Mr. Adam Sheparski reports

ACADIAN TIMBER CORP. REPORTS FOURTH QUARTER AND YEAR-END RESULTS

Acadian Timber Corp. has released financial and operating results for the three months ended Dec. 31, 2023, as well as for the full 2023 fiscal year.

"Acadian performed well and generated solid results for 2023, despite challenges resulting from labour shortages, unfavourable weather conditions and inflationary pressures. Demand and pricing for our products remained stable, reflecting the favourable attributes of northeast regional log markets," commented Adam Sheparski, president and chief executive officer. "We are also pleased with the progress made early in 2024 toward our growth objectives, including executing our first long-term agreement related to renewable energy."

Investors, analysts and other interested parties may join the Acadian fourth quarter 2023 results conference call and webcast on Thursday, Feb. 8, 2024, at 1 p.m. ET. Please register, or follow the link on the company website to receive your unique PIN. For those unable to participate, a recorded rebroadcast will be available until 4 p.m. ET on Feb. 8, 2025.

Adjusted earnings before interest, taxes, depreciation and amortization for the year were $20.6-million, compared with $18.2-million in 2022. Acadian generated $15.0-million of free cash flow during the year, compared with $12.2-million in 2022, and declared dividends of $19.8-million or $1.16 per share to its shareholders. Acadian's balance sheet remains solid with $14.8-million of net liquidity as at Dec. 31, 2023, which includes funds available under its credit facilities.

Solar land lease agreement

On Feb. 6, 2024, Acadian executed an agreement for the option to lease approximately 10,000 acres of its Maine timberlands for the purpose of the development, construction, operation and maintenance of a solar-powered electric-generating facility. The agreement includes inspection, development, construction and commercial operations terms with escalating leasing fees. The incremental cash flows attributable to the inspection and development terms are modest. However, should the project reach the construction term, which is not expected to occur for several years, the incremental cash flows may become material to Acadian.

Carbon credit project

On June 8, 2023, 770,071 voluntary carbon credits were registered on the American carbon registry and made available for sale under the project name Anew -- Katahdin forestry project. The total volume of credits expected to be generated from the project over the 10-year crediting period is 1.9 million credits. Its focus has turned to the marketing and sale of these credits, as well as the registration of future tranches. It completed its first sale in December, 2023. While the volume sold was modest at 1,500 credits, the sale demonstrated solid pricing of $24.85 (U.S.) per credit.

This project has provided valuable experience to the Acadian team and has formed the foundation for potential further carbon credit developments in the future.

Dividend reinvestment plan

Macer Forest Holdings Inc., which owns approximately 47 per cent of the outstanding common shares of Acadian, has to date participated in the dividend reinvestment plan for 50 per cent of dividends payable to it. Macer intends to increase its participation to 100 per cent of dividends payable to it beginning with the next dividend payable on April 15, 2024.

Normal course issuer bid

On Feb. 7, 2024, the company renewed its normal course issuer bid by filing a notice of intention with the Toronto Stock Exchange to purchase for cancellation up to 862,739 common shares, representing 5 per cent of the 17,254,798 common shares outstanding as of Jan. 31, 2024. The TSX has approved the company's NCIB. The purchases will be made through the facilities of the TSX and/or any alternative Canadian trading systems to the extent they are eligible. The price that the company will pay for any such shares will be the market price at the time of acquisition. The company believes that repurchasing shares at the prevailing market prices from time to time is a worthwhile use of funds and in the best interests of the company and its shareholders. Purchases may commence on Feb. 14, 2024, and shall terminate not later than Feb. 13, 2025. Based on average daily trading volume of 5,524 over the last six months, daily purchases will be limited to 1,381 common shares (25 per cent of the ADTV of the common shares), other than block purchase exemptions.

Under the company's current NCIB, which commenced on Feb. 14, 2023, and expires on Feb. 13, 2024, the company received approval from the TSX to purchase up to 847,944 common shares during the period commencing Feb. 14, 2023, and ending Feb. 13, 2024, representing 5 per cent of the 16,958,881 common shares outstanding as of Jan. 31, 2023. The company has not purchased any of its common shares over the past 12 months.

Three months ended Dec. 31, 2023

During the fourth quarter, Acadian generated sales of $23.8-million, consistent with the prior-year period. Sales volume, excluding biomass, increased 4 per cent over the prior year. New Brunswick experienced improved contractor availability and increased volumes; however, contractor availability remained a significant challenge in Maine and resulted in decreased volumes.

The weighted-average selling price, excluding biomass, decreased 3 per cent year over year mainly due to decreased softwood sawlog prices in Maine and decreased hardwood sawlog prices in both regions caused by weak hardwood lumber markets. Biomass pricing increased 4 per cent over the prior year, but sales volume decreased 17 per cent due to limited processing capacity, combined with fibre availability as biomass represents a byproduct of its harvesting operations.

