Earnings call transcript: GreenFirst Forest Products Q2 2025 sees revenue rise

GreenFirst Forest Products Inc. (GFP) reported its financial results for the second quarter of 2025, revealing a net loss of $9.6 million amid an 18% increase in revenue quarter-over-quarter. Despite the revenue growth, the company’s stock price fell 3.86% to close at $3.11. According to InvestingPro analysis, GFP is currently trading below its Fair Value, with a market capitalization of $48.96 million and a beta of 1.65 indicating higher volatility than the market average. The company remains cautious about future market uncertainties, particularly in the US housing market and potential trade impacts.

Key Takeaways

• Q2 2025 net loss of $9.6 million despite an 18% revenue increase.
• Stock price decreased by 3.86% following the earnings announcement.
• Record production of 160 million board feet achieved.
• Concerns about increased duty rates impacting future performance.
• Ongoing exploration of market diversification and government support.

Company Performance

GreenFirst Forest Products showed a significant increase in production and revenue in Q2 2025. The company achieved record production levels, manufacturing 160 million board feet, marking the highest in its history. However, this was overshadowed by a net loss of $9.6 million, attributed in part to rising costs and increased duty rates affecting profitability. InvestingPro data reveals a concerning gross profit margin of just 3.33%, though the company maintains strong liquidity with a current ratio of 2.19. The company maintains a strong presence in the US market, shipping 70-85% of its wood south of the border, and is developing local partnerships in Canada to diversify its market reach.

Financial Highlights

• Revenue: $84.5 million, up 18% quarter-over-quarter.
• Net Loss: $9.6 million for Q2 2025.
• Adjusted EBITDA: -$5.2 million.
• Cost of Sales: Increased 29% to $80 million.

Outlook & Guidance

GreenFirst Forest Products remains cautious about future market conditions, particularly given the uncertain US housing market and potential trade barriers. The company is exploring diversification into new market channels and awaiting details on a $1.2 billion federal industry support plan. Future projections for fiscal years 2025 and 2026 show anticipated EPS of $1.13 and $4.17, respectively, with revenue forecasts of $423.03 million and $740.31 million. InvestingPro analysis indicates expected net income growth this year, with 10 additional exclusive insights available to subscribers, including detailed valuation metrics and growth forecasts in the comprehensive Pro Research Report.

Executive Commentary

CEO Joao Fournier emphasized the company’s cautious approach: "We will continue to manage cash cautiously and move forward with only selected capital expenditure." CFO Peter Ferrante noted, "The majority of the lumber we sold during the second quarter relates to production coming from our prior quarter." These statements underscore the company’s strategic focus on careful financial management and leveraging previous production gains.

Risks and Challenges

• Increased duty rates from 14.4% to 35.19% could significantly impact profitability.
• The US housing market remains uncertain, with potential trade quota systems looming.
• Rising costs of sales and operational expenses could pressure margins.
• The company is pausing half of its previously announced $50 million CapEx program, which may affect future growth initiatives.

Q&A

During the earnings call, analysts expressed concern about the increased duty rates and their potential impact on GreenFirst’s US market operations. The company is evaluating potential government support to mitigate these challenges and is exploring international market opportunities to broaden its revenue base. Executives confirmed that there are no current plans for a full company sale, indicating a focus on strategic growth and market adaptation.

Full transcript - GreenFirst Forest Products Inc (GFP) Q2 2025:

Conference Moderator: Good morning, ladies and gentlemen, and welcome to GreenFirst Second 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 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 turn the call over to Joao Fornier to begin the management presentation.

Joao Fournier, Chief Executive Officer, GreenFirst Forest Products: Thank you very much, Joanne, and good morning, everyone, and welcome to our Q2 twenty twenty five earning call. I’m Joelle Fournier, the Chief Executive Officer of GreenFirst Forest Products. Today, I’m joined by Peter Ferrante, our CFO and Michel Lassard, our President. We did end up with a negative EBITDA of $5,200,000 in Q2 twenty twenty five. The loss is primarily due to higher cost of selling, higher SG and A and lower by product revenue.

In Q2, the cost of selling was impacted with inventory adjustment, representing higher costs coming from finished goods we produced in Q1 and sold during the 2025. Our manufacturing costs did improve in Q2. SG and A was impacted negatively as well with a non cash expense. Despite the loss in Q2, our cash balance sheet remained strong. On a positive note, her operational performance in Q2 was very strong.

