Release Date: May 12, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Conifex Timber Inc (CFXTF, Financial) achieved a positive net income of $600,000 in Q1 2025, joining Wes Fraser as one of the few public SPF producers in Western Canada to do so.
- The company reported an EBITDA of $4.9 million in Q1 2025, which is approximately 30% of its current equity market capitalization.
- Conifex Timber Inc (CFXTF) has access to an affordable supply of quality sawlogs, supporting a two-shift sawmill operation and improving its position on the North American lumber industry cost curve.
- The company benefits from higher electricity prices in the opening and closing months of the year, contributing positively to its EBITDA.
- Conifex Timber Inc (CFXTF) operates in a fiber supply region with unparalleled self-sufficiency, reducing supply constraints faced by other sawmill operations in British Columbia.
Negative Points
- The company faces higher duty deposit rates, expected to increase to 26.81% in September and potentially 34.45% in November 2025.
- Conifex Timber Inc (CFXTF) has cumulative duties of $40.3 million held in trust by US Customs, which could impact financial flexibility.
- The company's power plant will undergo maintenance downtime in Q2, reducing its EBITDA contribution during that period.
- Conifex Timber Inc (CFXTF) is currently running its mill four days a week on two shifts due to insufficient log supply, affecting capacity utilization.
- The company is dealing with a high interest rate of 14% on its loans, which impacts its liquidity and financial costs.
Q & A Highlights
Q: With respect to the guidance, I heard fiscal '25 adjusted EBITDA in the low double digits. Did I hear that correctly?
A: Yes, very low double digits. If you look at the general forecasts for major companies, they are generally around $40 or $50 per 1,000 board feet of SPF produced and sold. We expect to achieve $60 or $70 per 1,000 board feet over the 12-month period, resulting in low double digits for EBITDA for the calendar year. (Ken Shields, CEO)
Q: Does the guidance assume no additional tariffs?
A: It assumes the ramp-up of duties to 34.45% in the second half of 2025. (Ken Shields, CEO)
Q: Can you characterize the pricing assumption? Is it roughly in line with today's pricing, or are you assuming some ramp?
A: We are assuming a ramp. We monitor major analysts' forecasts, and our pricing assumptions towards the end of the year represent an improvement from today's price. They are not materially different from the Q1 average price of 488. We expect some price relief to partially offset the higher duties. (Ken Shields, CEO)
Q: On the last call, you mentioned positive EBITDA in the second quarter. Are you still expecting it to be positive?
A: Yes, but it will be quite a bit lower. Our power plant is down for maintenance for at least four weeks, which will reduce EBITDA. Additionally, we are running our mill four days a week on two shifts rather than five due to weather-related log supply issues. (Ken Shields, CEO)
Q: How do you feel about liquidity? Do you need to borrow additional funds to support working capital?
A: We have a close relationship with our main lenders and appreciate their understanding of our competitiveness. We have a 14% interest rate, which is expensive, so we don't keep much surplus liquidity. We will review our second-half plans with lenders, considering small capital projects with rapid paybacks and developing stands for future harvests. (Ken Shields, CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
