Earnings call transcript: GreenFirst Forest Products Q1 2025 shows positive net income

GreenFirst Forest Products (GFP), with a market capitalization of CAD $64.6 million, reported a positive net income of CAD $920,000 for Q1 2025, showcasing a notable turnaround from the previous quarter. The company’s revenues totaled CAD $72 million, marking a 3% decline quarter-over-quarter. Despite this, the average lumber selling price increased, reflecting a favorable market shift. According to InvestingPro analysis, the stock appears undervalued based on its Fair Value estimate, though it has experienced a -42.86% return over the past year.

Key Takeaways

• GreenFirst achieved a positive net income of CAD $920,000 in Q1 2025.
• Revenue decreased by 3% compared to the previous quarter.
• The company reduced its strategic capital investment program by CAD $30 million.
• Average lumber selling prices rose to $729 per thousand board feet.
• The US housing market showed mixed signals with a decrease in housing starts.

Company Performance

GreenFirst Forest Products demonstrated resilience in Q1 2025 with a positive net income, a substantial improvement from the negative results in Q4 2024. The company’s focus on operational efficiencies and strategic capital investment reductions contributed to this positive outcome. Despite a 3% decline in revenue, the increase in average lumber selling prices from $680 to $729 per thousand board feet helped offset some of the revenue loss.

Financial Highlights

• Revenue: CAD $72 million, down 3% quarter-over-quarter.
• Net Income: CAD $920,000, a significant improvement from Q4 2024.
• Adjusted EBITDA: CAD $5.1 million, compared to a negative CAD $913,000 in Q4 2024.
• Lumber production: 101 million board feet, slightly lower than the previous quarter’s 103 million.
• Sales volume: 90 million FBM, down from 93 million in Q4 2024.

Outlook & Guidance

GreenFirst anticipates potential challenges with a possible duty rate increase to 34.45% in late Q3 2025. The company expects production costs to decrease during the summer months, which could positively impact future financial results. Additionally, GreenFirst plans to install a new production line, which may temporarily reduce sales volume but is aimed at long-term efficiency gains.

Executive Commentary

CEO Joel Fournier emphasized the company’s cautious approach to cash management, stating, "We continue to exercise caution in our cash management strategy." Michel Lesar, President, highlighted the ongoing trade tensions, noting, "The forest industry in Canada has already paid around more than $7 billion US in duties since 2017."

Risks and Challenges

• Potential duty rate increase to 34.45% could impact profitability.
• Inventory levels have increased, which may affect cash flow.
• Ongoing US-Canada trade tensions create market uncertainties.
• The softening demand towards the end of the quarter could impact future sales.
• Fluctuations in lumber prices may affect revenue stability.

Q&A

During the earnings call, analysts inquired about the increased inventory levels, which were attributed to seasonal harvesting. Concerns were also raised about the potential impact of tariff uncertainties on market performance. GreenFirst expressed hope for a resolution to the US-Canada lumber trade conflict, while confirming no immediate plans to monetize its Boreal Carbon Corp holding.

Full transcript - GreenFirst Forest Products Inc (GFP) Q1 2025:

Conference Moderator, GreenFirst: Good morning, ladies and gentlemen, and welcome to GreenFirst First Quarter of twenty twenty five Results Conference Call. Please note that all lines are muted to prevent any background noise. During this conference call, GreenFirst representatives will be making certain statements about future financial and operational performance, business outlook and capital plans. These statements may contain forward looking information or forward looking statements within the meaning of Canadian securities law. Such statements involve certain risks, uncertainties and assumptions, which may cause GreenFirst’s actual or future results and performance to be materially different from those expressed or implied in these statements.

Additional information about these risks, factors and assumptions is included in GreenFirst’s MD and A and annual AIF, which can be accessed on the company’s website or through SEDAR plus After the speakers’ remarks, there will be a question and answer session. Please submit your questions through the online portal. I will now pass it over to Joe Forney to begin the management presentation.

