EACOM Timber Corporation announces its third quarter

2012-11-13 | News / Press Releases

November 13, 2012 – 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, 2012 and the
commencement of the reconstruction of its Timmins mill.

HIGHLIGHTS

  • EACOM recorded a positive adjusted EBITDA of $1.5 million for the third quarter
  • EACOM generated positive cash flows from operations of $2.8 million during the quarter
  • Substantial progress with the upgrades underway at Nairn Centre and Elk Lake
  • Preparation for commencement of the reconstruction of the Timmins mill

The third quarter saw a continuation of the significant improvement in housing activity
which had a positive impact on lumber consumption, contributing to a stronger pricing
environment and higher mill realizations for the Company. This improvement was somewhat
offset by start-up costs at two of its mills which had been temporarily shut down since the
second half of 2011, Val-d’Or and Matagami, and by downtime costs related to upgrades
underway at Nairn Centre and Elk Lake. As a result, the Company recorded a positive
adjusted EBITDA of $1,482,000 for the third quarter ended September 30, 2012, down from
$2,792,000 in the previous quarter but up against a negative adjusted EBITDA of
$4,367,000 in the corresponding quarter of 2011.

During the third quarter, the Company made significant progress in its capital improvements
targeted at increasing the production capacity at two of its mills, Nairn Centre and Elk Lake.
Improvements at Nairn Centre are now completed. Construction at Elk Lake is expected to
be completed shortly following a six-week shutdown of the mill. These upgrades are
expected to partially offset the capacity lost at Timmins and mitigate some of the damages
incurred as a result of the fire. A significant portion of these investments will be reimbursed
under the business interruption insurance claim.

The Company has also commenced preliminary preparation for the reconstruction of the
Timmins mill which was destroyed by fire earlier this year. A substantial portion of the total
cost of the project is being funded from proceeds of insurance related to the fire. To date,
the Company has received $23,700,000 of insurance proceeds, of which $10,000,000 for
damage or destruction of assets and $13,700,000 related to business interruption.

‘We are progressing well with our capital expenditure program at Nairn Centre and Elk Lake.
We also moved forward with the commencement of the rebuilding process at Timmins. The
Company intends to continue its focused capital investments with a view to increase
capacity and recovery, and reduce manufacturing costs. This should contribute to improve
our competitiveness in the global forestry sector. It should also provide a more stable and
sustainable employment environment for our employees in the communities where we
operate’, stated Rick Doman, President and CEO.

 

QUARTER ENDED SEPTEMBER 30, 2012 vs. QUARTERS ENDED JUNE 30, 2012 AND SEPTEMBER 30, 2011

For the quarter ended September 30, 2012, the net loss attributable to shareholders
amounted to $964,000 or $0.00 per common share, against a net loss of $709,000 or $0.00
per common share in the previous quarter and a net loss of $564,000 or $0.00 per common
share in the corresponding quarter of 2011. During the corresponding quarter of 2011, the
Company recorded a gain of $4,339,000 on the sale of the idled mill located in Big River,
Saskatchewan and a $2,940,000 recovery of income taxes as a result of the acquisition of
the remaining one-third interest in the Elk Lake mill.

During the third quarter, the Company recorded sales of $63,380,000, down 3% against
sales of $65,256,000 in the previous quarter but up 3% against sales of $61,396,000 in the
corresponding quarter of 2011. The Company’s sales include both lumber and by-product
sales. During the quarter, the Company shipped 125 million board feet of lumber (133
million board feet in the previous quarter and 135 million board feet in the corresponding
quarter of 2011) and 127,000 oven-dried metric tons of by-products (119,000 oven-dried
metric tons in the previous quarter and 138,000 oven-dried metric tons in the
corresponding quarter of 2011).

Pricing has improved again in the third quarter of 2012 with benchmark lumber prices
averaging US$394/Mfbm for studs and US$404/Mfbm for random lengths delivered Great
Lakes, up 2% and 3% from US$388/Mfbm and US$393/Mfbm respectively in the second
quarter of 2012. Mill realizations were impacted by a slightly stronger Canadian dollar with
the exchange rate relative to the US$ averaging 1.005 in the third quarter of 2012, up 2%
against an average of 0.990 in the previous quarter. Compared to the corresponding quarter
of 2011, studs and random lengths are trading at prices 24% and 22% above the levels
achieved last year, and the Canadian dollar is down 1% relative to the US$.

Substantially all of the Company’s sales were to North American customers. Sales to U.S.
customers are subject to export taxes and volume quotas under Option B of the Softwood
Lumber Agreement. Effective July 1, 2012, the export tax rate for sales to U.S. customers
decreased from 3% to 2.5%, increasing back to 3% for the months of August and
September. Overall, compared to the corresponding quarter of 2011, export taxes paid by
EACOM decreased from $1,095,000 to $388,000 as a result of lower shipments and a
decrease in the export tax rate for sales to U.S. customers.

Lumber production for the quarter ended September 30, 2012 was 112 million board feet of
lumber, against 109 million board feet in the previous quarter and 126 million board feet in
the corresponding quarter of 2011. During the third quarter, the Company operated at 45%
of its capacity (40% during the previous quarter and 51% in the corresponding quarter of
2011). Mills in Val-d’Or and Matagami resumed their operations during the third quarter –
these mills had been temporarily shut down since the second half of 2011 due to weak
market conditions. Compared to the corresponding quarter of 2011, the capacity lost at
Timmins where operations have been interrupted since January 22, 2012 as a result of the
fire at the mill site has been partially mitigated by higher production levels at two other
sites, and by the additional production at Elk Lake following the acquisition of the remaining
one-third interest in that mill in the third quarter of 2011.

Unit costs increased compared to those experienced in the second quarter of 2012 and in
the corresponding quarter of 2011 as a result of the higher cost mills resuming their
operations and downtime costs related to upgrades underway at Nairn Centre and Elk Lake.

 

FINANCIAL POSITION

At September 30, 2012, the Company had cash and cash equivalents of $31,807,000 and
restricted cash of $10,000,000 ($37,711,000 and $10,000,000 respectively at June 30,
2012). Its credit facility was undrawn against a borrowing availability of $8,432,000
(outstanding advances of nil and a borrowing availability of $7,900,000 at June 30, 2012).

During the third quarter, the Company generated positive cash flows from operations of
$2,755,000 (prior to net changes in non-cash working capital), down from $3,211,000 in
the previous quarter.

Substantially all of the $6,356,000 in capital spending during the quarter was targeted at
improving the production capacity at two of the Company’s mills which, once completed, will
partially offset the lost capacity at Timmins and mitigate some of the damages incurred as a
result of the fire. A significant portion of these investments will be reimbursed under the
business interruption insurance claim.

 

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 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.
Operations in Val-d’Or and Matagami which had been temporarily shut down due to weak
market conditions resumed during the third quarter. The mill in Timmins was substantially
damaged by fire in January 2012 and remains shut down. EACOM also owns a lumber
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 “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 “RISKS AND UNCERTAINTIES” in
the Company’s current MD&A, and under “RISK FACTORS” in the Company’s Filing
Statement dated January 8, 2010.

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

Additional information relating to EACOM is available at www.eacom.ca and 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


BACK TO POSTS »