VANCOUVER, BC - Investors, analysts and other interested parties can access Acadian Timber Corp.'s 2010 Third Quarter Results conference call via webcast on Wednesday, October 27, 2010 at 10:00 a.m. ET at the company’s site or via teleconference at 1-800-319-4610, toll free in North America. For overseas calls please dial +1-604-638-5340, at approximately 9:50 a.m. ET. The teleconference taped rebroadcast can be accessed at 1-800-319-6413 or +1-604-638-9010 and enter passcode 2826.
All figures in Canadian dollars unless otherwise noted
Acadian Timber Corp. ("Acadian") (TSX:ADN) today reported financial and operating results(1) for the three months ended September 25, 2010 (the "third quarter"). EBITDA of $4.8 million for the third quarter of 2010 was $4.1 million higher than Acadian's EBITDA in the third quarter of 2009, excluding the $0.6 million gain from a land sale in the prior year. EBITDA margin increased to 27% from 9% in the comparable period of 2009.
"Demand for softwood sawlogs was relatively strong during the third quarter and we were able to merchandise effectively to achieve a larger proportion of sales from this higher margin product. In addition, Acadian saw average selling prices increase for all primary products", said Reid Carter, Chief Executive Officer of Acadian. "Acadian was also very successful in its corporate initiatives by arranging a new 5 year loan at a very attractive interest rate with a flexible covenant package to replace its term debt maturing in February 2011."
Subsequent to the third quarter, Acadian obtained a commitment letter from a major institutional lender for a 5 year, US$72.5 million loan to refinance the existing debt maturing on February 27, 2011. The terms of this financing, including the interest rates, are very favourable. Acadian anticipates that at the time of issuance of this new loan the effective interest rate will be approximately 3.4%, a rate management believes reflects the high credit quality of Acadian's assets. Compared to the existing debt facilities, Acadian expects incremental free cash flow of approximately $1.3 million per year resulting from the lower interest costs and the company will also benefit from a more flexible covenant package.
For the third quarter of 2010, Acadian generated net sales of $17.9 million on sales volume of 345.8 thousand m3, which represents a $3.5 million, or 24% improvement in net sales revenue over the same period in 2009. This increase was driven primarily by higher prices across all primary products, a greater proportion of sales being softwood sawlogs and the greater contribution from the Crown land service agreement.
For the nine months ended September 25, 2010, Acadian generated net sales of $50.5 million on sales volume of 1,016.8 thousand m3 as compared to net sales of $46.7 million on sales volume of 915.3 thousand m3 in the comparable period of 2009. EBITDA of $11.6 million during the nine months ended September 25, 2010 is $2.1 million more than the comparable period of 2009, excluding the $0.6 million gain from a land sale in the prior year.
Review of Operations
2010 Financial and Operating Highlights
1 Net income includes the impact of future income tax recovery, and depreciation and depletion expense, which are non-cash items recorded in each respective period. Net income for the nine months ended September 26, 2009 only, included the impact of the revaluation of the Class B Interest Liability of a subsidiary.
Included in the net income for the three month period ended September 25, 2010 is a non-cash future income tax expense of $0.6 million (2009 – recovery of $0.5 million). The future income tax asset of Acadian is based on differences between the financial reporting and tax basis of assets and liabilities of its subsidiaries, which have been measured using the substantially enacted tax rates and laws that are expected to be in effect at the time the differences are anticipated to reverse. The reduction in the future income tax asset, and related expense, recorded during the period is largely a result of changes in the timing of when the differences are anticipated to reverse.
The nine month period ended September 26, 2009 included a non-cash gain related to the Class B Interest Liability of a subsidiary. On February 3, 2009, an affiliate of Brookfield Asset Management Inc. converted all units representing the Class B Interest Liability into Class A units of Acadian Timber Income Fund on a one-for-one basis. For the nine-month period ended September 26, 2009, the revaluation of this interest resulted in a gain of $4.7 million. The gain was comprised of a $4.1 million mark-to-market gain plus an additional $0.6 million foreign exchange gain due to the weakening of the Canadian currency in the quarter.
New Brunswick Timberlands
Softwood, hardwood and biomass shipments were 98 thousand m³, 97 thousand m³ and 68 thousand m³, respectively, for the third quarter of 2010. Approximately 35% was sold as sawlogs, 39% as pulpwood and 26% as biomass. This compares to 29% sold as sawlogs, 42% as pulpwood and 29% as biomass in the third quarter of 2009.
Net sales for the third quarter of 2010 was $13.3 million (2009 – $11.6 million) with an average selling price across all products of $43.47 per m³ which compares to an average selling price of $41.46 per m³ during the third quarter of 2009. The year-over-year increase in the average selling price resulted from a high percentage of softwood sawlog sales and improved prices for hardwood pulpwood, which accounted for 31% of sales volume. Net sales for the first nine months ended September 25, 2010 was $39.5 million, an increase of $4.0 million over the comparable period of 2009.
