VANCOUVER, BRITISH COLUMBIA - Ainsworth Lumber Co. Ltd. (TSX:ANS)(TSX:ANS.WT) today announced its financial results for the first quarter ended March 31, 2012.
First Quarter Highlights:
•Achieved positive adjusted EBITDA of $10.0 million - $7.3 million higher than the prior quarter.
•Improved production efficiency and inventory management.
•Margin improvement program delivered gains of $2.4 million in the quarter.
•Achieved a significant safety milestone - first mill to operate accident-free for one full year.
Ainsworth Performance Improves In First Quarter
Ainsworth President and Chief Operating Officer, Jim Lake, said, "I am pleased to report that Ainsworth's performance improved in the first quarter of 2012. The Company recorded positive EBITDA of $10.0 million, which was $7.3 million higher than the prior quarter and $3.6 million higher than the same quarter last year. Our EBITDA improvement reflects a stronger pricing environment and better operating results at all three mills."
Production efficiency and conversion costs improved over the same period last year at all three mills. Lower inventory levels were also achieved during the seasonally higher period that takes place during the first quarter of each year. Our margin improvement program resulted in cost savings of $2.4 million in the quarter. In addition, the Barwick, Ontario mill achieved a significant safety milestone by operating accident-free for one full year.
The Company also reported softer sales to Japan as customers continued to work through their post-tsunami inventories. As the leading supplier of OSB to Japan, Ainsworth continues to pursue the significant growth potential of this market and is firmly committed to supporting customers in Japan while they await the start of the "rebuilding" phase. The Company is also making inroads into other market regions, notably China, where significant progress was made during the quarter with new product development initiatives.
For the first quarter of 2012, Ainsworth recorded net income from continuing operations of $0.7 million, compared to $77.7 million in the first quarter of 2011. This change is primarily the result of a $73 million gain that was recorded in the first quarter of 2011 on the acquisition of the remaining 50% interest in our mill in High Level, Alberta. Sales were $85.1 million in the first quarter of 2012, an increase of $13.6 million from the first quarter of 2011 due to an increase in volume and an increase in OSB pricing, most notably in Western Canada. Adjusted EBITDA for the first quarter of 2012 was $10.0 million compared to adjusted EBITDA of $6.4 million in the same quarter last year.
Adjusted EBITDA margin for the first quarter of 2012 was 11.8% compared to an adjusted EBITDA margin of 9.0% for the same period in 2011. The cost of products sold per msf (3/8-inch basis) for the first quarter of 2012 was 1.7% higher than the same period in 2011.
In the first quarter of 2012, the average North Central market price for 7/16" OSB was U.S. $203 per msf, an increase of 2% from an average price of U.S. $199 per msf in the first quarter of 2011. The average Western Canadian market price for 7/16" OSB increased 10% from U.S. $182 per msf in the first quarter of 2011 to U.S. $201 per msf in the first quarter of 2012. Sequentially, Western Canadian prices in the first quarter of 2012 increased by 35% from $149 per msf in the fourth quarter of 2011.
Selected financial information is presented in the table below. The full financial report is available to be viewed at the following link: http://media3.marketwire.com/docs/Q1-2012-Interim-Report-to-Shareholders....
|Three months ended March 31|
|Cost of products sold||71.4||60.9|
|Net income from continuing operations||0.7||77.7|
|Adjusted EBITDA (1)||10.0||6.4|
|Adjusted EBITDA margin (2)||11.8%||9.0%|
|Basic and diluted earnings (loss) per share:|
|Net income from continuing operations||0.01||0.77|
|Weighted average common shares outstanding (3)||100.8||100.6|
- Adjusted EBITDA, a non-IFRS financial measure, is defined as net income from continuing operations before amortization, gain on disposal of property, plant and equipment, cost of curtailed operations, stock option expense (recovery), finance expense, foreign exchange (gain) loss on long-term debt, other foreign exchange loss (gain), income tax (recovery) expense, and non-recurring items.
- Adjusted EBITDA margin, a non-IFRS financial measure, is defined as adjusted EBITDA divided by sales.
- 100,768,888 common shares were outstanding on March 31, 2012.
At March 31, 2012, Ainsworth's available liquidity, consisting of cash and cash equivalents, restricted cash, and short-term investments, was $54.1 million, down from $62.5 million at December 31, 2011. Although we are encouraged by our improved financial performance and reduced working capital use, the Company continues to review various alternatives which could enhance our liquidity, which could include the sale of non-core assets, cost reduction initiatives, refinancing or repayment of debt and issuance of new debt or equity.
Ainsworth is permitted, under the terms of its Senior Unsecured Notes and Senior Secured Term Loan, to borrow an additional U.S. $125 million of Senior Secured Debt and U.S. $75 million of Senior Unsecured Debt. The availability of additional sources of capital will depend on capital markets at the time and may not be available on acceptable terms.
In the first quarter, the U.S. housing market showed some positive signs, with U.S. housing starts, permits and single-family starts sharply up by 20%, 30% and 17% respectively year-over-year. Industry forecasts for 2012 housing starts have accordingly been upgraded and now range between 680,000 and 770,000, which is 11% to 26% higher than last year's 610,000 starts. Jim Lake said, "While we are encouraged by the improving U.S. housing market, we have come to learn that the U.S. economic recovery is not only slow but fragile. Provided that improvements in the U.S. economy continue to hold, we expect demand to trend incrementally better for the remainder of the year."
The Company also announced that Chris Davies, the chief financial officer of the Company, has tendered his resignation effective June 4, 2012 after accepting a position with a privately-held company outside the forest products industry. Meanwhile, the Company has commenced an external search for qualified CFO candidates.
"Mr. Davies has made an important contribution to Ainsworth since he joined in October 2009. We thank him for his leadership and dedication to the company. We wish him all the best in his future endeavors," said Mr. Lake.
Source: Ainsworth Lumber Co. Ltd.
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