GreenFirst Reports Financial Results for the Third Quarter of 2024

GreenFirst Forest Products Inc. (“GreenFirst” or the “Company”) announced results for the third quarter ended September 28, 2024. The Company’s interim financial statements (“Financial Statements”) and related Management’s Discussion and Analysis (“MD&A”) for the third quarter ended September 28, 2024 are available on GreenFirst’s website at www.greenfirst.ca and on SEDAR+ at www.sedarplus.ca.

Highlights

• Q3 2024 net income from continuing operations was $14.8 million or $0.08 per share (diluted), compared to net loss of $9.9 million or loss of $0.06 per share (diluted) in Q2 2024. Adjusted EBITDA for Q3 2024 was positive $15.7 million compared to negative $6.1 million in Q2 2024. Lumber had a negative contribution to Q3 2024 as a result of weak market conditions.
• US Department of Commerce’s (“US DOC”) Final Determination of its Fifth Administrative Review resulted in a final duty rate of 14.40%. The Company stands to benefit from an approximate US$14.2 million (CAD$19.2 million) recovery on duties paid in 2022, plus accrued interest of US$2.3 million (CAD$3.1 million) as recorded in Q3 2024. Additionally, the ongoing lower duty rate has positively impacted the Company’s earnings and free cash flow since August 1, 2023. In August 2024 the Company’s duties rate increased from 8.05% to 14.40%.
• Average realized lumber prices of $614/mfbm for Q3 2024 were also lower than the $637/mfbm pricing realized in Q2 2024. Benchmark prices continued to be under pressure at the start of Q3 2024 due to lower housing affordability and monetary policy, however towards the tail end of the quarter pricing started to move favorably as a result of recent rate cuts by the US Federal Reserve and Bank of Canada signaling a reversal in monetary policy. Subsequent to Q3 2024 pricing continued to trend upward significantly.
• The valuation provision for lumber and log inventory was increased to $4.2 million from $3.2 million at the end of Q2 2024, generating a $1.0 million charge to lumber cost of sales in Q3 2024.
• On July 17, 2024, the Company announced the appointment of Peter Ferrante as its new Chief Financial Officer.
• On August 9, 2024, the Company purchased a buy-out group annuity that transfers approximately $26.5 million of defined benefit pension obligations to a Canadian insurance company. The Company’s prudent management of the pension fund allowed for the recognition of a net settlement gain of approximately $0.8 million during the third quarter ended September 28, 2024.
• On October 17, 2024, the Company completed a substantive consolidation of its outstanding common shares on the basis of one post-consolidation  Common  Share  for  each  ten pre-consolidation  common
• On October 31, the Company announced a rights offering to raise gross proceeds of up to $96.9 million (the “Rights Offering”) by issuing up to 17,722,410 common shares in the capital of the Company at a price of $5.47 per share representing a 25% discount to the Company’s five day VWAP ending on October 30, 2024. The Company has entered into a Standby Purchase Agreement pursuant to which Ravenswood Investments III, L.P. and The Ravenswood Investment Company L.P., two funds managed by Robotti & Company Advisors, LLC agreed to commit up to $20.0 million.
• On November 8, 2024 the Company closed the Plan of Arrangement that has resulted in the distribution of the outstanding shares of Kap Corporation to the GreenFirst shareholders on the basis of one common share of Kap Corporation for each ten common shares of GreenFirst held. The spin-out of Kap Corporation is part of the natural progression of the decentralization and deconsolidation of the paper mill that was originally disclosed by GreenFirst in the Fall of 2023.

“Q3 2024 was a challenging quarter for GreenFirst and the broader industry. July was our toughest month, primarily due to low pricing, but both August and September saw improvements in pricing. Average Western Base pricing rose from $338/mfbm in July to $428/mfbm early November 2024. In July, due to market conditions and high inventory levels, we implemented targeted curtailments equivalent to six weeks of production. Despite this, our operations ran smoothly for the remainder of the quarter. We also continue to manage cash tightly, including postponing capital expenditures during the third quarter. Aside from the curtailment in July, we achieved good operational performance, breaking production records across multiple sites. In fact, during the third quarter, our efficiency was 4% higher as compared to 2023.  Looking ahead, we expect pricing to continue improving for the rest of the year, primarily driven by industry curtailments across North America and reversals in monetary policy by the Bank of Canada and the US Federal Reserve. However, we remain cautious in the short term, and the Company will continue to focus on tightly managing its costs and liquidity. Finally, as previously announced, GreenFirst will continue its strategy of selling non-core assets.” said Joel Fournier, Chief Executive Officer of GreenFirst.

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About GreenFirst

GreenFirst Forest Products is a forest-first business, focused on sustainable forest management and lumber production. The Company owns four sawmills located in rich wood baskets proudly operating over six million hectares of FSC® certified public Ontario forest lands (FSC®-C167905). The Company believes that responsible forest practices, coupled with the long-term green advantage of lumber, provide GreenFirst with significant cyclical and secular advantages in building products.

Source: GreenFirst Forest Products Inc.