Earnings call transcript: Acadian Timber misses Q2 2025 earnings forecasts

Acadian Timber Corp reported disappointing financial results for Q2 2025, with earnings per share (EPS) of $0.15, significantly below the forecasted $0.38. Revenue also fell short, reaching $17.1 million against an expected $29.6 million. Following the announcement, the company’s stock price dropped by 0.89% in after-hours trading to $1.91. According to InvestingPro analysis, the stock is currently trading below its Fair Value, suggesting potential upside despite recent challenges. The company’s shares have declined 61.8% year-to-date, significantly underperforming the market.

Key Takeaways

• Acadian Timber’s Q2 2025 EPS and revenue both missed analyst expectations.
• Timber sales and services revenue declined due to decreased sales volume and lack of carbon credit sales.
• The company is transitioning to internal logging operations, impacting production costs.
• Market uncertainty is heightened by potential tariffs and reduced pulpwood demand.
• The stock price fell by 0.89% in after-hours trading following the earnings announcement.

Company Performance

Acadian Timber’s performance in Q2 2025 was notably weaker compared to the same period last year. The company’s timber sales and services revenue dropped to $17.1 million, down from $21.5 million in 2024, while adjusted EBITDA plummeted to $2.4 million from $20.6 million. The absence of carbon credit sales, which contributed $19.7 million in 2024, was a significant factor in the revenue decline. Despite these challenges, the company declared dividends of $5.2 million, or $0.29 per share. InvestingPro data reveals the company maintains a relatively low beta of 0.69, indicating lower price volatility compared to the broader market. Get access to 7 more exclusive InvestingPro Tips and comprehensive financial analysis through the Pro Research Report.

Financial Highlights

• Revenue: $17.1 million, down from $21.5 million in Q2 2024
• Earnings per share: $0.15, down from $0.46 in Q2 2024
• Adjusted EBITDA: $2.4 million, down from $20.6 million in Q2 2024
• Net income: $2.7 million, down from $7.9 million in Q2 2024

Earnings vs. Forecast

Acadian Timber’s Q2 2025 EPS of $0.15 fell significantly short of the $0.38 forecast, marking a 60.53% negative surprise. Revenue also missed expectations by 42.13%, coming in at $17.1 million compared to the forecasted $29.6 million. This marks a substantial deviation from previous quarters, indicating operational challenges and market pressures.

Market Reaction

Following the earnings release, Acadian Timber’s stock price decreased by 0.89%, reflecting investor disappointment. The stock closed at $17.81, nearing its 52-week low of $16.33. This movement aligns with broader market trends, where companies missing earnings forecasts have faced similar market reactions.

Outlook & Guidance

Looking ahead, Acadian Timber expects to reach full production capacity of 240,000 cubic meters by the end of 2025. The company is also focusing on ramping up production in the second half of the year and continuing its carbon credit project development. InvestingPro analysts project strong revenue growth of 64.63% for FY2025, though the company’s overall Financial Health Score remains WEAK. The next earnings announcement is scheduled for September 26, 2025, which could be a crucial catalyst for the stock’s performance. Subscribers to InvestingPro can access detailed financial health metrics and expert analysis to better understand the company’s growth trajectory.

Executive Commentary

CEO Adam Sheparsky stated, "We are well positioned to navigate evolving operational and economic conditions," highlighting the company’s strategic focus on internal logging operations and renewable energy partnerships. He emphasized, "Safety is our number one priority," reflecting the company’s commitment to improving operational efficiency.

Risks and Challenges

• Transition to internal logging operations may increase costs and impact production efficiency.
• Potential tariffs could introduce market volatility and affect pricing strategies.
• Reduced demand for pulpwood poses a challenge to revenue growth.
• Unfavorable weather conditions in Maine could disrupt operations.
• The absence of carbon credit sales may continue to impact financial performance.

Q&A

During the earnings call, analysts inquired about the transition to internal logging operations and its impact on costs. CEO Adam Sheparsky explained the strategic rationale, emphasizing improved safety and efficiency. Questions also focused on the company’s carbon credit protocol transition and potential renewable energy partnerships, highlighting investor interest in Acadian Timber’s future growth strategies.

