Woodword

Interfor's Q4 Results Decline on Lower Volumes and Market Prices

INTERNATIONAL FOREST PRODUCTS LIMITED or INTERFOR reported a net loss of $6.5 million or $0.12 per share in the fourth quarter of 2011. Included in the Company's accounts in the quarter was the effect of unrecognized tax assets of $3.9 million or $0.07 per share.

Excluding the tax allowance and other one-time items, Interfor recorded a net loss of $2.5 million or $0.04 per share compared to a net loss of $0.5 million or $0.01 per share in the immediately preceding quarter and net earnings of $0.5 million or $0.01 per share in the fourth quarter of 2010.

Also included in the Company's accounts in the fourth quarter was a provision for share-based compensation of $0.9 million or $0.02 per share compared to a recovery of $0.9 million or $0.02 per share in the third quarter.

Sales revenue in the fourth quarter was $190.0 million, down $10.2 million or 5% versus the third quarter, reflecting lower sales volumes and market prices.

EBITDA for the quarter (adjusted to exclude one-time items and "other income") was $8.0 million, down $6.3 million versus the third quarter and $6.5 million compared to the fourth quarter of 2010.

Lumber production in the fourth quarter was 294 million board feet, down 20 million board feet or 6 percent versus the third quarter as production rates were adjusted downwards in the face of log supply issues in the Pacific Northwest and for maintenance at the Hammond and Acorn mills on the BC Coast. Sales volumes, including wholesale activities, fell by 18 million board feet to 318 million board feet versus 336 million board feet in the third quarter.

In the quarter, SPF 2x4 in the North American market was US$238, down US$8 versus the third quarter, and Hem-Fir studs were down $US14 to US$260. Prices and volumes to China weakened quarter-on-quarter as high in-market inventories and tight credit conditions negatively impacted activity levels in the early part of the quarter.

Prices in the Japanese market for traditional products were flat while the cedar market was firm as unseasonably mild weather and low inventories throughout the distribution channel helped to support demand.

Currency rates remained volatile during the quarter with the C$ averaging US$0.978, down US$0.042 or 4.1% versus the third quarter.

In the quarter, Interfor generated $4.6 million in cash from operations before changes in working capital and $3.9 million in cash after working capital changes were considered. Capital spending in the quarter amounted to $9.0 million, including $5.4 million on roads and $2.2 million on discretionary projects including the projects announced in November to upgrade the Grand Forks and Castlegar sawmills.

Net debt closed the quarter at $100.3 million or 20 percent of invested capital.

Business conditions have improved in recent weeks with a more positive tone in the US and higher activity levels in China. That said, the global economic environment remains uncertain. Interfor expects to maintain operating rates at current levels or above for the next few quarters but will remain alert to changes in market activity in order to keep inventories in balance.

Considerable attention is being devoted to the Grand Forks and Castlegar capital projects with a goal of completing construction by the end of the first quarter of 2013 rather than the original schedule of the end of the third quarter of 2013.