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Interfor Corp reported a significant earnings miss for Q3 2025, with an actual EPS of -4.29 USD compared to the forecasted -1.04 USD. This represents a surprise of -312.5%. Revenue also fell short of expectations at 689.3 million USD, slightly below the forecast of 701.63 million USD. Following these results, Interfor's stock price dropped by 2.15%, closing at 7.89 USD, near its 52-week low of 7.21 USD.
Key Takeaways
- Interfor's EPS fell significantly below expectations, marking a large earnings miss.
- Revenue decreased by 12% quarter-over-quarter, reflecting ongoing market challenges.
- The stock price declined by 2.15% post-earnings, indicating investor disappointment.
- Production curtailments and market uncertainties are impacting financial performance.
- Executives remain cautiously optimistic about market improvements by 2026.
Company Performance
Interfor Corp faced a challenging third quarter, with total revenue declining by 12% from the previous quarter. Despite an increase in lumber shipments by 6%, the average realized lumber price fell by 10%. The company managed to generate 144 million USD through an equity offering, which helped maintain liquidity at 386 million USD. However, operating cash flow was negative, consuming 26 million USD.
Financial Highlights
- Revenue: 689 million USD (12% decrease quarter-over-quarter)
- EPS: -4.29 USD (compared to forecast -1.04 USD)
- Adjusted EBITDA Loss: 36 million USD
- Financial leverage: 35.2%
- Available liquidity: 386 million USD
Earnings vs. Forecast
Interfor's actual EPS of -4.29 USD was a significant miss compared to the forecasted -1.04 USD, resulting in a surprise of -312.5%. Revenue also fell short of the expected 701.63 million USD, coming in at 689.3 million USD, a surprise of -1.76%.
Market Reaction
Interfor's stock reacted negatively to the earnings report, declining by 2.15% to 7.89 USD, close to its 52-week low. This drop reflects investor concerns over the company's financial performance and the broader market challenges it faces.
Outlook & Guidance
Looking ahead, Interfor anticipates market improvement by 2026, driven by better housing affordability and economic conditions. The company plans to continue production curtailments to help rebalance the market and maintain financial flexibility.
Executive Commentary
Ian Fillinger, an executive at Interfor, stated, "We're confident in our portfolio, balance sheet, and our clear plan to manage through the uncertainty." Bart Bender, SVP of Sales and Marketing, added, "We anticipate that affordability will begin to improve, which should lead to better market conditions."
Risks and Challenges
- Prolonged economic uncertainty and housing affordability concerns.
- Low consumer sentiment and elevated mortgage rates affecting demand.
- Production curtailments and potential goodwill impairment of approximately 500 million USD.
- Regional production cost differences and potential mill closures.
Q&A
During the Q&A session, analysts focused on the company's supply curtailment strategies and the potential for permanent mill closures. Executives also addressed concerns about regional production cost differences and the impact of market conditions on future performance.
Full transcript - Interfor Corp (IFP) Q3 2025:
Sylvie, Conference Operator: Good morning. My name is Sylvie, and I will be your conference operator today. At this time, I would like to welcome everyone to the Interfor Analysts conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star then number one on your telephone keypad. If you would like to withdraw your question, please press star then number two. Thank you. Mr. Fillinger, you may begin your conference.
Ian Fillinger, Executive (likely CEO), Interfor Corporation: Thanks, Operator. Hello, everyone. With me on the call today are Rick Pozzebon, Executive Vice President and Chief Financial Officer, and Bart Bender, Senior Vice President of Sales and Marketing. Thank you for joining us. Before commenting on the quarter, I want to step back and provide some perspective on how Interfor is positioned and how we're addressing the near-term challenges while setting up for long-term success. As you're all aware, we're in the midst of a prolonged down market, with several factors creating significant challenges for our industry. These include economic uncertainty and housing affordability concerns, which are weighing directly on building products' demand, as well as cross-border trade tensions. The combined effect has been a persistently weak price environment. Against that backdrop, our leadership team remains focused on what we can control, driving out costs, reducing risks, and positioning our business for success when the market turns.
