INTERFOR CORPORATION ('Interfor' or the 'Company') (TSX: IFP) recorded Net earnings in Q3'22 of $3.5 million, or $0.06 per share, compared to $269.9 million, or $4.92 per share in Q2'22 and $65.6 million, or $1.05 per share in Q3'21. Adjusted net earnings in Q3'22 were $31.5 million compared to $280.2 million in Q2'22 and $46.7 million in Q3'21. Adjusted EBITDA was $129.5 million on sales of $1.0 billion in Q3'22 versus $428.6 million on sales of $1.4 billion in Q2'22.
Notable items in the quarter:
Lumber Production Balanced with Demand
Lumber production totaled 986 million board feet, representing a decrease of 30 million board feet quarter-over-quarter. The U.S. South and U.S. Northwest regions accounted for 470 million board feet and 159 million board feet, respectively, compared to 467 million board feet and 163 million board feet in Q2'22. The Eastern Canada Operations produced 198 million board feet versus 211 million board feet in Q2'22. Production in the B.C. region decreased to 159 million board feet from 174 million board feet in Q2'22, in part due to the sale of the Acorn sawmill during Q2'22.
Lumber shipments were 1.1 billion board feet, or 18 million board feet lower than Q2'22, leading to a reduction of lumber inventories by 36 million board feet during the quarter.
Lumber inventories ended the quarter within our target range.
Moderating Lumber Demand
Lumber demand moderated during the quarter due in part to rising interest rates across North
America, contributing to significantly lower lumber prices quarter-over-quarter. Interfor's average selling price was $800 per mfbm, down $304 per mfbm versus Q2'22. The SYP Composite, Western SPF Composite, KD H-F Stud 2x4 9' and ESPF Composite price benchmarks decreased quarter-over-quarter by US$127, US$287, US$264 and US$281 per mfbm to US$555, US$550, US$627 and US$657 per mfbm, respectively.
Financial Flexibility Maintained
Net debt ended the quarter at $249.7 million, or 10.5% of invested capital, resulting in ample available liquidity of $601.4 million.
DeQuincy, LA Sawmill at Full Production
The DeQuincy, LA sawmill, with an annual two-shift capacity of 200 million board feet, reached its full production run-rate in Q3 2022.
Strategic Capital Investments
Capital spending was $86.1 million, including $50.8 million on discretionary projects. The majority of this discretionary spending was focused on the multi-year rebuilds of the Eatonton, GA and Thomaston, GA sawmills, a new planer at the Castlegar, B.C. sawmill and upgrades to the Perry, GA sawmill.
The comprehensive rebuild of the Eatonton, GA sawmill was successfully completed during the quarter and it is currently ramping up as expected towards the designed production capacity of 230 million board feet per year.
Substantial Issuer Bid ('SIB')
On July 26, 2022, Interfor announced a SIB pursuant to which the Company offered to purchase up to $100.0 million in value of its outstanding common shares for cancellation from holders of common shares for cash. The SIB proceeded by way of a 'modified Dutch auction' procedure with a tender price range from $29.00 to $34.00 per common share.
On September 12, 2022, the Company purchased for cancellation 3,355,704 common shares for total consideration of $100.0 million at a price of $29.80 per share or 0.72 times book value per share at September 30, 2022.
Softwood Lumber Duties Rate Adjustment
In Q3'22, the U.S. Department of Commerce ('DoC') published the final rates for countervailing ('CV') and anti-dumping ('AD') duties based on the results of its third administrative review ('AR3') covering shipments for the year ended December 31, 2020. The final combined rate for 2020 was 8.59%, compared to the cash deposit rate of 20.23% from January to November 2020 and 8.99% for December 2020. To reflect the lower amended final rates for 2020, Interfor recorded a $26.1 million reduction to duties expense in Q3'22 and a corresponding receivable on its balance sheet.
Interfor has cumulative duties of US$418.9 million held in trust by U.S. Customs and Border
Protection as at September 30, 2022. Except for US$124.2 million recorded as a receivable in respect of overpayments arising from duty rate adjustments and the fair value of rights to duties acquired, Interfor has recorded the duty deposits as an expense.
