GreenFirst Forest Products Inc.

Good morning, ladies and gentlemen, and welcome to Green First Q1 2022 Results Conference Call. Please note that all lines are muted to prevent any background noise. During this conference call, Green First representatives will be making certain statements about future financial and operational performance, business outlook, and capital plans. These statements may contain forward-looking information or forward-looking statements within the meaning of Canadian securities law. Such statements involve certain risks uncertainties and assumptions which may cause Green First's actual or future results and performance to be materially different from those expressed or implied in these statements. Additional information about these risks, factors, and assumptions is included both in the accompanying presentation and in our MD&A and the 2021 Annual Information Form, which can be accessed on the company's website or through CDAR. After the speaker's remarks, there will be a question and answer session. This presentation also contains certain non-GAAP measures which are not intended to replace measures of financial performance and liquidity reported in accordance with IFRS. For additional information regarding these non-GAAP measures, please refer to the company's MD&A for the first quarter of 2022. Mr. Doman, you may begin your conference.

Good morning. Bonjour. Thank you for joining our Q1 2022 earnings call. I am Rick Doman, CEO of Green First. and I am pleased to be joined today by Michelle Lessard, our president, and Alfred Koles, our CFO. Alfred recently joined us, and we welcome him to our team. Alfred has a strong background in commodities, and in the short time since he started, he has had a very positive impact on the company, and we're very appreciative. I will now touch on some key highlights for the company. We successfully completed our first quarter of 2022 with an adjusted EBITDA of $45 million. I will allow Alfred to further expand on this in his part of the presentation. Lumber markets were stable in Q1 and continue to be above historical trends to date. Accordingly, Q2 will likely be another very positive quarter for the company. We recently announced the potential relocation of our Kenora sawmill. Some equipment will be relocated to our other sawmills to help increase production and improve recovery. We also announced that we will restart our second paper machine at our paper mill in campus casing. We're looking forward to this. The operation can run better on two machines than it can on one, lowering operating costs. As a company, we continue to consciously integrate ESG into all aspects of our operations, and we expect to issue a full sustainability report in the second half of 2022. For those who may not know us, Green First is already one of Canada's top lumber producers, and we are working towards becoming a global leader through five strategies. First, integrating ESG into all aspects of our business. Second, we're committed to being an employer of choice, focused on creative hiring strategies. Third, low cost of production and operational excellence. I cannot express the importance of this enough. We are driven to maintain a sustainable and viable company and ensure long-term stable employment for our workforce. Fourth, accretive acquisitions. We are true value buyers as demonstrated by the Rainier and Kenora acquisitions. Lastly, rational capital allocation. We first look to optimize operations with little or no capital outlay, and then as cash flow from operations provides, we plan to make select capital investments that generate cost savings. We believe our strategies will lead to enhanced value for our stakeholders. Our current annual lumber production capacity is estimated at 905 million board feet a year, which includes Kenora operations. And we will work towards both maximizing our capacity and also expanding it. We have started our capital expenditures plan, which involves spending approximately $60 million over the next three years, excluding Kenora. As mentioned, we will also be using some of the parts and equipment from our Kenora sawmill operation, which should help make improvements to our lumber production capacity. COVID-19 was a factor in Q1. Production was down 12% from plan and 10% lower compared to Q4, mainly due to COVID-19. At some points during the quarter, we had over 11% of our workforce unavailable. Shipments were substantially lower in Q1, declining approximately 34% compared to Q4 and 22% compared to plan. Logistics Disruptions was our biggest challenge in Q1. These challenges led to lower sales volume and higher inventory levels. However, we are now seeing a significant improvement in shipments in Q2, and we hope that the railways improve also their ability to get us more rail cars and improve our shipments. Our goal is to monetize the 114-acre parcel of prime Lake of the Front Woods property in Kenora. In addition, the company owns a four-acre island adjacent to this land. This land is very prime property, and we look to monetize it in the future. With the planned restart of our second paper machine and campus casing in Q2, we expect to significantly reduce operating costs. Paper markets remain strong. We have successfully hired additional personnel for phase one of this machine's restart. The outlook for lumber prices remains favorable. Strong demand and lower supply are keeping prices elevated. U.S. housing starts forecast is encouraging for 2022. North American lumber prices are expected to be volatile but to remain above historical levels. In our operations, supply chain transportation and delivery services are currently experiencing a wide range of inflationary cost pressures and operational challenges. Many of these inflationary factors are beyond our control and are not unique to Green First. I'm confident we have taken proactive measures to mitigate the impact and continue to drive production as much as possible. We continue to provide opportunities for employment in communities we operate in. at our sawmill and paper operations. Housing prices can be substantially lower in these communities where we operate as opposed to cities like Toronto. So we think that will continue to allow us to attract people in these communities. I will now pass it over to our CFO, Alfred Kolas, to go over the financial highlights.

