Mr. L. Sauder reports

INTERFOR REPORTS Q1'23 RESULTS

Interfor Corp. recorded a net loss in first quarter 2023 of $41.3-million, or 80 cents per share, compared with $72.2-million, or $1.40 per share, in fourth quarter 2022 and net earnings of $397.0-million, or $6.69 per share, in Q1 2022.

Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) was $26.1-million on sales of $829.9-million in Q1 2023 versus negative adjusted EBITDA of $68.7-million on sales of $810.3-million in Q4 2022 and adjusted EBITDA of $570.1-million on sales of $1.3 billion in Q1 2022.

Notable items in the quarter:

• Lower lumber prices:
  • Lumber prices continued to reflect softened demand driven by the elevated interest rate environment. Interfor's average selling price was $639 per thousand board feet, down $60 per thousand board feet versus Q4 2022. The western SPF composite, SYP composite, KD H-F stud two-by-four nine feet and ESPF composite price benchmarks decreased quarter over quarter by $21 (U.S.), $19 (U.S.), $33 (U.S.) and $24 (U.S.) per thousand board feet to $399 (U.S.), $442 (U.S.), $428 (U.S.) and $474 (U.S.) per thousand board feet, respectively.
• Lumber production balanced with demand:
  • Lumber production totalled 1.0 billion board feet, representing an increase of 157 million board feet quarter over quarter. This growth was mostly driven by a decrease in temporary production curtailments in Q1 2023 compared with Q4 2022 and the first full quarter of contribution from two sawmills acquired in November, 2022.
  • The U.S. south and U.S. northwest regions accounted for 473 million board feet and 142 million board feet, respectively, compared with 404 million board feet and 135 million board feet in Q4 2022. The Eastern Canada region produced 250 million board feet versus 212 million board feet in Q4 2022. Production in the B.C. region increased to 166 million board feet from 123 million board feet in Q4 2022.
  • Lumber shipments were 1.0 billion board feet, or 65 million board feet higher than Q4 2022.
• Financial flexibility maintained:
  • Net debt at quarter-end was $880.0-million, or 30.7 per cent of invested capital, while available liquidity was ample at $321.4-million.
  • Liquidity is expected to be strengthened during the rest of 2023 by the drawdown of seasonally high working capital and income tax refunds totalling approximately $98.0-million related to overinstallments for the 2022 tax year.
• Strategic capital investments:
  • Capital spending was $63.7-million, including $45.4-million on discretionary projects. The majority of this discretionary spending was focused on the multiyear rebuild of the Thomaston, Ga., sawmill, a new planer at the Castlegar, B.C., sawmill and upgrades to the Perry, Ga., sawmill.
  • Total capital expenditures planned for 2023 have been reduced to approximately $210.0-million from $240.0-million in response to continuing lumber market weakness. This reduction reflects the delay of certain components of continuing strategic capital projects.
• Continuing monetization of coastal B.C. operations:
  • The company is continuing to work with the Ministry of Forests to subdivide and transfer a number of forest tenures from its 1.57 million cubic metres of annual harvesting rights. The timing remains uncertain as to when the ministry approval and certain contractual consents may be received.
• Softwood lumber duties:
  • Interfor expensed $10.7-million of duties in the quarter, representing the full amount of countervailing (CV) and anti-dumping (AD) duties incurred on shipments of softwood lumber from its Canadian operations to the United States at a combined rate of 8.59 per cent.
  • Interfor has cumulative duties of $520.6-million (U.S.), or approximately $10 per share after tax, held in trust by U.S. Customs and Border Protection as at March 31, 2023. Except for $156.8-million (U.S.) recorded as a receivable in respect of overpayments arising from duty rate adjustments and the fair value of rights to duties acquired, Interfor has recorded the duty deposits as an expense.

Outlook

North American lumber markets over the near term are expected to be volatile as the economy continues to adjust to inflationary pressures, elevated interest rates, labour shortages and geopolitical uncertainty.

Interfor expects that over the midterm, lumber markets will continue to benefit from favourable underlying supply and demand fundamentals. Positive demand factors include the advanced age of the U.S. housing stock, a shortage of available housing and various demographic factors while growth in lumber supply is expected to be limited by extended capital project completion and ramp-up timelines, labour availability, and constrained global fibre availability.

Interfor's strategy of maintaining a diversified portfolio of operations in multiple regions allows the company to both reduce risk and maximize returns on capital over the business cycle. Interfor is well positioned with its strong balance sheet and significant available liquidity to continue pursuing its strategic plans despite continuing economic and geopolitical uncertainty globally. In the event of a sustained lumber market downturn, Interfor maintains flexibility to significantly reduce capital expenditures and working capital levels and to pro-actively adjust its lumber production to match demand.

About Interfor Corp.

Interfor is a growth-oriented forest product company with operations in Canada and the United States. The company has annual lumber production capacity of approximately 5.2 billion board feet and offers a diverse line of lumber products to customers around the world.

The company's unaudited condensed consolidated interim financial statements and management's discussion and analysis for Q1 2023 are available at SEDAR and the Interfor website.

There will be a conference call on Friday, May 5, 2023, at 8 a.m. Pacific Time, hosted by Interfor, for the purpose of reviewing the company's release of its first quarter 2023 financial results.

The dial-in number is 1-888-396-8049. The conference call will also be recorded for those unable to join in for the live discussion and will be available until June 4, 2023. The number to call is 1-877-674-7070, passcode 786874 followed by the number sign.

We seek Safe Harbor.