EACOM Timber Corporation announces its third quarter results

 
17:48 EST Tuesday, Nov 13, 2012

MONTREALand VANCOUVER, Nov. 13, 2012/CNW Telbec/ - EACOM Timber Corporation (TSXV: ETR) ("EACOM", or the "Company") is pleased to announce its third quarter results for the three-month period ended September 30, 2012and the commencement of the reconstruction of its Timmins mill.

HIGHLIGHTS

  • EACOM recorded a positive adjusted EBITDA of $1.5 millionfor the third quarter
  • EACOM generated positive cash flows from operations of $2.8 millionduring the quarter
  • Substantial progress with the upgrades underway at Nairn Centre and Elk Lake
  • Preparation for commencement of the reconstruction of the Timmins mill

 

The third quarter saw a continuation of the significant improvement in housing activity which had a positive impact on lumber consumption, contributing to a stronger pricing environment and higher mill realizations for the Company. This improvement was somewhat offset by start-up costs at two of its mills which had been temporarily shut down since the second half of 2011, Val-d'Or and Matagami, and by downtime costs related to upgrades underway at Nairn Centre and Elk Lake. As a result, the Company recorded a positive adjusted EBITDA of $1,482,000for the third quarter ended September 30, 2012, down from $2,792,000in the previous quarter but up against a negative adjusted EBITDA of $4,367,000in the corresponding quarter of 2011.

During the third quarter, the Company made significant progress in its capital improvements targeted at increasing the production capacity at two of its mills, Nairn Centre and Elk Lake. Improvements at Nairn Centre are now completed. Construction at Elk Lake is expected to be completed shortly following a six-week shutdown of the mill. These upgrades are expected to partially offset the capacity lost at Timmins and mitigate some of the damages incurred as a result of the fire. A significant portion of these investments will be reimbursed under the business interruption insurance claim.

The Company has also commenced preliminary preparation for the reconstruction of the Timmins mill which was destroyed by fire earlier this year. A substantial portion of the total cost of the project is being funded from proceeds of insurance related to the fire. To date, the Company has received $23,700,000of insurance proceeds, of which $10,000,000for damage or destruction of assets and $13,700,000related to business interruption.

'We are progressing well with our capital expenditure program at Nairn Centre and Elk Lake. We also moved forward with the commencement of the rebuilding process at Timmins. The Company intends to continue its focused capital investments with a view to increase capacity and recovery, and reduce manufacturing costs. This should contribute to improve our competitiveness in the global forestry sector. It should also provide a more stable and sustainable employment environment for our employees in the communities where we operate', stated Rick Doman, President and CEO.

QUARTER ENDED SEPTEMBER 30, 2012vs. QUARTERS ENDED JUNE 30, 2012AND SEPTEMBER 30, 2011

For the quarter ended September 30, 2012, the net loss attributable to shareholders amounted to $964,000or $0.00per common share, against a net loss of $709,000or $0.00per common share in the previous quarter and a net loss of $564,000or $0.00per common share in the corresponding quarter of 2011. During the corresponding quarter of 2011, the Company recorded a gain of $4,339,000on the sale of the idled mill located in Big River, Saskatchewan and a $2,940,000recovery of income taxes as a result of the acquisition of the remaining one-third interest in the Elk Lake mill.

During the third quarter, the Company recorded sales of $63,380,000, down 3% against sales of $65,256,000in the previous quarter but up 3% against sales of $61,396,000in the corresponding quarter of 2011. The Company's sales include both lumber and by-product sales. During the quarter, the Company shipped 125 million board feet of lumber (133 million board feet in the previous quarter and 135 million board feet in the corresponding quarter of 2011) and 127,000 oven-dried metric tons of by-products (119,000 oven-dried metric tons in the previous quarter and 138,000 oven-dried metric tons in the corresponding quarter of 2011).

