EACOM Timber Corporation (TSX VENTURE:ETR)("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 quarters.
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.
FINANCIAL POSITION
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.
SUBSEQUENT EVENT
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.
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 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.
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" 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.
SELECTED QUARTERLY INFORMATION
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The following table provides an overview of the Company's financial results
for the quarters ended September 30, 2011 and 2010, and for the nine-month
period ended September 30, 2011, along with some key operating metrics.
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(in thousands of dollars, Quarter ended Quarter ended Nine-month period
except where otherwise September 30, September 30, ended September
noted) 2011 2010 30, 2011
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Sales 61,396 71,902 212,522
EBITDA (4,004) (6,088) (17,359)
Net loss and comprehensive
loss (564) (9,054) (20,357)
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Average lumber price in US$ -
RL 2x4 #1&2 (1) 332 316 350
Average lumber price in US$ -
Stud 2x4x8 (1) 318 283 320
Average exchange rate 1.020 0.962 1.023
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Production - SPF lumber
(MMfbm) 127 130 412
Shipments - SPF lumber
(MMfbm) 114 128 394
Shipments - wholesale lumber
(MMfbm) 21 23 69
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U.S. housing starts
(thousands of units) 615 584 591
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(1) Eastern spruce/pine/fir, per thousand board feet delivered Great Lakes
(Source: Random Lengths Publications, Inc.)
The following table reconciles, for the quarters ended September 30, 2011
and 2010, and for the nine-month period ended September 30, 2011, the
Company's net loss and comprehensive loss attributable to shareholders as
reported in accordance with IFRS to EBITDA.
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Quarter ended Quarter ended Nine-month period
September 30, September 30, ended September
(in thousands of dollars) 2011 2010 30, 2011
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Net loss and comprehensive
loss, as reported (564) (9,054) (20,357)
Add (subtract):
Depreciation 3,435 2,890 10,057
Interest expense 397 76 1,134
Gain on sale of property,
plant and equipment (4,332) - (4,423)
Income tax recovery (2,940) - (3,770)
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EBITDA (4,004) (6,088) (17,359)
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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.
Contacts: Investors: Marc Girard Executive Vice-President and
Chief Financial Officer (514) 848-5133 Media Relations: Frederic
Berard HKDP (514) 917-1040
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