EACOM Timber Corporation announces its second quarter results

2011-08-23 | News / Press Releases

August 23, 2011 – Montréal, Québec and Vancouver, British Columbia – EACOM Timber Corporation (ETR: TSX-V) (“EACOM”, or the “Company”) is pleased to announce its second quarter results for the three-month period ended June 30, 2011.

On June 30, 2010, EACOM completed the acquisition of the Domtar forest products business which transformed the Company from a lumber trading business to a lumber manufacturing, marketing and distribution business capable of producing approximately 900 million board feet annually. The Company began operating these newly acquired assets on July 1, 2010. As a result, only twelve months or four quarters of operations are indicative of the Company’s ongoing activities. A sequential quarterly comparison of the financial results for the quarters ended June 30, 2011 and March 31, 2011 is provided, such a comparison being consideredmore representative of ongoing operations.

 

OVERVIEW OF FINANCIAL RESULTS

The Company’s operating results are significantly affected by lumber prices and the CDN$/US$ exchange rate. For the quarter ended June 30, 2011, a weaker pricing environment and a stronger Canadian dollar translated into a lower EBITDA compared to the previous quarter. The Company recorded for the quarter a negative EBITDA of $10,026 ($3,238 for the quarter ended March31, 2011). The net loss and comprehensive loss for the quarter amounted to $13,662 or $0.03 per common share ($6,132 or $0.01 per common share for the preceding quarter).

 

QUARTER ENDED JUNE 30, 2011 vs. QUARTER ENDED MARCH 31, 2011

For the quarter ended June 30, 2011, the Company recorded sales of $71,171, against sales of $79,955 for the preceding quarter. During the quarter, the Company shipped 158 million board feet of lumber (170 million board feet in the earlier quarter) and 140,000 oven-dried metric tons of by-products (161,000 oven-dried metric tons in the preceding quarter). This decrease in shipments quarter over quarter is attributable to a lower production with three mills taking market-related downtime due to weak market conditions. The pricing environment deteriorated with benchmark lumber prices averaging US$314/Mfbm for studs and US$336/Mfbm for random lengths delivered Great Lakes, compared to US$327/Mfbm and US$383/Mfbm respectively for the quarter ended March 31, 2011. The impact of a weaker pricing environment was compounded by a stronger Canadian dollar, the exchange rate averaging 1.033 during the second quarter of 2011 compared to 1.015 during the preceding quarter. The mix of lumber grades and dimensions sold during the second quarter
remained similar to that of the preceding quarter. Prices of by-products have remained constant over the past two quarters.

Lumber production for the quarter ended June 30, 2011 was 119 million board feet of lumber compared to 166 million board feet in the preceding quarter. During the quarter, the Company operated at 47% of its capacity with two of the eight sawmills acquired from Domtar idled (65% during the earlier quarter with no change to idled mills). Sawmills were subject to longer market-related downtime during the second quarter as market conditions deteriorated. Unit costs were consistent with those experienced in the earlier quarter. SG&A expenses were higher in the second quarter of 2011 as compared to the previous quarter due to some non-recurring costs.

 

FINANCIAL POSITION

At June 30, 2011, the Company had cash and cash equivalents of $13,577 ($1,257 at March 31, 2011), and outstanding borrowings under its revolving credit facility amounted to $3,330 against a borrowing availability of $12,119 ($20,500 and $20,535 respectively at March 31, 2011). During the three-month period ended June 30, 2011, the Company used $4,608 in operating activities as a result of cash operating losses of $10,382, offset by a non-cash working capital recovery of $5,774. The Company’s working capital requirements vary during the year due to the seasonality of forestry operations, and those requirements are usually reaching their peak at the end of the first calendar quarter. On April 20, 2011, the Company closed a private placement of 69,122,500 common shares sold at $0.50 per share for net proceeds of $32,346. The net proceeds of this financing have been used to reduce outstanding borrowings under the revolving credit facility and, post-quarter end, to fund the acquisition of the remaining one-third interest in the Elk Lake sawmill.

 

SUBSEQUENT EVENTS

Effective July 30, 2011, EACOM acquired from Liskeard Lumber Limited the remaining one-third interest in the Elk Lake sawmill for a total consideration of $15 million, comprised of a cash component of $10 million and a secured promissory note of $5 million due November 30, 2011. The Company previously owned two-thirds of the mill.

 

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 seven 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 and Matagami in Quebec. The sawmills in Ear Falls, Ontario, and Ste-Marie, Quebec, are currently idled. EACOM also owns an idled mill in Big River, Saskatchewan, a remanufacturing facility in Val-d’Or, Quebec, and a 50% interest in an “I” joist plant in Sault Ste-Marie, Ontario. The TSX Venture Exchange has neither approved nor disapproved the content of this press release. All director and officer appointments are subject to TSX Venture Exchange approval.

 

Forward-Looking Statements

All statements in this news release that are not based on historical facts are “forward-looking statements”. While management has based any forward-looking statements contained herein on its current expectations, the information on which such expectations were based may change. These forward-looking statements rely on a number of
assumptions concerning future events and are subject to a number of risks, uncertainties and other factors, many of which are beyond our control and could cause actual results to materially differ from such statements. Such risks, uncertainties and other factors include, but are not necessarily limited to, those set forth under “Risk Factors” in the Company’s Filing Statement dated January 8, 2010 and “Risks and Uncertainties” in the Company’s current MD&A filed with the Canadian Securities Commissions.

The financial information included in this release also contains certain data that are not measures of performance under IFRS. For example, “EBITDA” and “EBITDA excluding specific items” are measures used by management to assess the operating and financial performance of the Company. We believe that EBITDA is a measure often used by investors to assess a company’s operating performance. EBITDA has limitations and you should not consider this item in isolation, or as a substitute for an analysis of our results as reported under IFRS. Because of these limitations, EBITDA should not be used as a substitute for net loss or cash flows from operating activities as determined in accordance with IFRS, nor is it necessarily indicative of whether or not cash flow will be sufficient to fund our cash requirements. In addition, our definitions of EBITDA may differ from those of other companies. A reconciliation of EBITDA to net loss is set forth under “OVERVIEW OF FINANCIAL RESULTS – Supplemental Information on Non-GAAP Measures” in the Company’s current MD&A.

Additional information relating to EACOM is available on SEDAR at www.sedar.com.

 

INVESTORS :

Marc Girard
Executive Vice‐President and Chief Financial Officer

Tel: 514-848‐5133

 

MEDIA RELATIONS:

Frédéric Bérard
H+K Stratégies

Tel: 514-395‐0375 ext. 259


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