Acadian Timber reports Q4 2011 income of C$11.43M, compared with C$2.62M a year earlier, on sales of C$15.14M; full-year income drops 56% to C$13.76M on wet summer, reduced contractor availability in Maine
VANCOUVER, British Columbia
February 6, 2012
– All figures in Canadian dollars unless otherwise noted
Investors, analysts and other interested parties can access Acadian Timber Corp.'s 2011 Fourth Quarter Results conference call via webcast on Tuesday, February 7, 2012 at 1:00 p.m. ET at www.acadiantimber.com or via teleconference at 1-800-319-4610, toll free in North America. For overseas calls please dial +1-604-638-5340, at approximately 12:50 p.m. ET. The teleconference taped rebroadcast can be accessed at 1-800-319-6413 or +1-604-638-9010 and enter passcode 2826.
Acadian Timber Corp. ("Acadian" or the "Company") (TSX:ADN) today reported financial and operating results(1) for the three months ended December 31, 2011 (the "fourth quarter").
For the fourth quarter of 2011, Acadian generated net sales of $15.1 million on sales volume of 284 thousand m3, which represents a $5.4 million, or 26%, decrease in net sales compared to the same period in 2010.
EBITDA of $3.8 million for the fourth quarter of 2011 was $2.6 million lower than in the fourth quarter of 2010, and EBITDA margin decreased to 25% from 31% in the same period of last year. The decrease in margin is attributed to lower contributions to fixed costs resulting from reduced sales volume.
For the year ended December 31, 2011, Acadian generated net sales of $66.2 million on sales volume of 1,293 thousand m3 as compared to net sales of $71.0 million on sales volume of 1,399 thousand m3 in 2010. EBITDA of $15.5 million during the year ended December 31, 2011 is $2.2 million lower than 2010 reflecting lower overall sales volume and higher costs in the Maine Timberlands operation due to renegotiated contractor rates.
"Acadian's operations were challenged in 2011 by an unusually wet summer and fall and reduced contractor availability in our Maine operations both of which led to lower harvest and sales volumes," said Reid Carter, Chief Executive Officer of Acadian. Mr. Carter further noted that, "Despite these challenges, Acadian continued to benefit from strong demand and pricing for its hardwood and softwood pulpwood, good markets for its hardwood specialty sawlogs and reasonable markets for most of its softwood sawlogs."
(1) This news release makes reference to EBITDA and free cash flow which are key performance measures in evaluating Acadian's operations and are important in enhancing investors' understanding of Acadian's operating performance. Acadian's management defines EBITDA as earnings before interest, taxes, fair value adjustments, unrealized exchange gain/loss on debt, depreciation and amortization. For the year ended December 31, 2010 only, EBITDA was adjusted to remove the gain on corporate conversion. As these performance measures do not have standardized meanings prescribed by International Financial Reporting Standards ("IFRS"), they may not be comparable to similar measures presented by other companies. As a result, we have provided in this news release reconciliations of net income, as determined in accordance with IFRS, to EBITDA and free cash flow.
Review of Operations
The operating challenges during the year along with a continuation of the depressed log pricing environment decreased free cash flow causing Acadian's payout ratio to climb to 111% for the year ended December 31, 2011. While this exceeds our 95% target level, the current dividend rate continues to reflect our long-term view on sales volumes and the return to normalized prices.
International Financial Reporting Standards
Effective fiscal 2011, Acadian's financial results are reported in accordance with International Financial Reporting Standards ("IFRS"). Comparative figures in this press release, previously presented in Canadian generally accepted accounting principles, have been adjusted to conform to IFRS.
New Brunswick Timberlands
Softwood, hardwood and biomass shipments were 78 thousand m3, 81 thousand m3 and 55 thousand m3, respectively, during the fourth quarter, representing a 29% decrease in net sales volume over the same period in 2010. Strong harvest volumes in the first three quarters of 2011 aimed at capturing market opportunities resulted in Acadian reducing harvest levels in the fourth quarter to be in line with long run sustainable yield projections. Approximately 39% of sales volume was sold as sawlogs, 35% as pulpwood and 26% as biomass in the fourth quarter. This compares to 36% of sales volume sold as sawlogs, 46% as pulpwood and 18% as biomass in the fourth quarter of 2010.
Net sales for the fourth quarter totaled $11.3 million compared to $16.4 million for the same period last year. This was primarily the result of the decrease in sales volume due to managing Acadian's harvesting within the long run sustainable yield. The decrease in other sales reflects reduced margins from operations conducted under Acadian's timberland management services agreement as a result of higher operating and transportation costs due to harvesting in areas that are more distant from customer locations and harvesting on terrain that requires the use of higher cost logging systems. The weighted average selling price was $48.09 in the fourth quarter of 2011, consistent with $48.10 in the same period of 2010.
Costs for the fourth quarter were $8.0 million, compared to $10.8 million in the same period in 2010 as a result of lower sales volume.
EBITDA for the fourth quarter was $3.3 million, compared to $5.6 million in the same period in 2010, while EBITDA margin decreased from 34% to 29% largely due to the lower contribution to fixed costs resulting from reduced sales volume.
