GreenFirst Reports Financial Results for the First Quarter of 2023
TORONTO, ON, May 15, 2023 / Business Wire / GreenFirst Forest Products Inc. (TSX: GFP) (“GreenFirst” or the “Company”) today announced results for the first quarter ended April 1, 2023. The Company’s interim financial statements (“Financial Statements”) and related Management Discussion and Analysis (“MD&A”) for the first quarter ended April 1, 2023 are available on GreenFirst’s website at www.greenfirst.ca and on SEDAR at www.sedar.com. All amounts are in thousands of Canadian dollars unless indicated otherwise.
First Quarter of 2023 Highlights
- First quarter 2023 (“Q1 2023”) net loss from continuing operations was $20.2 million or a $0.11 loss per share (diluted), compared to net loss of $25.9 million or $0.15 loss per share (diluted) in the fourth quarter of 2022 (“Q4 2022”) on the same basis. Lumber prices dropped, reflecting economic headwinds and lower demand in Q1 2023, with an average selling price of $605/mfbm compared to $644/mfbm in Q4 2022. The Q1 2023 valuation provision for lumber and logs inventory was increased to $11.9 million from $8.7 million at the end of Q4 2022.
- Sold its two Quebec mills for gross proceeds of $94.1 million, subject to working capital adjustments, at a $3.5 million loss on disposal.
- Reducing overheads and operating costs while increasing production efficiencies.
- Signed a non-binding letter of intent to sell approximately 30 of 118 acres of the land in Kenora.
- The Company has significantly deleveraged its balance sheet by reducing its outstanding debt and is no longer subject to financial covenant ratios.
“GreenFirst is now focused on optimizing its core assets in Ontario, supported by a streamlined, cost-effective operating platform. We have strengthened our balance sheet and our recent efforts to improve operational efficiencies have begun to yield positive results”, said Paul Rivett, interim CEO and executive Chairman of GreenFirst. “In August 2023, we expect the duty rates to drop from 20.23% to 8.24%, which will increase profitability”, added Paul Rivett.
Financial Highlights
The following selected financial information is from the Company’s Financial Statements and MD&A:
(In thousands of CAD, except per share amounts) | April 1, | December 31, | March 26, |
For the quarter ended | 2022(2) | 2022(1)(2) | 2021(1)(2) |
Net sales from continuing operations | |||
Forest products(4) | $ 61,272 | $ 69,628 | $ 105,033 |
Paper products | 37,845 | 30,564 | 14,684 |
Total net sales from continuing operations | 99,117 | 100,192 | 119,717 |
Operating (loss) earnings from continuing operations | (19,510) | (33,747) | 26,675 |
Net (loss) earnings | (18,417) | (43,615) | 35,314 |
Net (loss) earning from continuing operations | (20,200) | (25,876) | 21,293 |
Basic (loss) earnings per share | (0.10) | (0.25) | 0.20 |
Basic (loss) earnings per share from continuing operations | (0.11) | (0.15) | 0.12 |
Diluted (loss) earnings per share | (0.10) | (0.25) | 0.18 |
Diluted (loss) earnings per share from continuing operations | (0.11) | (0.15) | 0.11 |
Adjusted EBITDA from continuing operations(3) | $ (15,166) | $ (27,385) | $ 29,586 |
(In thousands of CAD) | April 1, | December 31, |
As at | 2023 | 2021(1) |
Total assets | $ 325,695 | $ 371,504 |
Total liabilities | 116,753 | 147,042 |
Total shareholders’ equity | $ 208,942 | $ 224,462 |
1Certain prior period amounts have been restated as a result of the Company finalizing its purchase price accounting related to the Rayonier Asset Acquisition, as allowed under IFRS. Please refer to Note 4 – Acquisition of Sawmills and Paper Mill, in the Company’s Annual Financial Statements for the year ended December 31, 2022 for further information.
