Earnings call transcript: Acadian Timber Q1 2025 sees revenue decline

Acadian Timber Corp (ADN) reported its first-quarter 2025 earnings, revealing a decline in revenue and earnings per share (EPS) compared to analyst forecasts. The company posted EPS of $0.21, falling short of the expected $0.3054, while revenue reached $24.8 million, below the forecasted $26.97 million. Despite the financial shortfalls, Acadian Timber’s stock saw a modest increase of 0.4% in the market, closing at $17.49. According to InvestingPro analysis, the company currently shows a FAIR financial health score, with data suggesting the stock is trading below its Fair Value.

Key Takeaways

• Acadian Timber’s Q1 2025 revenue decreased by 14% compared to Q1 2024.
• No carbon credit sales were reported, impacting revenue figures.
• Timber sales volumes increased in New Brunswick but declined in Maine.
• The company is transitioning to internal logging operations in Maine.
• The stock price increased slightly by 0.4% post-earnings announcement.

Company Performance

Acadian Timber’s performance in Q1 2025 showed a notable decline compared to the same period last year. Revenue fell from $28.8 million in Q1 2024 to $24.8 million, primarily due to the absence of carbon credit sales, which contributed $4.9 million in the previous year. The company is focusing on expanding its internal logging operations in Maine to address capacity constraints and improve margins.

Financial Highlights

• Revenue: $24.8 million, down 14% year-over-year.
• Earnings per share: $0.21, down from $0.35 in Q1 2024.
• Adjusted EBITDA: $4.7 million, down from $10.6 million in Q1 2024.
• Dividends declared: $5.2 million or $0.29 per share.

Earnings vs. Forecast

Acadian Timber missed analyst expectations for Q1 2025, with EPS at $0.21 versus the forecast of $0.3054, a miss of approximately 31%. Revenue also fell short by about 8%, with actual figures at $24.8 million compared to the expected $26.97 million.

Market Reaction

Despite the earnings miss, Acadian Timber’s stock price rose by 0.4% to $17.49. This movement places the stock closer to its 52-week high of $18.48, suggesting that investors may have focused on the company’s strategic initiatives, including internal logging operations and future carbon credit sales. The company maintains a strong free cash flow yield of 0.81, indicating efficient cash generation relative to its market value of $8.38 million. Get access to 8 more exclusive InvestingPro Tips and comprehensive analysis in the Pro Research Report, available for over 1,400 US stocks.

Outlook & Guidance

Looking forward, Acadian Timber plans to enhance its operations in Maine, aiming for margins similar to those in New Brunswick. The company is also preparing to register 350,000 carbon credits in Q2 2025 and is exploring opportunities in real estate and renewable energy investments. For deeper insights into Acadian Timber’s valuation and growth potential, including exclusive financial metrics and expert analysis, visit InvestingPro for the comprehensive Pro Research Report.

Executive Commentary

CEO Adam Shaparsky expressed confidence in the long-term stability of the forestry sector, emphasizing the importance of sustainable forest management. He noted the company’s strategy to leverage existing contractors to improve operations without additional investments in trucking.

Risks and Challenges

• Supply chain constraints in Maine impacting timber sales volumes.
• Potential tariff impacts on sawlog demand.
• Softening pulpwood demand due to elevated regional inventories.
• Dependence on carbon credit sales for revenue growth.
• Market volatility affecting timber prices.

Q&A

During the earnings call, analysts inquired about the company’s trucking capacity in Maine and the potential impacts of tariffs on sawlog demand. Discussions also covered the strategy for carbon credit sales and the long-term outlook for the forestry sector.

Full transcript - Acadian Timber Corp (ADN) Q1 2025:

Conference Operator: Good day, and thank you for standing by. Welcome to the Acadian Timber First Quarter twenty twenty five Analyst Conference Call and Webcast. 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.

Thank you, operator. Good afternoon, everyone, and welcome to Acadian Timber’s first quarter conference call. With me on the call today is Adam Shaparsky, Acadian’s President and Chief Executive Officer. Before discussing Acadian’s results, I will first remind everyone that in discussing our first 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 are on our website at Acadiantimber.com. I’ll begin by outlining the financial and operational highlights for our first quarter ended 03/29/2025. Adam will then provide some additional comments and will discuss our outlook for the remainder of 2025. Acadian experienced steady demand during the first quarter despite heightened economic uncertainty. However, unfavorable weather conditions in both New Brunswick and Maine, as well as continued limited contractor capacity in Maine impacted our ability to deliver to our customers.