Alfred Kolas Thank you, Rick. I'm happy to report that our second successive quarter of operations generated net income of $34 million, or 18 cents per share, driven by net sales totaling $173 million. Now, just a short note about how Green First's first quarter was cut off. The company operates on a 13-week fiscal quarter, and the first quarter of 2022 includes results of operations from January 1st to March 26th. By contrast, Q4 of 21 included results from September 26th to December 31, which represented approximately a 14-week fiscal quarter. This is something to be borne in mind when comparing Q1 versus Q4. We continued to benefit from strong lumber prices in the first quarter, which more than made up for a harsh winter and lower rail capacity and volume of ships in the quarter. Our forest product segment had sales of $158 million last on 115 million board feet shipped, with a cost of sales of $90 million. We produced 134 million board feet during the quarter. Turning to our paper segment, for the first quarter we had net sales of $14.7 million, reflecting shipments of 18,400 metric tons, with cost of sales of $20.6 million. The company increased orders in the first quarter for delivery in Q2 and beyond, reflecting higher demand for all products. Along with higher demand, pricing has increased by $50 U.S. per metric ton from January to March. Another increase totaling a further $50 U.S. or $64 Canadian per metric ton has been announced for May. We've been progressing with the commissioning of the second paper machine, as Rick said earlier, which will be online during the second quarter and is expected to reach full production capacity during the second half of 2022. Selling general and administrative expenses were $6 million for the quarter, mainly reflecting personnel costs, costs related to the transitional services provided by Rainier, office-related and IT infrastructure costs, and costs incurred at Canora. SG&A expense did increase by $1 million compared to Q4, and this mainly reflects the ramp-up of hirings. So speaking of hirings, starting in the fourth quarter of 21 and continued in the first quarter, We were successful in hiring many of the corporate personnel required to transfer head office functions from Rainier to Green First. We were able to terminate most of the transitional services from Rainier at the end of February, with the balance expected to conclude by the end of May. Most of our new hires are located at our office in North Bay, Ontario, which we opened in the fourth quarter of 21, and where we had our board and committee meetings just yesterday. Our North Bay office has over 30 full-time employees in IT, accounting, and human resources, and is strategically located close to our operating sites. We recorded EBITDA of $46.4 million in the first quarter. Reconciling from net earnings include finance expenses, income tax expenses, and depreciation and amortization. Finished goods inventory in transit at the end of the first quarter led to a sales cutoff adjustment of a net $10 million and an associated estimated EBITDA impact of $5.6 million, which would have otherwise been added to EBITDA in the first quarter. Adjusted EBITDA was $44.9 million as it excluded an unrealized $1.5 million foreign exchange gain on our U.S. denominated long-term debt. After the first quarter in early April, we made a voluntary principal payment of $8.9 million U.S. dollars against the U.S. term debt and the outstanding principal balance currently stands at about $88 million. With shipments of lumber accelerating in Q2 and the drawdown of inventories, strong cash flows are projected for the remainder of the year, and we will continue to take opportunities to further reduce the long-term debt. Turning to the highlights from our balance sheet, our liquidity position at the end of Q1 was $89.1 million, composed of $39.1 million in cash on hand and $50 million available under our $65 million asset-backed loan, net of standby letters of credit. Our asset-backed loan has remained undrawn since acquisition to today. Almost $40 million of log inventory was built up during the first quarter, and this was fully funded from cash flows from operations. Log inventory buildup happens mostly during the frozen winter months in the first quarter. which also explains the high level of inventories at March 26th. We also have loss carry-forwards. We have $26 million in non-capital loss pools and $15 million in capital loss pools that would be available to reduce future taxable income. During the first quarter, we recognized a deferred tax asset of $7 million on the basis of the profits reported for Q1 and expected for the remainder of 2022. As spring advanced, rising interest rates in response to higher inflation represented a headwind to lumber demand. However, lumber market prices rebounded in late April, partly due to tightening lumber supply. While the pandemic seems to be abating, we expect COVID-19 to remain a concern through the remainder of 2022. And finally, Management and the board's investment in Green First shares aligns their interests with those of all shareholders. And this final slide shows that share ownership by management and directors comprises about 13% of the company, which is an important alignment of interests, as I said. Now, I'm happy to pass the floor to Michel.