Full transcript - Acadian Timber Corp (ADN) Q2 2025:

Conference Operator: Good day, and thank you for standing by. Welcome to the Acadian Timber Second Quarter twenty twenty five Analyst Conference Call. At this time, all participants are in a listen only mode. After the speakers’ presentation, there will be a question and answer session. To ask a question during the session, you will need to press 11 on your telephone.

You will then hear an automated message advising your hand is raised. To withdraw your question, please press 11 again. Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your first speaker today, Susan Wood, Chief Financial Officer. Please go ahead.

Susan Wood, Chief Financial Officer, Acadian Timber: Thank you, operator. Good afternoon, everyone, and welcome to Acadian Timber’s second quarter conference call. With me on the call today is Adam Sheparsky, Acadian’s president and chief executive officer. Before discussing Acadian’s results, I’ll first remind everyone that in discussing our second quarter financial and operating performance, the outlook for the remainder of 2025, and responding to your questions, we may make forward looking statements. These statements are subject to known and unknown risks and future results may differ materially.

For further information on our known risk factors, I encourage you to review our news release and MD and A, which are available on SEDAR and on our website at acadianpimber.com. I’ll begin by outlining the financial and operational highlights for our second quarter ended 06/28/2025. Adam will then provide some additional comments and will discuss our outlook for the remainder of 2025. Acadian’s operations and financial results for the three months ended 06/28/2025 reflected both positive trends and operational challenges. Despite ongoing economic uncertainty, overall demand remained relatively stable across most of our markets.

New Brunswick delivered solid results. Favorable weather conditions and increased contractor availability supported strong timber sales volumes. However, operations in Maine were challenged by unfavorable weather conditions, which impacted our ability to deliver to our customers as well as lower production during the ramp up of internal logging operations. Acadian generated timber sales and services of $17,100,000 compared to $21,500,000 in the prior year period. Timber sales volume excluding biomass decreased 13% compared to the 2024.

Timber sales volumes increased in New Brunswick driven by strong demand for softwood sawlogs and increased harvesting capacity. However, this increase was offset by the lower sales volumes in Maine. The second quarter of the prior year also included $19,700,000 in carbon credit sales, while no carbon credit sales occurred in the 2025. Softwood sawlog pricing increased 2% primarily due to strong demand, while hardwood sawlog pricing decreased 5% due to weakness in hardwood lumber markets. Softwood pulpwood pricing decreased 2% as a result of lower demand in Maine, while hardwood pulpwood pricing decreased 8% also due to lower demand, combined with shorter hauling distances as compared to the prior year.

Lower fuel adjustment surcharges resulting from lower fuel prices, particularly in New Brunswick, also impacted pricing. Biomass volume volumes doubled and pricing increased 68% due to changes in product mix. Overall, the weighted average selling price excluding biomass decreased 4% compared to the same quarter last year. Operating costs and expenses were $15,400,000 during the second quarter compared to $32,200,000 during the 2024. Included in operating costs and expenses for the 2024 was $15,200,000 related to sales of carbon credits.

Operating costs and expenses related to timber sales and services decreased $1,500,000 from the prior year period as a result of decreased timber sales volumes and timber services activity, partially offset by higher average operating costs and expenses per cubic meter produced in Maine as a result of the transition to internal logging operations and a more fixed cost structure. Adam will speak more later about our internal logging operations. Adjusted EBITDA for the second quarter was $2,400,000 compared to $20,600,000 in the prior year period. Carbon credit sales contributed $15,700,000 in adjusted EBITDA to the 2024. Adjusted EBITDA margin for the quarter was 14% compared to 50% in the prior year period.

Our net income for the second quarter totaled $2,700,000 or $0.15 per share compared to $7,900,000 or $0.46 per share in the same period of 2024. Lower operating income and higher interest expense were partially offset by lower income tax expense. Acadian generated $800,000 of free cash flow and declared dividends of $5,200,000 to our shareholders during the second quarter or twenty nine cents per share. I will now move into the second quarter results for our New Brunswick operations. Sales for our New Brunswick Timberlands were $14,400,000 compared to $16,200,000 during the prior year period.