Overall, both timber sales volumes from our timberlands and timber services activity increased as compared to the same period in the prior year, but were offset by a decrease in the weighted average selling price. Acadian generated sales of $24,800,000 compared to $28,800,000 in the prior year period. The first quarter of twenty twenty four included $4,900,000 in carbon credit sales, while no carbon credit sales occurred in the first quarter of twenty twenty five. Timber sales and services revenue increased by $1,000,000 year over year with timber sales volume excluding biomass increasing 3%. Pricing for softwood sawlogs and hardwood sawlogs decreased by 108% respectively due to weak end use markets.

Softwood pulpwood pricing decreased 11 due to lower demand, while hardwood pulpwood pricing increased 5% due to longer hauling distances. Biomass sales volumes doubled as compared to Q1 twenty twenty four. However, pricing decreased 69% due to more roadside sales versus delivered sales. Overall, the weighted average selling price excluding biomass decreased 5% compared to the same quarter last year. However, it’s also worth noting that the weighted average selling price increased 3% from Q4 twenty twenty four, demonstrating recent stability.

Operating costs and expenses were $20,400,000 during the first quarter compared to twenty one point two million dollars during the first quarter of twenty twenty four. Operating costs and expenses related to timber sales and services increased as a result of higher timber sales volumes and higher timber services activity and were offset by a decrease in costs related to carbon credit sales as compared to the prior year period. Transition costs associated with the establishment of our own logging operations in Maine also impacted operating costs and expenses. Adam will speak more later about our new internal logging operations. Adjusted EBITDA for the first quarter was $4,700,000 compared to $10,600,000 in the prior year period, and adjusted EBITDA margin for the quarter was 19% compared to 37% in the prior year period.

Adjusted EBITDA for Q1 twenty twenty four included $4,100,000 related to the sale of carbon credits. Our net income for the quarter totaled $3,700,000 or $0.21 per share compared to $6,000,000 or $0.35 per share in the same period of 2024. Lower operating income and lower non cash fair value adjustments were partially offset by lower income tax expense. Acadian generated $3,000,000 of free cash flow and declared dividends of $5,200,000 to our shareholders during the first quarter or $0.29 per share. I will now move into the first quarter results for our New Brunswick operations.

Sales for our New Brunswick Timberlands were $22,100,000 compared to $19,100,000 during the prior year period. Sales volume, excluding biomass, increased 15% compared to the prior year period, primarily due to strong demand for sawlogs. With regards to sawlogs, softwood sawlog volumes increased 15% and hardwood sawlog volumes increased 40% compared to Q1 twenty twenty four. Pricing for softwood sawlogs decreased 8% and pricing for hardwood sawlogs decreased 6%, both due to a lower value product mix combined with weakness in end use markets. Softwood pulpwood volumes increased 9%.

Although demand for spruce fir pulpwood decreased, demand for other softwood pulpwood increased as compared to the prior year period. Overall, pricing for softwood pulpwood decreased 10% as compared to the prior year period. Hardwood pulpwood sales volumes increased 11% as compared to Q1 twenty twenty four, with some softening in demand, although some softening in demand was noted as we exited the quarter, stemming from elevated regional inventories. Hardwood pulpwood pricing increased 4% compared to the prior year period due to longer hauling distances. Overall for New Brunswick, the weighted average selling price excluding biomass decreased 3% as compared to Q1 twenty twenty four.

Operating costs and expenses were $16,300,000 during the first quarter compared to $13,200,000 in the prior year period as a result of increased harvesting and timber services activity and increased weighted average variable costs. Weighted average variable costs, excluding biomass, increased 2% as a result of higher contractor costs compared to the prior year period. New Brunswick’s adjusted EBITDA for the quarter was $5,900,000 compared to $6,000,000 in the prior year period. Adjusted EBITDA margin was 27% compared to 31% in the prior year period. Switching over to Maine.

Sales during the first quarter totaled $2,800,000 compared to $4,800,000 in the same period last year. Timber sales volume, excluding biomass, decreased 44% compared to the same period of 2024, primarily due to reduced contractor capacity and unfavorable weather conditions, which impacted deliveries. Softwood sawlog volumes decreased 43% and pricing decreased 16% in U. S. Dollar terms compared to the prior year period as a result of changes in product mix and weakness in lumber markets.

Hardwood sawlog volumes were negligible during the first quarter of the year. Softwood pulpwood volumes were also negligible in Maine due to the extended shutdown of a major softwood pulpwood customer. Hardwood pulpwood volumes decreased 49%, although pricing increased 2% in U. S. Dollar terms as compared to the same quarter last year.

Overall, the weighted average selling price, excluding biomass in U. S. Dollar terms, decreased 12% as compared to the same quarter in the prior year. Operating costs and expenses for the first quarter were $3,600,000 compared to $3,700,000 during the same period in 2024. Decreases in costs resulting from lower timber sales volumes were partially offset by transition costs related to the startup of our own logging operations.

