Conifex Announces Fourth Quarter 2013 Results
VANCOUVER, BRITISH COLUMBIA--(Marketwired - Feb 21, 2014) -
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 $0.86 per share for the year ended December 31,
2012.
Summarized operating results and statistics for each of the
comparison periods are provided below.
(millions of dollars except share and per share amounts) |
Q4 2013 |
Q3 2013 |
|
YTD 2013 |
|
Q4 2012 |
|
YTD 2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales |
|
63.7 |
|
65.2 |
|
|
259.6 |
|
|
60.0 |
|
|
217.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA |
|
4.9 |
|
2.8 |
|
|
21.7 |
|
|
(0.3 |
) |
|
(4.0 |
) |
Operating earnings (loss) |
|
2.2 |
|
0.7 |
|
|
12.8 |
|
|
(2.4 |
) |
|
(12.9 |
) |
Net
income (loss) |
|
1.1 |
|
(0.1 |
) |
|
9.5 |
|
|
(3.6 |
) |
|
(16.2 |
) |
Net
income (loss) per share - basic and diluted |
|
0.05 |
|
(0.01 |
) |
|
0.46 |
|
|
(0.18 |
) |
|
(0.86 |
) |
Shares outstanding - weighted average (millions) |
|
20.8 |
|
20.8 |
|
|
20.8 |
|
|
19.6 |
|
|
18.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statistics |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lumber shipments - Conifex product (MMfbm) |
|
118.6 |
|
129.3 |
|
|
487.0 |
|
|
110.2 |
|
|
444.2 |
|
Lumber shipments - Wholesale (MMfbm) |
|
9.2 |
|
17.6 |
|
|
56.3 |
|
|
37.5 |
|
|
94.9 |
|
Lumber production (MMfbm) |
|
116.3 |
|
123.0 |
|
|
499.4 |
|
|
108.4 |
|
|
424.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average exchange rate - US$/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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
EBITDA (4) |
|
4.9 |
|
2.8 |
|
|
21.7 |
|
|
(0.3 |
) |
|
(4.0 |
) |
(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.
Conifex Timber Inc.Yuri LewisChief Financial Officer(778)
331-8687
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