Earnings up, debt down for Interfor

B.C. forestry company posted record earnings in 2016
Interfor's Acorn mill in Delta is one five mills it owns in B.C.

Interfor Corp. (TSX:IFP) posted record earnings in 2016 and expects 2017 to be another good year, thanks to strong demand for lumber in the U.S.

In its fourth quarter financial statements, Interfor – B.C.’s third largest forestry company by market cap – said its earnings before interest, tax, depreciation and amortization (EBITDA) in 2016 was $200 million.

"Adjusted EBITDA was a record $199.6 million, eclipsing the previous record set in 2014," the company said in a press release.

Its net earnings in the fourth quarter were $26.6 million, compared with $15.1 million in Q3 2016, and a net loss of $3.5 million in Q4 2015.

Thanks to stronger revenue and U$20 million netted from the sale a mill in Tacoma, Washington, Interfor added $57.4 million to its debt reduction in 2016.

Canadian forestry companies are benefitting from a low Canadian dollar and a strengthening American housing market, which makes them highly competitive with American mills.

That is likely to be an additional sore point for American lumber producers, who have already succeeded in convincing the U.S. International Trade Commission to launch an investigation into charges of unfair subsidization, which are expected to result in countervailing and anti-dumping duties.

The Canadian-U.S. Softwood Lumber Agreement expired last year, and Canadian and American governments have not managed to negotiate a new agreement, which means Canadian forestry companies are vulnerable to duties placed on lumber exports to the U.S.

To date, four Canadian companies are being investigated for dumping, but Interfor appears not to be among them.

According to the Council of Forest Industries (COFI), the four companies being initially targeted are B.C.’s Canfor Corp. (TSX:CFP), West Fraser Timber Co. (TSX:WFT) and Tolko Industries Ltd., and Resolute Forest Products (TSX:RFP) in Quebec.

Like Canfor and West Fraser, Interfor has been acquiring sawmills in the U.S., which gives those companies something of a hedge against softwood lumber duties, since their products in American would not be subject to those duties.

Interfor actually owns more mills in the U.S. than it does in Canada. Interfor owns 17 sawmills – five in B.C. and 12 in the U.S.

nbennett@biv.com

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