Sales volume excluding biomass increased 4% compared to the prior year period, primarily due to a favorable change in customer mix, which redirected harvesting from Crown licensed timberlands to our freehold operations. This shift increased sales from our freehold timberlands and decreased revenue from timber services activity. With regards to softwood, softwood sawlog volumes increased 11% and softwood pulpwood volumes increased 39% compared to Q2 twenty twenty four. Pricing for softwood sawlogs increased 5% and pricing for softwood pulpwood increased 2%, both due to solid demand. With regards to hardwood, potential tariffs caused some uncertainty in hardwood pulpwood markets at the end of Q1 and beginning of Q2, which in turn impacted the amount of hardwood sawlogs harvested.

Hardwood sawlog volumes decreased 33% and hardwood pulpwood sales decreased 4%. Hardwood sawlog pricing decreased 4% due to weakness in hardwood lumber markets and hardwood pulpwood pricing decreased 7% due to shorter hauling distances. Lower fuel adjustment surcharges resulting from lower fuel prices also impacted pricing across most of our products. Overall, for New Brunswick, the weighted average selling price excluding biomass decreased 4% as compared to q two twenty twenty four. Operating costs and expenses were $10,700,000 during the second quarter compared to $11,800,000 in the prior year period.

Increased harvesting activity was offset by decreased weighted average variable costs and lower timber services activity. Weighted average variable costs excluding biomass decreased 5% as a result of higher proportion of softwood products, which carry lower variable costs and lower fuel adjustment costs, partially offset by increased contractor rates. New Brunswick’s adjusted EBITDA for the quarter was $4,000,000 compared to $4,500,000 in the prior year period. Adjusted EBITDA margin was 27% compared to 28% in the prior year period. Switching over to Maine.

Sales during the second quarter totaled $2,700,000 compared to $5,300,000 in the same period last year. Timber sales volume excluding biomass decreased 59% compared to the same period of 2024, primarily due to unfavorable weather conditions, which impacted our ability to deliver to our customers combined with lower production during the ramp up of internal logging operations. Softwood sawlog volumes decreased 46% due to lower harvesting production. However, pricing for softwood sawlogs increased 3% in US dollar terms due to strong demand for spruce fir sawlogs and changes in product mix. Hardwood sawlog volumes were minimal during the second quarter of the year.

Hardwood pulpwood volumes decreased 67% due to lower demand and pricing decreased 6% in US Dollar terms as compared to Q two twenty twenty four. Softwood pulpwood volumes were negligible in Maine due to the extended shutdown of a major softwood pulpwood customer. Overall, the weighted average selling price, excluding biomass in US dollar terms, increased 9% as compared to the same quarter in the prior year. Operating costs and expenses for the second quarter were $4,100,000 compared to $4,600,000 during the same period in 2024. Decreased costs resulting from lower timber sales volumes were partially offset by higher average operating costs and expenses per cubic meter produced.

This increase is attributable to the lower production during the ramp up of internal logging operations, as well as the transition to a more fixed cost structure. Adjusted EBITDA for the quarter was negative $900,000 compared to $900,000 during the prior year period and adjusted EBITDA margin was negative 35% compared to 17%. With respect to Acadian’s financial position at the end of the quarter, it remained strong ending with a net liquidity position of $15,100,000 including cash balances and our revolving credit facilities, which remain undrawn. With that, I will now turn the call over to Adam.

Adam Sheparsky, President and Chief Executive Officer, Acadian Timber: Thank you, Susan, and good afternoon, everyone. As always, Acadian remains committed to health and safety as our number one priority. Acadian’s operations experienced two recordable safety incidents during the quarter among employees and one among contractors, which were all minor in nature. As we have said before, we believe that emphasizing and achieving an excellent safety record is a leading indicator of success in the broader business, and incident reduction will always be a primary focus for Acadian. As Susan mentioned, we experienced mixed results across our operations.