Joel Fournier, Chief Executive Officer, GreenFirst Forest Products: Thank you very much, Joanna, and good morning, everyone, and welcome to our Q1 twenty twenty five earnings call. I’m Joel Fournier, the Chief Executive Officer of Green Forest Forest Products. Today, I’m joined by Peter Ferrante, our CFO and Michel Lesar, our President. We are pleased to report a positive EBITDA of $5,100,000 and a net income of $920,000 for Q1 twenty twenty five. These results represent an improvement compared to last quarter, Q4 twenty twenty four, when we recorded a negative EBITDA of $913,000 and a net loss from continuing operations of $26,600,000 The stronger performance this quarter was primarily driven by higher lumber prices.

However, boat shipment and production were lower than expected due to uncertainty created by tariff development and winter related disruption in Northern Ontario. We began the quarter facing uncertainty following the announcement of the potential 25 tariff on Canadian lumber by the U. S. Government on 02/01/2025. Just three days later, this tariff was removed.

However, implementation was again treated on March 6 and finally on April 2. April second, lumber was officially excluded from the proposed tariff going forward, which is a good news. This back and forth created a negative buyer sentiment for the quarter, which negatively impacted our sales volume. During the quarter, lumber price increased, effectively absorbing most of the potential tariff risk, which should have been over and above the current duty we paid. While this helped mitigate the financial impact on producer, it unfortunately contributed to higher home construction costs for American consumer.

Towards the end of Q1, as the market began to stabilize, we observed a return to a more normal sales level. We continue to exercise caution in our cash management strategy. The U. S. Department of Commerce has initiated an investigation under Section two thirty two of the Trade Expansion Act to determine the effect on U.

S. National security of import of wood products. The reports with this finding are expected by November 2025, which could lead to potential imposition of new tariffs. We currently pay contributing an antidumping duty, CBD and ADD, at a combined rate of 14.4%. This rate is expected to increase in approximately 34.45% starting late Q3, which will primarily impact the end consumer.

As a reminder, GreenFirst made the strategic decision to sell its right for potential reimbursement for duty paid in twenty twenty one-twenty twenty two in Q4 twenty twenty four. We continue to believe this was the right decision for the company. To summarize the quarter relative to Q4 twenty twenty four, if we start with production, it was slightly lower. Q1 production reached 101,000,000 FBM, slightly lower than Q4 with 103,000,000 FBM. Some of our mill finished under target due to extreme weather condition, but we do have a mitigation plan to avoid downtime for next winter.

January and February was lower for production, but we saw a pickup in March. In fact, the Capuchinseng sawmill broke four production record during the month. On the sales volume side, we finished lower at 90,000,000 FBM in Q1 versus 93,000,000 FBM in Q4 twenty twenty four due to the economic uncertainty we mentioned previously. SG and A remained well below our announced target of $40 per 1,000 and we finished the quarter at $29 per $1,000 Inventory end up the quarter higher than expected overall with our finished goods up mainly because the uncertainty created by the tariff and our log inventory was lower and in better position. Quality of wood continued to improve in Q1.

We did operational change and the overall grade we’re producing went up, driving our mill net approximately $30 per thousand higher overall. Capital expenditure and continuous improvement. From the previously announced $50,000,000 capital investment program aimed to improve the company cost structure, GreenFirst will move forward with only selected strategic project at this time. Specifically, we will proceed with the installation of the new line at Chaplot facility, and we’re going to do upgrade at the cogeneration plant at the Chaplot site. These projects represent a total investment of approximately $20,000,000 Other major capital initiative will be temporarily paused to preserve a strong balance sheet and maintain an excellent debt position in anticipation of potential economic headwinds.

However, the company has identified smaller, high return capital project with payback period of less than one year. These projects will continue and we will report results to our shareholders as they are realized. GreenFirst remains deeply committed to fostering a culture of continuous improvement, which we view as essential to maximizing return on capital investment and driving a long term value. In 2024, the company successfully delivered 9,100,000 in incremental EBITDA through operational improvement alone, non CapEx related. For 2025, we have identified approximately $8,000,000 in non CapEx efficiency gain and we are actively executing on these initiatives to capture their full potential.

