Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Acadian Timber Corp (ACAZF, Financial) delivered very strong financial results for Q2 2024, driven by the sale of 600,000 voluntary carbon credits and steady operational performance.
- Sales for the second quarter were $41.2 million, a significant increase of $20.5 million compared to Q2 2023.
- Adjusted EBITDA for the quarter was $20.6 million, a substantial increase from $5.7 million in the prior year period.
- Free cash flow was $16.4 million, $12.3 million higher than the same period in the prior year.
- Acadian Timber Corp (ACAZF) has net liquidity of $25.8 million as of June 29, 2024, primarily due to the net cash flows from the sales of carbon credits.
Negative Points
- Weighted average selling price, excluding biomass, decreased 8% year-over-year.
- Operating costs and expenses increased to $32.2 million during the second quarter, up from $15.5 million in the prior year period.
- Softwood sawlog pricing decreased 10% and hardwood sawlog pricing decreased 9% due to market weaknesses.
- New Brunswick's adjusted EBITDA for the quarter was $4.5 million, down from $5 million in the prior year period.
- Challenges remain in Maine regarding contractor availability and the need for investment in more efficient equipment.
Q & A Highlights
Acadian Timber Corp (ACAZF) Q2 2024 Earnings Call Highlights
Q: In the MD&A, you mentioned that labor markets remain tight in Maine, but based on your increase in Maine sales volumes this quarter, have you seen conditions begin to improve in the region? And do you expect this to continue going forward?
A: (Adam Sheparski, President, CEO) We did see some increase. I think there's still a fair bit of work to be done in Maine. We have some capacity now. And I would say -- I would divide it between just pure capacity from a volume perspective. But also as we talked about cost moving forward it's going to be very important for us to stay focused and increase capacity in the right forms of equipment and get more efficient equipment on the land base, which means we need our contractors to invest more capital. So we will stay focused, although we were happy to see some improvements that we still have a lot of work to do.
Q: Could you provide any more color on the progress in determining the opportunity to develop carbon credits across your Canadian timberlands?
A: (Adam Sheparski, President, CEO) The federal protocol came out and it seems like it's a reasonable protocol. There is some concern regarding demand for those credits. We do have to spend more time evaluating that. If the federal protocol doesn't work, there is the voluntary market that we currently use for our main project that would avail itself to us in an IFM format similar to Maine.
Q: Can you make the choice between whether you're developing a project for the compliance or the voluntary market relatively late in the project development process? Or is that something you need to determine from the outset as part of the project's design?
A: (Adam Sheparski, President, CEO) There is a point where you do have to decide, but there is work that can be done early on. There is a lot of heavy lifting associated with inventory, that has to get done to develop either project and those would be similar processes. But eventually you will have to make a decision to choose a path.
Q: Could you help us understand exactly what the situation is with changes in equipment mix and how material that potentially could be?
A: (Adam Sheparski, President, CEO) In Maine, there is a traditional tree length system, which is very expensive to run and requires more units compared to what is traditionally used specifically as it relates to softwood, which is a cut-to-length processor. We aren't seeing the investment in this new and sometimes more expensive equipment in Maine. We are trying to work with our contractors to get that investment made in the hopes that we can be much more efficient in harvesting softwood in Maine.
Q: SG&A picked up a fair bit in the quarter. Are you able to quantify or provide any comments around how much of that would have been associated with the carbon credit sales?
A: (Adam Sheparski, President, CEO) About 15% of the sales price of carbon credits is associated with SG&A. Additionally, we have been experiencing some corporate costs associated with the land claim as well, but to a much lesser extent than the carbon credit sales.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