2Certain prior period amounts have been restated as a result of a change in presentation of the Company’s Financial Statements for continuing and discontinued operations under IFRS. Please refer to Note 4 – Discontinued Operations, in the Company’s Financial Statements for the first quarter ended April 1, 2023 for further information.
3Adjusted EBITDA is a Non‐GAAP measure and does not have standardized meaning under GAAP or IFRS. As a result, it may not be comparable to information presented by other companies. For an explanation and reconciliation of Adjusted EBITDA to related comparable financial information presented in the Financial Statements prepared in accordance with IFRS, refer to the Non-GAAP Measures section in the MD&A for the first quarter ended April 1, 2023.
4Includes net sales to external parties only.
The Company reported net sales for continuing operations of $99.1 million during Q1 2023, a decline of $1.1 million or 1%, compared to Q4 2022. This decrease was primarily due to declining lumber prices ($605/mfbm average realized in Q1 2023 compared to $644/mfbm in Q4 2022), partially offset by higher sales for the paper segment.
The Company reported cost of sales of $106.9 million during Q1 2023, lower by $12.7 million or 11%, compared to Q4 2022. This decrease reflects the impact of lower lumber shipments and lower overall costs compared to Q4 2022.
The Company’s softwood lumber sales to US customers are subject to countervailing and anti-dumping duties as determined by the US Department of Commerce. Duties expensed in Q1 2023 were $6.6 million, a decrease of $1.2 million or 15%, quarter-over-quarter. In August 2023, the company expects its duty rates to drop from from 20.23% to 8.24%.
The Company reported selling, general and administration expenses for continuing operations of $5.2 million during Q1 2023 which was a decrease of $0.7 million or 12% compared to Q4 2022.
Liquidity and Borrowings
At April 1, 2023, the Company has $62.6 million, less $5.4 million for standby letters of credit, of excess availability under the revolving portion of the Credit Facility. The Company made net repayments of $19.0 million against the Credit Facility during the first quarter ended April 1, 2023 (with a further repayment of $5.0 million subsequent to April 1) and the Company is no longer subject a minimum fixed-charge coverage ratio.
Outlook
The impacts of rising interest rates in response to ongoing inflation resulted in softened lumber demand since mid year 2022. This led to a decline in lumber market prices throughout the second half of 2022, with those levels persisting in the first quarter of 2023 and through early spring thus far. Further monetary tightening and interest rate rises would continue to put downward pressure on lumber market prices, which are expected to remain volatile over the near term. However, there is optimism amongst US homebuilders for growth during the balance of 2023.
Partially offsetting the negative impact is the tightening lumber supply, spurred on by the curtailment of lumber production in the province of British Columbia and in other regions of North America. There is an expectation that there could be further curtailments in British Columbia and the Pacific North West if the current low levels of pricing persist.
The Company continues to experience challenges with an ongoing tight labour market, with some residual impacts of COVID-19 in early 2023. This continues to cause disruptions in the flow of production at the Company’s mills. From a logistics standpoint, disruptions in trucking and rail have only been limited since the second quarter of 2022.
Inflationary pressures in North America have raised the cost of many inputs required for our operations. Ongoing shortages of people, materials or equipment could negatively impact the Company, as well as the industry. Many of these pressures arose due to the COVID-19 pandemic, and they continue to be a significant factor affecting our business.
Reconciliation of Adjusted EBITDA
References to EBITDA in this document are measures of earnings (loss) before interest and finance costs, income taxes, depreciation and amortization, while references to Adjusted EBITDA reflect EBITDA plus other non-operating costs such as acquisition and transaction-related costs, impact of valuation changes on the Company’s investments, the impact of foreign exchange on the Company’s long-term debt, loss on extinguishment of debt, gain on sale of assets and other non-operating losses. Management believes that certain lenders, investors, and analysts use EBITDA and Adjusted EBITDA as a common valuation measurement and to measure the Company’s ability to service debt and meet other payment obligations. EBITDA and Adjusted EBITDA are not intended to replace net earnings (loss), or other measures of financial performance and liquidity reported in accordance with GAAP. Please refer to the Company’s MD&A for further information on non-GAAP measures.
