Canfor Corporation

Good morning. My name is Kevin, and I'll be your host today. Welcome to CanForce first quarter 2026 analyst call. At this time, all participants have been placed on mute to prevent any background noise. A question and answer session will be available after today's presentation. During this call, CanForce chief financial officer will be referring to a slide presentation that is available in the best relations section of the company's website. Also, the company would like to point out that this call will include forward-looking statements, so please refer to the press release for the associated risk of such statements. I would now like to turn the meeting over to Susan Yurkovich, Canfor's Corporation President and Chief Executive Officer. Please go ahead, Susan.

Thank you, Kevin. Good morning, and thanks for joining Canfor's Q1 2026 results conference call. I'm going to open with a few comments this morning before turning things over to Pat Elliott, our Chief Financial Officer. We're also joined by Stephen Mackey. CanForce Chief Operating Officer, Kevin Pankratz, our Senior Vice President of Sales and Marketing, and Brian Ewan, our Vice President of Pulp and Paper Sales, who are going to be available and happy to take questions at the end. Our lumber business generated modest EBITDA in the first quarter with improved pricing supported by seasonally higher demand and more limited supply, partly reflecting the significant capacity reductions in our industry we've seen in the last couple of years. While supply has been somewhat constrained, lumber prices have started to moderate in recent weeks, particularly for southern yellow pine, as demand continues to be impacted by the uncertainty facing the global economy. Similarly, our pulp business continues to face significant headwinds, with elevated inventories and weak global pulp demand offsetting modest cost improvements realized in the first quarter. Notwithstanding the current economic landscape, we continue to position the business to navigate the challenges facing our industry. Our goal remains to be more resilient and better able to deliver more stable returns over the cycle, and we are focused on executing our strategy, strengthening our operating platform, improving our cost competitiveness, and diversifying our business. Looking ahead, we anticipate further reductions to our cost structure as we continue to ramp up our low-cost capacity in the U.S. South and see a reduction in our anti-dumping and countervailing duties beginning in October. In Europe, while results have been challenging for several quarters, we are beginning to see modest log cost relief, higher pricing, and the benefits from our acquisition of the Carl Ledeen assets last September. Following significant capital investment in recent years, we're focused on operating our low-cost sawmills efficiently as we look to optimize regional cyber supply and maximize the returns on our investment. Going forward, we are anticipating significantly lower capital requirements due to the improvements in our underlying asset base. So while markets are anticipated to remain challenging in the near term, our business is well positioned to generate strong free cash flow as the market recovers. In addition, we've maintained a solid balance sheet which provides us with flexibility to pursue strategic growth should the right opportunities present themselves. Now I'll turn it over to Pat to provide an overview of our financial results.

Thanks, Susan, and morning, everyone. In my comments this morning, as always, I'll speak to our first quarter financial highlights, which is included in an overview slide presentation located in the investor relations section of our website. Our lever business generated adjusted EBITDA of $29 million in the first quarter, $37 million higher than the previous quarter. These results have been adjusted to exclude a $20 million recovery of a previously recorded inventory write-down. Improved earnings in the first quarter largely reflected an increase in North American lumber pricing, particularly for Southern Yellow Pine, as well as lower unit manufacturing costs. While North American lumber prices benefited from tighter supply, global demand remains challenging. As a result, our European lumber business generated adjusted EBITDA loss of $12 million, $4 million lower than the prior quarter. Looking ahead, we anticipate a modest improvement in European lumber prices, driven by seasonally higher demand and reduced supply. In addition, log costs are anticipated to decrease slightly through the balance of 2026, which should support improved earnings going forward. Our pulp business reported an adjusted EBITDA loss of $8 million in the first quarter, $8 million better than the prior. While our first quarter results benefited from improvements to our underlying cost structure, global pulp markets continue to be impacted by elevated inventories and weak demand, which we believe will persist. Following Canfor's acquisition of Canfor Pult in March, our pulp business is better positioned to manage through the current market dynamics. Turning to our balance sheet, following a refinancing of our credit facility in March, Canfor's It ended the first quarter with available liquidity of approximately $970 million and net debt, excluding the duty loan, of approximately $530 million. We forecast capital spend of $210 million in 2026, and this includes $35 million for pulp and remaining spend associated with our Bruja facility in Sweden and our Iron Mountain facility in Arkansas. Following completion of these projects, we expect capital spend to moderate further over the next several years, supported by our strong lumber platform. And with that, we're now ready to take questions from analysts.