Pricing has improved again in the third quarter of 2012 with benchmark lumber prices averaging US$394/Mfbm for studs and US$404/Mfbm for random lengths delivered Great Lakes, up 2% and 3% from US$388/Mfbm and US$393/Mfbm respectively in the second quarter of 2012. Mill realizations were impacted by a slightly stronger Canadian dollar with the exchange rate relative to the US$ averaging 1.005 in the third quarter of 2012, up 2% against an average of 0.990 in the previous quarter. Compared to the corresponding quarter of 2011, studs and random lengths are trading at prices 24% and 22% above the levels achieved last year, and the Canadian dollar is down 1% relative to the US$.

Substantially all of the Company's sales were to North American customers. Sales to U.S. customers are subject to export taxes and volume quotas under Option B of the Softwood Lumber Agreement. Effective July 1, 2012, the export tax rate for sales to U.S. customers decreased from 3% to 2.5%, increasing back to 3% for the months of August and September. Overall, compared to the corresponding quarter of 2011, export taxes paid by EACOM decreased from $1,095,000 to $388,000as a result of lower shipments and a decrease in the export tax rate for sales to U.S. customers.

Lumber production for the quarter ended September 30, 2012was 112 million board feet of lumber, against 109 million board feet in the previous quarter and 126 million board feet in the corresponding quarter of 2011. During the third quarter, the Company operated at 45% of its capacity (40% during the previous quarter and 51% in the corresponding quarter of 2011). Mills in Val-d'Or and Matagami resumed their operations during the third quarter - these mills had been temporarily shut down since the second half of 2011 due to weak market conditions. Compared to the corresponding quarter of 2011, the capacity lost at Timmins where operations have been interrupted since January 22, 2012as a result of the fire at the mill site has been partially mitigated by higher production levels at two other sites, and by the additional production at Elk Lake following the acquisition of the remaining one-third interest in that mill in the third quarter of 2011.

Unit costs increased compared to those experienced in the second quarter of 2012 and in the corresponding quarter of 2011 as a result of the higher cost mills resuming their operations and downtime costs related to upgrades underway at Nairn Centre and Elk Lake.

FINANCIAL POSITION

At September 30, 2012, the Company had cash and cash equivalents of $31,807,000and restricted cash of $10,000,000($37,711,000and $10,000,000respectively at June 30, 2012). Its credit facility was undrawn against a borrowing availability of $8,432,000(outstanding advances of nil and a borrowing availability of $7,900,000at June 30, 2012).

During the third quarter, the Company generated positive cash flows from operations of $2,755,000(prior to net changes in non-cash working capital), down from $3,211,000in the previous quarter.

Substantially all of the $6,356,000in capital spending during the quarter was targeted at improving the production capacity at two of the Company's mills which, once completed, will partially offset the lost capacity at Timmins and mitigate some of the damages incurred as a result of the fire. A significant portion of these investments will be reimbursed under the business interruption insurance claim.

About EACOM

EACOM Timber Corporation is a TSX-V listed company. The business activities of EACOM consist of the manufacturing, marketing and distribution of lumber, wood chips and wood-based value-added products, and the management of forest resources. EACOM owns eight sawmills, all located in Eastern Canada, and related tenures. The mills are Timmins, Nairn Centre, Gogama, Elk Lake and Ear Falls in Ontario, and Val-d'Or, Ste-Marie and Matagami in {C}Quebec{C}. The mills in Ear Falls, Ontario and Ste-Marie, {C}Quebec{C} are currently idled. Operations in Val-d'Or and Matagami which had been temporarily shut down due to weak market conditions resumed during the third quarter. The mill in Timmins was substantially damaged by fire in January 2012and remains shut down. EACOM also owns a lumber remanufacturing facility in Val-d'Or, Quebec, and a 50% interest in an "I" joist plant in Sault Ste-Marie, Ontario.

I guess I was expecting more with all the hype of recovery in US housing. I do not remember reading about Elk Lake 6 week shut down, althought better now the later when selling price is higher..