At the top of our list is supply discipline. We've led the industry in taking proactive steps to preserve our position today and to prepare for improving conditions ahead. For Q4, we announced reductions of approximately 250 million board feet of lumber, representing about 26% when compared to Q2 volumes. We've consistently acted early from curtailment announcements this year to the divestiture of our Quebec assets and the indefinite curtailment of two US sawmills. These decisions reflect our fundamental commitment to maintaining a responsible operating posture across the portfolio. Interfor has a top-performing platform in the North American lumber industry, optimized for both tough times like today but also for better markets when they return. Our second priority is cost discipline. We already deliver top quartile EBITDA margins, and that performance continues to drive our team. Our Canadian platform has remained resilient despite difficult markets and punitive duties.
We continue to optimize our portfolio for operations that support industry-leading margins and position us to capitalize when markets recover. Fundamentals exist for strengthening lumber markets, particularly owing to the pent-up housing demand. Economic indicators suggest improvements starting in 2026, with continued upward trends in 2027. While that recovery will take time, we believe we're as well-positioned as anyone to benefit once it comes. We're moving forward with a solid foundation. We've significantly strengthened our balance sheet through a recent equity raise that was well-supported by long-term shareholders. Combined with the renewal of our current credit facility, this gives us flexibility to weather the downturn for several years if necessary. With that backdrop, I'll turn to the most recent quarter, where our results reflect the challenging operating environment that I've been speaking about, with pricing down across all regions, particularly in the US South.
These conditions and our philosophy of adjusting quickly were the catalyst for lumber production adjustments last month. While prices are finding ground, we've seen similar curtailment announcements across the industry. The market remains in balance. We'll continue to align our production with market realities in a disciplined and proactive way. Looking ahead, these are undeniably tough times. Like others in our industry, our numbers reflect that. We're confident in our portfolio, balance sheet, and our clear plan to manage through the uncertainty and position Interfor to thrive as conditions recover. With that broader perspective, we see considerable opportunity and long-term value in our company, and we're committed to delivering that to our shareholders. With that, I'll turn it over to Rick for a closer look at this quarter's financial results. Over to you, Rick.
Rick Pozzebon, Executive Vice President and Chief Financial Officer, Interfor Corporation: Thank you, Ian, and good morning, all. Please refer to cautionary language regarding forward-looking information in our Q3 MD&A. Overall, our financial results for the quarter reflected significant lumber price weakness, especially in Southern Yellow Pine, and significantly higher duty rates imposed by the U.S. As Ian alluded to, earnings continue to be constrained by a general oversupply of lumber in the market, despite significant production curtailments across the industry since the beginning of 2024. Interfor contributed further to these supply curtailments with recent announcements indicating plans to significantly reduce production across all regions through the end of this year. In August, the U.S. more than doubled the combined rate of anti-dumping and countervailing duties imposed on lumber shipments from Canada, from 14.4% to over 35%. This increased duty rate directly impacts approximately 25% of Interfor's total lumber shipments.
With respect to earnings, Interfor generated an adjusted EBITDA loss of $36 million, excluding non-cash duty-related adjustments, on total revenue of $689 million. Total revenue dropped 12% quarter over quarter, driven by a 6% increase in the volume of lumber shipped, a 10% decrease in the average realized lumber price, and a slightly weaker US dollar. The decrease in volume reflects production curtailments and lower demand, a portion of which is seasonal. Lumber price declines were led by Southern Yellow Pine, whose benchmark composite average price fell nearly 20% quarter over quarter. On the cost side, reported production costs per unit of lumber increased 2% quarter over quarter, reflective of the lower shipment volume, partially offset by a slightly weaker US dollar.
From an operating cash flow standpoint, $26 million was consumed in the quarter, driven by negative cash margins on lumber sales, partially offset by an $18 million reduction in working capital. Beyond operations, we invested $32 million in capital projects and generated $1 million from the sale of assets. Over the remainder of this year and next, we anticipate generating net cash flow from ongoing sale of BC Coast Forest tenders in the ballpark of $30-$35 million. Just following quarter end on October 1, Interfor completed a bought deal equity offering, which generated $144 million of gross proceeds. Including this, financial leverage as measured by net debt to invested capital would have been 35.2% at the end of Q3, with available liquidity of $386 million.