Adjusted EBITDA for the quarter was negative $700,000 compared to $1,200,000 during the prior year period, and adjusted EBITDA margin was negative 24% compared to 24%. With respect to Acadian’s financial position at the end of the quarter, it remained strong, ending with a net liquidity position of $17,600,000 including cash balances and our revolving credit facilities, which remain undrawn. A portion of our long term debt totaling $46,000,000 matured during the first quarter. We have refinanced the debt for a five year term under essentially the same terms as the existing facilities at a rate of 5.25%. With that, I will now turn the call over to Adam.

Adam Shaparsky, 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. During the first quarter, there was one recordable safety incident among our employees. The incident was minor, and the employee has returned to work. 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 continues to be a primary focus for Arcadia.

As Susan mentioned, our operations and financial results continued to be affected by limited contractor availability in Maine, which has been a persistent issue for several years. In response, during the first quarter, we took meaningful steps towards addressing this challenge by establishing our own internal logging operations in Maine, which we expect to ramp up over the course of the year. This occurred through two initiatives. First, in January, Acadian purchased several pieces of harvesting equipment for $2,400,000 and hired equipment operators to conduct harvesting operations on our main timberlands. Then on February 28, Acadian acquired additional logging and related assets for total cash consideration of $6,900,000.

These assets include harvesting, trucking, and road working equipment and related real estate, which combined with an established workforce, constitute an operational logging business, which has operated on our land base for many years. And two months into the acquisition, we have been very pleased with the professionalism and entrepreneurial spirit of the new team. The transition to internal logging operations required a certain amount of initial investment, including startup costs and transaction fees, as well as costs associated with training and development of operators that increased our cost in Maine during the quarter. We do not expect significant amount of these costs to recur. However, additional investments in equipment will be made as necessary to ensure productive and efficient operations.

Although some operations will continue to be performed by external contractors in Maine in the near term, these initiatives represent a significant transition away from contracted lagging operations in Maine. So far, the transition has gone very well, and our entire employee base has come together as one team. As our logging operations are further developed, we expect to expand our production capacity and reduce our operating costs in Maine. Turning to our outlook for the remainder of 2025. Near term pressures on end use markets persist, and potential tariffs are causing concern among forest products companies in both The US and Canada.

We continue to evaluate the impacts that could be felt by Acadian and its customers and the alternative strategies that may be available should tariffs be imposed. However, with the ever changing landscape and the many dynamics that come into play, including the greater economic outlook, the ultimate impacts cannot be known at this time. North American interest rates and inflation are showing signs of easing, and consensus forecast for US housing starts is steady and 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 the long term requirement 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 first quarter, which is expected to continue for the remainder of the year.

Although tight labor markets in Maine and unfavorable weather conditions contributed to delays in trucking in the first quarter, we continued harvesting and have a healthy inventory of harvested timber ready to truck as spring road conditions allow. As I mentioned, the establishment of our own internal logging operations is expected to alleviate historical logging capacity constraints and increase overall production over the course of 2025 while reducing operating costs over the longer term. Demand for Acadian’s hardwood and softwood sawlogs is mainly driven by regional supply and demand. Near term softwood sawlog demand is expected to remain stable while pricing may remain challenged until end use markets improve. Hardwood sawlogs are being impacted more by supply constraints, and therefore, demand is high, and we expect pricing to increase in the coming quarters.

Demand and pricing for softwood pulpwood is expected to remain at reduced levels in the near term, and demand for hardwood pulpwood began to soften due to elevated regional inventories as we exited the quarter, which may affect demand and pricing in the near term, but we expect volumes and pricing to improve as we progress through the remainder of the year as this inventory is depleted. With respect to voluntary carbon credits, demand and pricing are expected to remain stable. After selling nearly all of our currently registered credits in 2024, our inventories are expected to be replenished in the near term. The registration process for the second and third tranches of carbon credits for the ongoing project is expected to result in approximately 350,000 credits in total and is expected to be completed in the second quarter of twenty twenty five. We have already begun we have already begun the registration process of our fourth tranche of credits, which represents an additional 40,000 credits and expect these to be registered by the end of twenty twenty five.

As a reminder, the protocol for developing compliance carbon credits for managed forest in Canada was finalized during 2024, and Acadian is evaluating the opportunities to develop 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 been making investments in both real estate projects and renewable energy and remain optimistic of the opportunities that exist for Acadian. We expect to begin to sell our residential lots this year and continue to focus on further investments and partnerships in renewable energy in both Maine and New Brunswick. In closing, supported by a strong balance sheet, diverse markets, and a highly capable team, Acadian has the ability to weather challenging operating and economic conditions as they arise.

