Conifex Announces First Quarter 2014 Results
VANCOUVER, BRITISH COLUMBIA--(Marketwired - May 11, 2014) -
Conifex Timber Inc. ("Conifex" or the "Company") (TSX-VENTURE:CFF)
today reported net income of $1.6 million or $0.08 per diluted
share for the first quarter of 2014 compared to net income of $1.1
million or $0.05 per diluted share for the previous quarter and net
income of $6.2 million or $0.29 per diluted share for the first
quarter of 2013.
Summarized operating results and statistics for each of the
comparison periods are provided below.
(millions of dollars except share and per share amounts) |
Q1 2014 |
Q4 2013 |
Q1 2013 |
|
|
|
|
Sales |
67.2 |
63.7 |
66.2 |
|
|
|
|
EBITDA |
6.1 |
4.9 |
9.2 |
Operating income |
2.8 |
2.2 |
6.6 |
Net income |
1.6 |
1.1 |
6.2 |
Net income per share - basic |
0.08 |
0.05 |
0.30 |
Net income per share - diluted |
0.08 |
0.05 |
0.29 |
Shares outstanding - weighted average (millions) |
20.8 |
20.8 |
20.7 |
|
|
|
|
Statistics |
|
|
|
Lumber shipments - Conifex product (MMfbm) |
95.9 |
118.6 |
119.8 |
Lumber shipments - Wholesale (MMfbm) |
24.9 |
9.2 |
17.2 |
Lumber production (MMfbm) |
128.3 |
116.3 |
124.2 |
|
|
|
|
Average exchange rate - US$/Cdn$ (1) |
0.906 |
0.953 |
0.991 |
Average WSPF 2x4 #2&Btr lumber price (US$) (2) |
$
367 |
$
370 |
$
390 |
Average WSPF 2x4 #2&Btr lumber price (Cdn$) (3) |
$ 405 |
$ 388 |
$ 393 |
|
|
|
|
Reconciliation of EBITDA to Net Income |
|
|
|
Net income |
1.6 |
1.1 |
6.2 |
Add: Interest expense and accretion |
1.5 |
1.5 |
1.1 |
Amortization |
2.6 |
2.2 |
2.0 |
Non-cash items related to compensation |
0.4 |
0.1 |
(0.1) |
EBITDA |
6.1 |
4.9 |
9.2 |
(1) |
Source: Bank of Canada website www.bankofcanada.ca |
(2) |
Source: Random Lengths Publications Inc. |
(3) |
Average WSPF 2x4 #2&Btr lumber price (US$) divided by average
exchange rate |
The variation in consolidated net income, operating income, and
EBITDA was largely attributable to operating results in the lumber
segment as fluctuations in corporate costs, other items and
bioenergy segment expenses between the comparative quarters were
modest and did not have a material effect on overall operating
results. The lumber segment recorded operating income of $4.4
million during the first quarter of 2014 which represented an
improvement of $1.1 million over the previous quarter and a decline
of $4.0 million from the first quarter of 2013. First quarter 2014
EBITDA of $6.1 million was comprised of lumber segment EBITDA of
$7.1 million offset by corporate costs and other items of $1.0
million. Lumber segment EBITDA improved by $1.6 million over the
previous quarter and declined by $3.4 million from the first
quarter of 2013.
According to data published by the U.S. Census Bureau, U.S.
housing starts averaged a seasonally adjusted annualized rate of
923,000 over the first quarter of 2014, which represented a decline
of 8% from the fourth quarter of 2013 and 4% from the first quarter
2013. Industry analysts largely attributed the subdued level of new
home construction activity during the first quarter of 2014 to the
unusually severe winter weather conditions experienced across many
regions in North America. In Western Canada, seasonal railcar
shortages were heightened by the adverse winter conditions and the
shipping environment was further exacerbated in March 2014 by a
truckers' strike at the main container port in Vancouver, British
Columbia. As a result of the logistics related challenges,
shipments of Conifex produced lumber totalled 96 million board feet
during the first quarter of 2014 which represented a decline of
approximately 20% from the previous quarter and the first quarter
of 2013. Production volumes, also somewhat hampered by weather
related operational challenges, totalled 128 million board feet and
reflected an increase of 10% over the previous quarter and 3% over
the first quarter of 2013.
