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Conifex Timber Inc. reported a net income of $600,000 for Q1 2025, translating to earnings of approximately 2 cents per fully diluted share. The company’s revenue for the quarter was $44.6 million, contributing to its trailing twelve-month revenue of $116.42 million. Following the earnings announcement, Conifex’s stock surged by 23.08% in pre-market trading, reflecting positive investor sentiment. According to InvestingPro analysis, the company’s current valuation suggests it is trading slightly above its Fair Value.
Key Takeaways
- Conifex Timber achieved a net income of $600,000 in Q1 2025.
- The company’s stock price jumped 23.08% in pre-market trading.
- Transition to a two-shift sawmill operation aims to boost production efficiency.
- Conifex benefits from a strong position in log supply and power generation.
Company Performance
Conifex Timber’s performance in Q1 2025 demonstrated resilience amid industry challenges. The company transitioned to a two-shift sawmill operation, enhancing its production capabilities. This strategic shift, coupled with a focus on reliable log sourcing, positioned Conifex favorably against competitors. The firm ranked second among public SPF producers in Western Canada for net income, highlighting its competitive edge.
Financial Highlights
- Revenue: $44.6 million for Q1 2025.
- Net Income: $600,000 (approximately 2 cents per share).
- EBITDA: $4.9 million.
- Duty expenses: $2.8 million.
Earnings vs. Forecast
Conifex Timber reported earnings per share of 2 cents, with revenue reaching $44.6 million. The company’s performance aligned with market expectations, leading to a positive response in the stock market. The 23.08% rise in stock price underscores investor confidence in Conifex’s strategic initiatives and operational improvements.
Market Reaction
The market reacted favorably to Conifex Timber’s Q1 2025 earnings report. The stock’s 23.08% surge in pre-market trading reflects optimism about the company’s future prospects and strategic direction. This movement is significant given the stock’s 52-week range, where it previously fluctuated between $0.21 and $0.66.
Outlook & Guidance
Looking ahead, Conifex Timber expects its full-year EBITDA per 1,000 board feet to align with or slightly surpass competitors. The company anticipates low double-digit EBITDA for 2025, with projected duty deposit rates potentially increasing in September and November. These factors indicate a cautious yet optimistic outlook for the remainder of the year.
Executive Commentary
Ken Shields, Conifex’s executive, emphasized the importance of accessing affordable quality sawlogs, stating, "Our Q1 results illustrate the EBITDA we are capable of achieving." He also noted the company’s advantageous position in a self-sufficient sawlog supply region, adding, "We are fortunate to operate in a private supply region that has a degree of sawlog self-sufficiency that is unparalleled."
Risks and Challenges
- Potential increases in duty deposit rates could impact profitability.
- Maintenance and log harvesting challenges may affect future EBITDA.
- Market volatility in lumber prices could influence revenue projections.
Q&A
During the earnings call, analysts inquired about the company’s low double-digit EBITDA guidance. Executives confirmed expectations of $50 to $70 per 1,000 board feet over the next 12 months. Questions about Q2 EBITDA outlook revealed anticipated challenges due to power plant maintenance and log harvesting, with executives managing these issues closely with lenders.
Full transcript - Conifex Timber Inc (CFF) Q1 2025:
Conference Operator: This conference is being recorded.
Ken Shields, Executive (likely CEO), Conifex Timber, Inc.: All participants, thank you for standing by. The conference is ready to begin. Good morning, ladies and gentlemen. Welcome to the Conifex Timber, Inc. Q1 twenty twenty five Results Conference Call.
I would now like to turn the meeting over to Mr. Ken Shields. Please go ahead. Good morning, everyone, and welcome to our call covering our t one twenty twenty five results. I’m in our Vancouver office today, but our chief operating officer, Andrew McClellan, and our chief financial officer, Trevor Pruden, are participating on this call from our regional office in Prince George.
