MONTRÉAL, QUÉBEC and VANCOUVER, BRITISH COLUMBIA -- EACOM Timber Corp. is pleased to announce its third quarter results for the three-month
period ended Sept. 30, 2011.
On June 30, 2010, EACOM completed the acquisition of the Domtar forest products business, which transformed the Company from a lumber trading to a lumber manufacturing, marketing and distribution business capable of producing approximately 900 million board feet annually. The Company began operating these newly acquired assets on July 1, 2010. As a result, only fifteen months or five quarters of operations are indicative of the Company's current activities and a comparison of the Company's financial results for the nine-month periods ended Sept.
30, 2011 and 2010 respectively may not be meaningful. However, for the first time with the current quarter ended Sept. 30, 2011, a comparison of the quarterly financial results against those of the same period last year is provided. All amounts are expressed in thousands of Canadian dollars unless otherwise specified.
OVERVIEW OF FINANCIAL RESULTS
The Company's operating results are significantly affected by lumber prices and the CDN$/US$ exchange rate. For the quarter ended September 30, 2011, compared to the same quarter last year, higher lumber prices, somewhat offset by a stronger Canadian dollar, translated into an improved EBITDA. The Company recorded for the quarter a negative EBITDA of $4,004 ($6,088 in the third quarter of 2010). The net loss and comprehensive loss attributable to shareholders for the quarter amounted to $564 or $0.00 per common share ($9,054 or $0.02 per common
share in the third quarter of 2010). This improvement is primarily attributable to better operating results, a gain of $4,339 on the sale of the Big River mill and a $2,940 recovery of income taxes as a result of the acquisition of the remaining one-third interest in the Elk Lake sawmill.
QUARTER ENDED SEPT. 30, 2011 vs. QUARTER ENDED SEPT. 30, 2010
For the quarter ended Sept. 30, 2011, the Company recorded sales of $61,396, against sales of $71,902 in the same quarter of 2010. The Company's sales include both lumber and by-product sales. During the quarter, the Company shipped 135 million board feet of lumber (151
million board feet in the third quarter of 2010) and 138,000 oven-dried metric tons of by-products (140,000 oven-dried metric tons in the third quarter of 2010). This decrease in shipments compared to last year is attributable to weak market conditions and lower production with three mills taking market-related downtime during the quarter ended Sept. 30, 2011. Benchmark lumber prices have slightly improved in the third quarter of 2011 but still reflect a slow housing market, averaging U.S. $318/Mfbm for studs and U.S.$332/Mfbm for random lengths delivered Great Lakes, compared to U.S. $283/Mfbm and U.S. $316/Mfbm respectively in the third quarter of 2010. A firmer pricing environment was somewhat offset by a strengthening Canadian dollar, the exchange rate averaging 1.020 during the third quarter of 2011 compared to 0.962 in the third quarter of 2010. And, on July 1, 2011, the Canadian government removed the additional 10% export tax following an announcement that the full amount to be collected had been fully recovered. The mix of lumber grades sold and prices of
by-products have remained similar over these two quarters.
Lumber production for the quarter ended Sept. 30, 2011 was 127 million board feet of lumber, compared to 130 million board feet in the same quarter last year. During the quarter, the Company operated at 49% of its capacity with two of the eight sawmills acquired from
Domtar idled, Ear Falls in Ontario and Ste-Marie in Quebec (51% during the same quarter last year with no change to idled mills). Sawmills were subject to longer market-related downtime during the third quarter of 2011 compared to the same quarter last year. Unit costs
improved slightly compared to those experienced in the year earlier quarter as a result of those mills taking market-related downtime being the higher cost mills.
At Sept. 30, 2011, the Company had cash and cash equivalents of $5,694 and its credit facility was undrawn against a borrowing availability of $7,907, compared to cash and cash equivalents of $13,577 and outstanding borrowings of $3,330 under its revolving credit facility against a borrowing availability of $12,119 at June 30, 2011. For the third quarter, cash operating losses of $4,679 were offset by a non-cash working capital recovery of $3,096, resulting in
$1,583 being used in operating activities. The Company's working capital requirements vary during the year due to the seasonality of forestry operations. Those requirements are usually substantial in the first and second calendar quarters whereas in the third and fourth quarters, the Company benefits from its working capital. Part of the net proceeds of $32,346 from a private placement of the Company's common shares completed in the second quarter were used to acquire the remaining one-third interest in the Elk Lake sawmill and to repay
outstanding borrowings under the revolving credit facility. And, on Sept. 19, 2011, the Company sold its Big River mill for a cash consideration of $7,500.
On Oct. 8, 2011, the Company experienced a fire at its Gogama mill site with substantial losses to log and lumber inventories. However, the mill is intact and operations should resume in the fourth quarter. Losses incurred, including business interruption, are fully covered under the Company's insurance policy, less a deductible.
Source: EACOM Timber Corp.
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