GreenFirst Reports Financial Results for the Second Quarter of 2024
Highlights
-
Q2 2024 net loss from continuing operations was
$14.5 million or$0.08 per share (diluted), compared to net loss of$13.4 million or loss of$0.08 per share (diluted) in Q1 2024. Adjusted EBITDA for Q2 2024 was negative$12.1 million compared to negative$3.5 million in Q1 2024. Both the lumber and paper operations had a negative contribution to Q2 2024 as a result of weak market conditions. -
Lumber sales volumes in Q2 2024 were lower than Q1 2024 due to the continued drag on lumber demand as housing affordability remains significantly impacted by high mortgage rates. There also remain an oversupply of lumber, which resulted in lower field takeaways. Average realized lumber prices of
$637 /mfbm for Q2 2024 were also lower than the$644 /mfbm pricing realized in Q1 2024. Benchmark prices continued to be under pressure subsequent to Q2 2024. The recent cuts by theBank of Canada is signaling a reversal in monetary policy. -
The valuation provision for lumber and log inventory was increased to
$3.2 million from$1.0 million at the end of Q1 2024, generating a$2.2 million charge to lumber cost of sales in Q2 2024. -
Our lower duty rate has positively impacted the Company's earnings and free cash flow since
August 1, 2023 . The Company's initial duty deposit rate, totaling 20.23%, remained in effect for almost two years, since the Company's acquisition of its sawmill and paper mill assets onAugust 28, 2021 . This resulted inUS$22 million in higher duties paid compared to its Canadian peers. The Company anticipates an increase in duty deposit rate inmid-August 2024 , in line with its industry peers. -
The Company plans to complete a spin-out transaction of
Kap Corporation ("Kap"), the holding company ofKap Paper Inc. ("Kap Paper"), which holds all operating assets related to the paper mill operations. The shares of Kap will be held directly by the shareholders of the Company as of the completion of the Spin-out. The Spin-out is expected to be completed in Q4 2024. The Spin-out of Kap is part of the natural progression of the decentralization and deconsolidation of the paper mill that was originally disclosed by GreenFirst in the Fall of 2023. -
During Q2 2024, Kap Paper entered into a
$24.0 million term loan agreement with the Province ofOntario (the “Kap Term Loan”). The financing is integral to Kap Paper's long-term strategy and ability to improve its competitiveness in a challenging environment. -
On
August 9, 2024 , the Company purchased a buy-out group annuity that transfers approximately$26.5 million of defined benefit pension obligations to a Canadian insurance company.
"We continue to see macroeconomic pressures impacting our business as lumber prices regressed during Q2 2024. It is times like this where we must focus on things we can control and I am proud of the team's operational accomplishments in our sawmills which continued to see production records being established in the first half of 2024. We also continue to manage liquidity on all fronts through this down cycle, including focusing on sale of non-core assets to better position the Company." said
Financial Highlights
The following selected financial information is from the Company’s financial statements and MD&A:
(In thousands of CAD, except per share amounts) |
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For the quarter ended |
2024 |
2024 |
2023 |
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Net sales from continuing operations |
|
|
|
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Forest products(2) |
$ |
66,309 |
|
$ |
68,853 |
|
$ |
73,475 |
|
|||
Paper products |
|
28,068 |
|
|
24,215 |
|
|
38,153 |
|
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Total net sales from continuing operations |
|
94,377 |
|
|
93,068 |
|
|
111,628 |
|
|||
Operating loss from continuing operations |
|
(16,279 |
) |
|
(7,441 |
) |
|
(9,453 |
) |
|||
Net loss |
|
(14,529 |
) |
|
(13,351 |
) |
|
(9,671 |
) |
|||
Net loss from continuing operations |
|
(14,529 |
) |
|
(13,351 |
) |
|
(9,671 |
) |
|||
Basic loss per share |
|
(0.08 |
) |
|
(0.08 |
) |
|
(0.05 |
) |
|||
Basic loss per share from continuing operations |
|
(0.08 |
) |
|
(0.08 |
) |
|
(0.05 |
) |
|||
Diluted loss per share |
|
(0.08 |
) |
|
(0.08 |
) |
|
(0.05 |
) |
|||
Diluted loss per share from continuing operations |
|
(0.08 |
) |
|
(0.08 |
) |
|
(0.05 |
) |
|||
Adjusted EBITDA from continuing operations(1) |
$ |
(12,104 |
) |
$ |
(3,468 |
) |
$ |
(5,012 |
) |
(In thousands of CAD) |
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As at |
2024 |
2023 |
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Total assets |
$ |
281,716 |
$ |
277,944 |
||
Total liabilities |
|
127,327 |
|
92,706 |
||
Total shareholders' equity |
$ |
154,389 |
$ |
185,238 |
||
1Adjusted EBITDA is a Non‐GAAP measure and does not have standardized meaning under GAAP or IFRS. As a result, it may not be comparable to information presented by other companies. For an explanation and reconciliation of Adjusted EBITDA to related comparable financial information presented in the Financial Statements prepared in accordance with IFRS, refer to the Non-GAAP Measures section in the MD&A for the second quarter and two quarters ended |
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2Includes net sales to external parties only. |
Forest Products (Lumber)
During Q2 2024, the Company saw contribution (net sales less cost of sales) of negative
Net sales were
Cost of sales were
Paper Products
During Q2 2024, the Company saw contribution (net sales less cost of sales) of negative
Net sales were
Cost of sales were
Consistent with all major North American newsprint producers, the Company announced a US$50\MT price increase effective
Other Expenses
The initial duty deposit rate, totaling 20.23%, had remained in effect since the Company's acquisition of its sawmill and paper mill assets and has resulted in a higher payment in relation to our Canadian peers as at
SG&A expenses of
Liquidity and Borrowings
At
Outlook
High interest rates, overall macroeconomic concerns continue to negatively impact lumber demand and pricing. The positive impact on new home builds in the US, due to lack of activity in the resale market, has also subsided as affordability continues to be negatively impacted by higher interest rates. The slowing of activity in the repair and remodeling segment has added to the downward pressure on lumber prices. Near term prospects for lumber markets continue to be challenging, with field inventories remaining extremely lean along with a significant slowdown in takeaway.