Let’s quickly deal with a housekeeping item. We will be making forward looking statements and references to non IFRS measures and therefore call your attention to the warning statements set out on Pages one and two of the management discussion and analysis that we released this morning. Turning to our Q1 results, all of us at Conifex are most pleased that our Q1 twenty twenty five net income allowed us to join West Fraser as the second member of the club of public SPS producers operating facilities in Western Canada that managed to achieve positive net income after tax in q one. We barely made it. We reported net income of $600,000 or just under 2¢ per fully diluted Conifer’s share.
But we generated EBITDA in ’1 ’4 point ’9 million, which incidentally is equivalent to roughly 30% of our present equity market capitalization. Two years ago, we alerted our shareholders that the chief forest’s May twenty twenty three harvest determination, coupled with some other forest ministry initiatives we were pursuing, would enable our Mackenzie site to migrate to a lower and more enviable ranking on the North American lumber industry cost curve. Our Q1 results illustrate the EBITDA we are capable of achieving when we access an affordable supply of quality sawlogs to support a two chip sawmill operation. Our Q1 results, as you’d be aware, are fully consistent with the guidance we provided you on our March call when we explained how transitioning to a two shift sawmill operation would substantially boost EBITDA. We would like to take about five minutes or so of your time now to provide our perspective on where we rank on the North American softwood lumber industry posture and the thoughts we have about our ability to continue to generate positive EBITDA after duty deposit rates increase in the second half of twenty twenty five.
The simple fact is that our q one twenty twenty five EBITDA per thousand board feet of lumber produced and sold from our integrated Mackenzie, Domino, and power complex has not been matched by any other public board products company in North America. We achieved EBITDA of Canadian 4,900,000.0 on shipments of 38,000,000 board seats, and this translates into EBITDA of Canadian a hundred and $29 per thousand board feet of lumber produced and sold in the quarter. This is equivalent to approximately $90 per thousand board feet. In the opening quarter of twenty twenty five, traditional low cost SPF producers, Weyerhaeuser, Potlatch, Sheltic, and West Timber earned between US 35 and US $53 per thousand board feet of the lumber they produced and sold. I think 10 for its North American lumber business and something like Canadian forty eight dollars per thousand board feet, and the Indoor four appears to have earned around $56.
So our q one results reflect seasonally strong EBITDA margin for two main reasons. The first is that in q one, we benefit from relatively low log cost because our winter harvest is sourced from relatively closed end, low cost truck delivery van. Our delivered log costs are higher in the summer and fall because our harvesting activity takes place in the northern half of the Mackenzie Timber supply area. And in the North, the the harvesting and delivery costs are are greater than they are in the South. And the second reason we typically do well in in the opening quarter of the year is that the prices we received for the electricity we sell to the BC Hydro grid under our energy purchase agreement are higher in the opening and closing months of each calendar year, but lower in the middle month.
And, typically, our Q2 EBITDA contribution from power generation is held back by the annual maintenance downtime that we take at our at our plant. So, against that backdrop, we’ve looked at a variety of scenarios to project our results over the remainder of 2025. Our mid pay projection assumes higher duty deposit rates, but it assumes that there are no additional tariffs. Our pricing assumptions for the year align with the price assumptions made by the leading forest product analysts in Canada. Our mid case projected indicates that a full year EBITDA per thousand board feet of lumber produced and sold in 2025 is expected to be in line with or a bit higher than what Ford’s product analysts presently expect Canfor, Interfor, and Max Fraser to achieve in 2025 from their North American operation.
On our recent calls with you, we discussed the 05/04/2023 release by D. C. T. Forrester of a new harvest level determination for the Mackenzie timber supply. Included in included in the release was the removal of the previous requirement to secure 55% of our sawlog supply from dead pine salvage stands, most of which had already lost their commercial value to sawlog.
The current annual allowable cut for the Mackenzie PSA is 2,320,000 cubic meters. We operate the only sawmill. Our annual fiber requirements are roughly 800,000 cubic meters. So you can see that the new AAC is roughly 2.9 times our present requirement. And this confirms our view that we do not face supply constraints in McKenzie, similar to those that are presently challenging many sawmill operations in DC and in certain other regions.