While New Brunswick had a very solid quarter, operational performance in Maine was challenged. Second quarter of the year is traditionally our weakest due to seasonal operating conditions and operating activity in Maine was impacted by prolonged wet conditions, which significantly delayed the commencement of deliveries in the spring. Additionally, our strategic transition in Maine from contractor based logging to internal logging operations has temporarily reduced production volumes. As expected during ramp up, during the 2025, production volumes were well below anticipated long term levels and operating costs per cubic meter of timber produced were elevated relative to long term targets. Additionally, the transition to a more fixed cost structure has resulted in changes from historical cost patterns, with costs less directly tied to revenue generated.

This impact is and will be amplified in the second quarter because of the lower sales volumes. Acadian is actively investing in operator training programs, optimizing equipment utilization, and expanding its operational workforce to support the strategic shift and complete the ramp up. These efforts are designed to enhance efficiency, build long term capabilities, and ensure sustainable cost improvements. As internal operations continue to scale, Acadian expects to see meaningful gains in production capacity and drive greater cost efficiencies in Maine. Near term pressures on end use markets persist, and the potential for tariffs is concerning for forest products companies in both The US and Canada.

However, the consensus forecast for US housing starts is steady at approximately 1,370,000 starts in 2025 as compared to 1,350,000 in 2024. We remain confident that the stability of the Northeastern forestry sector combined with long term demand for new homes and repair and remodel activity will support the long term demand for our products. We maintain sufficient contractor availability in New Brunswick through the second quarter, which is expected to continue for the remainder of the year. Although production in Maine was challenged during the second quarter, with continued focus on the internal logging operations, we expect to increase production levels while advancing towards our targeted cost structure. Demand for Acadian sawlogs is mainly driven by regional supply and demand.

Near term sawlog demand is expected to remain stable while pricing may remain challenged until end use markets improve. Demand and pricing for softwood and hardwood pulpwood is expected to remain at reduced levels in the near term. With respect to voluntary carbon credits, demand and pricing are expected to remain stable. Issuance of the next tranches of carbon credits from Acadian’s current project has been delayed due to the transition to ACR’s updated improved forest management protocol, which is fundamentally the same approach as the previous protocol, but introduces dynamic baselines. The transition to the new protocol may result in slightly fewer car total carbon credits being issued than was expected under the initial protocol.

However, all credits generated will be higher valued carbon removal credits and no conservation credits will be generated. Carbon credits assessed using the new protocol are expected to be more appealing to customers thereby commanding higher pricing. Registration is expected in the 2025. As a reminder, the protocol for developing compliance credits from managed forest in Canada was finalized during 2024 and Acadian is evaluating the opportunities to develop the eligible carbon credits that the protocol may present in conjunction with the opportunities that exist under the current protocols and is in the process of designing our next projects. We expect to remain busy with real estate through the remainder of 2025.

We have designed and began the process of implementing projects in both New Brunswick and Maine, and we are looking forward to introducing these opportunities to our local communities. These development projects continue to progress, and we expect to begin to sell our residential lots later this year. With regards to renewable energy, we continue to actively pursue opportunities to further investments and partnerships in both Maine and New Brunswick. We recently submitted a proposal in partnership with others in response to MB Power’s request for expressions of interest for renewable energy generation. Though we may not be selected to advance this particular proposal, we are enthusiastic about the potential these types of projects hold and are encouraged by the growing momentum in the sector.

We are optimistic about future opportunities to participate in projects that align with our long term sustainability goals. In closing, supported by a strong balance sheet, diverse markets, and a highly skilled and dedicated team, Acadian is well positioned to navigate evolving operational and economic conditions. The second half of the year offers significant potential for continued progress towards both our operational and financial goals. Through the remainder of 2025, we will remain focused on safety and environmental while obtaining the highest margins available for our products and making operational improvements not only in Maine, but throughout the business to maximize cash flows. Guided by the principles of sustainable forest management, we will continue to advance opportunities to deliver long term value to our shareholders.

