Interfor Corporation

Good morning. My name is Ina and I will be your conference operator today. At this time, I would like to welcome everyone to the Interforer 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 would like to ask a question during this time, simply press star then the number one on your telephone keypad. If you would like to withdraw your question, please press star followed by the two. Thank you. Mr. Fillinger, you may begin your conference.

Thank you, operator, and thank you, everyone, for joining us this morning. With me on the call, as usual, we have Rick Posbon, 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 the quarter before passing the call off to Rick and Bart. Hearing to our Q2 results, our adjusted EBITDA was negative $17 million during yet another challenging quarter that was impacted by continued weak pricing. Log costs and conversion costs were down in most regions and shipments were ahead of production. Our team continued to drive cash from working capital with reductions made in receivables and also in both log and lumber inventories. We did see additional industry supply reductions made and believe about five to 7% of industry capacity has been removed since the beginning of this year. And we expect more volume to come out. We are updating our production forecast and we will be curtailing several of our low margin mills for the remainder of the year. Our updated guidance represents approximately 15% of our production volume or around 280 to 350 million feet. It's not lost on us the difficulties and challenges these decisions have on our employees, families, suppliers, communities. We have been and will continue to be 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 2025. However, we are planning for continued weakness until more industry supply is removed. 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 Q2 MD&A. At a high level, InterFOR's Q2 results from operations were fairly similar to the prior quarter and continued to reflect the ongoing weak lumber market. With respect to earnings, InterFOR generated an adjusted EBITDA loss of $17 million. on total revenue of $771 million. Revenue declined by 5% quarter over quarter, driven by a 4% decrease in lumber shipment volume, combined with a 1% drop in the average realized lumber price. On the cost side, reported production cost per unit of lumber sold were 2% lower quarter over quarter. This reflects benefits from our ongoing focus on productivity and cost efficiencies. Ultimately, a net loss of $76 million was realized in the quarter. Regarding Interfor's financial position, it remained stable quarter over quarter, ending Q2 with a net debt to invested capital leverage ratio of 35% and available liquidity of $331 million. The company's financial position was supported by $48 million of operating cash flows in the quarter, driven by the release of $72 million of working capital, This working capital improvement is attributable in part to our active management of log and lumber inventories. Also supporting the financial position was $21 million of cash generated from asset sales, including assets of the former sawmill in Philomath, Oregon. Looking out over the remainder of 2024, we continue to expect collection of tax refunds totaling approximately $59 million and further cash proceeds from the sale of coastal BC forest tenures. We anticipate completing the sale of all remaining coastal tenures by the end of 2025 for estimated total net proceeds in the ballpark of $70 million, with approximately 50% in the second half of this year and the remainder in 2025. Regarding capital allocation, we will continue to take a conservative approach as we manage through the sustained market weakness. Our primary focus remains on reducing financial leverage into our target range below 25% net debt to invested capital. As part of this conservative approach, total planned capital expenditures for 2024 have been reduced to $70 million from our previous guidance of $90 million. To wrap up, Interforest Q2 results reflect a persistently weak lumber market, which we continue to view as unsustainable for the industry as a whole. We continue to be focused on positioning Inter4 and its operations to successfully navigate through this period as supply rebalances with demand. That concludes my remarks. I'll now turn the call over to Bart.