GreenFirst Reports Financial Results for the Second Quarter of 2024

GreenFirst Forest Products Inc. (“GreenFirst” or the “Company”) announced results for the second quarter ended June 29, 2024. The Company’s interim financial statements (“Financial Statements”) and related Management’s Discussion and Analysis (“MD&A”) for the second quarter ended June 29, 2024 are available on GreenFirst’s website at www.greenfirst.ca and on SEDAR+ at www.sedarplus.ca.

Highlights

• Q2 2024 net loss from continuing operations was $14.5 million or $0.08 per share (diluted), compared to net loss of $13.4 million or loss of $0.08 per share (diluted) in Q1 2024. Adjusted EBITDA for Q2 2024 was negative $12.1 million compared to negative $3.5 million in Q1 2024. Both the lumber and paper operations had a negative contribution to Q2 2024 as a result of weak market conditions.
• Lumber sales volumes in Q2 2024 were lower than Q1 2024 due to the continued drag on lumber demand as housing affordability remains significantly impacted by high mortgage rates. There also remain an oversupply of lumber, which resulted in lower field takeaways. Average realized lumber prices of $637/mfbm for Q2 2024 were also lower than the $644/mfbm pricing realized in Q1 2024. Benchmark prices continued to be under pressure subsequent to Q2 2024. The recent cuts by the Bank of Canada is signalling a reversal in monetary policy.
• The valuation provision for lumber and log inventory was increased to $3.2 million from $1.0 million at the end of Q1 2024, generating a $2.2 million charge to lumber cost of sales in Q2 2024.
• Our lower duty rate has positively impacted the Company’s earnings and free cash flow since August 1, 2023. The Company’s initial duty deposit rate, totaling 20.23%, remained in effect for almost two years, since the Company’s acquisition of its sawmill and paper mill assets on August 28, 2021. This resulted in US$22 million in higher duties paid compared to its Canadian peers. The Company anticipates an increase in duty deposit rate in mid-August 2024, in line with its industry peers.
• The Company plans to complete a spin-out transaction of Kap Corporation (“Kap”), the holding company of Kap Paper Inc. (“Kap Paper”), which holds all operating assets related to the paper mill operations. The shares of Kap will be held directly by the shareholders of the Company as of the completion of the Spin-out. The Spin-out is expected to be completed in Q4 2024. The Spin-out of Kap 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.
• During Q2 2024, Kap Paper entered into a $24.0 million term loan agreement with the Province of Ontario (the “Kap Term Loan”). The financing is integral to Kap Paper’s long-term strategy and ability to improve its competitiveness in a challenging environment.
• 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.

“We continue to see macroeconomic pressures impacting our business as lumber prices regressed during Q2 2024. It is times like this where we must focus on things we can control and I am proud of the team’s operational accomplishments in our sawmills which continued to see production records being established in the first half of 2024. We also continue to manage liquidity on all fronts through this down cycle, including focusing on sale of non-core assets to better position the Company.” said Joel Fournier, GreenFirst’s Chief Executive Officer. “On the paper side, as part of our previously announced decentralization efforts for this business, we plan to complete a spin-out transaction which will result in Kap gaining operational independence and flexibility to consider independent financing alternatives and partnerships in the future, such as the Kap Term Loan. This will also enable GreenFirst to focus on its core business of being a pure-play lumber producer. We also saw continued stabilization of paper operations following a challenging couple quarters.”

For the full second quarter results, click here.

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.