Conifex Announces Fourth Quarter 2013 Results
February 21 2014 - 3:00PM
Marketwired Canada
Conifex Timber Inc. ("Conifex" or the "Company") (TSX VENTURE:CFF) today
reported net income of $1.1 million or $0.05 per diluted share for the fourth
quarter of 2013 compared to a net loss of $0.1 million or $0.01 per share for
the previous quarter and a net loss of $3.6 million or $0.18 per share for the
fourth quarter of 2012. The net income for the year ended December 31, 2013 was
$9.5 million or $0.46 per diluted share compared to a net loss of $16.2 million
or $0.86 per share for the year ended December 31, 2012.
Summarized operating results and statistics for each of the comparison periods
are provided below.
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(millions of dollars except Q4 Q3 YTD Q4 YTD
share and per share amounts) 2013 2013 2013 2012 2012
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Sales 63.7 65.2 259.6 60.0 217.6
EBITDA 4.9 2.8 21.7 (0.3) (4.0)
Operating earnings (loss) 2.2 0.7 12.8 (2.4) (12.9)
Net income (loss) 1.1 (0.1) 9.5 (3.6) (16.2)
Net income (loss) per share -
basic and diluted 0.05 (0.01) 0.46 (0.18) (0.86)
Shares outstanding - weighted
average (millions) 20.8 20.8 20.8 19.6 18.9
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Statistics
Lumber shipments - Conifex
product (MMfbm) 118.6 129.3 487.0 110.2 444.2
Lumber shipments - Wholesale
(MMfbm) 9.2 17.6 56.3 37.5 94.9
Lumber production (MMfbm) 116.3 123.0 499.4 108.4 424.4
Average exchange rate - US$/Cdn$
(1) 0.953 0.963 0.971 1.009 1.001
Average WSPF 2x4 #2&Btr lumber
price (US$) (2) $ 370 $ 328 $ 355 $ 335 $ 300
Average WSPF 2x4 #2&Btr lumber
price (Cdn$) (3) $ 388 $ 341 $ 366 $ 332 $ 299
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Reconciliation of EBITDA to Net
Income (Loss)
Net income (loss) 1.1 (0.1) 9.5 (3.6) (16.2)
Add: Interest expense and
accretion 1.5 0.7 4.0 1.2 3.5
Amortization 2.2 2.3 8.6 1.9 7.6
Non-cash items related to
compensation 0.1 - (0.4) 0.1 0.8
Loss on disposal of assets - - - - 0.3
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EBITDA (4) 4.9 2.8 21.7 (0.3) (4.0)
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(1) Source: Bank of Canada website www.bankofcanada.ca
(2) Source: Random Lengths Publications Inc.
(3) Average WSPF 2x4 #2&Btr lumber price (US$) divided by average exchange
rate
(4) May not total exactly due to rounding
The variation in consolidated net income, operating earnings or loss, and EBITDA
was largely attributable to operating results in the lumber segment as aggregate
corporate costs, other items and bioenergy segment expenses remained relatively
consistent in each of the comparative quarters. The lumber segment recorded
operating income of $3.3 million during the fourth quarter of 2013 which
represented an improvement of $1.5 million over the previous quarter and $4.5
million over the fourth quarter of 2012. Lumber segment EBITDA improved to $5.5
million compared to $4 million in the previous quarter and $0.7 million in the
fourth quarter of 2012.
The improvement in lumber segment operating results over the third quarter of
2013 was largely attributable to a 13% increase in sales realization that more
than offset a corresponding decline in shipment volumes and an increase in unit
cash conversion costs. Compared to the fourth quarter of 2012, an improvement in
sales realization reflective of the increase in Canadian equivalent benchmark
prices and a modest reduction of unit cash conversion costs more than offset a
6% increase in unit log costs.
The combined effect of an increase in average WSPF 2x4 #2 & Btr prices and a
weaker Canadian dollar during the fourth quarter of 2013 resulted in an
improvement in Canadian equivalent benchmark prices of 14% over the third
quarter of 2013 and 17% over the fourth quarter of 2012. Benchmark prices were
confined to a relatively narrow trading range in the fourth quarter of 2013 and
the sustained higher levels contributed to a reduction in export tax rates which
averaged 2% compared to 5% in the previous quarter and 8% in the fourth quarter
of 2012.