The benchmark lumber price expressed in Canadian dollars
averaged $405 during the first quarter of 2014, an increase of $17
per thousand board feet or 4% over the previous quarter and $12 per
thousand board feet or 3% over the first quarter of 2013. The
export tax rate on shipments to the U.S. was zero percent during
the first quarters of 2014 and 2013 and averaged 2% during the
fourth quarter of 2013.
Compared to the previous quarter, although gross lumber revenues
from Conifex produced lumber declined by 12%, unit gross sales
realizations and unit mill net realizations improved by 9% and
compare favourably to Canadian equivalent benchmark prices which
increased by 4% quarter over quarter. The better than trend
improvement in unit mill net realizations is partly attributable to
shipments of a higher value product mix, because shipments to the
U.S. increased while shipments to China, which generally consumes
lower grade lumber products, decreased. Compared to the first
quarter of 2013, gross lumber revenues from Conifex produced lumber
declined by 14% while unit gross sales realizations increased by 8%
and unit mill net realizations increased by 4%.
Compared to the fourth quarter of 2013, the main factors
contributing to the increase of $1.1 million in lumber segment
operating income included a 9% improvement in unit mill net
realizations and a modest increase in revenue from by-products
which more than offset a 19% decline in shipment volume of Conifex
produced lumber, a 5% increase in unit log costs and a 4% increase
in unit cash conversion costs. Compared to the first quarter of
2013, the decline of $4.0 million in lumber segment operating
income was primarily attributable to the adverse impact of a 13%
increase in unit log costs, a 21% increase in unit cash conversion
costs and a 20% decline in shipment volumes, partially offset by a
4% improvement in unit mill net realizations and a 33% increase in
by-product revenue.
Management expects that anticipated solid demand in each of the
Company's markets in North America, China and Japan for the balance
of the year will result in average U.S. benchmark lumber prices
approximating levels similar to those of 2013, and higher year over
year unit mill nets to be realized if the Canadian currency remains
at relatively weaker ranges. Management expects improvement in unit
cash conversion costs, which were higher than usual in the current
quarter due partly to seasonal and weather related factors and
non-recurring events, to result from further productivity gains and
a return to a more typical cost environment. These gains are
expected to more than offset higher log and labour costs and
contribute to further growth in lumber segment profitability.
On February 3, 2014, the Company completed the acquisition of
Lignum Forest Products LLP, a private partnership which operates a
lumber marketing and distribution business. The aggregate purchase
price of approximately $4.8 million was funded from the Company's
existing available cash.
In the first quarter of 2014, the Company generated cash of $7.5
million from operations before working capital changes and used
cash of $18.8 million in net working capital increases. The Company
ended the first quarter of 2014 with consolidated net debt of $87.1
million (December 31, 2013 - $44.0 million) and net debt to
capitalization ratio of 42% (December 31, 2013 - 27%). Excluding
borrowings under the project financing facility related to the
construction of the power generation project, which is largely
structured on a non-recourse basis to the lumber segment assets and
to the parent company, Conifex Timber Inc., net debt was $48.2
million (December 31, 2013 - $21.2 million) and the net debt to
capitalization ratio was 29% (December 31, 2013 - 15%). The Company
expects this ratio to revert to a more conservative level over the
next several months concurrent with the normalization of higher
than usual working capital levels.
Outlook and Strategy
The Company is executing a strategy to grow and add value to its
business. Management has been executing against this plan since the
Company's management restructuring late in 2012. The momentum
established in 2013 in terms of increasing production volumes and
expanding profit margins is expected to continue through the
balance of 2014.
Through the balance of the year, the Company expects to complete
its power generation project on budget, and to commence deliveries
of electricity late in the third quarter of 2014. The Company also
expects to establish a long-term plan for its idled Mackenzie mill
following the release of information regarding future sawlog
harvest levels in the Mackenzie Timber Supply Area by the Ministry
of Forests, Lands and Natural Resources Operations.
Conference Call
There will be a conference call held by the Company on Monday,
May 12, 2014 at 8:00 AM Pacific time / 11:00 AM ET to discuss the
first quarter financial and operating results. To participate in
the call, please dial 416-340-8530 or toll
free 800-766-6630. The
call will also be available on instant replay access until May 26,
2014 by dialling 905-694-9451 or
800-408-3053 and
entering participant pass code 6673270.
