Interfor Corporation

Good morning, my name is Kelvin and I will be your conference operator today. At this time, I would like to welcome everyone to the Inter4Analyst conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press the star button followed by the number 1 on your telephone keypad. If you would like to withdraw your question, please press the pound key. Thank you. Mr. Fillinger, you may begin your conference.

Okay, thank you, Operator, and thank you, everyone, for joining us this morning. With me on the call, I 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 our quarter before passing the call on to Rick and Bart. Turning to our Q3 results, our adjusted EBITDA was negative $22 million. during yet another challenging quarter that was impacted by continued weak pricing. During the quarter, we reduced production across our platform, including indefinite closures at two mills in our U.S. South region. During the quarter, we also announced plans to exit our Quebec region, selling our three manufacturing facilities and closing our regional office in Montreal. These decisions have strengthened our portfolio by lowering both our production and overhead costs. We did see additional industry supply reductions made by other manufacturers and believe about 10% of the industry capacity has been removed. The full impact of these supply reductions will come to light over the next two to three months. And I'll turn the call over to Rick, who will walk you through the financials.

Thank you, Ian, and good morning all. Please refer to cautionary language regarding forward-looking information in our Q3 MD&A. Interfor continued to face weak lumber markets in Q3, and our earnings for the quarter reflect this. Despite the earnings weakness, we were able to generate positive cash flow from operations in the quarter, as we collected on tax refunds and further reduced our working capital, while continuing to realize proceeds from the sale of non-core assets. As a result, financial leverage has remained relatively flat quarter over quarter at 36%, while available liquidity grew to over $350 million. Looking through the third quarter, we are encouraged by the significant and mostly permanent lumber capacity cuts across the industry this year, as well as the U.S. Fed beginning to cut interest rates. These factors have contributed to steadily improving lumber prices since early July, which are now up over 20% since that time. With respect to Q3 earnings, Interfor generated an adjusted EBITDA loss of $22 million on total revenue of $693 million. Revenue declined by 10% quarter over quarter, driven mostly by a 10% decrease in lumber shipment volume, combined with a 5% drop in the average realized lumber price. On the cost side, reported production costs per unit of lumber sold were flat quarter over quarter, despite the lower volume. Ultimately, a net loss of $106 million was realized in the quarter. which included non-cash impairments totaling $91 million associated with the previously announced sale of our Quebec operations and indefinite curtailment of our mill in Somerville, South Carolina. The company's financial position was supported by $38 million of operating cash flows in the quarter, driven by the receipt of tax refunds totaling $55 million and release of working capital amounting to $7 million. Looking ahead to Q4, we are seeing improved operating cash flows from the higher lumber prices. We have incremental tax refunds of $13 million already in hand, and we expect over $30 million of cash to be realized from selling our Quebec operations and ongoing disposition of coastal BC forest tenures. Regarding capital allocation, we will continue to take a conservative approach focused on reducing our financial leverage. As part of this, we continue to expect capital expenditures for 2024 to be approximately $70 million, while our preliminary guidance for capital expenditures in 2025 is approximately $75 million. To wrap up, Interfor's Q3 earnings reflected a weak but improving lumber market. Interfor is well-positioned to benefit financially from the rebalancing of supply with demand that is taking place across the industry. That concludes my remarks, and I'll turn the call over to Bart.