Interfor Corporation

Good morning, my name is Sylvie and I will be your conference operator today. Welcome to Interfor Corporation's second quarter 2026 results conference call. As a reminder, all participants are in a listen-only mode and the conference is being recorded. Following prepared remarks, there will be an opportunity for analysts to ask questions. During this call, Interfor's representatives may make forward-looking statements within the meaning of applicable securities laws. Additional information regarding the risks, uncertainties, and assumptions of such statements can be found in Interfor's most recent press release and MD&A. And I would like to turn the call over to Mr. Ian Fillinger, Interfor's President and CEO. Mr. Fillinger, please go ahead.

Thank you, Operator, and thank you, everyone, for joining us this morning. With me on the call, I have Mike Mackay, our Executive Vice President and Chief Financial Officer. The second quarter reflected strong execution across our business, supported by stronger lumber markets, continued progress on our cost reduction, improved mill productivity and disciplined inventory management. While uncertainty remains, particularly around the softwood lumber trade dispute, we are encouraged by the progress our teams are making and remain focused on further strengthening our balance sheet. Our previously announced two-year company-wide cost reduction initiative continues to perform well. with results tracking on our annualized $80 million target. In addition, our Thomaston Mill in Georgia delivered a strong quarter and has been transformed into one of our top performing assets in our portfolio. In the second quarter, we generated $92 million of EBITDA, strengthened our financial position, aligned our products mix with market demand, reduced inventories, lowered production costs, and continued to successfully navigate the ongoing uncertainty around the softwood lumber trade dispute. If we look ahead, our priorities remain unchanged. We will continue to focus on operating our mills safely and efficiently, aligning production with market demand, maintaining a relentless focus on costs, and preserving the financial strength and flexibility of our balance sheet. These fundamentals position us to withstand prolonged market volatility while continuing to create long-term value for our shareholders. Consistent with that focus, we recently announced the transition of certain corporate support roles to our Peachtree City office in Georgia, where the majority of our operations are located within the central eastern Atlantic time zones. This change is intended to better align our support functions with the needs of our business, while maintaining a strong corporate presence in both Canada and the United States. Transition will occur gradually over time, primarily through attrition and future hiring decisions. This will allow us to evolve our organizational footprint in a measured manner. This is not a re-domiciling of the company, nor does it alter our long-standing commitment within our Canadian operations, mills, employees, or communities. Our leadership team remains in place, and Burnaby will continue to play an important role as our corporate headquarters. With that, I'll turn the call over to Mike. Thanks, Ian, and good morning, everybody.

From an earnings standpoint, Interfort generated $92 million of adjusted EBITDA in the second quarter, a significant improvement from the first quarter and one of our best quarterly results in nearly four years. Sequential improvement was driven by stronger realized pricing, higher production volumes, and lower manufacturing costs. From a sales perspective, realized selling prices increased approximately 11% quarter over quarter, with all five of our operating regions benefiting from stronger market conditions. Production costs per unit improved by approximately 1% and were down 6% compared to full year 2025 levels. These improvements were driven by higher operating rates, the continued ramp up of Thomaston, and ongoing productivity gains driven by our performance improvement initiatives. Production volumes increased by just over 70 million board feet, or 8%, compared to the first quarter. This increase was driven primarily by higher production in the U.S. South, following the ramp-up of Thomaston, along with a more normalized operating posture in the U.S. Northwest. This was partially offset by the indefinite curtailment of two mills in Ontario. Shipments exceeded production, and while logistics remained challenging in certain markets, the actions taken earlier in the year helped improve our shipment execution and supported inventory reductions. Turning to cash flow and the balance sheet, Improved earnings, disciplined working capital management, and lower capital spending all contributed to a strengthening financial position. Net debt to invested capital ratio improved to 36.7%, down from 38.3% at the end of the first quarter. And available liquidity also improved, ending the period at just over $440 million. Looking ahead, benchmark lumber prices have maintained positive momentum into the early part of the third quarter. and our order files have remained solid. At the same time, the summer building season can introduce increased volatility in end-use demand and pricing and we continue to plan cautiously for the back half of the year. At a broader level though, the industry supply rationalization that began in prior years has continued through the first half of 2026. We believe this has contributed to a much more balanced and disciplined market environment despite the ongoing macro trade and geopolitical uncertainty. Also looking ahead over the next several months, we continue to anticipate proceeds from day vestitures, including the ongoing sale of our BC Coast forest tenures, and the anticipated sale of real estate at two of our former facilities in the US South. Turning lastly to capital allocation, total capital expenditures for 2026 are expected to be approximately 90 million, and this reflects mostly maintenance spending in the back half of the year, as our priority remains focused on reducing leverage. With that, I'll now turn the call back over to you, Ian.