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Interfor Reports Q1’23 Results

Press Release

INTERFOR CORPORATION (“Interfor” or the “Company”) (TSX: IFP) recorded a Net loss in Q1’23 of $41.3 million, or $0.80 per share, compared to $72.2 million, or $1.40 per share in Q4’22 and Net earnings of $397.0 million, or $6.69 per share in Q1’22.

Adjusted EBITDA was $26.1 million on sales of $829.9 million in Q1’23 versus negative Adjusted EBITDA of $68.7 million on sales of $810.3 million in Q4’22 and Adjusted EBITDA of $570.1 million on sales of $1.3 billion in Q1’22.

Notable items in the quarter:

Lower Lumber Prices
Lumber prices continued to reflect softened demand driven by the elevated interest rate environment. Interfor’s average selling price was $639 per mfbm, down $60 per mfbm versus Q4’22. The Western SPF Composite, SYP Composite, KD H-F Stud 2×4 9’ and ESPF Composite price benchmarks decreased quarter-over-quarter by US$21, US$19, US$33 and US$24 per mfbm to US$399, US$442, US$428 and US$474 per mfbm, respectively.
Lumber Production Balanced with Demand
Lumber production totaled 1.0 billion board feet, representing an increase of 157 million board feet quarter-over-quarter. This growth was mostly driven by a decrease in temporary production curtailments in Q1’23 compared to Q4’22 and the first full quarter of contribution from two sawmills acquired in November 2022.
The U.S. South and U.S. Northwest regions accounted for 473 million board feet and 142 million board feet, respectively, compared to 404 million board feet and 135 million board feet in
Q4’22. The Eastern Canada region produced 250 million board feet versus 212 million board feet in Q4’22. Production in the B.C. region increased to 166 million board feet from 123 million board feet in Q4’22.
Lumber shipments were 1.0 billion board feet, or 65 million board feet higher than Q4’22.
Financial Flexibility Maintained
Net debt at quarter-end was $880.0 million, or 30.7% of invested capital, while available liquidity was ample at $321.4 million.
Liquidity is expected to be strengthened during the remainder of 2023 by the draw down of seasonally high working capital and income tax refunds totaling approximately $98.0 million related to over-installments for the 2022 tax year.
Strategic Capital Investments
Capital spending was $63.7 million, including $45.4 million on discretionary projects. The majority of this discretionary spending was focused on the multi-year rebuild of the Thomaston, GA sawmill, a new planer at the Castlegar, B.C. sawmill and upgrades to the Perry, GA sawmill.
Total capital expenditures planned for 2023 have been reduced to approximately $210.0 million from $240.0 million in response to ongoing lumber market weakness. This reduction reflects the delay of certain components of ongoing strategic capital projects.
Ongoing Monetization of Coastal B.C. Operations
The Company is continuing to work with the Ministry of Forests to subdivide and transfer a number of forest tenures from its 1.57 million cubic metres of annual harvesting rights. The timing remains uncertain as to when the Ministry approval and certain contractual consents may be received.
Softwood Lumber Duties
Interfor expensed $10.7 million of duties in the quarter, representing the full amount of countervailing (“CV”) and anti-dumping (“AD”) duties incurred on shipments of softwood lumber from its Canadian operations to the U.S. at a combined rate of 8.59%.
Interfor has cumulative duties of US$520.6 million, or approximately $10.00 per share after-tax, held in trust by U.S. Customs and Border Protection as at March 31, 2023. Except for US$156.8 million recorded as a receivable in respect of overpayments arising from duty rate adjustments and the fair value of rights to duties acquired, Interfor has recorded the duty deposits as an expense.


North American lumber markets over the near term are expected to be volatile as the economy continues to adjust to inflationary pressures, elevated interest rates, labour shortages and geo-political uncertainty.

Interfor expects that over the mid-term, lumber markets will continue to benefit from favourable underlying supply and demand fundamentals. Positive demand factors include the advanced age of the U.S. housing stock, a shortage of available housing and various demographic factors, while growth in lumber supply is expected to be limited by extended capital project completion and ramp-up timelines, labour availability and constrained global fibre availability.

Interfor’s strategy of maintaining a diversified portfolio of operations in multiple regions allows the Company to both reduce risk and maximize returns on capital over the business cycle. Interfor is well positioned with its strong balance sheet and significant available liquidity to continue pursuing its strategic plans despite ongoing economic and geo-political uncertainty globally. In the event of a sustained lumber market downturn, Interfor maintains flexibility to significantly reduce capital expenditures and working capital levels, and to proactively adjust its lumber production to match demand.

