Interfor Corporation

Good morning. My name is Sylvie, and I will be your conference operator today. At this time, I would like to welcome everyone to the Interfor Analyst Conference Call. Note that 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. And if you would like to ask a question during this time, simply press star then number one on your telephone keypad. If you would like to withdraw your question, please press star followed by 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, I have Rick Pazabon, Executive Vice President and Chief Financial Officer, and Bart Bender, Senior Vice President of Sales and Marketing. I'll start off by providing a brief recap of 2024 and our Q4 quarter before passing the call to Rick and Bart. 2024 was a year where we again strengthened our company and our portfolio. During another down market year which saw persistent low lumber prices, we continued delivering on the controllables, achieving positive operating cash flow of $144 million. I thought a few notables were worth mentioning. Number one, solid synergy achievements were made with our log and lumber inventory targets, achieving year-over-year reductions of 25% and 16% on a value basis, respectively. Number two, we completed a new planer project at our Thomason, Georgia mill, which met all KPI targets within 30 operating days. Number three, we achieved mill conversion cost reductions across most regions even with significant market-related curtailments. Number four, our employee turnover rates improved across our platform. Number five, we continued the divestiture of our BC Coast tenures and executed on eight tenure sales for gross proceeds of $67 million. Number six, we streamlined our admin functions and closed our offices in both Montreal and Japan. Number seven, we addressed higher cost non-core mills by selling a mill in Oregon, two sawmills and one remand plant in Quebec, and indefinitely curtailing two mills in the U.S. south. Turning to our Q4 results, all of our operating regions in Canada and the U.S. were EBITDA positive. resulting in adjusted EBITDA of $80 million for Q4. 2025 will be hard to predict. However, we're well positioned to deal with uncertainty, with only 25% of our lumber subject to duties or tariffs. We expect more B.C. Coast tenure sales this year. We have approximately 900,000 cubic meters to sell, and the majority of the remaining sales are expected to transact in 2025. We are maintaining our conservative capital spending plan for 2025. The pace of single-family starts has been solid with four of the last five months above 1 million starts. We see homebuilders' continued use of incentives likely to continue given where rates are currently at. European imports have dropped considerably with 21% year-over-year reduction and log costs reportedly increasing heading into 2025. As the political situations both in the U.S. and Canada unfold, and until we know the impacts to the economy, we will continue to be careful with our capital allocation. Our foundations are strong, we're diversified, and we continue to see great opportunities to improve operations without spending major capital. Pass the call now over to Rick.

Thank you, Ian, and good morning all. Please refer to cautionary language regarding forward-looking information in our Q4 MD&A. From a financial standpoint, fourth quarter was a step in the right direction for our business. Average lumber prices improved notably, driven by the substantial production curtailments across the industry in 2024, and supported by relatively strong demand from single-family home construction. The higher lumber prices drove positive cash flow from operations in the quarter, as Ian just mentioned. As a result, financial leverage remained flat quarter over quarter at 36%, while available liquidity grew to over $380 million. Looking through the fourth quarter, we expect ongoing volatility in our industry, with uncertain economic and political environments raising the potential for impacts on both lumber supply and demand over the near term. With respect to Q4 earnings, Interfor generated adjusted EBITDA of $80 million, on total revenue of $747 million. Revenue increased by 8% quarter over quarter, driven by a 16% increase in the average realized price of lumber. Volume of lumber sold was relatively flat over the same period. On the cost side, reported production cost per unit of lumber sold fell 5% quarter over quarter, reflective of a more normal operating cadence and an incremental $9 million reduction in the reserve against inventories. Significant strengthening of the U.S. dollar against the Canadian dollar was also a notable factor in the quarter. This drove a positive effect on EBITDA as the large majority of our sales are priced in U.S. dollars, combined with the revaluation of U.S. dollar-denominated working capital and duty deposit balances. Ultimately, a net loss of $50 million was recorded in the quarter, which includes a $42 million foreign exchange loss, mostly unrealized in relation to cross-border intercompany funding denominated in U.S. dollars. Turning to cash flows, $75 million of operating cash flow in the quarter helped fund $11 million of CAPEX and a $35 million debt repayment. Looking ahead to Q1 of this year, the divestiture of the Quebec operation closed in January and improved our net cash position by $16 million. We expect the sale of coastal BC forest hens to continue generating net cash flow, estimated to be in the range of $20 to $25 million for the current year. Regarding capital allocation, we will continue our conservative approach focused on reducing financial leverage. As part of this, we've refined our guidance for capital expenditures in 2025 to be approximately $85 million. To wrap up, InterFOR's Q4 earnings were a significant improvement over the prior quarter, driven by improved lumber prices reflective of tightened supply. Interfor is well-positioned with its high quality and geographically diverse operations to navigate successfully through the current economic and political uncertainty. That concludes my remarks, and I'll turn the call over to Bart.