GreenFirst Forest Products Inc.

Good morning, ladies and gentlemen, and welcome to Green First Q1 2026 earnings 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 critical plans, 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 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 MD&A and annual AIF, 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. Please submit your questions through the online portal. I will now pass the call over to Joël Fournier to begin the management presentation.

Thank you very much, Joanne, and good morning, everyone, and welcome to our first quarter 2026 running call.

I'm Joel Fournier, the Chief Executive Officer of Green First. Today, I'm joined by Peter Ferrante, our CFO, and Michel Lessard, our President. I would like to start this call by highlighting that we have maintained our excellent safety performance for Q1. Last year, we achieved record safety results at Green First, and these results continue to position us among the best in the industry. That reflects a strong and ongoing commitment to our safety culture. We finished the quarter with a negative EBITDA of $15.1 million. This loss is primarily due to weaker market conditions along with lower sales volume and production during the quarter. The market began the year at a low point in January, but improved steadily through the quarter, with price increasing from $422 to $487 by quarter end using the Western benchmark prices. Three of our mills took downtime in January due to market conditions. Their shipments were also negatively impacted by weather-related issues that limited rail car availability. In addition, we continue ramping up the new saw line at Chapleau, which affected production level during the quarter. During Q2 2026, it was also announced that the preliminary potential countervailing duty and empty dumping rate applicable starting in October are expected to be around 25% down from the 35% we are currently paying. In previous earning calls, We mentioned that we're working with the federal government to secure a $30 million loan to support the industry. Today, I'm pleased to announce that we received these funds in Q1, along with approximately $2.4 million in additional support from the provincial government for the CHIP program. Both will help strengthen their current and future liquidity position. We will continue to work closely with both federal and provincial governments

to benefit from recently announced program. I will now talk a little bit about the Q1 number market.

On the demand side, we did receive some positive news in March 2026 regarding both housing starts and repair and remodeling activity. Housing starts were 12% above last year and 11% higher than the previous month. In addition, Repair and remodeling activity came in 6% above forecast for the last six months. During Q1, lumber price started at a low point in January, but increased steadily through February and March. Our big box retail customer pulled strong volume during the quarter. However, shipment volume were impacted by logistic constraints, as already mentioned. Home affordability remains a challenge, and mortgage interest rates will need to continue declining to support a stronger demand going forward. On the supply side, the recent announcement of mill closure in Ontario provides some near-term support. Looking ahead to the remainder of 2026, despite these encouraging signs, We remain cautious in our outlook and continue to anticipate only modest price increase in the second half of the year. I will pass it to Peter for the financial section. Thank you.

Good morning, everyone, and thank you for joining our call. Today I will review Green's first quarter 2026 financial results and provide an update on our operational performance, cost structure, and liquidity position. For the first quarter of 2026, total revenue was $60.6 million compared to $77 million in Q4 2025 and $71.8 million in Q1 2025. Revenue was primarily driven by lumber sales of $55.4 million and byproduct revenue of $5.2 million. The quarter over quarter decline reflects lower shipment volumes of 83% million board feet compared to 108 million board feet in Q4 2025, driven primarily by seasonal demand patterns and timing differences between production and sales. Overall, the quarter reflects a volume driven decline in revenue, while pricing conditions remain relatively stable versus Q4 2026. Total cost of sales for the quarter was 62.6 million. compared to 86 million in Q4 2025, and 60.8 million in Q1 2025. The quarter-over-quarter reduction of approximately 23.4 million reflects three main drivers. First, cost of inventory sold declined to 52.8 million compared to 61.8 million in Q4, mainly a reflection of lower shipment volumes. NRV expense decreased to $1.8 million compared to $10.2 million in Q4 2025. While NRV adjustments were still recorded in the quarter, they were lower than the prior period. The $1.8 million reflects inventory build associated with seasonal harvesting activity, combined with slight cost increases derived from the continued ramp-up of our shop-flow large log line, offset by improved pricing. Third, freight costs decreased to $8 million from $9.8 million in Q4, consistent with lower shipment volumes. Depreciation remained stable at $3.9 million. Overall, the reduction in cost of sales was primarily driven by lower shipment volumes and reduced NRV expense. Gross margin for the quarter was a loss of $2 million, compared to a loss of $9 million in Q4 2025. and a gain of 11 million in Q1 2025. The improvement versus Q4 2025 reflects reduced NRV pressure and lower shipment volumes. Duties and tariffs totaled 12.1 million in Q1 2026 compared to 15.1 million in Q4 2025 and 5.7 million in Q1 2025. The decrease reflects lower shipments compared to the prior quarter. In comparison to Q1 2025, duties this year are at a 35% rate versus 14% last year. In addition, this year we are subject to a 10% section 232 title. While still elevated, duties remain an external industry-wide headwind and continues to represent a significant cost burden on the business. SG&A expenses was 4.8% 4 million in Q1 of 2026 compared to 1.5 million in Q4 2025 and 3.8 million in Q1 2025. The increase versus Q4 reflects timing of corporate initiatives and selected adjustments to compensation related costs and one time adjustments relating to operating expenses during Q4 2025 amounting to approximately two and a half million. It does not represent a structural change in the underlying cost base. Foreign exchange losses were 0.5 million for the quarter, and there was no impairment charges in Q1 2026 neither. Finance costs were 1.7 million, broadly consistent with prior periods. Operating income for the quarter was a loss of 19 million compared to a loss of $25.8 million in Q4 2025 and an income of $1.4 million in Q1 2025. EBITDA from continued operations from Q1 2026 was negative $15.1 million compared to negative $21.7 million in Q4 2025 and positive $5.1 million in Q1 2025. The improvement versus Q4 2025 reflects the lower shipment volumes, reduced NRV expense, partially offset by higher SG&A. On a normalized basis, the quarter reflects improving cost efficiency despite continued price and volume pressure from market conditions. Sales volumes were 83 million compared to 108 million Q4 and 90 million in Q1 2025. Production volumes were 98.6 million which is broadly consistent with prior levels, resulting in a temporary mismatch between production and sales timing. This contributed to inventory buildup during the quarter, but does not reflect the change in the underlining production capability. As of March 31st, 2026, the company ended the quarter with cash of $6.5 million compared to $3.5 million at year end. The increase in cash was primarily driven by external financing activities rather than operating performance. From an operating cash flow purpose for the quarter, it was impacted by a loss adjusted for non-cash items and interest rate of approximately 12.7 million. This was further affected by working capital outflows of 22.5 million, primarily driven by seasonal harvesting requirements. Investing activities were minimal at 0.9 million, reflecting a continued focus on liquidity preservation. Financing activities provided $38.6 million of cash flows, primarily consisting of a $30 million draw on the software lumber program turn low and $10 million on our credits facility. As a result, our total availability remained supported. However, revolver availability did decline to $19.6 million from $39.4 million at the prior quarter end. The company continues to maintain a disciplined approach to liquidity management with a focus on reversing the capital, working capital built and stabilizing operating cash flows in the upcoming months. This concludes my remarks and I will now pass it over to Joël.