Financial and Operating Highlights1

For the three months ended

Mar. 31 Mar. 31 Dec. 31

Unit 2023 2022 2022

Financial Highlights2

Total sales $MM 829.9 1,349.0 810.3

Lumber $MM 642.5 1,212.5 656.3

Logs, residual products and other $MM 187.4 136.5 154.0

Operating earnings (loss) $MM (36.2) 512.7 (114.8)

Net earnings (loss) $MM (41.3) 397.0 (72.2)

Net earnings (loss) per share, basic $/share (0.80) 6.69 (1.40)

Operating cash flow per share (before working capital changes)3,5 $/share 0.47 6.18 (1.75)

Adjusted EBITDA3 $MM 26.1 570.1 (68.7)

Adjusted EBITDA margin3 % 3.1% 42.3% (8.5%)

Total assets $MM 3,695.1 3,081.4 3,619.8

Total debt $MM 946.2 403.1 798.0

Net debt3 $MM 880.0 340.2 720.4

Net debt to invested capital3 % 30.7% 15.8% 26.2%

Annualized return on capital employed3 % (5.0%) 86.6% (13.8%)

Operating Highlights

Lumber production million fbm 1,031 917 874

Lumber sales million fbm 1,004 843 939

Lumber – average selling price4 $/thousand fbm 639 1,410 699

Average USD/CAD exchange rate6 1 USD in CAD 1.3525 1.2662 1.3578

Closing USD/CAD exchange rate6 1 USD in CAD 1.3533 1.2496 1.3544


Figures in this table may not equal or sum to figures presented elsewhere due to rounding.
Financial information presented for interim periods in this release is prepared in accordance with IFRS and is unaudited.
Refer to the Non-GAAP Measures section of this release for definitions and reconciliations of these measures to figures reported in the Company’s unaudited condensed consolidated interim financial statements.
Gross sales including duties and freight.
Financial information has been adjusted for a reclassification in the presentation of unrealized foreign exchange loss (gain) within cashflow from operations resulting in a $/share change of $(0.20) – Q1 2022.
Based on Bank of Canada foreign exchange rates.


Balance Sheet

Interfor’s Net debt at March 31, 2023 was $880.0 million, or 30.7% of invested capital, representing an increase of $159.6 million from the level of Net debt at December 31, 2022.

As at March 31, 2023 the Company had net working capital of $512.9 million and available liquidity of $321.4 million, based on the available borrowing capacity under its $600 million Revolving Term Line (“Term Line”).

The Term Line and Senior Secured Notes are subject to financial covenants, including a net debt to total capitalization ratio and an EBITDA interest coverage ratio.

Management believes, based on circumstances known today, that Interfor has sufficient working capital and liquidity to fund operating and capital requirements for the foreseeable future.

For the three months ended

Mar. 31 Dec. 31 Mar. 31

Thousands of Dollars 2023 2022 2022

Net debt

Net debt (cash), period opening $720,361 $249,718 $(162,886)

Net issuance of Senior Secured Notes – 270,160 –

Revolving Term Line net drawings 149,478 133,430 31,150

Decrease in cash and cash equivalents 10,810 73,812 478,203

Foreign currency translation impact on U.S. Dollar denominated cash and cash equivalents

and debt (656) (6,759) (6,287)

Net debt, period ending $879,993 $720,361 $340,180

On December 16, 2022, the Company completed an expansion of its Term Line. The commitment under the Term Line was increased by $100 million to a total of $600 million.

On December 1, 2022, the Company issued US$200 million of Series H Senior Secured Notes, bearing interest at 7.06% with principal payments of US$66.7 million due on December 26, 2031, 2032 and on final maturity in 2033.

Capital Resources

The following table summarizes Interfor’s credit facilities and availability as of March 31, 2023:


Term Secured

Thousands of Canadian Dollars Line
Notes Total

Available line of credit and maximum borrowing available $600,000 $661,989 $1,261,989


Drawings 284,193 661,989 946,182

Outstanding letters of credit included in line utilization 60,622
– 60,622

Unused portion of facility $255,185 $ – 255,185


Cash and cash equivalents


Available liquidity at March 31, 2023


Interfor’s Term Line matures in December 2026 and its Senior Secured Notes have maturities in the years 2023-2033.

As of March 31, 2023, the Company had commitments for capital expenditures totaling $156.9 million for both maintenance and discretionary capital projects.

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