The interim financial statements and management's discussion and
analysis for the quarter ended March 31, 2014 will be available on
the Investors Relation page of our website at www.conifex.com.
About Conifex Timber Inc.
Conifex and its subsidiaries' primary business currently
includes timber harvesting, reforestation, forest management,
sawmilling logs into lumber and wood chips, and value added lumber
finishing and distribution. Conifex's lumber products are sold in
the United States, Chinese, Canadian and Japanese markets. Upon
completion of its power generation facility at Mackenzie, British
Columbia, Conifex's business sectors will be expanded to include
bioenergy.
Forward-Looking Statements
Certain statements in this news release may constitute
"forward-looking statements". Forward-looking statements are
statements that address or discuss activities, events or
developments that the Company expects or anticipates may occur in
the future. When used in this news release, words such as
"estimates", "expects", "plans", "anticipates", "projects", "will",
"believes", "intends" "should", "could", "may" and other similar
terminology are intended to identify such forward-looking
statements. Forward-looking statements reflect the current
expectations and beliefs of the Company's management. Because
forward-looking statements involve known and unknown risks,
uncertainties and other factors, actual results, performance or
achievements of the Company or industry may be materially different
from those implied by such forward-looking statements. Examples of
such forward-looking information that may be contained in this news
release include statements regarding: growth and future prospects
of our business; our perceptions of the industry and markets in
which we operate and anticipated trends in such markets and in the
countries in which we do business; benefits that may accrue to the
Company as a result of certain capital expenditure programs; U.S.
benchmark lumber prices; year over year unit mill nets; unit cash
conversion costs; the Company's net debt to capitalization ratio;
that the Mackenzie mills will incorporate the expected harvest
levels for the Mackenzie Timber Supply Area; and the anticipated
benefits, cost, timing and completion dates for projects, including
the power generation project at the Company's Mackenzie facility.
Assumptions underlying the Company's expectations regarding
forward-looking information contained in this news release include,
among others: that the Company will be able to effectively market
its products; that the U.S. housing market will continue to
improve; that there will be no further delays and disruptions
affecting the completion of the power generation project at the
Company's Mackenzie facility and that the Company will be able to
commence timely delivery of power therefrom; that softwood lumber
will experience improved and sustained demand in the marketplace at
favourable prices; that the Company will be able to dynamically
respond to shifts in demand among its major markets; the general
stability of the economic, political and regulatory environments
within the countries where the Company conducts operations; the
ability of the Company to obtain financing (if necessary) on
acceptable terms or at all; that interest and foreign exchange
rates will not vary materially from current levels; and that our
mills and equipment will operate at expected levels.
Forward-looking statements involve significant uncertainties,
should not be read as a guarantee of future performance or results,
and will not necessarily be an accurate indication of whether or
not such results will be achieved. A number of factors could cause
actual results to differ materially from the results discussed in
the forward-looking statements, including, without limitation:
those relating to potential disruptions to production and delivery,
including as a result of equipment failures, labour issues, the
complex integration of processes and equipment and other factors;
labour relations; failure to meet regulatory requirements; changes
in the market; potential downturns in economic conditions;
fluctuations in the price and supply of required materials,
including log costs; fluctuations in the market price for products
sold; foreign exchange fluctuations; trade restrictions or import
duties imposed by foreign governments; availability of financing
(as necessary); shipping or logging disruptions; and other risk
factors described in the Company's 2013 annual information form,
available on SEDAR at www.sedar.com. These risks, as well as
others, could cause actual results and events to vary
significantly. Accordingly, readers should exercise caution in
relying upon forward-looking statements and the Company undertakes
no obligation to publicly revise them to reflect subsequent events
or circumstances, except as required by law.
Neither the TSX Venture Exchange nor its Regulation Services
Provider (as that term is defined in the policies of the TSX
Venture Exchange) accepts responsibility for the adequacy or
accuracy of this release.
Conifex Timber Inc.Yuri LewisChief Financial Officer(778)
331-8687www.conifex.com
Conifex Timber (TSXV:CFF)
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