Interfor Corporation

today. At this time, I would like to welcome everyone to the Inter4 Analyst Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star, then the number one on your telephone keypad. If you'd like to withdraw your question, please press star too. Thank you. Ian Fillinger, you may begin your conference.

Thank you, Operator, and thank you, everyone, for joining us this morning. With me on the call, I have Rick Posbon, our Executive Vice President and Chief Financial Officer, and Bart Bender, our Senior Vice President of Sales and Marketing. I'll start off by providing a brief recap of our quarter, provide some comments on the market outlook and several key initiatives before passing the call on to Rick and Bart. Turning to our Q1 results, our adjusted EBITDA was a loss of $22 million during another challenging quarter that was impacted by continued weak pricing. To be clear, current pricing is generally below industry break-even levels, which is simply not sustainable for an extended period of time. We've been proactive in addressing the controllables during these market conditions. Last quarter, we made the decision to indefinitely curtail our Philomath operation in Oregon. We've also done a good job reducing working capital and recently we announced the removal of 175 million feet of production across all North American regions to address the oversupply and weak pricing that exists today. We've always been fact-based and disciplined and consistently have been an industry leader when it comes to dealing with adjusting capacity or making tough decisions to strengthen our portfolio of operations. We have a more positive outlook as we head into the back half of 2024 and into 2025. However, we intend to continue to manage the business and our balance sheet conservatively. I'll now turn the call over to Rick, and he'll walk you through the financials.

Thank you, Ian, and good morning all. Please refer to cautionary language regarding forward-looking information in our Q1 MD&A. At a high level, Interforest Q1 results were a slight improvement over the preceding quarter, but lumber markets continued to be challenging. Lumber prices remained unsustainably weak relative to average costs across the industry, resulting in cash margins hovering around break-even levels across North America. As Ian mentioned, our focus continues to be on the controllables within our business. We're using this down market as an opportunity to strengthen the core of our business and set up for success over the long term. Turning to Q1 earnings, Interfor generated an adjusted EBITDA loss of $22 million on total revenue of $813 million. Compared to the previous quarter, revenue benefited from a 5% increase in lumber shipments and a 2% uplift in the average realized lumber price. On the cost side, reported production costs on a per unit of lumber basis were 5% lower quarter over quarter, benefiting from a $14 million decrease in the provision against inventories. A net loss of $73 million was realized in the quarter. which included $31 million of gains from the ongoing sale of coastal BC forest tenures. In terms of cash flows, there was a $17 million outflow from operating activities in the quarter, as negative operating earnings were partially mitigated by the management of inventories to reduce levels. Capital expenditures were as expected at $26 million in the quarter, while the sale of forest tenures contributed $29 million of cash. Ultimately, our net debt to invested capital leverage ratio ended the quarter at 34.7%. Looking out over the remainder of 2024, we continue to expect a collection of $64 million in tax refunds and further cash proceeds from the sale of coastal BC forest tenures. Regarding capital allocation, we will continue to take a conservative approach as we manage through this sustained market weakness. The primary focus is on reducing financial leverage into our target range below 25% net debt to invested capital. Capital expenditures will continue to be restrained in line with previous guidance. To wrap up, Interfor's Q1 results reflect significant ongoing market weakness, which we view as unsustainable for the industry as a whole. Fortunately, Interfor is well positioned to successfully navigate through this period as supply rebalances with demand. That concludes my remarks. I'll now turn it over to Bart.