This equity raise, combined with the credit facility renewal in July, has provided Interfor with enhanced financial flexibility to navigate through the ongoing downturn. To wrap up, Interfor's financial results for the third quarter reflect significant lumber price weakness and higher duty rates imposed by the U.S. We anticipate continued lumber market volatility going forward as supply continues to rebalance with demand and trade actions by the U.S., including the Section 232 tariff of 10% implemented in October. Interfor will continue taking actions that position its high-quality and geographically diverse operations to succeed through this volatility and capture the upside when the market returns to strength. That concludes my remarks. I'll now turn the call over to Bart.
Bart Bender, Senior Vice President of Sales and Marketing, Interfor Corporation: Thanks, Rick. Lumber markets remain challenged given the uncertainty we're seeing at both the macroeconomic and geopolitical level. Multi-year lows on consumer sentiment, low U.S. home building confidence, and elevated mortgage rates all represent headwinds. That's impacting new home construction, industrial activity, and repair and remodel demand. This uncertainty continues to put downward pressure on the demand for lumber, which we expect to see for the balance of this year. Looking ahead to 2026, we anticipate that affordability will begin to improve, which should lead to better market conditions. On the supply side, production curtailments are increasing in response to unsustainable pricing in all markets. We expect this to continue until a balance is achieved. Although difficult to be exact, it's our position that in-market inventories remain very low. Less demand and low lead times have allowed distributors to run comfortably with much lower inventories than normal.
This strategy works until it doesn't. For Interfor specifically, our diversification of species, producing regions, and product mix allows for a targeted market approach and access to a broader range of the lumber market, beneficial in times of oversupply. Lastly, Interfor will continue to monitor our customers' needs and adjust our production levels accordingly. With that, back to you, Ian.
Ian Fillinger, Executive (likely CEO), Interfor Corporation: Thanks, Bart. Operator, we're ready to take any questions at this point.
Sylvie, Conference Operator: Thank you, sir. Ladies and gentlemen, as stated earlier, if you would like to ask a question, please press star followed by one on your touch-tone phone. If you would like to withdraw from the question queue, you will need to press star followed by two. Remember, if using speakerphone, please lift the handset first before pressing any keys. Thank you. Your first question will be from Amir Patel at RBC Capital Markets. Please go ahead.
Amir Patel, Analyst, RBC Capital Markets: Hi, good morning. Ian, we've seen some more industry capacity closures announced yesterday in British Columbia. How are you feeling about your cost position in the province, and how much additional industry capacity do you think needs to come out?
Ian Fillinger, Executive (likely CEO), Interfor Corporation: Thanks, Amir. Yeah, our BC operations in Adams Lake, Grand Forks, and Castlegar, as you know, have been modernized over the last number of years and are very competitive on a cost basis and also on a product mix basis, with being much different where some of our competitors are in the north or central interior. A lot more species variability, product mix that aren't on random length pricing. In addition to that, all three of those operations have an extremely high percentage of secure fiber through licenses, etc., probably, I would say, less than province. Very good opportunity to log from our tenures, or if we have to go to open market, we can be very strategic about that. Very competitive operations in BC, Amir. As far as volume goes out, I think the way out of where we're at now is supply.
It's the adjustments that industry needs to make to be able to get out of this situation we're in. It's part of our responsibility to do that. We've been doing that, as you know, usually first and leading in the industry on some of those difficult decisions.
Amir Patel, Analyst, RBC Capital Markets: Great. Thanks, Ian. Rick, a question for you. I know the company has close to, I believe, $550 million of goodwill on the balance sheet. How should we think about risks of further impairments there?
Bart Bender, Senior Vice President of Sales and Marketing, Interfor Corporation: Hey, good morning, Amir. Yeah, our goodwill on our balance sheet is about $500 million today. That is within the total assets on the balance sheet of about $3.1 billion and a book value per share of about $21 today. When we think about goodwill testing, it typically happens for us every Q4. It is an annual testing requirement required by IFRS. The testing, Amir, involves a multi-year discounted cash flow model. We are in the process of doing that right now. It would be too early for me to speculate on what the results are. However, I think it is worth noting that the testing uses long-term lumber prices, long-term trend lumber prices, which have not really changed year over year. We have made improvements in terms of the quality of our portfolio over the last year, just given some of the asset sales we have made.
I'm feeling good about where we're at with the testing, but it's too early to speculate at this stage.
Amir Patel, Analyst, RBC Capital Markets: Fair enough. Thanks, Tully Haddell. I'll turn it over.
Ian Fillinger, Executive (likely CEO), Interfor Corporation: Thank you.