Overall lumber revenues were generally consistent in each of the comparative
quarters. Lumber shipments totaled 128 million board feet during the fourth
quarter of 2013 and represented a decline of 13% compared to the third quarter
of 2013 and the fourth quarter of 2012. Unit gross sales realizations and unit
mill net realizations increased by 13% over the previous quarter. Unit mill net
realizations were relatively flat on shipments to Canada and Japan but increased
by 12% on shipments to China and 18% on shipments to the U.S. The Company
shipped 80% of its products to the Chinese and U.S. markets during the second
half of 2013.
During the fourth quarter of 2013, total production volumes declined by 5%
compared to the previous quarter despite a 3% increase in average hourly
production. Overall productivity in the fourth quarter was held back due to the
integration of a number of capital projects and to a seasonal reduction in
operating hours. Production increased by 7% and average hourly production by 5%
compared to the fourth quarter of 2012 when the Company operated slightly
reduced hours to accommodate a planned curtailment at Fort St. James related to
a capital upgrade. Unit log costs remained consistent during the fourth and
third quarters of 2013 and increased by 6% over the fourth quarter of 2012. An
increase in unit cash conversion costs of 13% over the previous quarter was
largely attributable to lower production volumes and higher costs related to
compensation, employee training, maintenance and contractor services.
During 2013, the Company made considerable progress on operational improvements
and completed a number of its key near-term financing objectives. Operating
results for 2013 benefited from favourable market conditions and solid demand
from each of Conifex's primary markets which fostered a sustained higher lumber
price environment compared to 2012. Positive external factors coupled with
continued improvements in key performance metrics largely contributed to the
generation of $21.7 million EBITDA. The Company invested $15.8 million in lumber
segment capital projects during the year.
The Company significantly improved liquidity in its lumber segment with the
completion of a three-year, $25 million revolving credit facility to primarily
support working capital requirements and the issuance of four-year senior
secured notes aggregating $30 million to primarily underpin future capital
projects. The completion of the financing initiatives combined with significant
year over year improvement in cash flow from operations allowed for increased
direct shipments to offshore markets, optimization of harvesting activities,
capital investments in the lumber segment, and continued support of critical
path activities related to the power generation project at Mackenzie, B.C. until
project financing was completed later in the year.
The Company resumed construction of its power generation project in September
2013 upon the commitment of project financing. The financing for an aggregate
amount of $102.7 million was completed by the Company's wholly-owned subsidiary
in November 2013. The project is currently on budget and proceeding as scheduled
with an expected commercial operation date in the third quarter of 2014. The
Company expects the successful completion of the project will contribute to cash
flow by providing a consistent source of revenue from the fixed price
Electricity Purchase Agreement with BC Hydro and will enhance the long-term
competitiveness of the Mackenzie sawmilling site.
The Company ended the year with consolidated net debt of $44.0 million (December
31, 2012 - $11.6 million) and net debt to capitalization ratio of 27% (December
31, 2012 - 10%). Excluding borrowings under the project financing, which is
largely structured on a non-recourse basis to the lumber segment assets and to
the parent company, net debt was $21.2 million and net debt to capitalization
ratio was 15% at December 31, 2013.
Outlook and Strategy
Management anticipates further growth in lumber segment cash flow based upon the
expected continuation of solid demand in each of the Company's markets in North
America, China and Japan, incremental improvements in productivity and unit cash
conversion costs which are expected to offset higher log and labour costs, and
contributions from its recently expanded lumber marketing and distribution
business.
In addition to continued focus on operational improvements, management intends
to complete detailed plans to further upgrade its Fort St. James mill and to
optimize the potential of its two manufacturing locations at Mackenzie.
Management also expects its longer-term plans for the Mackenzie mills will
incorporate the expected harvest levels for the Mackenzie Timber Supply Area
which are currently being reviewed by the Ministry of Forests, Lands and Natural
Resources Operations.