(In thousands of CAD) | |||
For the quarter ended | April 1, 2023(2) |
December 31, 2022(1)(2) |
March 26, 2022(1)(2) |
Net (loss) earnings from continuing operations | $ (20,200) | $ (25,876) | $ 21,293 |
Adjustments: | |||
Finance costs, net | 896 | 1,162 | 3,619 |
Income taxes | 80 | (1,030) | 3,264 |
Depreciation and amortization | 4,344 | 6,362 | 2,911 |
EBITDA | (14,880) | (19,382) | 31,087 |
Foreign exchange on long-term debt | — | — | (1,501) |
Gain on investment | (286) | — | |
Gain on sale of assets | — | (8,003) | — |
Adjusted EBITDA from continuing operations(3) | $ (15,166) | $ (27,385) | $ 29,586 |
1Certain prior period amounts have been restated as a result of the Company finalizing its purchase price accounting related to the Rayonier Asset Acquisition, as allowed under IFRS. Please refer to Note 4 – Acquisition of Sawmills and Paper Mill, in the Company’s Annual Financial Statements for the year ended December 31, 2022 for further information.
2Certain prior period amounts have been restated as a result of a change in presentation of the Company’s Financial Statements for continuing and discontinued operations under IFRS. Please refer to Note 4 – Discontinued Operations, in the Company’s Financial Statements for the first quarter ended April 1, 2023 for further information.
3Adjusted EBITDA is a Non‐GAAP measure and does not have standardized meaning under GAAP or IFRS. As a result, it may not be comparable to information presented by other companies. For an explanation and reconciliation of Adjusted EBITDA to related comparable financial information presented in the Financial Statements prepared in accordance with IFRS, refer to the Non-GAAP Measures section in the MD&A for the first quarter ended April 1, 2023.
4Includes net sales to external parties only.
Earnings Conference Call
GreenFirst will host a conference call to review the first-quarter 2023 financial results on Tuesday, May 16, 2023 at 8:30am (Eastern). The live webcast of the earnings conference call can be accessed via web: http://momentum.adobeconnect.com/greenfirstq1/ and via phone: (+1) 416 764 8658 or (+1) 888 886 7786. A replay of the webcast and presentation slides will be available on GreenFirst’s website following the conference call.
About GreenFirst
GreenFirst Forest Products is a forest-first business, focused on sustainable forest management and lumber production. The Company owns four sawmills located in rich wood baskets proudly operating over 6.1 million hectares of FSC® certified public Ontario forestlands (FSC®-C167905). The Company believes that responsible forest practices, coupled with the long-term green advantage of lumber, provide GreenFirst with significant cyclical and secular advantages in building products.
Forward Looking Information
Certain information in this news release constitutes forward-looking statements under applicable securities laws. Any statements that are contained in this news release that are not statements of historical fact are forward-looking statements. Forward looking statements are often identified by terms such as “may”, “should”, “anticipate”, “expect”, “potential”, “believe”, “intend”, “estimate” or the negative of these terms and similar expressions. Forward-looking statements are based on certain assumptions and, while GreenFirst considers these assumptions to be reasonable, based on information currently available, they may prove to be incorrect. In addition, forward-looking statements necessarily involve known and unknown risks, including those set out in GreenFirst’s public disclosure record filed under its profile on www.sedar.com. Readers are further cautioned not to place undue reliance on forward-looking statements as there can be no assurance that the plans, intentions or expectations upon which they are placed will occur. Such information, although considered reasonable by management at the time of preparation, may prove to be incorrect and actual results may differ materially from those anticipated. Forward-looking statements contained in this news release are expressly qualified by this cautionary statement and reflect our expectations as of the date hereof, and thus are subject to change thereafter. GreenFirst disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
For more information, please visit: www.greenfirst.ca or contact Investor Relations (416) 775 2821