| Investors, analysts and other interested parties may access Acadian Timber Corp.'s 2024 Third Quarter Results conference call and webcast on Thursday, October 31, 2024 at 1:00PM ET. Please register here or follow the link on our website at www.acadiantimber.com/presentations_and_webcasts, to receive your unique PIN. For those unable to participate, a recorded rebroadcast will be available until 4:00PM ET October 30, 2025. |
"We maintained steady harvest volumes during the third quarter, supported by sufficient contractor capacity and favourable operating conditions. However, pricing pressure caused by weak end user markets continued, affecting our total sales,” said Adam Sheparski, President and Chief Executive Officer. "We have advanced our real estate initiatives in the second half of the year and we are excited about the opportunities ahead.”
Acadian generated sales of $26.0 million in the third quarter, compared to $26.6 million in the prior year period. Increased sales volumes from our freehold land ("freehold sales”) were offset by a lower weighted average selling price and lower timber services activity. Adjusted EBITDA for the quarter was $4.0 million, compared to $4.9 million in the same period of 2023. Acadian generated $2.5 million of Free Cash Flow during the quarter, compared to $4.3 million in the third quarter of 2023, and declared dividends of $5.1 million or $0.29 per share to our shareholders.
Acadian is committed to health and safety as our number one priority. We believe that emphasizing and achieving a good safety record is a leading indicator of success in the broader business. Acadian's operations experienced one recordable safety incident among contractors during the quarter and none among employees. Safety performance and incident reduction will be a primary focus for the remainder of 2024 and beyond.
Real Estate Activities
We are advancing our efforts to maximize cash flows from our timberland assets through real estate activities. During the third quarter, Acadian purchased a meteorological tower to collect wind data on our New Brunswick land base. This investment enables further exploration of the opportunities available to Acadian to participate in the renewable energy sector.
On October 24, 2024, subsequent to the third quarter, Acadian entered into an agreement to sell approximately 2,100 acres of timberland. The land included in the disposition is composed of smaller parcels of relatively low operational or strategic value to Acadian. The transaction is expected to close in the fourth quarter and to result in gross proceeds of $1.4 million and a gain on sale of $0.4 million.
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| 1 | This news release makes reference is made to "Adjusted EBITDA”, which Acadian's management defines as net income before interest, income taxes, fair value adjustments, non-cash cost of sales related to carbon credits, recovery of or impairment of land and roads and depreciation and amortization, and to "Adjusted EBITDA margin”, which is Adjusted EBITDA as a percentage of sales. Reference is also made to "Free Cash Flow”, which Acadian's management defines as Adjusted EBITDA less interest paid, current income tax expense, and capital expenditures excluding acquisitions of timberlands, plus net proceeds from the sale of timberlands and other fixed assets (proceeds less gains or losses). Reference made to "Payout Ratio” is defined as dividends declared divided by Free Cash Flow and "Payout Ratio with DRIP” is defined as dividends paid in cash divided by Free Cash Flow. Management believes that Adjusted EBITDA, Adjusted EBITDA margin, Free Cash Flow, and Payout Ratios are key performance measures in evaluating Acadian's operations and are important in enhancing investors' understanding of the Company's operating performance. Adjusted EBITDA and Adjusted EBITDA margin are indicative of the underlying profitability of Acadian's operating segments and are used to evaluate operational performance. Free Cash Flow is used to evaluate Acadian's ability to generate sustainable cash flows from our operations while Payout Ratios are used to evaluate Acadian's ability to fund its distribution using Free Cash Flow. Please refer to the section entitled "Non-IFRS Measures” in Management's Discussion and Analysis for further details. |
Financial and Operating Highlights
| (CAD thousands, | Three Months Ended | Nine Months Ended | ||||||||||
| except volume and per share information) | September
28, 2024 | September 30, 2023 | September 28, 2024 | September
30, 2023 | ||||||||
| Timber sales volume (000s m3) | 287.4 | 272.9 | 744.9 | 662.3 | ||||||||
| Carbon credit sales volume (000s credits) | - | - | 752.1 | - | ||||||||
| Timber sales and services | $ | 25,959 | $ | 26,593 | $ | 71,371 | $ | 69,662 | ||||
| Carbon credit sales | - | - | 24,588 | - | ||||||||
| Operating income | 3,899 | 4,733 | 20,444 | 15,254 | ||||||||
| Net income | 2,215 | 6,408 | 16,153 | 17,841 | ||||||||
| Adjusted EBITDA | $ | 4,039 | $ | 4,916 | $ | 35,194 | $ | 16,168 | ||||
| Adjusted EBITDA margin | 16 | % | 18 | % | 37 | % | 23 | % | ||||
| Free Cash Flow | $ | 2,540 | $ | 4,312 | $ | 26,680 | $ | 12,188 | ||||
| Dividends declared | 5,080 | 4,961 | 15,128 | 14,819 | ||||||||
| Dividends paid in cash | 2,588 | 3,721 | 8,900 | 11,166 | ||||||||
| Payout Ratio | 200 | % | 115 | % | 57 | % | 122 | % | ||||
| Payout Ratio with DRIP | 102 | % | 86 | % | 33 | % | 92 | % | ||||
| Per share - basic and diluted | ||||||||||||
| Net income | $ | 0.13 | $ | 0.37 | $ | 0.93 | $ | 1.05 | ||||
| Free Cash Flow | 0.15 | 0.25 | 1.53 | 0.71 | ||||||||
| Dividends declared | 0.29 | 0.29 | 0.87 | 0.87 | ||||||||
During the third quarter, Acadian generated sales of $26.0 million, compared to $26.6 million in the prior year period with increased freehold sales volumes offset by a lower weighted average selling price and lower timber services activity. Freehold sales volume, excluding biomass, increased 15% compared to the prior year period primarily due to a favourable change in customer mix which shifted harvesting volumes from Crown licensed timberlands to our freehold timberlands. The shift decreased our timber services revenue and increased our freehold sales.
