GreenFirst Forest Products Inc.

Good morning, ladies and gentlemen, and welcome to GreenFirst's second quarter 2023 results conference call. Please note that all lines are muted to prevent any background noise. During this conference call, GreenFirst representatives will be making certain statements about future financial and operational performance, business outlooks, 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 in Green First's MD&A, which can be accessed on the company's website or through CEDAR+. After the speaker's remarks, there will be a question and answer session. I would now like to turn the conference over to Paul Rivette. Please go ahead, sir.

Thank you very much, Sylvie. Good morning, everyone, and thank you for joining our second quarter call. I am Paul Rivette, as Sylvie said, the Chair and Interim CEO of Green First. Joined with me today are Michelle Lessard, our President, Alfred Golas, our Chief Financial Officer, and Gwen Webster, our Chief of Staff. By way of quick overview of our company, we are now exclusively based in Canada with our four sawmills all centrally located in the heart of the province of Ontario with approximately 2.5 million cubic meters of allowable annual fiber allocation. We directly employ over a thousand people and now having a smaller concentrated footprint that allows us to focus on maximizing our production capacity. Last week, Our software duty rate was reduced from 20.23% to 7.99%. This was very welcome news for us, bringing us more in line with our competitors, significantly improving our earnings and cashflow profile. We finally have a level playing field with our Canadian competitors who are exporting lumber to the US. Since our acquisition of the Rainier assets in August, 2021, we've made an overpayment of duties in comparison to our Canadian peers of over US$21 million. In today's value, that is approximately Canadian $28 million. We will continue to advocate for our shareholders to see a timely return of this overpayment. In addition, we continue to seek a fair settlement of all remaining duty deposits, which has reached an additional US$51 million and continues to climb. These duties will be settled with the rest of the Canadian softwood lumber industry, and consequently, the amount of refund remains uncertain. Last quarter, and again this quarter, we have showcased improving results at our paper mill and campus casing, primarily due to us seeing efficiency gains on the second paper machine. We keep a keen eye on this segment of our business as we see pricing and demand pressures, along with a decline in the demand for newsprint. The paper mill is a distinctly different operation from our sawmills, and in order to focus on additional efficiencies and in-line incentives, the Board of Directors recently approved the separation of the sawmill and paper mill assets. This corporate reorganization is a positive step towards decentralization, which we believe allows for the building of more mill-level responsibility, accountability, and profitability. It is our experience that this decentralization leads to stronger team culture, faster decision-making, and entrepreneurism. With respect to our lumber assets, lumber pricing showed a positive trend toward the end of Q2 2023. Based on these levels, coupled with our newly revised duties rate, we are hopeful that our sawmills are positioned for a stronger second half of 2023. This quarter, we incurred less than $500,000 in net finance costs than the same period last year. Over the same period last year, we paid $4 million in financing costs and we incurred $4 million foreign exchange loss on our U.S. denominated debt. This in total is a reduction of $7.5 million in financing costs. We have significantly reduced our levels of debt and interest, along with reducing the exposure to sensitivities in the Canadian US dollar exchange rate. We have a current net debt to invested capital ratio of only approximately 7%, providing us the ability to remain flexible and agile in volatile lumber pricing environments. We remain focused on our balance sheet and the ability to maintain excess liquidity throughout volatile commodity price cycles. We announced last quarter our non-binding agreement to sell 30 acres of our Kenora property for $8 million. We continue to actively pursue the best use for the remaining land, including reviewing further redevelopment versus a potential sale outright. We continue with our overhead and cost reduction projects that we discussed last quarter to ensure we achieve a more streamlined, cost-effective operating platform in recognition of our smaller organizational footprint in Ontario. For the second quarter, Green First reported a net loss of $9.7 million based on its continuing operations, or a quarterly loss of $0.05 per share on a diluted basis. Adjusted EBITDA was negative $5 million. While being driven by lower lumber prices and higher US duties in the second quarter, these results are a significant improvement over the first quarter when we reported a net loss of $20.2 million and negative adjusted EBITDA of $15.2 million. This favorable trend in Q2 reflects higher lumber sales this quarter and includes the impact of a $7.5 million credit from the reduction of valuation provisions for lumber and log inventories at the end of the quarter. This will be discussed in further detail by Alfred shortly. We remain cautiously optimistic that we will see increasing stability in lumber prices in the second half of 2023 and into 2024 based on many factors, including the ongoing US housing shortage and increasing new builds in both the US and Canada. US home builders are showing moderate growth for the balance of 2023, which started to positively impact lumber pricing in June 2023. Homeowners have become increasingly reluctant in the U.S. to sell their homes that are locked in at favorable longer-term mortgage rates, which is creating higher demand for new builds in the U.S. And in Canada, record levels of immigration are expected to continue to drive higher demand for new homes as well. This quarter, the industry experienced tightened lumber supply, spurred on by curtailment of lumber production primarily in British Columbia, and the uncertainty around forestry activities due to historically high levels of wildfires seen in Canada this summer. This provided positive pricing support, some of which will moderate, hopefully, going forward. Alfred will now walk you through the financials.

