hold steady in both New Brunswick and Maine. In summary, we do not anticipate significant near-term changes to our markets or our pricing over the coming months, and we maintain a positive longer-term outlook as end-use markets improve and customers increase their consumption. With that said, we note two headwinds that are affecting our customers. The first is tariffs and duties, which remain at elevated levels for certain products. Beyond their direct costs, these have added a layer of uncertainty to our customers' end-use markets. We have not yet observed curtailments that are explicitly due to tariffs and duties, and in any case, Acadian's products are not currently subject to tariffs or duties themselves, but we suspect that the associated uncertainty is discouraging full operating schedules at some facilities. The second headwind is fuel costs. Pricing mechanisms in our customer contracts have continued supporting partial recovery of elevated fuel costs in New Brunswick by Acadian. In Maine, where our internal harvesting capacity is directly exposed to fuel costs, our recovery is much lower. Again, elevated fuel costs have not directly led to curtailments, but appear to be discouraging operating schedules and therefore demand in our region. A further headwind is the competitiveness of certain segments. During Q3, a major consumer of hardwood, pulpwood and New Brunswick curtailed operations without specifying a restart date. The immediate impact on Acadian is expected to be limited as Acadian maintains multiple customers for each product. However, the impact on the broader region and the broader regional supply and demand dynamics may be significant over the coming months. Looking at end-use markets more broadly, most macroeconomic indicators are neutral in the short term and positive over the long term. The consensus forecast for using U.S. housing starts remains steady. Production curtailments elsewhere in North America, both temporary and permanent, should help to support demand and pricing for our customers in New Brunswick and Maine. Taken together, these trends support our view that the Northeastern forestry sector is well positioned, despite these headwinds that I have noted. With respect to the outlook for our newer businesses, our environmental solutions business is progressing. The voluntary carbon credit market remains steady, and our next tranche of carbon credits for the Maine project is working through the transition to ACR's updated improved forest management protocol, and we continue to expect registration in the near future. Our real estate business is also advancing. Acadian sold 19 acres of non-core land in Maine at attractive valuations during Q3 2026, generating a significant gain with no impact to our harvesting operations. There are several related real estate initiatives underway across the business, which we expect will allow this business to become a more material and non-depleted pillar of our broader operations in time. Finally, I will close with a positive high-level update about recent announcements in our region. Since the inception of Acadian, we have spoken frequently about our confidence in the long-term resilience and prosperity of the northeastern forestry sector in general, and New Brunswick in particular. Over the course of Q3, that conviction was supported by several positive announcements, including first, the planned conversion of the Bellevue Generating Station from coal to biomass to increase regional demand for biomass. Second, an enhanced focus on wind and solar energy developments in the integrated resource plan of New Brunswick Power to facilitate renewable energy development. Third, combined federal provincial investments of approximately $86 million in the Strategic Innovation Center in Digital Forestry in New Brunswick to improve efficiency across the forestry sector. And fourth, several announcements related to the expansions or modernization of roundwood consuming facilities in the region, which cumulatively represent significant new demand in the future. While it may be several years before some of these initiatives directly benefit Acadian, They support our positive outlook for the region in which we operate and align with our plan to operate Acadian as a land-based company with core operations focused on sustainable forest management, complicated by other business activities such as environmental solutions and real estate. In closing, on behalf of the Board of Directors, thank you for your continued support. Susan and I are now available to take your questions. Operator?