Acadian Timber Corp. Reports Second Quarter Results

EDMUNDSTON, New Brunswick, July 26, 2023 (GLOBE NEWSWIRE) -- Acadian Timber Corp. (“Acadian” or the “Company”) (TSX:ADN, Financial) today reported financial and operating results¹ for the three months ended June 24, 2023 (the “second quarter”).

“While the second quarter of the year is traditionally our slowest due to seasonal operating conditions, favourable weather allowed harvest to continue later into the winter and to begin earlier after the spring thaw. Combined with increased contractor capacity, Acadian delivered strong second quarter results and recovered much of the volume shortfall of the first quarter,” commented Adam Sheparski, President and Chief Executive Officer. “We are also pleased to announce the successful registration of our first voluntary carbon credits, which are now available for sale."

Acadian generated $4.1 million of Free Cash Flow during the second quarter and declared dividends of $4.9 million to shareholders. Acadian’s balance sheet remains solid with $17.0 million of net liquidity as at June 24, 2023, which includes funds available under our credit facilities.

On June 8, 2023, 770,071 voluntary carbon credits were registered on the American Carbon Registry and made available for sale under the project name Anew – Katahdin Forestry Project, and have been recorded as inventory in our June 24, 2023 interim condensed consolidated financial statements. These carbon credits are associated with our first carbon credit development project on the portion of our Maine Timberlands that is subject to a working forest conservation easement.

The total volume of credits expected to be generated from the project over the 10-year crediting period has increased from the initial estimate of 1.6 million credits to 1.9 million credits. Actual credit issuances will be adjusted each reporting period based on actual harvesting, natural disturbances, and other factors, as well as periodic updating for inventory and verification activities.

Acadian is committed to health and safety as our number one priority. We believe that emphasizing and achieving a good safety performance is a leading indicator of success in the broader business. Acadian’s operations experienced no recordable safety incidents during the quarter among employees or contractors.

¹ This news release makes reference to Adjusted EBITDA, Adjusted EBITDA margin, Free Cash Flow and Payout Ratios which are key performance measures in evaluating Acadian’s operations and are important in enhancing investors’ understanding of the Company’s operating performance. Adjusted EBITDA and Adjusted EBITDA margin are indicative of the underlying profitability of Acadian’s operating segments and are used to evaluate operational performance. Free Cash Flow is used to evaluate Acadian’s ability to generate sustainable cash flows from our operations while Payout Ratios are used to evaluate Acadian’s ability to fund its distribution using Free Cash Flow. Acadian’s management defines Adjusted EBITDA as net income before interest, income taxes, fair value adjustments, recovery of or impairment of land and roads and depreciation and amortization, and “Adjusted EBITDA margin” as Adjusted EBITDA as a percentage of Acadian’s sales. Free Cash Flow is defined as Adjusted EBITDA less interest paid, current income tax expense, and capital expenditures plus net proceeds from the sale of timberlands and other fixed assets (proceeds less gains or losses). Reference made to “Payout Ratio” is defined as dividends declared divided by Free Cash Flow, and Payout Ratio with DRIP is defined as dividends paid in cash divided by Free Cash Flow. We have provided in this news release reconciliations of net income, as determined in accordance with International Financial Reporting Standards (“IFRS”), to Adjusted EBITDA and Free Cash Flow. Reference is also made to net liquidity which includes cash and funds available under credit facilities less amounts reserved to support the minimum cash balance related to long-term debt. As these measures do not have standardized meanings prescribed by IFRS, they may not be comparable to similar measures presented by other companies. Please refer to Management’s Discussion and Analysis for further details.

Review of Operations

Financial and Operating Highlights

During the second quarter, Acadian generated sales of $20.7 million, compared to $16.5 million in the prior year period. The weighted average selling price, excluding biomass, increased 9% year-over-year, benefiting from strong softwood sawlog and hardwood pulpwood prices driven by strong demand.

Sales volume, excluding biomass, was 18% higher compared to the prior year period as a result of favourable weather, which allowed harvest to continue later into the winter and to begin earlier after the spring thaw, and increased contractor availability. Biomass sales volume was 8% higher due to favourable market conditions.

Operating costs and expenses were $15.5 million during the second quarter, compared to $13.8 million during the prior year period, reflecting higher sales volumes. Weighted average variable costs, excluding biomass, were 10% lower as compared to the prior year period, primarily as a result of lower fuel costs and shorter hauling distances, partially offset by increased contractor rates.

Net income for the second quarter totaled $5.8 million, or $0.34 per share, compared to $4.5 million, or $0.27 per share, in the same period of 2022. The increase in net income compared to the prior year period was primarily the result of higher operating income and gain on the sale of 16 acres of timberlands, partially offset by lower non-cash fair value adjustments.

Adjusted EBITDA was $5.7 million during the second quarter compared to $2.7 million in the prior year period, reflecting higher operating income and gain on sale of timberlands. Adjusted EBITDA margin for the quarter was 27% compared to 17% in the prior year period. Free Cash Flow was $4.1 million, being $2.2 million higher than the prior year period.

During the first half of 2023, Acadian generated sales of $43.1 million, consistent with the prior year period. Sales volume, excluding biomass, was 18% lower than the first half of 2022 but was offset by a 13% increase in the weighted average selling price, excluding biomass. Operating costs and expenses of $32.5 million were $1.1 million lower year-over-year. Adjusted EBITDA of $11.3 million was $1.6 million higher compared to the prior year period.

For the six months ended June 24, 2023, net income was $11.4 million, or $0.67 per share, which represents an increase of $2.7 million compared to the prior year period, primarily the result of higher operating income, gain on sale of timberlands and non-cash fair value adjustments.

Segment Performance

New Brunswick Timberlands

The table below summarizes operating and financial results for New Brunswick Timberlands.

Sales for New Brunswick Timberlands in the second quarter were $16.6 million compared to $13.5 million during the prior year period. Sales volume, excluding biomass, increased by 17% primarily due to favourable weather conditions compared to the second quarter of the prior year and increased contractor availability. Biomass sales volume increased by 98% as compared to the prior year period due to favourable market conditions.

The weighted average selling price, excluding biomass, for the second quarter was $86.36 per m³, or 7% higher than the prior year period, as a result of stable softwood sawlog and pulpwood prices, driven by strong demand, partially offset by lower hardwood sawlog pricing due to unfavourable end use markets. Biomass prices were 7% higher year-over-year due to favourable market conditions.

Operating costs and expenses were $11.9 million during the second quarter, compared to $10.9 million in the prior year period, reflecting higher sales volumes. Weighted average variable costs, excluding biomass, were 15% lower primarily as a result of lower fuel costs and shorter hauling distances, partially offset by increased contractor rates.

Adjusted EBITDA for the quarter was $5.0 million compared to $2.7 million in the prior year period and Adjusted EBITDA margin was 30% compared to 20% in the prior year period as a result of higher operating income.

During the first half of 2023, New Brunswick Timberlands’ sales of $34.5 million were 9% higher than the prior year period. The weighted average selling price, excluding biomass, increased 15%, however, sales volume, excluding biomass, decreased 9% year-over-year due to contractor availability noted previously. Operating costs and expenses of $25.2 million during the first half of 2023 were $0.9 million higher than the prior year period, due primarily to increased contractor rates. Adjusted EBITDA was $9.9 million compared to $7.4 million in the first half of 2022, and Adjusted EBITDA margin increased to 29% from 23%.

Maine Timberlands

The table below summarizes operating and financial results for Maine Timberlands.