Sylvie, Conference Operator: Next question would be from Matthew McKellar at RBC. Please go ahead.
Matthew McKellar, Analyst, RBC: Hi, good morning. Thanks for taking my questions. In your opening remarks, you talked about continued efforts to drive out costs. Are there any recent initiatives you'd highlight or any items on the docket for 2026 that we should be considering? Thanks.
Ian Fillinger, Executive (likely CEO), Interfor Corporation: Yeah, Matt, kind of in this type of format, we're a little bit reluctant to share the internal plans that we have. We've been running a targeted initiative through the down market each year and readjusting depending upon our outlooks and current conditions. I would say we're, as an executive team, pleased with both the cost side and the product mix side internal initiatives that we're doing. I think that that's reflective in our benchmarking of our margins compared to our public peers. Yeah, it's significant, but would be hesitant to kind of share it in this form with you, Matt. I can say that the entire organization, whether it's in offices or mills or woodlands or sales, all have very good targets set in place, and they're making good progress on all of them.
Matthew McKellar, Analyst, RBC: That's very helpful. Thanks very much. The last from me, we've seen pretty substantial changes in duties on Canadian lumber, new tariffs, and significant changes in FX rates this year. With the changes we've seen and, I guess, reflecting on some of the challenges the European producers are facing as well, how do you expect imports from Europe into North America to trend from here? Thanks very much.
Ian Fillinger, Executive (likely CEO), Interfor Corporation: Yeah. As you know, we do not really have operations in Europe to really completely understand that picture. Obviously, with 10% being put on European imports into the US, it should help North American producers compete against that volume. Yeah, we do not really have much more of an insight than you do on that front.
Matthew McKellar, Analyst, RBC: Okay. Fair enough. Thanks for the help. I'll pass it back.
Ian Fillinger, Executive (likely CEO), Interfor Corporation: Okay. Thanks, Matt.
Sylvie, Conference Operator: Next question will be from Keaton Mamtora at BMO Capital Markets. Please go ahead.
Keaton Mamtora, Analyst, BMO Capital Markets: Good morning, Ian, Rick, Bart.
Bart Bender, Senior Vice President of Sales and Marketing, Interfor Corporation: Good morning.
Keaton Mamtora, Analyst, BMO Capital Markets: Maybe first question, if I'm looking at this correctly, it looks to me that your lumber production was actually up 1% on a year-over-year basis in Q3. Can you provide some perspective on what is driving that?
Bart Bender, Senior Vice President of Sales and Marketing, Interfor Corporation: Hey, Keaton. It's Rick speaking. I think looking at Q3 last year, we had taken significant curtailments, a little bit more than we had taken in Q3 this year. I think that's the main reason. We will expect an increase in curtailments and production reductions in Q4 here based on our announcement that we made in October and referenced in his remarks.
Ian Fillinger, Executive (likely CEO), Interfor Corporation: Yeah. Further supporting what Rick's saying, it was curtailments. We were winding up a couple of operations in the US South, plus the Quebec mills from last year too, where they were at. We were in that process. Yeah, lots of moving parts from last year to this year, Keaton.
Keaton Mamtora, Analyst, BMO Capital Markets: Okay. I see. I recognize that you've announced curtailments for Q4. I'm just curious, given sort of how prolonged this downturn has been and given sort of where lumber prices have been, can you provide some perspective on how you are thinking about temporary curtailments versus kind of more indefinite or permanent curtailments? How are you all thinking about those two?
Ian Fillinger, Executive (likely CEO), Interfor Corporation: Yeah, Keaton. We have a model internally where we put in a bunch of, obviously, factors: market being one of them, demand being one of them, inventory levels, pull-throughs on what have you, input costs from logs and conversion costs. In that model, which we review on a weekly basis, we make some of those decisions, which we do not take lightly. Obviously, it impacts many people. Yeah, we do have a robust model that has been built and refined over the last five or six years. To answer your question, we are looking at it every week. We will make adjustments. We are not shy about doing that. We believe that, as difficult as they are, they are needed in these environments. Yeah, we are continually looking at those and ready to make the decision when needed and be proactive about it.