Acquisition of Chaleur Forest Product
On October 3, 2022, the Company announced it had reached an agreement with an affiliate of the Kilmer Group to acquire 100% of the equity interests in the entities comprising Chaleur Forest Products ('Chaleur') for a purchase price of $325.0 million, which includes $31.0 million of net working capital. In addition, Interfor will assume Chaleur's CV and AD duty deposits at closing, for consideration equal to 55% of the total deposits on an after-tax basis. The acquisition includes two sawmill operations located in Belledune and Bathurst, New Brunswick with a combined annual lumber production capacity of 350 million board feet, and a woodlands management division based in Miramichi, New Brunswick that manages approximately 30% of the total Crown forest in New Brunswick. The transaction remains subject to customary conditions and regulatory approvals for a transaction of this kind and is currently expected to close in the fourth quarter of 2022.
Renewal of NCIB
The Toronto Stock Exchange ('TSX') has approved the renewal by the Company of its NCIB. The NCIB will allow for the purchase during the twelve-month period commencing on November 11, 2022 and ending on November 10, 2023 of up to 5,105,002 common shares, which represents 10% of the Company's public float as at October 28, 2022. Under the prior NCIB that expires on November 10, 2022, the Company was authorized to purchase and purchased 6,041,701 common shares at a volume weighted average price of $37.60 per common share. Under TSX rules, Interfor will be allowed to purchase daily a maximum of 73,486 common shares, representing 25% of the average daily trading volume of the Company's common shares over the sixmonth period ending October 31, 2022, subject to certain exemptions for block purchases. As of October 28, 2022, the Company had 51,434,895 common shares issued and outstanding. All purchases will be made through open market transactions through the facilities of the TSX or other Canadian alternative trading systems and will conform to their rules and regulations. The price to be paid by Interfor for any common shares will be the market price at the time of acquisition. All common shares purchased pursuant to the NCIB will be cancelled. Interfor has also entered into an automatic securities purchase plan agreement with a securities broker under which the broker will act as the Company's agent to acquire Interfor common shares under the NCIB during the Company's scheduled blackout periods in the course of the NCIB. Purchases by the broker under the NCIB during these periods will be made at the broker's discretion, subject to certain parameters established by Interfor prior to each period with respect to price and number of common shares. The Company continues to believe that, from time to time, the market price of its common shares may be attractive and their purchase would represent a prudent use of its capital to increase shareholder value.
FORWARD-LOOKING STATEMENTS
This release contains forward-looking information about the Company's business outlook, objectives, plans, strategic priorities and other information that is not historical fact. A statement contains forward-looking information when the Company uses what it knows and expects today, to make a statement about the future. Statements containing forward-looking information may include words such as: will, could, should, believe, expect, anticipate, intend, forecast, projection, target, outlook, opportunity, risk or strategy. Readers are cautioned that actual results may vary from the forwardlooking information in this release, and undue reliance should not be placed on such forward-looking information. Risk factors that could cause actual results to differ materially from the forward-looking information in this release are described in Interfor's third quarter and annual Management's Discussion and Analysis under the heading 'Risks and Uncertainties', which are available on www.interfor.com and under Interfor's profile on www.sedar.com. Material factors and assumptions used to develop the forward-looking information in this release include volatility in the selling prices for lumber, logs and wood chips; the Company's ability to compete on a global basis; the availability and cost of log supply; natural or man-made disasters; currency exchange rates; changes in government regulations; Indigenous reconciliation; the Company's ability to export its products; the softwood lumber trade dispute between Canada and the U.S.; environmental impacts of the Company's operations; labour disruptions; information systems security; and the existence of a public health crisis. Unless otherwise indicated, the forward-looking statements in this release are based on the Company's expectations at the date of this release. Interfor undertakes no obligation to update such forward-looking information or statements, except as required by law.
ABOUT INTERFOR
Interfor is a growth-oriented forest products company with operations in Canada and the United States. The Company has annual lumber production capacity of approximately 4.8 billion board feet and offers a diverse line of lumber products to customers around the world. For more information about Interfor, visit our website at www.interfor.com.
There will be a conference call on Friday, November 4, 2022 at 8:00 a.m. (Pacific Time) hosted by INTERFOR CORPORATION for the purpose of reviewing the Company's release of its third quarter 2022 financial results.
The dial-in number is 1-888-396-8049. The conference call will also be recorded for those unable to join in for the live discussion and will be available until December 4, 2022. The number to call is
Contact:
Richard Pozzebon
Executive Vice President and Chief Financial Officer
T: (604) 422-3400
INTERFOR CORPORATION 
