MONTREAL and VANCOUVER, Aug. 17, 2012 /CNW Telbec/ - EACOM Timber Corporation (TSXV: ETR) ("EACOM", or the "Company") is pleased to announce its second quarter results for the three-month period ended June 30, 2012.
- EACOM recorded a positive EBITDA of $2.9 million for the second quarter
- EACOM generated positive cash flows from operations of $3.2 million during the quarter
- Upgrades underway at Nairn Centre and Elk Lake
- Commencement of reconstruction of the Timmins mill
A significant improvement in housing activity had a positive impact on lumber consumption during the quarter, contributing to a stronger pricing environment and higher mill realizations for the Company. As a result, the Company recorded a positive EBITDA of $2,862,000 for the second quarter ended June 30, 2012, against a negative EBITDA of $5,309,000 in the previous quarter and a negative EBITDA of $9,892,000 in the corresponding quarter of 2011.
The Company has determined to commence reconstruction of the Timmins mill which had been destroyed by fire earlier this year. During the second quarter, the Company initiated capital improvements targeted at increasing the production capacity at two of its mills, Nairn Centre and Elk Lake. Improvements at Nairn Centre are well underway and should be completed in the third quarter. Construction at Elk Lake has just started and completion is scheduled in the early part of the fourth quarter following a three-week shutdown of the mill. Once completed, these upgrades are expected to partially offset the capacity lost at Timmins and mitigate some of the damages incurred as a result of the fire. A significant portion of these investments will be reimbursed under the business interruption insurance claim. To date, the Company has received $17,000,000 of insurance proceeds, of which $10,000,000 for damage or destruction of assets and $7,000,000 related to business interruption.
'The Company intends to continue its focused capital investments with a view to increase capacity and recovery, and reduce manufacturing costs. This should contribute to improve our competitiveness in the global forestry sector, and provide a more stable and sustainable employment environment for our employees in the communities where we operate', stated Rick Doman, President and CEO.
QUARTER ENDED JUNE 30, 2012 vs. QUARTERS ENDED MARCH 31, 2012 AND JUNE 30, 2011
For the quarter ended June 30, 2012, the net loss attributable to shareholders amounted to $709,000 or $0.00 per common share, against net earnings of $6,347,000 or $0.01 per common share in the previous quarter and a net loss of $13,662,000 or $0.03 per common share in the corresponding quarter of 2011. The previous quarter results included a gain of $14,283,000 on disposal of property, plant and equipment destroyed by fire.
During the second quarter, the Company recorded sales of $65,256,000, up 9% against sales of $59,941,000 in the previous quarter but down 8% against sales of $71,171,000 in the corresponding quarter of 2011. The Company's sales include both lumber and by-product sales. During the quarter, the Company shipped 133 million board feet of lumber (128 million board feet in the previous quarter and 160 million board feet in the corresponding quarter of 2011) and 119,000 oven-dried metric tons of by-products (120,000 oven-dried metric tons in the previous quarter and 140,000 oven-dried metric tons in the corresponding quarter of 2011). Compared to the corresponding quarter of 2011, shipments reflect lower production volumes.
Pricing has improved again in the second quarter of 2012 with benchmark lumber prices averaging US$388/Mfbm for studs and US$393/Mfbm for random lengths delivered Great Lakes, up 18% and 9% from US$329/Mfbm and US$360/Mfbm respectively in the first quarter of 2012. The Company also benefited from a slightly softer Canadian dollar with the exchange rate relative to the US$ averaging 0.990 in the second quarter of 2012, down 1% against an average of 1.001 in the previous quarter. Compared to the corresponding quarter of 2011, studs and random lengths are trading at prices 24% and 17% above the levels achieved last year, and the Canadian dollar is down 4% relative to the US$.
Substantially all of the Company's sales were to North American customers. Sales to U.S. customers are subject to export taxes and volume quotas under Option B of the Softwood Lumber Agreement. Effective June 1, 2012, the export tax rate for sales to U.S. customers decreased from 5% to 3%. In addition to export taxes under the Softwood Lumber Agreement, Canadian producers have been subject to an additional 10% export tax. On July 1, 2011, the amount to be collected had been fully recovered and the Canadian government removed this 10% export tax. Overall, compared to the corresponding quarter of 2011, export taxes paid by EACOM decreased from $1,974,000 to $655,000 as a result of lower shipments, the removal of the additional 10% export tax and a decrease in the export tax rate for sales to U.S. customers.
Lumber production for the quarter ended June 30, 2012 was 109 million board feet of lumber, against 113 million board feet in the previous quarter and 119 million board feet in the corresponding quarter of 2011. During the second quarter, the Company operated at 40% of its capacity (46% during the previous quarter and 48% in the corresponding quarter of 2011). Compared to the previous quarter, the capacity lost at Timmins where operations have been interrupted since January 22, 2012 as a result of the fire at the mill site has been partially mitigated by higher production levels at two other sites. Compared to the second quarter of 2011, operations in Val-d'Or and Matagami have been temporarily shut down since the second half of 2011 due to weak market conditions, and the Timmins mill closed on January 22, 2012. These closures have been somewhat offset by the additional production at Elk Lake following the acquisition of the remaining one-third interest in the mill in the third quarter of 2011.
Unit costs improved compared to those experienced in the second quarter of 2011 as a result of the higher cost mills taking market-related downtime. The positive impact of lower unit costs was, however, offset by the fixed costs incurred in respect of those mills that are either idled or shut down.