Market overview. The lumber market price saw a notable improvement in Q1 twenty twenty five compared to Q4 twenty twenty four, with strong price increase throughout the quarter. Our average realized lumber selling price rose from $680 in Q4 twenty twenty four to $729 in Q1 twenty twenty five, and the Western based price rebound sharply from a low of $338 per thousand in July 2024 to an average of $492 per thousand US in Q1 twenty twenty five. Despite this positive momentum, demand began to soften and price started to decline towards the back half of the quarter. We believe the early Q1 price surge was largely driven by market reaction to the proposed 25% tariff on Canadian lumber announced previously in February.

This sentiment was reflected in lumber futures, which climbed significantly following the announcement. As the threat of tariff eased, price began to normalize. US housing starts in March 2025 came at 1,300,000 units, down 11.4% from January, but still 1.9% higher than March, suggesting year over year resilience despite the monthly fluctuation. On a more positive note, the repair and remodeling market segment remained strong. Demand continued to outperform historical norms, driven by factors such as increase in home equity, an aging housing stock, and favorable homeowner investment trends.

Finally, GreenFirst remain committed to continuous improvement as a core strategy to enhance business performance. At the same time, we will maintain a prudent and disciplined approach to cash management to ensure the company is well positioned to navigate potential economic headwinds and emerging market challenges. Over to you, Peter, for the financial section.

Peter Ferrante, Chief Financial Officer, GreenFirst: Thank you, Joao, and good morning to everyone. Please refer to our cautionary language regarding forward looking information in our q one twenty twenty five MD and A. The company reported a net income of CAD920000 in the first quarter of twenty twenty five with an adjusted EBITDA of positive CAD5.1 million on total revenues of CAD72 million. Revenue decreased 3% quarter over quarter compared to q four twenty twenty four, driven by a 7% increase in the average realized price of lumber, which averaged $7.29 per thousand board feet in q one twenty twenty five compared to $680 in q four twenty twenty four, reflecting stronger market pricing conditions during the quarter. Although, demand remains subdued.

The lumber industry continues to face headwinds, including reduced demand due to housing affordability challenges caused by elevated mortgage rates, compounded by ongoing uncertainty regarding the potential impact of US trade tariffs despite production curtailments across North America, which translated in volume of lumber sold down by 4%. For the first quarter ended 03/29/2025, the company reported cost of sales of 62,100,000.0 compared to 68,500,000.0 in the fourth quarter ended 12/31/2024. This represents a decrease of approximately 9%. The decrease in cost of sales was driven by a 4% reduction in shipment volumes combined with a 6% improvement in average cost per unit as compared to the fourth quarter of twenty twenty four. Lumber production for the first quarter of twenty twenty five was a 1,400,000 board feet compared to 102,900,000 board feet in the fourth quarter of twenty twenty four.

The slight decrease in production was primarily attributable to adverse weather conditions and related supply chain disruptions experienced during the first quarter twenty twenty five. This impacted slightly our operational efficiency and output levels. Duties expense of $5,700,000 in the first quarter twenty twenty five were lower than the fourth quarter twenty twenty four of $6,200,000 due to lower shipments. During both quarters, the company was subject to a combined duty rate of 14.4%. Early in 2024, the company implemented selected initiatives aimed at reducing selling, general, and administrative expenses.

These initiatives continue to deliver savings whereby the company incurred 2,600,000 of selling, general, and administrative expenses for the quarter compared to 2,800,000.0 in the fourth quarter ended 12/31/2024. The combination of these factors contributed to a positive EBITDA of 5,100,000.0 versus a negative EBITDA of 900,000 in the prior quarter. This is an overall improvement at 6,100,000.0 quarter over quarter. Under our amended and restated credit agreement, the company’s maximum borrowing capacity under the revolving portion of the credit facility is 60,000,000 and the equipment financing portion is 25,000,000. Taking into consideration that the first quarter of fiscal year is our primary harvesting season, the company did draw down $12,000,000 during the quarter against the revolving portion of the credit facility.