Thanks, Paul, and good morning, everyone. As summarized by Paul, for the second quarter of 2023, Green First reported a net loss of $9.7 million, or $0.05 per share, on a diluted basis based on its continuing operations. Lumber sales in the second quarter continued to reflect lower lumber prices, although volumes sold were 18% higher than in Q1. The average selling price of lumber during the second quarter was $596 per 1,000 board feet, slightly below the average unit selling price of $605 realized in the first quarter. Lumber shipments sold in the second quarter were 110.3 million board feet compared to 93.3 million board feet sold in Q1 of 2023. The net loss in the second quarter includes the beneficial impact of $7.5 million of credit for the reversal evaluation provisions for log and lumber inventory during Q2. On a year-to-date basis, the net reversal evaluation provisions generated a net credit of $4.3 million in the first half of 2023. This reversal was driven by higher lumber prices seen in the last days of June. Our paper shipments in the second quarter were 49,111 metric tons, which drove revenues of $38.2 million both modestly higher than the 42,620 metric tons shipped and paper revenues of $37.8 million in the first quarter of 2023. Cost of sales for the paper products was $35.7 million for an operating profit of $1.9 million in the second quarter, adding to the $1.3 million in operating profit realized in the first quarter. This is a significant turnaround for our paper mill, with operating profit of $3.2 million in the first half of 2023 compared to operating losses of $6.2 million in the first half of 2022. This is a $9.4 million turnaround year over year. Adjusted EBITDA for the second quarter was negative $5.0 million, which is a significant improvement over the negative $15.2 million reported in the first quarter. on higher lumber sales volumes at roughly level lumber prices, including the benefit of the $7.5 million credit from reductions to valuations for log and lumber inventories. During the first quarter, falling lumber prices resulted in a charge of $3.2 million for higher valuation provisions for log and lumber inventories. Finance costs, which are added back in deriving EBITDA, were $478,000 in the second quarter, Roughly half of the $896,000 reported in the first quarter and only a fraction of the $4.1 million in finance costs reported for the second quarter of the prior year. The reduction from the first to the second quarter of 2023 reflects debt repayments totaling $10 million made during the second quarter. The high prior year comparative finance costs reflects higher debt levels and interest rates before the successful refinancing of the company's debt last September. The company repaid $10 million of debt in the second quarter and $29 million of debt in the first half of 2023. The debt had an outstanding balance of $24.5 million at July 1st, 2023, and we have paid down the debt by a further $2 million to date in the third quarter. With the repayment of the term loan under the company's credit facility during the first quarter, Green First no longer has any financial covenant ratios under its credit agreement. Turning to liquidity, we ended the second quarter with a cash position of $9.8 million and $42.9 million in undrawn availability under our credit facility for total liquidity of $52.7 million as at July 1st, 2023. Debt repayments have been made using part of the proceeds from asset sales, which allows us to further reduce interest costs while maintaining liquidity under the asset backed revolving credit facility. We will continue to carefully manage liquidity while considering opportunities to reduce interest costs. Green First continues to be motivated by the interests of its shareholders and other stakeholders. This drives our prudent management of debt and interest costs and more broadly, the initiatives set in motion during the first quarter to reduce operating costs and general and administrative expenses. We do this while maintaining a sharp focus on our operations, their capital projects, and increasing productivity. Of course, everything we do first considers environmental, health, and safety imperatives. Our risk management policies and procedures underpin our measures to protect assets and manage risk. In early July, we made presentations at Lloyd's of London as part of our property insurance renewal, which is set for later this month. Due to our not having any claims in our almost two years of operating history, Green First is considered best in class by underwriters. Wildfires have been in the media all spring and summer, and they were top of mind with our underwriters. Now, when it comes to managing fire risk at our sawmills, this is a strong point for Green First. This map from Natural Resources Canada shows the location of 40 years worth of forest fires. The circled area in northeastern Ontario indicates where Green First's forest licenses are located, and this is an area with one of the lowest historical fire occurrences in Canada. There are physical reasons for this low occurrence of forest fires, including the presence of innumerable lakes and large rivers, which act as fire breaks, and the fact that much of our licensed forest is in boggy ground with high humidity. GreenFirst has a proactive forest risk management system, including plans for sustainable forestry, fire suppression, and forest restoration. Our sustainable forest management plan includes elements like harvesting plans that emulate fire disturbance and hourly monitoring of fire weather and rapid response. Our fire suppression plan benefits from world-class predictive fire models and lightning detection and strong collaboration with the fire program and crews of the Ontario Ministry of Natural Resources and Forestry. I'd like to now ask Michel to comment on the operational results for the second quarter.