Greenfirst Forest Products Inc. ((TSE:GFP)) has held its Q3 earnings call. Read on for the main highlights of the call.
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The recent earnings call for GreenFirst Forest Products Inc. painted a picture of a challenging quarter, marked by significant negative impacts from increased duty rates, market headwinds, and production issues at the Chapleau facility. Despite these hurdles, the company highlighted several positive developments, including federal support, effective SG&A cost control, and capital improvements at Chapleau, which are anticipated to enhance future performance.
SG&A Expenses Below Target
Selling, General, and Administrative expenses were reported to be on target at $32 per thousand board feet in Q3. This figure is below both last year’s and the year-to-date average, showcasing the company’s effective cost management strategies amidst a challenging economic environment.
Chapleau Mill Capital Improvements
GreenFirst has made significant capital improvements at the Chapleau mill, including the installation of a new saw line, a new planer mill, and major upgrades to the boiler and cogeneration plant. These enhancements are expected to improve the mill’s profitability with a payback period of under three years, indicating a strategic investment in long-term operational efficiency.
Federal Support Program for Softwood Lumber Industry
The company is set to benefit from the Canadian federal support program, which offers $700 million in loan guarantees and $500 million for market diversification. This support is anticipated to provide a financial cushion and aid in navigating the current market challenges.
Increase in Drying Capacity
Modifications to the cogeneration and boiler systems at the Chapleau sawmill have resulted in a 10% increase in drying capacity. This enhancement is expected to contribute positively to the mill’s operational efficiency and output.
Improved Cash Position
GreenFirst reported an improvement in its cash position, with excess liquidity rising from $22 million last year to $27 million this year. This improvement reflects the company’s continued focus on tight cash management and financial stability.
Negative EBITDA Due to Adjustments
The company reported a negative EBITDA of $47.2 million, primarily due to a $33.8 million duty adjustment, an $8.2 million NRV provision, and a $4.6 million impact from downtime at the Chapleau mill. These adjustments have significantly affected the company’s financial performance for the quarter.
Increased Duty Rates
Duty rates have increased to 35.16% for exports to the United States, negatively impacting sales volumes and creating customer hesitation. This increase poses a significant challenge for GreenFirst in maintaining its market position.
Sales Volume Decline
Sales volume declined to 93 million board feet from 109 million in Q2, influenced by market uncertainty and lower production due to the installation of new equipment at Chapleau. This decline underscores the operational challenges faced by the company.
Significant Market Headwinds
The company has faced macroeconomic challenges, including elevated interest rates, labor shortages, and geopolitical uncertainty. These factors have led to a decrease in shipments and revenues, further complicating the company’s financial landscape.
Lower Lumber Production
Lumber production decreased to 91 million board feet from 116 million in Q2, primarily due to downtime at Chapleau for the new saw line installation. This decrease highlights the operational disruptions impacting GreenFirst’s production capabilities.
Forward-Looking Guidance
During the Q3 2025 earnings call, GreenFirst reported a negative EBITDA of $47.2 million, influenced by several adjustments. Despite these challenges, the company remains optimistic about future cost improvements and revenue growth from the Chapleau upgrades, with full benefits expected by Q1 2026. The company is also exploring federal support programs to mitigate the impacts of duties and tariffs.
In summary, GreenFirst Forest Products Inc. is navigating a challenging quarter with several negative financial impacts. However, the company is taking strategic steps to improve future performance through capital improvements, federal support, and effective cost management. Investors and stakeholders will be keenly watching how these initiatives unfold in the coming quarters.