We are fortunate to operate in a private supply region that has a degree of sawlog self sufficiency that is unparalleled in the interior region of DC and perhaps in any other major StarLock supply region in Canada. As a company, we’ve gone through a transition period over the past two years, and our current harvest is now primarily sourced from green, commercially viable sawlogs there. This shift in log quality is the main reason our EBITDA loss fell in half in 2024 from what we incurred in 2023 and the main reason we are capable of achieving, in our opinion, low double digit EBITDA in 2025 with further improvement in 2026. So summing up on this point, after funding some minor projects that will improve the reliability and consistency of our C shift operation, we are confident that the EBITDA per thousand board feet of lumber we produce and sell will be in line with or slightly higher than the EBITDA reported by the other major public lumber companies whose diversified operations are viewed as being fully cost competitive and economically sustainable by knowledgeable industry of service. Turning to duty deposits.
You’ll note that we expensed $2,800,000 of duties in the quarter, representing the full amount of countervailing and antidumping duties incurred on shipments of softwood lumber from Mackenzie to The U. S. At a combined duty deposit rate of 14.4%. As of March 31, we had cumulative duties of 40,300,000 U. S.
Kelvin trucks by U. S. Customs and Border Protection. On a pretax basis, these deposits are equivalent to approximately Canadian 56,000,000 or a dollar 38 per Conifex share. Except for roughly 11,000,000 recorded as recoverable and respectable for payment, Artifex has recorded the duty deposit as an expense.
With the cumulative duty for the dollar 38 per share and recent trading prices of 30 to 40¢ per share and the plenty of tax shelter that we have, Conifer shareholders should benefit by more than the shareholders of any other publicly traded lumber company if an eventual trade settlement includes the provision for partial repayment of duty held on deposit. As everyone on the line that covers our industry knows is that some preliminary duty rates have been announced regarding duty deposit rates that are projected to increase from 14.4% presently. And in our case, if the preliminary rate holds, we expect to pay something like 26.81% in September and perhaps 34.45 in November and beyond. Turning to our book value, our book value per per share is $2 per share. And as you know, that’s it exceeds our share’s rating price by five or more times.
In closing, and before taking your questions, on behalf of our board of directors, I wish to express gratitude and deep appreciation first to our employees for their continued hard work helping strengthen the economic sustainability of our company in an environmentally responsible and safe manner. And secondly, to our lenders who continue to demonstrate their confidence and trust in the economic sustainability of our integrated site at Mackenzie as well as the asset values underpinning our fiber procurement, lumber manufacturing, and power production platform. This employee and lender support is crucially important given present cost current in the British Columbia lumber industry and the broader North American economy. Our differentiated and high quality fiber supply coupled with the contribution from $100,000,000 we’ve invested in power generation provide us the foundation we require to sustain a profitable lumber business that are exciting Mackenzie DC. All of us at Conifer, thank you for your interest in our company.
And Andrew Trevor and I look forward to responding to any questions analysts and shareholders may have, and so we’ll turn our discussion back to the operator. First question is from Kirk Lumpkin from Imperial Capital. Please go ahead.
Conference Operator: Hello, Ken. Appreciate the call.
Ken Shields, Executive (likely CEO), Conifex Timber, Inc.: Hi, Kurt. So I just wanted I with respect to the guidance, I I heard fiscal twenty five adjusted EBITDA on the low double digits. Is that did I hear that correctly? Yes. Very low double digits.
And and if if you if you look at at what the general forecasts are for the major companies, there the forecast is generally coming in around 40 or $50 per thousand board feet of FTS that’s produced and sold. And so, you know, if we do a hundred and 70 or a hundred and 80,000,000, then we get 50 or $70 per thousand board fee over the twelve month period, we would be in the in the low double digits for for EBITDA for the calendar year. Okay. Thank you. That’s helpful.