Operating costs and expenses were $19.5-million during the fourth quarter, compared with $19.8-million during the fourth quarter of 2022, as a result of lower weighted-average variable costs. Weighted-average variable costs, excluding biomass, decreased 3 per cent due to lower hauling and fuel costs, partially offset by higher contractor rates, compared with the prior-year period.

Adjusted EBITDA was $4.4-million during the fourth quarter, compared with $4.1-million in the prior-year period, and adjusted EBITDA margin for the quarter was 19 per cent compared with 17 per cent in the prior-year period as a result of lower variable costs. Free cash flow was $2.9-million compared with $2.0-million in the same period of 2022 due to lower current income tax expense.

Net income for the fourth quarter totalled $11.6-million, or 68 cents per share, compared with $22.0-million, or $1.30 per share, in the same period of 2022. The decrease in net income was largely due to the impact of lower gains on non-cash fair value adjustments in 2023 compared with 2022.

Year ended Dec. 31, 2023

Acadian generated sales of $93.5-million, compared with $90.5-million in the prior year, as a result of increased pricing partially offset by decreased sales volumes. Demand for all products remained stable; however, sales volume, excluding biomass, decreased 5 per cent as a result of challenging operating conditions in Maine, including continued limited contractor availability and unfavourable weather conditions.

Acadian's weighted-average selling price, excluding biomass, increased 5 per cent, benefiting from strong softwood sawlog and pulpwood prices, partially offset by decreased hardwood sawlog prices stemming from weakness in hardwood lumber pricing.

Operating costs and expenses were $73.9-million during 2023, compared with $72.6-million in the prior year, reflecting higher variable costs and increased investment in silviculture. Weighted-average variable costs, excluding biomass, increased 2 per cent over the prior year due to higher contractor rates partially offset by lower fuel prices.

Adjusted EBITDA for the year ended Dec. 31, 2023, was $20.6-million, compared with $18.2-million in the prior year, as a result of higher operating income for the reasons discussed above, combined with higher gain on sale of timberlands from the sale of 21 acres of timberlands. Adjusted EBITDA margin was 22 per cent compared with 20 per cent in the prior year. Free cash flow was $15.0-million compared with $12.2-million in 2022 due to higher adjusted EBITDA and lower current income tax expense.

Net income for the year ended Dec. 31, 2023, totalled $29.4-million, or $1.72 per share, compared with net income of $35.5-million, or $2.11 per share, in 2022, with higher operating income offset by lower non-cash fair value adjustments in 2023 compared with 2022.

Outlook

While North American interest rates remain elevated and near-term pressure on end use markets persists, inflation has begun to show signs of easing. The consensus forecast for U.S. housing starts is approximately 1.37 million starts in 2024 as compared with 1.40 million in 2023. It remains confident that the stability of the northeastern forestry sector, combined with the long-term demand for new homes and repair and remodel activity, will support the demand for its products.

Although labour markets remain tight, it continued to experience increased contractor availability in New Brunswick as it closed out the year. Management will continue to focus on further increasing its harvesting capacity through 2024. In the short to medium term, inflation is expected to continue to impact its financial results through elevated contractor rates and fuel surcharges, offset by the pricing of primary forest products like sawlogs and pulpwood.

Demand for Acadian's sawlogs is mainly driven by regional supply and demand, meaning that the stable demand experienced during 2023 is expected to continue into 2024. Pricing for softwood sawtimber is expected to remain stable, but pricing for hardwood sawtimber may remain weak, reflecting weakness in hardwood lumber pricing. Demand for hardwood pulpwood is expected to be steady, and softwood pulpwood markets are expected to remain at the improved levels experienced in 2023.

Quarterly dividend

Based on a strong balance sheet and positive outlook for the rest of the year, Acadian is pleased to announce a dividend of 29 cents per share, payable on April 15, 2024, to shareholders of record on March 31, 2024.

Acadian is one of the largest timberland owners in Eastern Canada and the northeastern United States, and has a total of approximately 2.4 million acres of land under management. Acadian owns and manages approximately 761,000 acres of freehold timberlands in New Brunswick and approximately 300,000 acres of freehold timberlands in Maine, and provides timber services relating to approximately 1.3 million acres of Crown licensed timberlands in New Brunswick. Acadian's products include softwood and hardwood sawlogs, pulpwood, and biomass byproducts, sold to approximately 90 regional customers.

Acadian's business strategy is to maximize cash flows from its existing timberland assets through sustainable forest management and other land use activities while expanding its business by acquiring assets and actively managing these assets to drive improved performance.

Acadian's shares are listed for trading on the Toronto Stock Exchange under the symbol ADN.

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