Ainsworth Lumber reports Q2 net loss of C$13M compared with losses of C$17.8M a year earlier, grows share of export sales to 38% of total, up from 7% in Q2, 2010

VANCOUVER, British Columbia , August 8, 2011 (press release) – Highlights

  • Export market sales grew to 38% of total sales from 7% in Q2 2010
  • Recorded adjusted EBITDA of $2.7 million, at an EBITDA margin of 3.4%
  • Barwick OSB mill recorded best quarter of production since its purchase in 2004
  • Maintained strong cash position during the quarter
Ainsworth Lumber Co. Ltd. (TSX:ANS)(TSX:ANS.WT) today reported its financial results for the second quarter of 2011.

Ainsworth President and CEO Rick Huff said, "Despite persistently challenging market conditions, Ainsworth achieved improvements in operational efficiency at our three OSB mills and a marked increase in overseas sales volumes as we worked to fulfill our commitment to supply our valued, long-term customers in Japan with the building materials they need to continue their recovery effort."

"The decision we made to implement strategic capital projects in the fourth quarter of 2010, which is typically a period of seasonally lower demand, resulted in operational efficiency gains in the second quarter of 2011. I am particularly pleased to report that, in Q2, our OSB mill in Barwick, Ontario recorded its highest volumes of production since its purchase in 2004. Additionally, the dryer improvements at 100 Mile House and the press overhaul at Grande Prairie enabled both mills to complete seamless changes in product mix," added Mr. Huff.

Adjusted EBITDA for the second quarter of 2011 was $2.7 million compared to $35.1 million in the same quarter of 2010. The difference was primarily the result of significantly lower North American OSB pricing in the second quarter of 2011 compared to the second quarter of 2010, a period recognized for extraordinarily high North American OSB pricing. In the second quarter of 2011, the published benchmark North Central price for 7/16" oriented strand board ("OSB") was U.S. $174 per msf, a decrease of 41% from an average quarterly price of U.S. $294 per msf in the second quarter of 2010. The average Western Canadian published price for 7/16" OSB was U.S. $151 per msf in the second quarter of 2011, down 49% from U.S. $299 msf in the same period of 2010.

In the second quarter of 2011, Ainsworth recorded a net loss from continuing operations of $12.9 million compared to a loss of $17.3 million in the second quarter of 2010. This decrease is primarily due to a $27.2 million increase in the unrealized foreign exchange gain on long-term debt, a $3.0 million decrease in amortization expense, a $1.1 million decrease in finance expense and a $10.9 million increase in income tax recovery, partially offset by a $33.1 million decrease in gross profit.

Performance and Operational Efficiency
In the second quarter of 2011, Ainsworth recorded sales of $80.5 million, a decrease of $25.9 million compared to sales of $106.4 million in the second quarter of 2010. The decrease in sales for the year was the result of a 32.1% decrease in realized sale prices offset by a 11.4% increase in sales volume.

In the first six months of 2011, Ainsworth recorded sales of $151.9 million, a decrease of $41.5 million compared to sales of $193.4 million for the same period in 2010. The decrease in sales revenue was a result of a 21.8% decrease in realized pricing. Sale volume did not change significantly compared to 2010.

Costs of products sold for the second quarter of 2011 was $73.9 million compared to $66.7 million for the second quarter of 2010. The increase was the result of higher sales and increased sales of value-added products.

Costs of products sold for the first six months of 2011 was $134.8 million, a 1.5% increase over costs of $132.8 million over the same period in 2010. The increase in cost of products sold was a result of the small increase in sales volume, higher freight costs due to increased sales overseas, increased resin and wax pricing partially offset by a strengthened Canadian dollar and reductions in labour, repairs and maintenance, and subcontractor expenses.

Liquidity

As of June 30, 2011, Ainsworth's adjusted working capital was $103.7 million, compared to adjusted working capital of $134.5 million on December 31, 2010. Our working capital requirements in the short term are to fund any potential shortfalls from operations, interest payments, debt principal repayments and essential capital expenditures. Ainsworth continues to take a disciplined approach to managing its expenses. The Company believes it has the necessary working capital to manage effectively through all phases of the business cycle.

Conference Call Information

Ainsworth will hold a conference call on Monday, August 8, 2011 at 2:00 p.m. PDT (5:00 p.m. EDT) to discuss the 2011 second quarter results. The dial-in phone number is 1-800-319-4610 from inside the U.S. or Canada and 1-604-638-5340 from outside the U.S. or Canada. To access the post-view line, dial 1-800- 319-6413, or 1-604-638-9010, Reservation 4176#. This recording will be available until the end of the day on August 15, 2011.

Forestweb Editor’s Note: In an omitted table, the company reported Q2 sales of C$80.5 million, a net loss of C$13 million and diluted net losses per share of C$0.13. For the same period a year ago, the company reported sales of C$106.4 million, a net loss of C$17.8 million and 
diluted net losses per share of C$0.18.

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