Her mill achieved the highest production in the company history, setting a record of 160,000,000 MfBM. The higher output helped us significantly reduce our manufacturing cost in the quarter, which will translate in reduction in cost of sales in the coming quarter when we sell those goods. On the sales side, we shipped 110,000,000 MfBM in Q2. This represents a strong quarter in terms of volume despite overall lumber demand, which was negatively affected by market uncertainty surrounding the tariffs and increase in duty. During the quarter, we learned that the new combined duty rate was expected to take effect in August at 34.4%, but in early August, we ended up slightly above 35%.

Unfortunately, for our US customers, the future price rose almost enough to fully absorb this rate increase, raising the cost of new homes in The United States and potentially dampening overall demand. As of now, we are not paying any additional tariffs, but we are awaiting for Section two thirty two report from the US Department of Commerce. On a positive note, the federal government announced a $1,200,000,000 industry support plan, and we are actively working with them to understand how this could help and benefit Green Forest Products. We will continue to manage cash cautiously and move forward with only selected capital expenditure. Some of the highlights for Q2 twenty twenty five versus Q1 twenty twenty five.

As already mentioned on the production side, we finished significantly higher reaching the all time record of 116 MfBM versus 101,000 in Q1. We also broke six additional production record during Q2. On the sales volume side, we finished with a higher at $110,000,000 MMB versus $90,000,000 MMB compared to Q1, supported also by a record of monthly sale volume with our key home center partner during the quarter. SG and A, we were higher in Q2 due to a one time non cash transaction, but still in line with their previously stated 2024 target of $40 per 1,000 MfBM. Inventory, the total inventory value decreased compared to Q1, but it remained above our expectation.

We are implementing a plan to reduce it in the coming months. On the quality side, we continue to improve versus 2024 and the overall mix of product we produce and sell is improving and continue to improve. On the residue side, the price remained challenging, but we maintained sales through long term contract we have with key partners. We are also developing a medium term plan to increase demand for our byproduct over the next three years. Presently, we do have an agreement with a third party to analyze the opportunity to produce a terrified pellet plant and a biochar for interested party that we are currently in discussion with.

If developed, this project would significantly improve the residue situation for our mills and for the province of Ontario. We will update shareholder as progress is made with this very exciting project. On the capital expenditure and continuous improvement side, from previously announced $50,000,000 CapEx investment program aimed to improving the company cost structure, GreenFirst is proceeding with only selected strategic projects at this time. As already communicated in Q1 twenty twenty five, we’re moving forward with: upgrading the production outputs at our Chaplot facility with the installation of a new saw line, installation of a new planar mill, as well as the cogeneration plan, which will bring us close to a top quartile cost operation point of view. These projects represent a total investment of approximately $25,000,000 A portion of the Chaplot mill is currently offline to accommodate the installation of those projects.

And so far, everything is going well. Commissioning of the new sawmill is expected to begin at the September and the full benefits are expected in Q1 twenty twenty six, while installation of the new planer and the cogeneration EcoPen will each take approximately two weeks and be completed by the August. We expect the overall project to be completed on time and on budget. We plan to host an investor tour in Q2 twenty twenty six, where participants will be able to see the new saw line in action at Chaplot and learn more about the financial benefit it will deliver for GreenFirst. Other major capital initiative will temporarily pause to preserve our strong balance sheet and maintain excellent debt position in anticipation of potential economic headwinds.

However, as previously announced, we will continue to move forward with smaller, high return capital projects. At the end of Q2, we completed some such project with payback period less than six months. GreenFirst remains deeply committed to fostering a culture of continuous improvement, essential for maximizing return on capital and driving long term value for the company and our shareholder. In Q2 twenty twenty five, we delivered operational improvement in excess of $3,000,000 of equivalent EBITDA improvement. We also recorded a significant safety improvement, reducing a recordable incident rate to 2.1.

This is a 50% improvement compared to 2024. We will continue to focus on the factor within our control and pursue opportunity to continue to improve the business. I will touch base a little bit on the market. So what happened in Q2? The lumber market remained uncertain in Q2, with some customers taking a very cautious approach in response in the recent duty increase and the potential looming tariff from United States.

Despite all this uncertainty, we did close the quarter with a solid sales volume of $110,000,000 in FBM. The housing market side finished below forecast in Q2 with 1,300,000 units sold in June. This is up 4.6% compared to May, but 05% lower than June last year and well below the historical year over year average of 1,600,000 units. Repair and remodeling activity also trended lower during the quarter. Despite these headwinds, we achieved a record quarterly shipment with our key home center partner.