Costs in the third quarter were $9.6 million (2009 – $10.3 million). Variable costs per m³ were 7% lower than the third quarter of 2009 as a result of an increased proportion of sales made to closer proximity markets and from the woodyard which resulted in lower transportation costs.
EBITDA for the third quarter was $3.7 million, compared to $1.3 million in the comparable period of 2009. For the nine months ended September 25, 2010, EBITDA was $9.8 million as compared to $8.3 million for the same period last year. EBITDA margin increased to 28%, as compared to 11% for the third quarter of 2009, primarily reflecting the impact of higher contribution from the Crown land service agreement and a greater proportion of sales of higher margin softwood sawlogs.
During the third quarter of 2010, NB Timberlands experienced no recordable safety incidents among employees and one recordable incident among contractors from which the individual has since fully recovered.
Softwood, hardwood and biomass shipments were 58 thousand m³, 21 thousand m³ and 3 thousand m³, respectively, for the third quarter of 2010. Approximately 54% was sold as sawlogs, 42% as pulpwood and 4% as biomass. This compares to 49% sold as sawlogs, 44% as pulpwood and 7% as biomass in the third quarter of 2009.
Net sales for the third quarter of 2010 was $4.6 million (2009 – $2.8 million) with an average selling price across all products of $53.38 per m³ which compares to an average selling price of $46.33 per m³ during the third quarter of 2009. This increase in average sales price is primarily the result of improved demand and pricing for spruce-fir sawlogs and hardwood pulpwood, partially offset by the strengthened Canadian dollar. Net sales for the first nine months ended September 25, 2010 was $11.0 million, a decrease of $0.2 million over the same period of 2009.
Costs for the third quarter were $3.3 million (2009 – $2.6 million, excluding the effect of the land sale in the prior year). Variable costs per m³ increased 1% in Canadian dollar terms and 6% in U.S. dollar terms. This increase reflects longer hauling distances with less sales made from the woodyard as compared to the prior year.
EBITDA for the third quarter was $1.3 million, compared to $0.8 million in the comparable period of 2009. For the nine months ended September 25, 2010, EBITDA was $2.7 million as compared to $3.5 million for the same period of 2009. The 2009 results for the quarter and year include a $0.6 million one-time gain from a land sale. Excluding this gain, EBITDA margin in the third quarter of 28% was 21% higher than the third quarter of 2009.
We are pleased to report that Acadian's Maine Timberlands experienced no recordable safety incidents among employees or contractors during the third quarter of 2010.
The following Outlook contains forward-looking statements about Acadian Timber Corp.'s outlook for fiscal 2010 and 2011. 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 (MD&A) of Acadian Timber Income Fund's most recent Annual Report and Acadian Timber Corp.'s Annual Information Form available on our website.
Acadian has benefited from the continued return to operation of many of its softwood sawmilling customers. Acadian has also benefited in its Maine operations from a stable labour force while several regional competitors are struggling to find contractors, owing to state government efforts to limit Canadian laborer's access to work in Maine. This has created additional demand and supported pricing. Despite these positives, we remain cautious in our outlook for softwood sawlog demand through at least the first quarter of 2011 as lumber demand and pricing is expected to remain weak.
Markets for hardwood sawlogs are expected to remain stable and positive through year end and into 2011. Acadian has benefited from the current strong markets for market pulp with strong demand for pulpwood throughout 2010. However, global pulp inventories increased during the third quarter and demand and pricing are expected to soften throughout the fourth quarter. High log inventories at regional pulp mills are expected to further soften demand through year end. To date Acadian's major hardwood pulpwood customers are all operating and taking deliveries and, despite this weak outlook, we expect prices to remain relatively stable through the fourth quarter. We view the recent announcement of the sale of Domtar's Woodland pulpmill to International Grand Investment Corp. favourably as this is expected to ensure a more consistent operating level for this key hardwood pulpwood customer going forward. While biomass demand and prices are currently weak, we expect demand and prices to improve with winter weather conditions as regional consumers move to increase the proportion of biomass in their fuel mix.
Acadian's strong performance to date this year has led to a payout ratio that is well below the target level. With continuing performance improvement expected and reduced interest costs resulting from the refinancing to be completed in February 2011, Acadian is well positioned to revisit the payout ratio in the first quarter of next year.
Acadian is pleased to announce a dividend of $0.05 per share, payable on January 14, 2011 to shareholders of record on December 31, 2010.
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 over 110 regional customers.
SOURCE: Acadian Timber Corp.
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