Release Date: February 14, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Interfor Corp (IFSPF, Financial) achieved positive operating cash flow of $144 million in a challenging market with low lumber prices.
- The company completed a new planer project at the Thomaston, Georgia mill, meeting all KPI targets within 30 operating days.
- Interfor Corp (IFSPF) reduced mill conversion costs across most regions despite significant market-related curtailments.
- Employee turnover rates improved across the company's platform.
- The company generated adjusted EBITDA of $80 million for Q4, with all operating regions in Canada and the US being EBITDA positive.
Negative Points
- Interfor Corp (IFSPF) recorded a net loss of $50 million in Q4, including a $42 million foreign exchange loss.
- The company faces ongoing volatility in the lumber industry due to uncertain economic and political environments.
- Canadian lumber is facing headwinds for shipments to the US markets, with potential tariffs adding to cost pressures.
- Lumber demand is showing signs of decline due to economic uncertainties, impacting short-term market stability.
- The threat of tariffs creates a fluid and uncertain demand environment, with customers hesitant to build inventory.
Q & A Highlights
Q: With net debt to capitalization stable at 35%-36%, do you need to use non-operational levers to prevent your net debt ratio from rising, especially considering the potential impact of tariffs on market value?
A: Ian Fillinger, President and CEO, stated that the impact of selling non-operational assets, such as BC Coast tenures, is not affected by tariff threats. These sales align with the BC government's mandate towards First Nations' ownership and are not tied to the dimensional market. The sales planned for 2025 are already advanced, and they do not foresee a value hit due to tariffs.
Q: Are customers stockpiling in anticipation of tariffs, or are they buying less?
A: J. Barton Bender, Senior VP of Sales and Marketing, noted that there was no significant stockpiling activity observed. Inventories remain low, and any current activity is likely filling in gaps from earlier in the year. The market is tense and uncertain, with no infrastructure for builders to store large inventories.
Q: How tight could the market get if demand picks up, and what flexibility does Interfor have to respond with higher production levels?
A: Ian Fillinger explained that despite unfavorable weather, the removal of 10% capacity in 2024 hasn't fully impacted the market yet. Interfor can adjust production to meet demand changes, benefiting from its diverse operations. Bart Bender added that current Southern Yellow Pine prices might represent the year's lows, encouraging buying.
Q: How have log costs trended in the US Southeast following the hurricane season, and what are the expectations for the next quarters?
A: Ian Fillinger mentioned that while there were localized cost decreases due to salvage wood in Georgia, these were short-lived and have mostly been worked through. Overall, the impact on log costs was limited.
Q: With potential tariffs, how much substitution could occur from SPF to Southern Yellow Pine, and could this open the door to more European imports?
A: Ian Fillinger emphasized that SPF remains the preferred choice for builders due to its lighter weight and ease of use. While some substitution with Southern Yellow Pine might occur, SPF is expected to remain the dominant choice. European imports are constrained by log costs and equipment limitations, likely maintaining current levels.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