We will continue executing to executing our strategy to grow this segment in collaboration with them to continue to ship strong volume going forward. Pricing condition were challenging in q two with an average Western base price of $468 per thousand excuse me, by August 1, however, Western base had risen up to $535 per thousand, primarily driven by supply constraint following announced mill curtailment by producers such as Canfor, RBAC, and other lumber producers. The anticipated duty increase also influenced future pricing, which rose to absorb nearly the full duty rate increase that took effect in August 2025. On a positive note, the federal government announced to support the Canadian producer of a plan of $1,200,000,000 including its intention to boost Canadian housing start by 5,000,000 units annually. We will closely monitor development and assess how GreenFirst can position itself to capture opportunity from this initiative.

In The US, there remain a significant housing under build of approximately 2,500,000 units. However, for the upcoming quarter, we remain cautious in our forecast, anticipating only modest price gain from recent curtailment. In the short term, we expect demand to remain relatively flat. 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 Forest Products: Thank you, Joel, and good morning to everyone. Please refer to the cautionary language regarding forward looking information in our q two twenty twenty five MD and A. The company reported a net loss of 9,600,000.0 in the 2025, with an adjusted EBITDA of negative 5,200,000.0 on total revenues of 84,500,000.0. For the two quarters ended 06/28/2025, we reported a net loss of 8,700,000.0 along with an adjusted EBITDA of negative $100,000 on a total revenue of 156,400,000.0. Revenues increased by about approximately 18% quarter over quarter compared to q one twenty twenty five, driven by an increase in shipments of approximately 20,000,000 board feet, representing an increase of 22% as we continue to strengthen our relationship with key customers as Joel made reference to.

The shipment increase was offset by a price decrease of approximately 2% or $17 per void fee, reflecting a stronger Canadian dollar versus The US, combined with a drop in benchmark prices. 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 track tariffs despite production curtailments across North America. For the second quarter ended 06/28/2025, the company reported cost of sales of approximately $80,000,000 compared to $62,000,000 in the first quarter ended 03/29/2025. This represents an increase of approximately 29%. Out of this increase, 22% is driven by increase in shipment volumes combined with an increase of 7% in average cost per unit.

Level production for the 2025 was approximately 160,000,000 board feet compared to one zero one in the 2025. This increase in production was primarily attributable to the continued focus on our production efficiencies. From a duties expense point of view, duties were at 8,200,000.0 in the 2025, which is higher than the 2025 of 5,700,000 due to higher shipments. During both quarters, the company was subject to a combined duty rate of 14.4%. Selling, general and administrative expenses for the 2025 totaled 4,600,000.0 compared to 2,600,000.0 in the 2025.

A good portion of this increase is attributable to noncash compensation expense. The combination of these factors contributed to a negative EBITDA of 5,200,000.0 versus a positive EBITDA of 5,100,000.0 in prior quarter. Under the amended and restated credit agreement, the company’s maximum borrowing capacity under the revolving portion of the credit facility is 60,000,000 And under the equipment financing portion, 25,000,000. Taking into consideration that the first half of our fiscal years is our primary harvesting season, the company has made net borrowings of 12,500,000.0 on a year to date basis ending 06/28/2025 against the revolving portion of the credit facility. As at the same time, there were 8,600,000.0 of outstanding standby letters of credit issue, which reduces the amounts available to be drawn on the revolving portion of the facility.

As such, approximately 39,000,000 was still available to be drawn. Additionally, as of 06/28/2025, the company had net aggregate amount of 12,300,000.0 drawn under the equipment financing portion of the credit facility in the in the form of a term loan and an additional 12,700,000.0 available to be drawn from. We continue to manage our liquidity through the 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, which was amended and extended to September 2028, is secured by borrowings against your inventory.

As a result, with higher inventory levels, we are supportive with our credit facility during these harvesting seasons. This concludes my remarks. We’ll pass it over back to Joel.

Joao Fournier, Chief Executive Officer, GreenFirst Forest Products: Thank you very much, Peter, and and I would like to thank everyone for joining the call today. We will now answer a couple of questions that, have come through.

Conference Moderator: 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.

Joao Fournier, Chief Executive Officer, GreenFirst Forest Products: Okay. So we did have first question here. What are company’s thoughts on the recent announced duty increase from 14.4 to 35.19 for Canadian shipment to The U. S. From final results of AR6.

What will be the impact on the business? I will let Michel, our President, to answer that first question. Over to you, Michel. Yes. Thanks, Joelle, and thanks for the question.