We are pleased to report that during the fourth quarter of 2011, New Brunswick Timberlands experienced no recordable safety incidents among employees or contractors.
Softwood, hardwood and biomass shipments were 47 thousand m3, 20 thousand m3, and 2 thousand m3, respectively, with net sales volume decreasing by 14% over the fourth quarter of 2010. The decrease in sales volume reflects contractor availability constraints and unusually wet weather. Approximately 57% of sales volume was sold as sawlogs, 40% as pulpwood and 3% as biomass during the fourth quarter. This compares to 57% of sales volume sold as sawlogs, 35% as pulpwood and 8% as biomass in the fourth quarter of 2010.
Net sales for the fourth quarter totaled $3.9 million, compared to $4.1 million for the same period last year. The year-over-year decrease in net sales is a result of lower shipment volumes which were somewhat offset by a higher value product mix. The weighted average price across all products was $54.84 in the fourth quarter, compared to $50.44 in the same period of 2010, reflecting a 9% increase in Canadian dollar terms. Weighted average selling prices increased 8% in U.S. dollar terms as compared to the same period of 2010.
Costs for the fourth quarter were $3.0 million, compared to $2.9 million for the same period in 2010. This increase reflects higher variable costs per m3 due to renegotiated contractor rates in 2011 and unfavourable foreign exchange movement, offset partially by lower sales volume.
EBITDA for the fourth quarter was $0.9 million, compared to $1.2 million for the same period in 2010, while EBITDA margin decreased from 29% to 23%.
During the fourth quarter of 2011, Maine Timberlands experienced no recordable safety incidents among employees and one recordable incident among contractors.
The following Market Outlook contains forward-looking statements about Acadian Timber Corp.'s market outlook for fiscal 2012. Reference should be made to the "Forward-looking Statements" section of this news release. For a description of material factors that could cause actual results to differ materially from the forward-looking statements in the following, please see the Risk Factors section of our management's discussion and analysis of Acadian's most recent Annual Report and Annual Information Form available on our website at www.acadiantimber.com or filed with SEDAR at www.sedar.com.
The U.S. housing market demonstrated slightly more encouraging signals in the fourth quarter with new home sales rising 2%, sales of existing homes increasing 4% and housing starts increasing by 9%. The NAHB housing market index also rose with improved buyer traffic. At the same time the S&P/Case-Shiller 20-city house pricing index has fallen 6% over the past four months with price declines in 16 of the 20 markets surveyed. Clearly, the timing of recovery for the U.S. housing market remains uncertain. Management believes the housing recovery process will require a further two to three years before home inventories normalize and new home construction recovers to trend levels. As a result, Acadian expects markets for softwood sawlogs to remain weak through 2012 before a formative recovery begins in earnest in 2013.
Global pulp and paper markets continue to be under pressure, however, pulp production appears to have come into alignment with demand resulting in more balanced inventories with stabilizing prices suggesting pulp prices may have bottomed. Acadian's pulp customers continue to have high operating rates and markets for Acadian's pulpwood continue to be very positive providing a positive offset to weak softwood sawlog markets.
Markets for hardwood sawlogs and specialty products improved slightly or were stable through 2011 with a similar outlook for 2012. Markets for biomass are expected to be stable although weak owing to continued low power prices and very low prices for natural gas.
While the business environment continues to slowly improve, some of Acadian's significant softwood pulpwood customers have struggled with challenging market conditions for an extended period of time resulting in a weakening of their financial position. Management recognizes that the ongoing financial viability of these customers is dependent on their continued access to capital and an improved market environment. We continue to monitor these situations closely while exploring market alternatives for our logs in the event that sales to these customers decline or cease. Acadian's financial results and cash flows to fund future dividends are dependent on current harvesting levels and sales revenue.
"We expect 2012 to present improving, although uncertain, conditions and we are confident that Acadian will continue to demonstrate its adeptness in identifying and accessing market opportunities while keeping costs low. To address limited contractor availability in Maine, we have initiated strategies which we expect to result in increased harvest levels in 2012," concluded Mr. Carter.
Acadian is pleased to announce a dividend of $0.20625 per share, payable on April 13, 2012 to shareholders of record on March 30, 2012.
Acadian Timber Corp. is a leading supplier of primary forest products in Eastern Canada and the Northeastern U.S. With a total of 2.4 million acres of land under management, Acadian is the second largest timberland operator in New Brunswick and Maine.
Acadian owns and manages approximately 1.1 million acres of freehold timberlands in New Brunswick and Maine, and provides management services relating to approximately 1.3 million acres of Crown licensed timberlands. Acadian also owns and operates a forest nursery in Second Falls, New Brunswick. Acadian's products include softwood and hardwood sawlogs, pulpwood and biomass by-products, sold to approximately 90 regional customers.
Acadian's shares are listed for trading on the Toronto Stock Exchange under the symbol ADN.
For further information, please visit our website at www.acadiantimber.com.
Industy Intelligence Editor's Note: In an omitted table, Acadian reported Q4 2011 net sales of C$15.14 million and net earnings of C$11.43 million. For the same period a year earlier, the company reported net sales of C$20.58 million and net earnings of C$2.62 million.