Thank you, Peter. Looking ahead, Green First will continue to pursue its objective of becoming a top quartile operator and the largest producer in Ontario by maximizing the use of its available wood supply. This continues to position the company uniquely from a log supply perspective compared to its competitors. In fact, there's many regions in Canada and elsewhere in North America with constrained log supply situation. As mentioned in previous quarter, we have only partially advanced the previously announced 50 million phase one of capital expenditure program proceeding with selected project only. As communicated in Q3, 2025, our primary focus has been on the installation of the new saw line, planer mill, and the cogeneration refurbishment at Chapleau. I'm pleased to announce that both the planer mill project and the cogeneration project are now complete and ramp up has been successfully finalized. This project has delivered as expected and will increase our capacity to process the additional production coming from the new line at Chapleau. We completed all performance testing for the new saw line, with production increasing by 60% from January to March and are currently operating at approximately 90% of our target capacity with the new saw line. During Q2, the focus will be on finalizing optimization and integration with other equipment along the production process, including log-in feed and sawmill stacker output. We expect this integration to be completed in Q2. Finally, we continue to work with TxCANA to explore a potential partnership to build a torrefied pellet plant mill in Chapleau. This project will support the province of New Brunswick effort to replace coal with green energy for power generation. There is currently a surplus of some mills in Ontario, and this initiative would help strengthen demand in the if the project proceeds. In addition, the federal government has announced measures to support the housing industry in Canada. One of our major CHIP customers, Cap Paper, is currently working with the federal government to explore the opportunity to build a new facility to produce building material in Canada. This project would help secure long-term demand for sawmill residue in north of Ontario. Finally, Green First remains committed to continuous improvement as a core strategy to enhance business performance. At the same time, we'll maintain a prudent and disciplined approach to cash management to ensure the company is well positioned to navigate potential economic headwinds and emerging market challenges. I want to thank everyone for joining the call and we'll take a few questions.

Thank you, sir. Ladies and gentlemen, we will now begin the question and answer session. Please enter your questions on the web using the Q&A tab. One moment, please, for your first question.

Okay, we do have one first question here.

What's your expectation for the remainder of the year with respect to lumber demand? I will answer this one. So for the outlook, as mentioned, we're only forecasting modest price increase for the remaining of the year, and this is in line with third party forecasters such as FEA or RISE. However, things could shift quickly with all the current geopolitical uncertainty. Since the start of the conflict, long term mortgage rates have moved above 6% and gas price have risen, reflecting current economic conditions that come into shape consumer sentiment. However, housing activity saw an increase in March, and we believe the long-term fundamentals supporting wood product demand remain positive. We do have another question here on the shop-low line. With the completion of the shop-low large log line, have you seen any meaningful increase in production volume or quality of output? When can we expect to see this reflect in the financial results? I will answer this question. In Q1, we hit our target on lumber recovery, and we're still in ramp-up mode for production with the new saw line. All performance testing were passed at the end of the quarter for the line. Production, like I mentioned earlier, is currently in the range of 90% plus of the expected target. We are currently finalizing optimization and integration with other equipment along the production process, including the log-in feed and the sawmill stacker output. We expect this integration to be completed in Q2. We're also seeing better quality lumber going through the planer in terms of trim loss, production, and grade improvement coming from the wood produced from the new lines. We're pleased to report that we expect the project to be under cost overall.