With our new logging operations in place in Maine, we look forward to a productive year ahead. Through 2025, we will remain focused on safety and environmental performance while obtaining the highest margins available for our products and making improvements 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: You. This time we will conduct a question and answer session. As a reminder, to ask a question, you’ll 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 comes from Matthew McKellar with RBC Capital Markets. Please go ahead. First question comes from Matthew McKellar with RBC Capital Markets. Please go ahead.

Susan Wood, Chief Financial Officer, Acadian Timber: Hi, good afternoon. Thanks for taking my questions.

Adam Shaparsky, President and Chief Executive Officer, Acadian Timber: Hi, Matthew.

Susan Wood, Chief Financial Officer, Acadian Timber: First for me, you mentioned that additional investments in equipment in Maine could be made if necessary. And I recognize the acquisitions you made in Q1 were mid quarter. But given some of the trucking delays in Maine in Q1, do you see any need to continue to build your own internal trucking capacity beyond what you’ve already acquired? Or would internal trucking capacity really not have been helpful in the quarter just given the dynamics around weather? Thanks.

Adam Shaparsky, President and Chief Executive Officer, Acadian Timber: Yeah, no, it was right after the acquisition at the February, we got hit with unseasonably warm weather, trucking certainly slowed regardless of what capacity we had. As we look forward, the trucking capacity that we did buy, I’m not sure it’s going to be able to handle all of our harvesting, we do have, as opposed to our harvesting constraints we have in Maine, there is a significant amount of trucking capacity that we believe we’re going to be able to use in the future. We’re going to lean into that starting over the next couple of weeks once we get the roads back opened up. So there’s no big significant plans today to invest in more trucking capacity for us. We’re gonna use existing contractors.

We’ve already had some of them reach out. So I think we’re gonna be in a good shape without having to invest in trucking at this point.

Susan Wood, Chief Financial Officer, Acadian Timber: That’s great. Thanks for the color. And how significant should that reduction in operating costs be in Maine over the next few quarters as you shift to those internal harvesting operations?

Adam Shaparsky, President and Chief Executive Officer, Acadian Timber: Yeah, so over the next couple of quarters, I expect it to be progressive but lumpy at the same time. Q2 is obviously a low volume quarter most years, and then it ramps back up in Q3 and Q4. The way we see it over the long term, we look at New Brunswick and say, that is a great model. That’s where we would expect to see our cost structure align with going forward. So as look forward for our main operations, those are our targets, and that’s what I would use is achieving the same margins, that high 20s that we see in New Brunswick.

I would like to see that in Maine.

Susan Wood, Chief Financial Officer, Acadian Timber: That’s helpful. Thank you. Next for me, I recognize there’s a lot of uncertainty around the outlook. Do you expect any impact of sawlog demand in New Brunswick later this year as duty step higher and Section two thirty two tariffs are potentially introduced? And could that potentially be offset by any tailwinds in Maine?

Any help around how you’re thinking about what demand looks like on a net basis once we get through the other side would be helpful. Thanks.

Adam Shaparsky, President and Chief Executive Officer, Acadian Timber: Yeah, it’s a great question. We’ve been you know, this is the time of year when we have a lot of conversations with our customers about the remaining part of 2025 and, you know, there’s been a significant amount of demand for softwood sawlogs in particular on both sides of the border. You know, our harvesting capacity has been, been great in New Brunswick, you know, as a result of a lot of hard work a lot of good hard work from our New Brunswick team. I’m not sure that’s been felt across the entire region, so there is mills that are looking for softwood sawlogs in New Brunswick. I would say what we experienced in Maine as well is not unique, and so we have softwood mills in Maine and across the border into Quebec, etcetera, that are looking for softwood sawlogs.

So the faster that we can get up and running, the better because we have homes for all of our softwood sawlogs as we, you know, look through the rest of 2025, and I would would say even out past that.

Susan Wood, Chief Financial Officer, Acadian Timber: Thanks for all the detail there. Last one for me. The second and third tranches of credits you expect to register this quarter, have you done any pre marketing of those? And is there anything you’d share around sale timing? For example, is that a Q3 kind of event?

Or any color around kind of expected pricing? Thanks.

Adam Shaparsky, President and Chief Executive Officer, Acadian Timber: Yeah, that’s a tough question. I know that our third party developer is working hard to market those credits. You know, I don’t think there’s any sales in place at this point in time, so it would be hard for me to actually commit to anything at this point in time, but we’ll keep you updated as we progress.

Susan Wood, Chief Financial Officer, Acadian Timber: Okay. Fair enough. Thanks very much. I’ll turn it back.

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

Conference Operator: Thank you. I’m showing no further questions at this time. I’d now like to turn it back to Adam Sheparsky for closing remarks.

Adam Shaparsky, President and Chief Executive Officer, Acadian Timber: Great. 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, and we look forward to you joining us for our second quarter of twenty twenty five conference call on August.

Goodbye.

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

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