In the longer-term, lack of available housing inventory, record levels of immigration in
Despite continued curtailment of lumber production in the Province of
Reconciliation of Adjusted EBITDA
References to EBITDA in this document are measures of earnings (loss) before interest and finance costs, income taxes, depreciation and amortization, while references to Adjusted EBITDA reflect EBITDA plus other non-operating costs such as impact of valuation changes on the Company's investments, the impact of foreign exchange on the Company’s long-term debt, loss on extinguishment of debt, loss on sale of assets and other non-operating losses. Management believes that certain lenders, investors, and analysts use EBITDA and Adjusted EBITDA as a common valuation measurement and to measure the Company’s ability to service debt and meet other payment obligations. EBITDA and Adjusted EBITDA are not intended to replace net earnings (loss), or other measures of financial performance and liquidity reported in accordance with GAAP. For more information on non-GAAP measures, please see the Company's MD&A.
(In thousands of CAD) |
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For the quarter ended |
2024 |
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Net loss from continuing operations |
$ |
(14,529 |
) |
$ |
(13,351 |
) |
$ |
(9,671 |
) |
|||
Adjustments: |
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|
|
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Finance costs, net |
|
1,101 |
|
|
1,056 |
|
|
478 |
|
|||
Income taxes |
|
(2,367 |
) |
|
4,924 |
|
|
(260 |
) |
|||
Depreciation and amortization |
|
4,175 |
|
|
3,973 |
|
|
4,441 |
|
|||
EBITDA |
|
(11,620 |
) |
|
(3,398 |
) |
|
(5,012 |
) |
|||
Gain on sale of assets |
|
(484 |
) |
|
(70 |
) |
|
— |
|
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Adjusted EBITDA from continuing operations(1) |
$ |
(12,104 |
) |
$ |
(3,468 |
) |
$ |
(5,012 |
) |
|||
1Adjusted EBITDA is a Non‐GAAP measure and does not have standardized meaning under GAAP or IFRS. As a result, it may not be comparable to information presented by other companies. For an explanation and reconciliation of Adjusted EBITDA to related comparable financial information presented in the Financial Statements prepared in accordance with IFRS, refer to the Non-GAAP Measures section in the MD&A for the second quarter and two quarters ended |
Earnings Conference Call
GreenFirst will host a conference call to review the Q2 2024 financial results on
About GreenFirst
Forward Looking Information
Certain information in this news release constitutes forward-looking statements under applicable securities laws. Any statements that are contained in this news release that are not statements of historical fact are forward-looking statements. Forward looking statements are often identified by terms such as “may”, “should”, “anticipate”, “expect”, “potential”, “believe”, “intend”, “estimate” or the negative of these terms and similar expressions. Forward-looking statements are based on certain assumptions and, while GreenFirst considers these assumptions to be reasonable, based on information currently available, they may prove to be incorrect. In addition, forward-looking statements necessarily involve known and unknown risks, including those set out in GreenFirst’s public disclosure record filed under its profile on www.sedarplus.ca. Readers are further cautioned not to place undue reliance on forward-looking statements as there can be no assurance that the plans, intentions or expectations upon which they are placed will occur. Such information, although considered reasonable by management at the time of preparation, may prove to be incorrect and actual results may differ materially from those anticipated. Forward-looking statements contained in this news release are expressly qualified by this cautionary statement and reflect our expectations as of the date hereof, and thus are subject to change thereafter. GreenFirst disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
For more information, please visit: www.greenfirst.ca.
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