With that, we are now available to take your questions. Operator?

Conference Operator: Thank you. At this time, we will conduct a question and answer session. As a reminder, to ask a question, you will need to press 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. Please stand by while we compile the Q and A roster.

Our first question is from Matthew McKellar at RBC Capital Markets. Your line is now open.

Matthew McKellar, Analyst, RBC Capital Markets: Hi, good afternoon. Thanks for taking my questions. First for me, would the pivot to the ACR’s new improved forest management protocol be likely revenue neutral for your project in your view when considering both potentially positive impacts on price and potentially negative impact on total credits?

Adam Sheparsky, President and Chief Executive Officer, Acadian Timber: Yes. That’s the initial view that we have at this point, Matthew.

Matthew McKellar, Analyst, RBC Capital Markets: Okay. Thanks very much. And then I guess how should we think about the quarterly progression of harvest volumes in Maine to the balance of the year? Is there sort of a target for each of hardwood and softwood we should be thinking about? Maybe you could just talk about how your operations have kind of evolved, like where you are today versus maybe where you were in Q2?

Thanks.

Adam Sheparsky, President and Chief Executive Officer, Acadian Timber: Yeah, no, thank you. Yeah, it’s an evolving process. Obviously, we started these crews up in the winter or acquired crews in the winter. And as we’ve outlined Q2 was a challenging quarter. The way we’re seeing the remainder of 2025, it’s going to be a ramp up.

We have hiring ongoing right now, which I would say is probably the key to getting our production levels to where we want them to be. And if we get that hiring done, say at this month, for instance, we’re hoping by the end of the fiscal year, we’ll be up to pretty close to what we would call or what we expect to be full production capacity. So, if you think about our AAC or our allowable cut that’s outlined in our circular, we would like to enter 2026 at that level. So, call that two forty thousand ish tons or cubic meters. That’s where we would expect to enter 2026.

So we should see a bit of a quick ramp up through Q3 and into Q4.

Matthew McKellar, Analyst, RBC Capital Markets: Great. And last one for me. Just to follow-up on the comments around safety and just thinking through the pivot to internal logging operations in Maine. You mentioned contracted training. Could you highlight anything else that you’re doing to just continue to ensure safe operating conditions as you bring those operations in house?

Thanks.

Adam Sheparsky, President and Chief Executive Officer, Acadian Timber: Yeah, no, it’s a great question. We always say safety is our number one priority and we spent many days when we acquired the Brochu assets and when we started with our own crew in January, just training and safety training Having our own crews in The U. S. A little bit different than Canada, we have a lot more control over that relationship as opposed to a contractor and these are employees.

So we’re able to really lean in even further. So, I would say we really increased our training, our ability and hands on. And I would say by focusing the entire organization on a large number of employees in Maine and our safety expertise that we have in New Brunswick, we’re able to get a lot more traction, I would say, in Maine. We’ve always been safe, obviously, but now that there are employees, we just, you know, feels a little bit different. We’ve always said we lean into wear safety even if they’re contractors, but, you know, now that they have Acadian on their chest and they go home with an Acadian paycheck, it’s so much more important for us to continue to stay focused on that.

So, increased training not only for the employees directly but for supervisors in Maine and an ongoing training for them as we move forward.

Matthew McKellar, Analyst, RBC Capital Markets: Great. Thanks for the detail there. I’ll pass it back.

Adam Sheparsky, President and Chief Executive Officer, Acadian Timber: Great. Thanks, Matthew.

Conference Operator: Thank you. I am showing no further questions at this time. I would now like to turn it back to the President and CEO, Adam Shaparsky.

Adam Sheparsky, President and Chief Executive Officer, Acadian Timber: Thank you, operator. On behalf of the board and management of Acadian, I would like to thank all of our shareholders for their ongoing support. Thank you. Stay safe. Enjoy the rest of the summer, and we look forward to you joining us for our 2025 conference call on October 30.

Goodbye.

Conference Operator: Thank you for your participation in today’s conference. This does conclude the program. You may now disconnect.

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