GreenFirst Forest Q1 Call: Progress Amid Pressure

Greenfirst Forest Products Inc. ((TSE:GFP)) has held its Q1 earnings call. Read on for the main highlights of the call.

GreenFirst Forest Products delivered a mixed first quarter, pairing tangible operational gains with persistent financial strain. Management highlighted improved safety, progress at its Chapleau operations and fresh government financing that bolstered cash, yet revenues fell, shipments weakened and tariffs weighed heavily, leaving the company firmly in the red and cautious on the near-term outlook.

Safety Culture Remains a Standout Strength

GreenFirst opened the call by underscoring its continued record on safety, emphasizing that its operations maintained industry-leading safety metrics through the quarter. Management framed this performance as a competitive advantage, arguing that a strong safety culture supports reliability, limits disruptions and keeps costly incident-related impairments off the balance sheet.

Government Financing Shores Up Liquidity

To address balance sheet pressure, the company secured a $30 million federal loan from a development bank alongside roughly $2.4 million in provincial support. These financings lifted cash to $6.5 million from $3.5 million and contributed to total financing inflows of $38.6 million in the quarter, providing a crucial buffer as operating cash flow and working capital remain under strain.

Chapleau Projects Drive Capacity and Quality Gains

The centrepiece of GreenFirst’s operational story was the Chapleau complex, where a new saw line completed performance testing and boosted output by 60% from January to March. The line is now running at about 90% of its target capacity, while planer and cogeneration refurbishments have been completed and ramped, delivering better lumber quality, improved recovery and grades, and importantly, coming in under budget.

Margins Improve Despite Ongoing Losses

Quarter-on-quarter profitability trends showed incremental progress, as the EBITDA loss narrowed to $15.1 million from $21.7 million in the prior quarter. Gross margin loss improved sharply to $2.0 million from $9.0 million, aided by a steep drop in net realizable value adjustments and lower freight costs, signalling that cost pressure is easing even though the business remains unprofitable.

Early Signs of Price and Demand Recovery

Management pointed to improving market indicators, with a key western lumber benchmark rising about 15% during the quarter to $487. U.S. housing data also turned more supportive, as March housing starts climbed double digits year over year and month over month, while repair and remodeling demand ran above forecasts, hinting at a nascent recovery in lumber consumption.

Revenue Contracts on Lower Shipments

Against these positives, the top line deteriorated, with total revenue slipping to $60.6 million from $71.8 million a year earlier and $77.0 million in the prior quarter. The decline was largely driven by weaker shipment volumes, underlining that operational improvements and modest price uplift have not yet translated into stronger sales.

Operating Losses Persist Despite Progress

The company remained in the red, reporting an operating loss of $19.0 million and negative EBITDA of $15.1 million for the quarter. While these figures represent a sequential improvement, management acknowledged that the business still faces a meaningful profitability gap that will depend on both further internal efficiencies and an improved pricing environment.

Volume Weakness and Inventory Build Pressure Cash

Shipments dropped to 83 million board feet from 108 million in the prior quarter, while production reached 90.6 million board feet, creating a mismatch that swelled inventories. This imbalance, combined with softer demand, put pressure on working capital and highlighted the challenge of aligning output with constrained markets without overburdening the balance sheet.

Tariff Burden Remains a Major Headwind

Duties and tariffs more than doubled to $12.1 million from $5.7 million year over year, reflecting a hefty 35% countervailing and anti-dumping rate plus an additional 10% tariff. Even with the prospect of a future rate reduction, management stressed that trade measures remain a significant structural cost headwind, dulling the benefits of operational gains and higher market prices.

Working Capital and Revolver Capacity Tighten

Operating cash flow was hit by losses and interest totaling around $12.7 million, while working capital outflows of approximately $22.5 million reflected seasonal harvesting and inventory build. Revolver availability shrank to $19.6 million from $39.4 million, underscoring that the recent cash increase was driven by financing rather than internally generated cash, and reinforcing the focus on disciplined cash management.

Rising SG&A and One-Time Timing Effects

Selling, general and administrative expenses rose to $4.4 million from $1.5 million in the prior quarter and $3.8 million a year earlier. The increase was tied to the timing of corporate initiatives, compensation changes and the absence of one-time items that had reduced Q4 expenses, adding near-term pressure to an income statement already weighed down by tariffs and losses.

Logistics Issues and Downtime Hit Shipments

Operationally, three mills faced downtime in January as management curtailed production in response to weak markets, directly limiting available volumes for sale. In addition, adverse weather constrained railcar availability, creating logistics bottlenecks that further depressed shipments and delayed deliveries to customers, amplifying the impact of softer demand.

Macro Headwinds Curb Near-Term Demand

Despite better pricing and housing data, the company emphasized that home affordability remains challenged by long-term mortgage rates above 6%. These financing conditions are capping U.S. housing demand, and management expects only modest price gains for the rest of the year, maintaining a cautious stance in light of broader economic and geopolitical risks.

Forward Outlook: Modest Price Gains, Operational Execution

Looking ahead, GreenFirst is planning around only modest lumber price increases in the second half, reflecting lingering macro and interest rate headwinds. The company expects the Chapleau saw line to reach full integration in the second quarter, with completed planer and cogeneration projects and a partially deployed $50 million capital program supporting efficiency, while any future duty relief and tight cash discipline will be critical to stabilizing the balance sheet.

GreenFirst’s latest earnings call offered a story of operational progress intersecting with financial fragility, as better safety, capacity gains and cost improvements were offset by weaker revenue, heavy tariffs and tight liquidity. For investors, the key questions now are whether improving lumber prices and Chapleau benefits can outpace macro headwinds and duties fast enough to move the company toward sustainable profitability.