Release Date: November 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Interfor Corp (IFSPF, Financial) generated positive cash flow from operations despite weak earnings, aided by tax refunds and reduced working capital.
- Available liquidity increased to over $350 million, providing a strong financial position.
- Lumber prices have improved by over 20% since early July, indicating a potential market recovery.
- The company is well-positioned to benefit from the rebalancing of supply and demand in the lumber industry.
- Interfor Corp (IFSPF) has secured new volume contracts, indicating strong customer interest in securing supply for 2025.
Negative Points
- Interfor Corp (IFSPF) reported an adjusted EBITDA loss of $22 million for Q3, reflecting ongoing challenges in the lumber market.
- Total revenue declined by 10% quarter-over-quarter, driven by a decrease in lumber shipment volume and lower average realized prices.
- The company incurred a net loss of $106 million, including noncash impairments related to the sale of Quebec operations.
- Production was reduced, including indefinite closures at two mills in the US South, impacting overall output.
- The fiber supply dynamics in Quebec have worsened, leading to the decision to exit the region and sell manufacturing facilities.
Q & A Highlights
Q: Can you provide a sense of how significant the change has been in customers looking to secure more volumes for 2025?
A: Customers have expressed concern about supply due to recent curtailments, leading to new inquiries and secured volume contracts. This indicates a recognition of potential supply challenges in 2025 among a significant portion of our customer base. - J. Barton Bender, Senior Vice President - Sales and Marketing
Q: What is your estimate of the industry capacity that has been removed, and how much of it could return if markets improve?
A: We estimate about 10% of industry capacity has been removed, with around 50% potentially returning if markets improve. Significant reductions have occurred in the US South and British Columbia. - Ian Fillinger, President, Chief Executive Officer, Director
Q: Could you elaborate on the rationale for the Quebec transaction and what changed since the EACOM purchase?
A: The fiber supply dynamics changed due to government environmental protection policies and record forest fires, leading to a shrinking fiber supply in Quebec. This prompted the sale to strengthen the counterparty's footprint in the region. - Ian Fillinger, President, Chief Executive Officer, Director
Q: How important is IP's fluff pulp mill for your Georgetown sawmill and other sawmills in Eastern Georgia?
A: The pulp mill's closure has minimal impact as we've secured a supply agreement with another mill in the region. The rationalization of mills along the coast has strengthened Georgetown's position. - Ian Fillinger, President, Chief Executive Officer, Director
Q: Given the recent capacity rationalization, what level of lumber production are you targeting for next year?
A: We are targeting around 4 billion board feet, depending on market conditions. Production levels can be adjusted based on lumber prices and market demand. - Richard Pozzebon, Chief Financial Officer, Executive Vice President
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
