Release Date: August 09, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Log costs and conversion costs were down in most regions.
- Shipments were ahead of production, indicating efficient inventory management.
- The company generated $48 million of operating cash flows in the quarter.
- Interfor Corp (IFSPF, Financial) maintained a stable financial position with a net debt to invested capital leverage ratio of 35%.
- The company expects to collect tax refunds totaling approximately $59 million and further cash proceeds from the sale of coastal BC forest tenures.
Negative Points
- Adjusted EBITDA was negative $17 million, reflecting ongoing weak lumber market conditions.
- Revenue declined by 5% quarter over quarter, driven by a 4% decrease in lumber shipment volume and a 1% drop in the average realized lumber price.
- A net loss of $76 million was realized in the quarter.
- The company announced curtailments of several low-margin mills, impacting approximately 15% of production volume.
- Softwood lumber duties on Canadian producers are set to increase from 8% to close to 14%, adding uncertainty to lumber production from Canada.
Q & A Highlights
Interfor Corp (IFSPF) Q2 2024 Earnings Call Highlights
Q: Question about the temporary curtailments, incremental temporary curtailments that you guys announced yesterday 280 million to 350 million board feet that's over August and December. Does that include any overlaps from the curtailments that you announced back on April 30, which were from May to September?
A: Certainly, there's a little bit of overlap there, but I guide you to think about that as being forward-looking guidance. So from August forward through the end of the year that is our stated temporary curtailments of 280 million to 350 million board feet and sort of ignore the prior guidance and just look at our actual production year to date through June and factor in this new guidance we've provided. (Richard Pozzebon, CFO)
Q: Can you maybe speak to the US South and how Southern yellow pine is more exposed to renovation and market?
A: The US South on the repair remodel side, heavy on the treating side. Obviously, that fiber lends itself very well to the treating applications. And so we've seen kind of a mid-single digit decline in activity on that side. The other piece that I think is pronounced for the South is a couple of things. One is on the multifamily side, the area that's hit the hardest and has the most significant declines as the markets in the South. So take your Florida, your Georgia, your Texas. They've seen pretty significant declines in that area. (Barton Bender, SVP Sales and Marketing)
Q: How do you potentially think about the lead time or timing here? Does capacity come up pretty quickly after rates move higher?
A: It's a tough question to answer really. I mean when people make curtailment decisions. Often there's whips still in process and shipments on orders that have been taken. So it is a bit of a longer-term process. It's going to be interesting to see how the duty increase kind of settles into the marketplace. Our position is that we think prices are going to go up. We think they're going to go up, not just for Canadian lumber, but also for US production as well. (Barton Bender, SVP Sales and Marketing)
Q: Can you provide some context in terms of the magnitude and what we should expect? I mean, is 5.5% 30-year mortgage rate? Is that what's going to cut it?
A: We've been discussing that with this week also. What is the magic number? It used to be 8% a number of years ago than it was 6%. The psyche, we don't know, I don't think there's a path that we can look back on kind of follow. So I think we're in sort of uncharted territories when it comes to trying to predict that. (Ian Fillinger, CEO)
Q: Are you able to touch on demand trends through Q2? What you saw and what you've seen since Q2 into July and in the early days of August?
A: On the repair and remodel side, we kind of look at that in two buckets. One is from the treating side and I suppose the other side is just the non-trading side. And I would say the non-treating side for us is off in that sort of 4% to 6% range, depending on a customer and the comp. And on the treating side, I would say it's more 5% to 7% it's been hit a little bit harder. (Barton Bender, SVP Sales and Marketing)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