We do have another question here.

Our opportunity to sell more product in Canada material or should investor expect the majority of sales to remain in the United States as ability to pass on tariff costs to US customer improve relative to Q4 2025? I will answer that question. So. Sometime ago when before the tariff ramp up to 35% plus, We started to shift some of our contract sales from United States to Canada. So our intention is to continue to accelerate that change going forward because there's savings for the company if we focus on the right grade, the right program in Canada versus United States. In addition, with the recent meal closure from our competitor in Ontario that was just announced a couple of days ago, it creates another opportunity for us to even foster faster or accelerate our strategy to sell more in Canada. And we're working right now with some of those customers to increase the volume.

Okay, we do have another question.

Can you speak to your expectation for input costs increase related to the inflationary pressure that we're seeing with energy prices? I will let Michel, our president, to answer the question.

Thanks, Joel. Yeah, so as you know, so energy-related inflation is certainly having an impact on our cost structure, particularly on our forestry operation where the fuel is a significant input of these operations. But as you are aware also, Q1 is our significant harvesting season where we bring in our logs to our mills. So as such, we should be minimally impacted by freight cost increases for the remaining 2026. But this could translate into higher delivered wood cost over time if things doesn't change in the near future. I spoke about forestry, but just a word on the lumber side. So while some of these cost pressures can be reflected in market pricing and are ultimately absorbed across the value chain, the extent of that recovery depends on the overall market condition and also the demand.

Okay, we do have another question here on liquidity. We've seen significant strain on the company liquidity position over the past few quarters. Can you speak to your ability to manage cash during this down cycle market if the down cycle market continues? I will let Peter or CFO to answer the question.

Okay, good question. So we go through a couple of items that we've been exposed to that have resulted in this liquidity issue. So yes, we have had liquidity pressure vote from market conditions and our seasonal working capital requirements, particularly in Q1, which is typical year over year in terms of inventory built. In addition, yes, we do see lumber inventories that are also higher year over year, which has weighed on our near-term liquidity, but this is expected to support stronger cash generation as these volumes are sold in the coming quarters. In addition, both Joelle and I did talk about in this call, we worked with the federal government. So we did secure $30 million loan with BDC to our banking partners. In addition to this, we're working on various programs with various levels of the government, primarily provincial, for an additional $10 million. And as we discussed, we have and we continue to look at all of our capital expenditures and we try to remain disciplined from a cash management perspective. When we put this all together, we believe we're well positioned to manage through this down cycle.

Okay, we do have another question.

As 80% of the company business is with the U.S., can you speak to any new U.S.-Canada relationship development in the near term? I will let Michel, the President, to answer the question.

Thanks, Joël. I would say what is encouraging is that we can hear the Prime Minister of Canada talking about the lumber industry as a priority for his government. And we can see also that there's always efforts, ongoing efforts to engage with the U.S. But that said, you know, there's limited traction at this stage and timing will likely depend on the U.S. There is also a possibility that softwood lumber becomes part of broader discussion around the KUSMA review. Although that process itself may extend over time rather than being resolved on the July 1st, 2026, that day that that's being advanced. But you know, from the industry perspective, there is no, there is a clear view that any agreement needs to be the right one. So what we mentioned also to the government many times is no deal is better than a bad deal, and that key elements such as such as overall tariff burden, including the Section 232 that we talked about before, will need to be addressed. It's going to be an important element of the negotiation. So again, while the discussions are ongoing, efforts are being made on multiple fronts, we would remain cautious in terms of near-term expectation for a resolution.

OK, we do have one more question.

There is some indication that US duty could decrease from around 35% to 25% by October 2026. How would such a change impact the forest industry? In your view? I will let Michelle or President to answer the question.

Sure, rejection in US duties from 35 to 25%. It will, it will help. It will be certainly a step in the right direction. and will help ease some of the pressure on Canadian producers. That said, you know, even at 25%, duties would remain elevated if we compare to historical standards. And that will continue also to weight on margins and also our competitiveness. And I would add again that the 10% Section 32 tariffs further increases the overall burden, which continues to impact the industry. Ultimately, the impact will also depend on broader market conditions, including also U.S. housing demand and lumber pricing. So we got also a question that I see if the tariffs could be passed to the customers. But, you know, with what we see, if we don't see any improvement in the U.S. housing demands, And considering also the high interest rate, as Joel mentioned also earlier, so we don't see how, you know, these duties could be absorbed by the customers. So again, from our perspective, while a reduction is positive, it does not change the need for more stable and predictable long-term trade frameworks.

Okay, we don't have any more questions, so that concludes our call for today. I would like to thank everyone for your participation for our Q1 call. Thank you very much. Have a good day.

Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your lines.

Please wait. The conference will begin shortly.