Conifex Timber Charts Difficult Path to 2026 Recovery

Conifex Timber ((TSE:CFF)) has held its Q4 earnings call. Read on for the main highlights of the call.

Conifex Timber’s latest earnings call painted a cautious but constructive picture. Management acknowledged heavy losses, extreme duty and tariff pressures, and deep curtailments, yet emphasized new financing, defined cost‑reduction levers, and an operational roadmap that could restore EBITDA‑positive performance by late 2026 if markets and policy headwinds ease.

Financing lifeline stabilizes capital structure

Conifex secured significant backing from Pender Fund and BDC, easing near‑term covenant and liquidity pressure. A $25 million Pender term loan and roughly $21.5 million in follow‑on advances, combined with a $19 million BDC softwood lumber loan maturing in 2033, provide runway for operations and restructuring.

Operational recovery built around 2026 transition

Management framed 2026 as a reset year, with curtailed or single‑shift production in the first half and a planned move to steady two‑shift operations in the second half. The mill restarted two‑shift operations in February, and several shifts reportedly ran well above internal targets, supporting the case for sustainable ramp‑up.

Targeted capex aimed at tangible cost gains

The company identified just over $11 million of quick‑payback capital projects tied directly to operating efficiency and throughput. These initiatives are expected to lift annual EBITDA by more than $4 million and, together with two‑shift dilution, could trim conversion costs by roughly $50 to $70 per 1,000 board feet.

Favorable log basin underpins cost competitiveness

Conifex operates in a timber region where sawlog supply of around 10 million cubic meters exceeds local demand of about 8 million, supporting more attractive stumpage economics. Management believes that, after its planned improvements, the McKenzie operation can sit in the bottom half of the stud lumber cost curve and benefit from a richer B.C. price mix.

Biomass power cushions lumber volatility

Diversified revenue from biomass power generation helped keep the McKenzie operation running during periods when lumber production was heavily curtailed. This non‑lumber cash flow stream demonstrated strategic value, partially offsetting the severe earnings swings tied to sawmill utilization and U.S. demand.

Accounting reclassification seen as temporary

The company noted that long‑term debt was shown as current at year‑end 2025 under IFRS rules because BDC documentation was not finalized in time. Management expects this classification to be reversed in the first‑quarter statements, aligning the balance sheet presentation with the long‑dated BDC maturity profile.

Large 2025 loss dominated by duty charges

Conifex reported a net loss of $35.7 million for 2025, driven largely by duty deposits and tariff expenses totaling $26.1 million. Results also absorbed a one‑time non‑cash $15.3 million charge associated with underpaid 2023 duties, underscoring the scale of trade‑related headwinds.

Surging U.S. duties and tariffs crush margins

Deposit rates on U.S. softwood lumber exports jumped from 14.4% to 35.16%, and an additional 10% tariff pushed the total burden to 45.16%. This sharp escalation significantly weakened export economics, prompting management to curtail production in the second half of 2025 to stem cash losses.

Deep curtailments slash utilization and raise unit costs

Operating rates in the fourth quarter fell to roughly 46% of capacity as the company pulled back output in response to negative margins. The reduced run‑rate constrained volumes and drove higher fixed costs per unit, compounding the financial impact of duties and soft pricing.

Liquidity tightness and ongoing funding needs

Late 2025 saw serious liquidity strain that required multiple short‑term advances from Pender before the BDC facility closed. Management signaled that additional capital will still be needed to rebuild log inventories and fund capex, noting that some government programs typically start around the $30 million loan level.

Log inventory shortfall limits near‑term production

Because the BDC financing closed late, the logging season was effectively shortened, leaving Conifex with insufficient logs to support a full single shift through the first half of 2026. Production may remain constrained until summer logging ramps, adding short‑term execution risk to the transition plan.

BC Hydro reversal clouds data center ambitions

The company described a setback in its data center strategy after BC Hydro reversed support for two planned interconnections, declined system impact studies, and removed the projects from its queue. Conifex is contesting the move, and the dispute injects uncertainty into a key diversification avenue beyond lumber.

Guidance frames 2026 as a bridge to recovery

Guidance stresses that a single shift is unlikely to be EBITDA positive under 2026 benchmark pricing, whereas consistent two‑shift operations could produce EBITDA‑positive months late in the year. Management’s plan hinges on executing over $11 million of efficiency capex, securing additional capital for sawlog builds, and benefiting from any easing in the current 45.16% duty and tariff regime.

Conifex’s earnings call highlighted a company under heavy pressure from trade policy, weak utilization, and tight liquidity but not without options. With new long‑term financing, concrete cost projects, and a defined ramp to two shifts, management is betting that disciplined execution and a more rational duty landscape can pull results back into positive territory by the end of 2026.