Conference Call
There will be a conference call held by the Company on Monday, February 24, 2014
at 8:00 AM Pacific time / 11:00 AM ET to discuss the fourth quarter financial
and operating results. To participate in the call, please dial 416-340-8530 or
toll free 800-766-6630. The call will also be available on instant replay access
until March 10, 2014 by dialling 905-694-9451 or 800-408-3053 and entering
participant pass code 9370553.
About Conifex Timber Inc.
Conifex and its subsidiaries' primary business currently includes timber
harvesting, reforestation, forest management, sawmilling logs into lumber and
wood chips, and value added lumber finishing and distribution. Conifex's lumber
products are sold in the United States, Chinese, Canadian and Japanese markets.
Upon completion of its power generation facility at Mackenzie, British Columbia,
Conifex's business sectors will be expanded to include bioenergy.
Forward-Looking Statements
Certain statements in this news release may constitute "forward-looking
statements". Forward-looking statements are statements that address or discuss
activities, events or developments that the Company expects or anticipates may
occur in the future. When used in this news release, words such as "estimates",
"expects", "plans", "anticipates", "projects", "will", "believes", "intends"
"should", "could", "may" and other similar terminology are intended to identify
such forward-looking statements. Forward-looking statements reflect the current
expectations and beliefs of the Company's management. Because forward-looking
statements involve known and unknown risks, uncertainties and other factors,
actual results, performance or achievements of the Company or industry may be
materially different from those implied by such forward-looking statements.
Examples of such forward-looking information that may be contained in this news
release include statements regarding: growth and future prospects of our
business; our perceptions of the industry and markets in which we operate and
anticipated trends in such markets and in the countries in which we do business;
benefits that may accrue to the Company as a result of certain capital
expenditure programs; that the Mackenzie mills will incorporate the expected
harvest levels for the Mackenzie Timber Supply Area; and the anticipated
benefits, cost, timing and completion dates for projects, including the power
generation project at the Company's Mackenzie facility.
Assumptions underlying the Company's expectations regarding forward-looking
information contained in this news release include, among others: that the
Company will be able to effectively market its products; that the U.S. housing
market will continue to improve; that there will be no further delays and
disruptions affecting the completion of the power generation project at the
Company's Mackenzie facility and that the Company will be able to commence
timely delivery of power therefrom; that softwood lumber will experience
improved and sustained demand in the marketplace at favourable prices; that the
Company will be able to dynamically respond to shifts in demand among its major
markets; the general stability of the economic, political and regulatory
environments within the countries where the Company conducts operations; the
ability of the Company to obtain financing (if necessary) on acceptable terms or
at all; that interest and foreign exchange rates will not vary materially from
current levels; and that our mills and equipment will operate at expected
levels. Forward-looking statements involve significant uncertainties, should not
be read as a guarantee of future performance or results, and will not
necessarily be an accurate indication of whether or not such results will be
achieved. A number of factors could cause actual results to differ materially
from the results discussed in the forward-looking statements, including, without
limitation: those relating to potential disruptions to production and delivery,
including as a result of equipment failures, labour issues, the complex
integration of processes and equipment and other factors; labour relations;
failure to meet regulatory requirements; changes in the market; potential
downturns in economic conditions; fluctuations in the price and supply of
required materials, including log costs; fluctuations in the market price for
products sold; foreign exchange fluctuations; trade restrictions or import
duties imposed by foreign governments; availability of financing (as necessary);
and other risk factors described in the Company's 2013 annual management's
discussion and analysis, available on SEDAR at www.sedar.com. These risks, as
well as others, could cause actual results and events to vary significantly.
Accordingly, readers should exercise caution in relying upon forward-looking
statements and the Company undertakes no obligation to publicly revise them to
reflect subsequent events or circumstances, except as required by law.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that
term is defined in the policies of the TSX Venture Exchange) accepts
responsibility for the adequacy or accuracy of this release.
FOR FURTHER INFORMATION PLEASE CONTACT:
Conifex Timber Inc.
Yuri Lewis
Chief Financial Officer
(778) 331-8687
Conifex Timber (TSXV:CFF)
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