And and so that assumes no additional tariffs, but it it does assume it assumes the ramp up exceeding 34.45% in the second half of twenty twenty five. Okay. And and can can you characterize the the pricing assumption there? Is it is it roughly in line with today’s pricing, or is it are you assuming some ramp? No.
We are assuming a ramp. We are you know, we we monitor, Kurt, what what the major analysts on the street have been forecasting. And, you know, the latest number I have is that one bank dealer is at benchmark prices of $5.28 and 25 and $5.48 in twenty twenty fifth. Others are generally $4.75 to $5.50, and one analyst is at $4.85 and $4.90. So so our our pricing assumption as we get towards the end of the year are represent an improvement from today’s price.
They probably aren’t materially different from the q one average price that we had on the benchmark of April. And and, you know, the the November futures are 18% higher than the current cash market prices. So we expect that that some of the cost of the incremental tariff will be borne by lumber consumers, not producers. And so we expect to have some place relief that partially offsets the higher duty that we will be incurred. Got it.
I appreciate it. Thank you. And on the last call, you mentioned positive EBITDA in the second quarter. Are you still thinking it’ll be positive? Yes.
But it will be quite a bit lower. And the main reason for that is that our power plant is down for for maintenance for at least four weeks. So the power plant goes from our source of EBITDA to continue the VA for repairs. And so that’s that’s not our EBITDA back in in the quarter. And secondly, that our team did a great job transitioning from a single shift to a two shift operation early in the New Year, but the weather didn’t cooperate with us enough.
And so we didn’t get enough logs in the yard to sustain a full two shift operation. So we’re running that mill four days a week now on two shifts rather than five days, and we’re hoping we can maintain that rate going through the balance of the year, but we might have to take a few extra days of downtime. So so we’re we’re not we’re we’re not going to have capacity utilization rate that are what we expect to be able to achieve on a pre ship basis on a go forward basis. And that’s because we had a relatively late start to shipping our harvest activities and boosting them up to support the two shift operation. So we don’t plan to use the rev 10 for the EBITDA in Q2, but it’s going to be more significantly reduced from q one.
Got it. Okay. Appreciate it. And then my last topic would be liquidity. How do you how would you how do you feel about it?
Do you need to borrow additional money to to to fund, you know, the ramp in working capital or or not? Yes. Well, that is, you know, the subject. We have a a very close relationship with our main lenders, one for the power plant and one for our sawmill business. They’re definitely financed businesses.
And we really appreciate the efforts that the lenders have taken to understand the competitiveness of our facility. But the fact of the matter is that in the domino side of things, we have a 14% interest rate. And we we expected a higher interest rate because we did not want to be burdened by a fixed charge coverage ratio. So and, you know, in the current year, there there are going to be some onetime charges once the duty rates are finalized. And and there there will be some accounting adjustments taken against EBITDA probably in Q3 of this year.
But the terms of our loan agreement I thought that that will not create any challenges for us. So the second point I’d make is that 14 is expensive. So we don’t we don’t like keeping a whole bunch of cash around and paying 14% interest on it. So so we we don’t have much surplus liquidity at all, but we’ll be spending some time with our lenders in the next four weeks or so reviewing our second half plans in in more detail and looking at, you know, factors such as several small capital projects that we have that have very rapid paybacks on them. And then secondly, we want to spend some money developing spend for our winter harvest season and next summer summer harvest.
And so we’re going to be putting some some capital to work developing the stands for future harvest. Okay. I appreciate. Thank you. Thank you.
As a reminder, you may press star one if you have a question. There are no further questions registered registered at this time. I would like to turn the meeting back over to mister Shields. Well, thank you for that very comprehensive questions, and and thanks to everyone on the call for monitoring our progress and showing interest in our company. It’s much appreciated by all of us.
Enjoy the rest of your day. Thank you. Thank you. The conference has now ended. Please disconnect your lines at this time and thank you for your participation.
Conference Operator: This conference is no longer being recorded.
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