As of 03/29/2025, there were also 8,600,000.0 of outstanding letter of credit issue, which reduces the amounts available to draw under the revolving portion of the credit facility. As such, approximately 39,000,000 were still available to be drawn on. Additionally, as of 03/29/2025, the company had a net aggregate amount of 13,000,000 drawn under the equipment financing portion of its credit facility in the form of a term loan. An additional 12,000,000 was available to be drawn on. Overall, we continue to manage our liquidity through this volatile lumber markets and harvesting season, which requires significant investments in raw materials.

We do this prudently by maintaining tight inventory management at the mill level, supplemented by drawdowns against our asset based lending facility to cover seasonal expenses. Our lending facility, was amended and restated and extended to this September 2028, is secured by borrowings against our inventory and accounts receivable. As a result, higher levels of inventory are supported by credit facility during this harvesting season. This concludes my remarks, and I will now pass it over back to Joel.

Joel Fournier, Chief Executive Officer, GreenFirst Forest Products: Thank you very much, Peter. I want to thank everyone for joining the call. We will now answer any questions that have come through. Thank you.

Conference Moderator, GreenFirst: Ladies and gentlemen, as a reminder, should you have any questions, please submit your question using the q and a pod through your online portal.

Joel Fournier, Chief Executive Officer, GreenFirst Forest Products: Okay. Good morning again. This is Joel. We do have, one question here. Can you speak to the high levels of inventory currently being held at the end of the quarter?

And are you seeing any demand concern from buyers due to this potential increase in duty and tariff? I will answer that question. So, first off, you know, the our raw material went up by $23,000,000, from q four two thousand twenty four, but this really aligned with our expectation with harvesting seasonability. As some of you know, you know, we cut most of our wood during winter when the ground is frozen. Also, through our discussion with buyer during the quarter, we have seen an overall general sentiment of economic uncertainty.

So some of the customer were on a holding pattern. But this led to a lumber inventory that went up close to $10,000,000 from Q4 twenty twenty four. But these inventory increase are temporary, and we expect a decrease during the course of Q2. Joel, again here. We do have another question around pricing.

So pricing has started to decline towards the back half of the quarter. Can you talk a little bit about what you are seeing in demand right now, both on the repair and remodeling side and also on the new residential construction side? So, during q one two thousand twenty five, the price average on a Western base basis was US492 dollars per $1,000 for the whole quarter, and we are currently at US437 dollars per $1,000 at the May, which we believe bottomed out. We saw US housing start in March. Like I said earlier, 02/2025 came in at 1,300,000 units, down 11.4 from January, but still 1.9% higher than March, suggesting a year over year resilience despite the monthly fluctuation.

Also, as I mentioned previously, the repair and remodeling market segment remained strong. Demand continued to outperform historical norms, driven by factors such as increased home equity and aging housing stock and favorable homeowner investment trends. And we do see with our customer home centers, a very steady continued demand during the quarter.

Michel Lesar, President, GreenFirst: Thank you.

Joel Fournier, Chief Executive Officer, GreenFirst Forest Products: We have another question here. You’ve spoken about making a $50,000,000 in capital expenditure investment in the past. How confident are you in being able to execute your CapEx plan with the company current capital allocation and strength of the balance sheet. I will let Peter, the CFO, answer this question.

Peter Ferrante, Chief Financial Officer, GreenFirst: Thank you. Good question. Based on current economic uncertainties, we are taking a prudent approach with our capital projects and only executing selective initiatives. Our main strategic capital project is our new saw line at the Shopko location, which is on schedule and planned for implementation late summer twenty twenty five. We feel that our balance sheet is is in strong position.