For sure, the increased duty rate is very concerning for the industry. However, we’ve seen in the past that a majority of the cost, as Joelle mentioned earlier, so majority of these rates increases have been passed on to the end consumer. So ultimately, this will drive to an increase in the cost of dehausing in The U. S. And I’d said that in response to these duty rates increase and potential tariffs, we’ll continue to explore also different market opportunities as the uncertainty remains also, actually.

So and I’ll terminate in saying that we are hoping also that the prime minister of Canada and also the president Trump will come to a resolution very shortly. You know, the the first industry in Canada has already paid around 7,500,000,000.0 US dollars in duty since 2017, and we are looking surely for a certain amount in the near term. Okay. Joel, again, we do have another question here. Can you talk a little bit more about what you’re seeing in demand and pricing right now?

I will I will take this one quickly. So during q two two thousand twenty five, the price decreased from previous quarter. However, recently, we saw some movie the lumber future increase in response of the higher duty rate announced in July and August 2025 and any potential tariff announcements. So it’s very good to see the lumber future price rose following those announcements. There’s still also some uncertainty related to demand.

However, like I mentioned in my in my previous, saying, we did ship 110,000,000 MVN for the quarter. This is a a good volume from GreenFirst. The volume was largely driven by our long term relationship with their home center. We we do have a strategy to grow that business, and it it it started to pay off as far as volume and price, and we’re gonna continue to focus on that on growing that business. Additionally, we noted that some of our competitor continue to announce sawmill curtailment.

So anytime there’s a mill that go down, it push pressure, it reduce the supply, therefore, it it put pressure on price. Okay. We do have another question here. You’ve made reference to production record during core q two. Why don’t we see the benefits of this in your financial statement?

I will let Peter Ferrante, the CFO, answer that question.

Peter Ferrante, Chief Financial Officer, GreenFirst Forest Products: Thank you, Joao. So as you know, the majority of the lumber we sold during the second quarter relates to production coming from our prior quarter. As such, the production costs associated with the prior quarter are actually in our cost of sales for this quarter. We anticipate that these benefits that we from our 02/2002 production records will translate into a reduction of cost of sales and the upco on the quarter as we sell through the lumber producing in q two during q three. As of June 28, on our balance sheet date, we held approximately 90,000,000 board feet on our balance sheet of the 110,000,000 that we have produced during the quarter.

So we will see the the benefit of q two being translated into q three.

Joao Fournier, Chief Executive Officer, GreenFirst Forest Products: Okay. We do have another question here. You’ve spoken about the CapEx related to the Shapu large logline in the past. Can the company provide any update regarding this project? I will take over this one.

As always, we’re talking we’re taking a prudent approach with with our capital expenditure. But we’re presently installing not only the large logline, but also a brand new planar mill and a ref refurbished cogeneration plant in Shaplow Sawmill. And like I said, we’re expecting the combination of this project to have a significant positive impact on the mill profitability profile. Just to say, maybe it’s not fully evident for the investor, but the line we’re replacing at Chapleu was a forty years old line, and we’re putting brand new technology, including artificial intelligence. So we’re looking to see a significant impact on on our cost profile and EBITDA going forward.

Okay. So we do have another question here. Could you explain why GreenFirst is subject to the higher 34% duty versus 22 reference for the smaller players? I will let Michel, our president, to answer that question. Yeah.

Thanks, Will. I would simplify the the answer. So what is happening, you know, is the the you will have some major lumber producer that, that are selected for the calculation that will determine the the duties. And after that, you know, we’re just getting the average as all the other companies are getting. So the 35.19 that has been announced is is an average of this this calculation and the average of what the major lumber producers that has been selected got.

Okay. We do have another question here. Joel, could you discuss the balance sheet? Specific specifically, what is the plan will be if if 232 hits further? So this those are potential tariff that could come at us.

So I’ll and you know what? I got, like, kind of two question in the same question. I’ll answer the first one here. So we of course, we made scenario, forecasting scenario with if, potentially, we’ve been hit with the 202, tariff. It’s hard to determine if those tariffs will come through, and it’s hard to determine what kind of percentage we may be hit with.

But we I can reassure a shareholder that we we made several scenario. And our as a result of that, you know, we that’s the reason why we decided to park half of our $50,000,000 CapEx, that we announced in q one. And with by keeping this money, we’re gonna continue to keep a strong balance sheet. We’re gonna continue to have a cautious approach until we have more certainty around those tariffs. There’s, another question here, from the same person.

Would a shift would a shift towards international markets be a possibility? So, yes, this is a a all good question, but I I like this one, particularly. So all all of our meal are Canadian meal, And, of course, we’re looking at different market. And presently, as we speak, you know, we’re looking to build a strong partnership with consumer, local consumer, mainly in Toronto area, and we’re looking to develop this partnership so they could consumer wood, and that will diversify some of our shipment from US to Canada. Okay.