At June 30, 2012, the Company had cash and cash equivalents of $37,711,000 and restricted cash of $10,000,000 ($12,236,000 and nil respectively at March 31, 2012). Its credit facility was undrawn against a borrowing availability of $7,900,000 (outstanding advances of $2,000,000 and a borrowing availability of $6,187,000 at March 31, 2012).
During the second quarter, the Company generated positive cash flows from operations of $3,211,000 (prior to net changes in non-cash working capital), a reversal from negative cash flows from operations of $5,770,000 in the previous quarter.
On April 11, 2012, the Company closed a $40 million senior secured debenture financing, the net proceeds of which will be used for general corporate purposes. As part of this financing, an aggregate of 200 million warrants have been issued with a five-year term and an exercise price of $0.20 per common share. Pursuant to the terms of the debentures, insurance proceeds of $10,000,000 received during the first quarter have been segregated and shown as restricted cash pending reconstruction of the Timmins mill.
Substantially all of the $5,495,000 in capital spending during the quarter was targeted at improving the production capacity at two of the Company's mills which, once completed, will partially offset the lost capacity at Timmins and mitigate some of the damages incurred as a result of the fire. A significant portion of these investments will be reimbursed under the business interruption insurance claim.
EACOM Timber Corporation is a TSX-V listed company. The business activities of EACOM consist of the manufacturing, marketing and distribution of lumber, wood chips and wood-based value-added products, and the management of forest resources. EACOM owns eight sawmills, all located in Eastern Canada, and related tenures. The mills are Timmins, Nairn Centre, Gogama, Elk Lake and Ear Falls in Ontario, and Val-d'Or, Ste-Marie and Matagami in Quebec. The mills in Ear Falls, Ontario and Ste-Marie, Quebec are currently idled, and operations in Val-d'Or and Matagami which had been temporarily shut down due to weak market conditions will be resuming in the third quarter. The mill in Timmins was seriously damaged by fire in January 2012 and remains shut down due to the fire. EACOM also owns a lumber remanufacturing facility in Val-d'Or, Quebec, and a 50% interest in an "I" joist plant in Sault Ste-Marie, Ontario.
The TSX Venture Exchange has neither approved nor disapproved the content of this press release. All director and officer appointments are subject to TSX Venture Exchange approval.
All statements in this news release that are not based on historical facts are "forward-looking statements". While management has based any forward-looking statements contained herein on its current expectations, the information on which such expectations were based may change. These forward-looking statements rely on a number of assumptions concerning future events and are subject to a number of risks, uncertainties and other factors, many of which are beyond our control and could cause actual results to materially differ from such statements. Such risks, uncertainties and other factors include, but are not necessarily limited to, those set forth under "RISKS AND UNCERTAINTIES" in the Company's current MD&A, and under "RISK FACTORS" in the Company's Filing Statement dated January 8, 2010.
The financial information included in this release also contains certain data that are not measures of performance under IFRS. For example, "EBITDA" is a measure used by management to assess the operating and financial performance of the Company. We believe that EBITDA is a measure often used by investors to assess a company's operating performance. EBITDA has limitations and you should not consider this item in isolation, or as a substitute for an analysis of our results as reported under IFRS. Because of these limitations, EBITDA should not be used as a substitute for net loss or cash flows from operating activities as determined in accordance with IFRS, nor is it necessarily indicative of whether or not cash flows will be sufficient to fund our cash requirements. In addition, our definition of EBITDA may differ from those of other companies. A reconciliation of EBITDA to net loss is set forth under "Supplemental Information on Non-GAAP Measures" in the Company's current MD&A.
SELECTED FINANCIAL INFORMATION AND OPERATING STATISTICS
The following table provides an overview of the Company's financial results for the quarters ended June 30, 2012, March 31, 2012 and June 30, 2011, along with some key operating metrics.
|(in thousands of dollars, except where otherwise noted)||Q2||Q1||Q2|
|Operating income (loss)||298||(7,788)||(12,467)|
|Net earnings (loss) attributable to shareholders||(709)||6,347||(13,662)|
|Average lumber price in US$ - RL 2×4 #1&2(1)||393||360||336|
|Average lumber price in US$ - Stud 2×4×8(1)||388||329||314|
|Average exchange rate (US$ per C$1.00)||0.990||1.001||1.033|
|Production - SPF lumber (MMfbm)||109||113||119|
|Shipments - SPF lumber (MMfbm)||105||104||138|
|Shipments - wholesale lumber (MMfbm)||28||24||22|
|Cdn. housing starts (thousands of units)||229||206||195|
|U.S. housing starts (thousands of units)||739||715||573|
(1) Eastern spruce/pine/fir, per thousand board feet delivered Great Lakes (Source: Random Lengths Publications, Inc.)
The following table reconciles the Company's net earnings (loss) attributable to shareholders, as reported in accordance with IFRS, to EBITDA for the quarters ended June 30, 2012, March 31, 2012 and June 30, 2011.
|(in thousands of dollars)||Q2||Q1||Q2|
|Net earnings (loss) attributable to shareholders||(709)||6,347||(13,662)|
|Income tax recovery||-||-||(155)|
|Share of earnings in a joint venture||(267)||(146)||133|
|Gain on disposal of equipment destroyed by fire||-||(14,283)||-|
SOURCE: EACOM TIMBER CORPORATION
For further information:
Executive Vice-President and Chief Financial Officer
(514) 395-0375 ext. 259