We ended the quarter with excess liquidity of 51,400,000.0, including both the revolving and equipment portion of our credit facility. We’ve worked very hard for for this in the last twelve months, and we’ve put ourselves in a good position. And we will continue to be very much focused on managing the balance sheet as it as it stands today.

Joel Fournier, Chief Executive Officer, GreenFirst Forest Products: Okay. We have a a couple of question here, around tariffs and duties. So I’ll go with the first one. What are the company thoughts on the recently announced duty increase from 14.4% to 34.45% for Canadian shipment to US from the preliminary results of the AR6? What will be the impact on the business?

I will let Michel Lassard, our President, answer the question.

Michel Lesar, President, GreenFirst: Thanks, Joelle. I’ll start to say that the increased duties rate is very concerning for the industry, not only for GreenFirst, but the industry in general. So however, we’ve seen in the past that the majority of the cost of these rates increases have been passed on to the end customers. So at the end of the day, you know, this will drive an increase in the cost of the housing in The US. So as mentioned, so at the end of the day, it’s always the end consumers who’s paying for that.

So but that said, so we we hoping that the the new premier of Canada and also the president Trump will come to a resolution shortly before that these new tariffs become into effect. The other thing that is important to mention also is the forest industry in Canada has already paid around more than $7,000,000,000 US in due dates since 2017. And for sure, we are ready for a settlement in the very near near term. So we remain available anytime to meet with the new government to discuss further and and help also to find a resolution to that conflicts again that that has been there for so long.

Joel Fournier, Chief Executive Officer, GreenFirst Forest Products: We do have another question around, the tariff here. What is the company position on the timing for resolution of US Department of Commerce under section two thirty two investigation?

Michel Lesar, President, GreenFirst: I will let Michel to continue, answer those questions. Thanks, Joelle. So as mentioned also, in Joelle’s presentation, so the the US Department of Commerce initiated the the investigation, again, the the section two thirty two of the trade extension act to determine the effects on The US national security of imports of wood products. So the investigation is expected to be completed by November 2025. So we’re presently not paying any additional tariffs as has been insured other than the duties that we’re paying.

And, we’re hoping also, you know, that this report will demonstrate that a number from Canada is not a threat, to The US national security. And, we hope that The US and Canada Governments will be able to to sit together and reach an agreement per year to this deadline of that the reports coming out. And before also, as I mentioned earlier, before that, the new tariffs are coming in.

Joel Fournier, Chief Executive Officer, GreenFirst Forest Products: Okay. Good morning again. This is Joel. We do have a question, here around Boreal. So update on, GreenFirst Forest product, Boreal Carbone Corp holding.

Any chance of monetizing that position and using that money for buybacks? I will let Peter Ferrante, our CFO, to answer the question.

Peter Ferrante, Chief Financial Officer, GreenFirst: We’ve held that position in Boreal for several years now. We’re we’re pretty content satisfied with it, and there is no short term intensions of monetizing that asset.

Joel Fournier, Chief Executive Officer, GreenFirst Forest Products: We do have another question here. So how do you see production cost trending throughout the year due to the elevated inventory level? Will production volume come down to sell down existing inventory? So, yes, we I’ll take this one on. We believe and we anticipate the cost will come down, for for a various reason.

But one of them is, you know, where we operate, it’s North Of Ontario. And historically, the the the monthly or the the the winter quarter, the production, is always a little bit lower. Therefore, costs are higher. So when we go into the summer season, we we we normally see a positive trend on the cost side. So that’s one one reason, but there’s other reasons as well.

And as far as the sales volume, we believe it’s gonna go down because when we’re gonna install the line at Shaplow, we’re expecting to take some downtime to install the line. Therefore, we’re looking to catch up and and on sales volume and and be more at a normal level. Okay. I look at the screen here, and there’s no more question. Again, I would like to thank everyone on the call for your participation and your interest on GreenFirst, and have a good day.

Thank you.

Conference Moderator, GreenFirst: Ladies and gentlemen, this concludes your conference for today. We thank you for participating, and we ask that you please disconnect your lines.

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