Another question here. Do we does the company, what about considering a full sale of the company? So this decision, it’s it’s above us. It’s a board decision, and, it’s up to them to to consider if they’re willing to sell or not. Okay.

We we we do have another question here. How would a quota system that has been floated by DC could impact GreenFirst operation? So I will answer this one. Of course, a quota could could impact GreenFirst, but we’re preparing yourself and potentially in response to that. So we we presently ship between 70 to 85% of all our wood to United States.

But we’re presently looking, like I already said, to develop a partnership with, some local wood consumer in the region of Toronto. In fact, I’m going to meet, a couple of players next week. So our strategy is is to is to, look at what we can do with them, build a relationship and a partnership, and start to sell more volume, locally. We, of course, we cannot sell all the volume we produce in Canada, but if a quota hit, we’re going to have to diversify a little bit a higher percentage to local market versus United States. But as we speak, we’re we’re working on that, and we’re preparing ourselves to to that.

Okay. So we did have two questions that look very similar here. The first one is, what will happen to the current offtake agreement with Rayonier if a new place, is found for the residual? And the other question is, can you clarify the company plan to address any potential exposure related to its byproduct? So I will let Michel, our president, to answer that question.

Yeah. Thanks, Asuel. So, you know, currently, our exposure is is minimized as we have a long term contracts, as referred here also in one of the questions, so with the Reoneer Advanced Material, and we have also a similar contract with Cap Paper Inc. So in this contract, they have to purchase the the chips or redirect if if they don’t take it. So to that question about what could could happen with, you know, Rayonier’s contract.

So the contracts remain, again, it’s to them to to use it or to find a room for for their chips if they don’t use it. That said, you know, the industry remains challenging with the closure of three major pulp and paper over the last two years, including Rayonier Advanced Material and also Espanola and Terraspase. So on that, we we continue to look for different alternative to enhance also the value of our bioprojects. Joel mentioned that also earlier that we’re currently exploring long term plan to build a terrified pellet plant in Chaplo. And we’ll look also for different opportunities for each of our sites.

So on these specific, we’ll be able to provide more details in the following months. Okay. We do have, again, well, two questions that look really the same. So does GreenFirst have any plan to take advantage of government grant loan recently discussed by the primer, Carney? And the other question is, recently, the primary ministry announced a program supporting the Canadian softwood lumber industry with program totaling 1,200,000,000.0.

Do you believe the company would benefit from this program? I will let Michel answer the question, and I will complete after. Thank you, Al. But first, I would say that we’re very pleased to hear also that our federal government recently in phases that the Canadians of wood lumber industry is now a top priority as part of their overall discussion with The US. We also believe that the the prime minister’s recent announcements last week of this $1,200,000,000 confirm also the importance for the kind of sense of wood lumber industry in this time of uncertainty.

Specifically on the programs, you know, it’s very early, but we we have started speaking with some government officials to better understand how and also when, they they will be accessible and more specifically for GreenFirst. So more to come on that, as I said. So the, that has been announced, but no details are are available yet. Okay. And if I may add to Michelle answer, like like Michelle said, we’re waiting for the detail.

Like, they make those announcement, but we’re waiting for the detail on how we’re gonna position ourselves, take advantage of that. But I would like to mention to the the shareholder that, you know, we we’re we’re 100% Canadian. GreenFirst, we’re 100% Canadian, and this help is for us. So we’re gonna look to utilize every single dollar available to us in terms of project. I know, you know, we’re waiting for the detail, but we do have project ready to go.

We just need to, have more information from the government, and we’re closely in discussion. You know, we’re continuing discussion with them, and we’re ready to go as they, unfold the detail. One thing they did they did mention in their, in their plan is they would like to boost and foster the housing start in Canada by half a million unit per year. I’m I’m very excited, by this one. So like I said earlier, you know, this if if this when this come to fruition, it’s gonna create more demand for lumber, and therefore, it’s gonna push price up if they build more houses in Canada.

Half a million, it’s not a small number. It’s a significant number for our country. So in preparation of that, like I said earlier, we’re we’re looking to develop more partnership to diversify some of our sales, in Canada and, increase our relationship with some of the home key homebuilder in Canada to potentially take advantage of this, increasing housing start. K. I would like to thank we have a lot of good question today.

I would like to thank all the the shareholder and the participant on the call to for their participation. Thank you very much for your time, and this concludes the Q2 call. Thank you very much.

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

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