Conifex Timber Inc.

Good afternoon, ladies and gentlemen. Welcome to the Conifex Timber Inc. 3rd Quarter 2023 Results Conference Call. I would now like to turn the meeting over to Mr. Ken Shields, the Chief Executive Officer and Chairman of the company. Please go ahead.

Well, thank you, Retka, and good afternoon, everyone, and welcome to our call covering our 3rd Quarter 2023 results. Here with me I have our CFO, Trevor Pruden, and our President, Andrew McClellan, and we're going to hear from both of them very shortly after I go through some brief opening remarks. First, quickly dealing with a housekeeping item, we will be making forward-looking statements and references to non-IFRS measures, and therefore call your attention to the warning statements set out on pages 1 and 2 of the MD&A dated November 7th that we released a short while ago. Turning to our results, in the third quarter, we reported negative EBITDA of 6.7 million, which was similar to what we reported in Q1, but represented an improvement of around $2 million from what we reported for the second quarter. On our previous call, we indicated that we expected improved lumber mill net sales risk realizations and that this would lead to improved results in Q3, although we cautioned that Q3 was expected to have negative EBITDA. Our Q3 results were favorably impacted by $1.7 million in recoveries of duty deposit overpayments. But this recovery was more than offset by a $2.4 million inventory write-down that was taken in response to the lower lumber prices that came into effect as we progressed through Q3. And it was also impacted by $600,000 in write-offs that we took at a logging camp that was destroyed by a forest fire. Fortunately for all of us, no employees or contractors were impacted by the fire, and we were not using the camp because we had proactively relocated our harvesting crews to lower-risk locations. We presently have U.S. $33.5 million in potentially refundable duties, which translates into something like 46 million Canadians, which is $1.14 per Conifex share. And many of you on the phone will recognize that these potential duty refunds exceed our current trading price by at least two-thirds, and that this is unusual because the other public lumber companies' share trading prices are well above their potential duty deposit refund. So I'm now going to turn it over to Andrew McClellan, who's got an important update on our outlook for our operation for the balance of 2023 and some preliminary comments on the outlook for 2024. Over to you, Andrew.

Thank you very much, Ken, and good afternoon to those on the line, and welcome to our Q3 call. We're Very pleased with our year-to-date accomplishments, particularly in terms of our safety, performance, environmental compliance, and harvest sustainability. I'd also like to take the opportunity to recognize our employees for their ongoing dedication and commitment in these important areas. Our sawmill is performing in line with our expectations. As we've mentioned previously, in May of 2023, the Chief Forester concluded that the remaining dead pine stands in the Mackenzie timber supply area have lost their commercial value as thaw logs. And as a result, our shift to a greener log diet has improved sawmill performance, resulted in higher grade outturns and stronger selling price realization. As we continue to see incremental improvements in log quality, we anticipate even better grade outturns and further improvements to average mill net sales realizations in 2024 as we proceed through that operating cycle. These operational successes are further bolstered by lower delivered log costs, which will continue to positively impact our overall results in 2024. Our power plant is operating well, and we anticipate we'll exceed 90% uptime through the front half of the year, extending into our annual maintenance window in 2024. Looking ahead to Q4, we expect our fourth quarter EBITDA loss will be lower than our Q3 EBITDA loss, even if prices for lumber and exchange rates remain unchanged. In the coming weeks, we'll be diligently working on our 2024 budget and business plan, aiming to develop a realistic and achievable strategy that will enable us to report high single-digit or low double-digit positive EBITDA in 2024. We base this outlook on current exchange and duty rates, assuming that 2024 benchmark lumber prices average out at $450 U.S. per thousand board feet. For the remainder of 2023, we anticipate lumber prices to remain consistent with year-to-date levels, and we also expect our lumber production and shipments in the closing quarter of 2023 to modestly surpass those of the third quarter, with seasonally higher power prices recorded in our power business. As we look forward to 2024, we agree with an analyst estimate forecasting a low double-digit percentage improvement in benchmark lumber prices. This optimism stems from what we perceive to be an improved supply-demand balance emerging for lumber producers in North America. For context, in the northern interior region of BC where we operate, trailing 12-month lumber production has decreased by one-third from 4.5 billion board feet in early 2021 to 3 billion board feet currently. Additionally, it's worth noting there has been a further 1 billion board foot reduction in the southern interior region. Combining these two together, the interior BC lumber production has declined by 2.5 billion board feet since early 2021. On the demand side, we anticipate a boost from potential a moderation in key interest rates, a critical driver of residential construction activity and lever prices. Additionally, we expect to benefit from lower stumpage charges and lower delivered log costs in Q4 of 2023 and into 2024. These improvements in supply-demand balance, coupled with our move to a lower ranking on the lumber industry cost curve, position us favorably to improve our EBITDA in 2024, even if lumber prices, exchange rates, and duty and positions remain at 2023 levels. I will now turn the call over to our CFO, Trevor Pruden.