Release Date: May 09, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Interfor Corp (IFSPF, Financial) reported an adjusted EBITDA of $49 million in Q1, with all operating regions being EBITDA positive despite challenges.
- The company has a strong liquidity position with over $300 million available, providing financial stability.
- Interfor Corp (IFSPF) has a geographically diversified asset base, with 60% of its assets in the US, reducing exposure to tariffs.
- The company successfully increased its operating rate from 78% in Q4 to 82% in Q1, indicating improved operational efficiency.
- Interfor Corp (IFSPF) has taken steps to optimize its sawmill portfolio, contributing to stronger lumber prices and improved financial performance.
Negative Points
- Interfor Corp (IFSPF) recorded a net loss of $35 million in Q1, including a $29 million non-cash loss on the disposition of Quebec operations.
- The company faced a 9% increase in production costs per unit of lumber due to operational disruptions from harsh winter weather.
- Lumber shipments were impacted by tariff-driven customer uncertainty and constrained truck availability in the US South.
- The company anticipates continued lumber market volatility due to rising duty rates and potential tariffs.
- Interfor Corp (IFSPF) experienced a $54 million build in working capital, primarily driven by seasonal log inventory increases and tariff-related shipment delays.
Q & A Highlights
Q: Are you seeing any meaningful production response in Southern yellow pine due to stronger pricing and upcoming higher duties?
A: Ian Fillinger, President and CEO, stated that there have been no significant changes in Southern yellow pine production. Mills are running steadily, and adding hours is challenging in the South for various reasons.
Q: How are your finished good inventories compared to typical levels, and how are tariffs affecting shipments?
A: Ian Fillinger mentioned that inventory levels are in line with expectations, despite some delays due to tariffs. Channel inventories are tight, with everyone managing risks carefully.
Q: Can you discuss current demand trends in repair and remodeling versus new residential construction?
A: Ian Fillinger noted that while drivers like aging housing stock and employment gains support repair and remodeling, consumer sentiment is softening. New residential construction has held up well despite mortgage rate challenges, aided by homebuilder incentives.
Q: With Western SPF prices declining and duties increasing, what is your approach to production?
A: Ian Fillinger emphasized the strength of Interfor's diversified portfolio, with over 75% not subject to duties. The company is well-positioned to handle market fluctuations, leveraging its diverse operations across Canada and the US.
Q: What is Interfor's stance on government support and the softwood lumber dispute?
A: Ian Fillinger stated that Interfor is not relying on government incentives but is engaging with the Canadian government on the softwood lumber dispute. The resolution requires high-level discussions between the US and Canadian governments.
Q: How is Interfor managing its 37% net debt to capitalization rate?
A: Richard Pozzebon, CFO, explained that the leverage increase is temporary due to inventory build-up. The company expects leverage to decrease by the end of Q2 and has several levers, including tenure sales and duty deposits, to manage cash flow.
Q: How might Section 232 tariffs affect European imports and North American prices?
A: J. Barton Bender, SVP of Sales and Marketing, noted that tariffs could lead to higher North American prices or supply rationalization. European imports have stabilized, and any additional costs would likely be passed on to consumers.
Q: What is the expected timeline for Section 232 tariffs, and how might they impact the market?
A: Ian Fillinger stated that the timing of Section 232 tariffs is uncertain. Interfor is prepared for potential impacts, with a strong US platform and diversified operations to manage any supply rationalization.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
