November 15, 2011 – Montréal, Québec and Vancouver, British Columbia – EACOM Timber Corporation (ETR: TSX-V) (“EACOM”, or the “Company”) is pleased to announce its third quarter results for the three-month period ended September 30, 2011.
On June 30, 2010, EACOM completed the acquisition of the Domtar forest products
business, which transformed the Company from a lumber trading 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 fifteen months or five quarters of operations are indicative
of the Company’s current activities and a comparison of the Company’s financial results for
the nine-month periods ended September 30, 2011 and 2010 respectively may not be
meaningful. However, for the first time with the current quarter ended September 30, 2011,
a comparison of the quarterly financial results against those of the same period last year is
provided. All amounts are expressed in thousands of Canadian dollars unless otherwise specified.
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 September 30, 2011, compared to the
same quarter last year, higher lumber prices, somewhat offset by a stronger Canadian
dollar, translated into an improved EBITDA. The Company recorded for the quarter a
negative EBITDA of $4,004 ($6,088 in the third quarter of 2010). The net loss and
comprehensive loss attributable to shareholders for the quarter amounted to $564 or $0.00
per common share ($9,054 or $0.02 per common share in the third quarter of 2010). This
improvement is primarily attributable to better operating results, a gain of $4,339 on the
sale of the Big River mill and a $2,940 recovery of income taxes as a result of the
acquisition of the remaining one-third interest in the Elk Lake sawmill.
QUARTER ENDED SEPTEMBER 30, 2011 vs. QUARTER ENDED SEPTEMBER 30, 2010
For the quarter ended September 30, 2011, the Company recorded sales of $61,396,
against sales of $71,902 in the same quarter of 2010. The Company’s sales include both
lumber and by-product sales. During the quarter, the Company shipped 135 million board
feet of lumber (151 million board feet in the third quarter of 2010) and 138,000 oven-dried
metric tons of by-products (140,000 oven-dried metric tons in the third quarter of 2010).
This decrease in shipments compared to last year is attributable to weak market conditions
and lower production with three mills taking market-related downtime during the quarter
ended September 30, 2011. Benchmark lumber prices have slightly improved in the third
quarter of 2011 but still reflect a slow housing market, averaging US$318/Mfbm for studs
and US$332/Mfbm for random lengths delivered Great Lakes, compared to US$283/Mfbm
and US$316/Mfbm respectively in the third quarter of 2010. A firmer pricing environment
was somewhat offset by a strengthening Canadian dollar, the exchange rate averaging
1.020 during the third quarter of 2011 compared to 0.962 in the third quarter of 2010. And,
on July 1, 2011, the Canadian government removed the additional 10% export tax following
an announcement that the full amount to be collected had been fully recovered. The mix of
lumber grades sold and prices of by-products have remained similar over these two
Lumber production for the quarter ended September 30, 2011 was 127 million board feet of
lumber, compared to 130 million board feet in the same quarter last year. During the
quarter, the Company operated at 49% of its capacity with two of the eight sawmills
acquired from Domtar idled, Ear Falls in Ontario and Ste-Marie in Quebec (51% during the
same quarter last year with no change to idled mills). Sawmills were subject to longer
market-related downtime during the third quarter of 2011 compared to the same quarter
last year. Unit costs improved slightly compared to those experienced in the year earlier
quarter as a result of those mills taking market-related downtime being the higher cost mills.
At September 30, 2011, the Company had cash and cash equivalents of $5,694 and its
credit facility was undrawn against a borrowing availability of $7,907, compared to cash and
cash equivalents of $13,577 and outstanding borrowings of $3,330 under its revolving credit
facility against a borrowing availability of $12,119 at June 30, 2011. For the third quarter,
cash operating losses of $4,679 were offset by a non-cash working capital recovery of
$3,096, resulting in $1,583 being used in operating activities. The Company’s working
capital requirements vary during the year due to the seasonality of forestry operations.
Those requirements are usually substantial in the first and second calendar quarters
whereas in the third and fourth quarters, the Company benefits from its working capital.
Part of the net proceeds of $32,346 from a private placement of the Company’s common
shares completed in the second quarter were used to acquire the remaining one-third
interest in the Elk Lake sawmill and to repay outstanding borrowings under the revolving
credit facility. And, on September 19, 2011, the Company sold its Big River mill for a cash consideration of $7,500.
On October 8, 2011, the Company experienced a fire at its Gogama mill site with substantial
losses to log and lumber inventories. However, the mill is intact and operations should
resume in the fourth quarter. Losses incurred, including business interruption, are fully
covered under the Company’s insurance policy, less a deductible.
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 woodbased
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
Quebec. The mills in Ear Falls, Ontario, and Ste-Marie, Quebec, are currently idled. EACOM
also owns 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
All statements in this news release that are not based on historical facts are “forwardlooking
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” is a measure 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 flows will be sufficient to fund our cash requirements. In addition, our
definition of EBITDA may differ from that 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.
Executive Vice‐President and Chief Financial Officer
Tel: 514-395‐0375 ext. 259