Keaton Mamtora, Analyst, BMO Capital Markets: Yeah. Ian, look, I recognize these are kind of very difficult decisions, and to everyone who is affected, I appreciate that. What do you need to see to either kind of make that decision or kind of not make that decision? What factors are we looking at? I recognize it's not just like one month or one quarter, right? You need to think kind of ahead. Outside of the fact that we've all looked at data around pent-up demand, outside of that, what are the things that you're looking at to sort of decide this?
Ian Fillinger, Executive (likely CEO), Interfor Corporation: Yeah. Basically, Keaton, the main driver is lumber demand and lumber price. It is a mathematical model on that. When we do see demand there to support either a shift coming up or a shift or a mill going down, that is a fairly easy decision for us to see with our model. On the pricing side, does pricing support a cash break even and above, or does it support cash break even and below? Where those cost inflection points are would drive whether we reduce and curtail or whether we add volume back in. We need to see a sustained improvement to bring back any kind of production.
On the other side, when it does not look great and we really kind of look out two to three weeks because that is the best sort of insight, and after that, it gets a little bit cloudy, we will make decisions to curtail. It is a real-time model.
Keaton Mamtora, Analyst, BMO Capital Markets: Got it. No, that's helpful. I'll jump back in the queue. Thank you.
Ian Fillinger, Executive (likely CEO), Interfor Corporation: Thanks, Keaton.
Sylvie, Conference Operator: As a reminder, ladies and gentlemen, if you do have any questions, please press star followed by one. Next, we will hear from Sean Steuart at TD Cowen. Please go ahead.
Sean Steuart, Analyst, TD Cowen: Thanks. Good morning, everyone. Ian, another question on the supply response and the thought process that goes into it. Maybe I'm thinking too far ahead here, but as a part of the thinking on the rolling downtime versus permanent or indefinite shuts, at this point, we're three years plus into an extended trough, which is abnormal. We're probably closer to the end of this than the start, hopefully, at this point. Does the duration of this downturn factor into the decision or the decision against permanent closures at this point, i.e., when things get better, you want to be able to respond? Is that a part of the thought process for the company at all?
Bart Bender, Senior Vice President of Sales and Marketing, Interfor Corporation: It is, Sean. I mean, these are big decisions when we're talking permanent. I think that's what your question's driving towards. When you look at operations and you kind of see where they're at on a cost curve, product mix, and then you look at a trend price, I mean, you kind of got to have that in the back of your mind. At the same time, the factor for us is our goal has always been to be in the top quartile in any operation we're at. From the time that you kind of look at a permanent or non-permanent decision, it also has to factor in what's the timeline to move that operation, even in a trend market, to where we want to be.
Those are the factors that we look at, and we got to get comfortable around and then make the appropriate decisions, which, as you've seen, we've done multiple times in the past.
Sean Steuart, Analyst, TD Cowen: Yep. Understood on that front. Ian, can you give us some updated perspective on if it's EBITDA per 1,000 board feet or relative margin metric? I'm not asking for the specifics region by region, but can you give us an idea of how wide the spread is at this point across your platform, region to region?
Ian Fillinger, Executive (likely CEO), Interfor Corporation: Not really, Sean. I think that would be kind of difficult for us to share in this environment. The one uniqueness, and you know this, being in New Brunswick and Ontario and British Columbia, it really diversifies our Canadian mix. We have an engineered wood products division also, which is helpful and strong. Being in the Pacific Northwest and the US South as these trade actions against the Canadian lumber continue, we feel that being in Washington and Oregon is an advantage to maybe some interior British Columbia operations in the Central and North, given our stud production in the Pacific Northwest. Each one of our regions actually is, from a product mix, species, and geographical log cost differences, really gives us a balanced portfolio. That is part of our growth strategy over the last five years.
When the market turns, I think we're in exceptional shape to capitalize.
Sean Steuart, Analyst, TD Cowen: Understood. Okay. That's all I have. Thanks very much, guys.
Ian Fillinger, Executive (likely CEO), Interfor Corporation: Okay, Sean. Thanks.
Sylvie, Conference Operator: At this time, I would like to turn the conference back over to Mr. Fillinger.
Ian Fillinger, Executive (likely CEO), Interfor Corporation: Okay. Thank you, Operator. Thank you, everybody, for attending and your questions. Have a great day, and we'll talk to you next quarter. Thank you.
Sylvie, Conference Operator: Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. At this time, we ask that you please disconnect your lines. Have a good week.
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