Weighted average selling price, excluding biomass, decreased 5% year-over-year. Softwood sawlog pricing decreased due to changes in product mix and weakness in end use markets. Hardwood sawlog pricing decreased primarily due to weakness in lumber markets. Softwood pulpwood pricing remained relatively flat on an overall basis and hardwood pulpwood pricing decreased as a result of shorter hauling distances. Biomass pricing decreased 54% as a result of roadside sales instead of delivered sales.
Operating costs and expenses were $22.1 million during the third quarter, compared to $21.9 million during the prior year period. The year-over-year increase reflects higher timber sales volumes and increased weighted average variable costs partially offset by lower timber services activity. Weighted average variable harvesting costs, excluding biomass, increased 5% as a result of greater hauling distances for softwood sawlogs and higher contractor rates overall.
Adjusted EBITDA was $4.0 million during the third quarter compared to $4.9 million in the prior year period. Adjusted EBITDA margin for the quarter was 16% compared to 18% in the prior year period. Free Cash Flow was $2.5 million as compared to $4.3 million for the same period in the prior year.
Net income for the third quarter totaled $2.2 million, or $0.13 per share, compared to $6.4 million, or $0.37 per share in the same period of 2023, primarily due to lower non-cash fair value adjustments. Operating income and gain on sale of timberlands and other fixed assets were also lower than the prior year period and were partially offset by lower income tax expense.
During the first nine months of 2024, Acadian generated sales of $96.0 million as compared to $69.7 million in the prior year period. The sale of 752,100 voluntary carbon credits contributed $24.6 million to total sales. Timber sales volume, excluding biomass, was 22% higher than the same period of 2023 but was partially offset by a 5% decrease in the weighted average selling price, excluding biomass, as well as lower timber services activity. Operating costs and expenses of $75.5 million were $21.1 million higher year-over-year due to the addition of costs related to carbon credit sales as well as increased timber sales volumes and higher weighted average variable harvesting costs, partially offset by lower timber services activity. Weighted average variable harvesting costs increased 3% compared to the same period in the prior year as a result of greater softwood sawlog hauling distances and higher contractor rates partially offset by changes in product mix. Adjusted EBITDA of $35.2 million was $19.0 million higher compared to the prior year period.
For the nine months ended September 28, 2024, net income was $16.2 million, or $0.93 per share, compared to $17.8 million, or $1.05 per share, in the prior year period, primarily the result of higher operating income offset by lower non-cash fair value adjustments, lower gains on sale of timberlands and other fixed assets, as well as higher income tax expense.
Segment Performance
New Brunswick Timberlands
The table below summarizes operating and financial results for New Brunswick Timberlands for the third quarter:
| Three Months Ended | Nine Months Ended | ||||||||||||
| September 28, 2024 | September 30, 2023 | September 28, 2024 | September 30, 2023 | ||||||||||
| Sales (000s m3) | |||||||||||||
| Softwood | 152.9 | 129.9 | 354.4 | 275.2 | |||||||||
| Hardwood | 71.8 | 63.5 | 207.7 | 187.9 | |||||||||
| Biomass | 18.4 | 41.6 | 32.3 | 74.5 | |||||||||
| Total | 243.1 | 235.0 | 594.4 | 537.6 | |||||||||
| Sales ($000s) | |||||||||||||
| Softwood | $ | 10,694 | $ | 9,701 | $ | 25,928 | $ | 20,185 | |||||
| Hardwood | 5,800 | 5,333 | 18,503 | 18,093 | |||||||||
| Biomass | 238 | 1,336 | 946 | 2,966 | |||||||||
| Total | $ | 16,732 | $ | 16,370 | $ | 45,377 | $ | 41,244 | |||||
| Timber services and other | 5,073 | 6,466 | 11,715 | ()[\]\\.,;:\s@\"]+)*)|(\".+\"))@((\[[0-9]{1,3}\.[0-9]{1,3}\.[0-9]{1,3}\.[0-9]{1,3}\])|(([a-zA-Z\-0-9]+\.)+[a-zA-Z]{2,}))$/;return b.test(a)}$(document).ready(function(){if(performance.navigation.type==2){location.reload(true)}$("iframe[data-lazy-src]").each(function(b){$(this).attr("src",$(this).attr("data-lazy-src"))});if($(".owl-article-body-images").length){$(".owl-article-body-images").owlCarousel({items:1,loop:true,center:false,dots:false,autoPlay:true,mouseDrag:false,touchDrag:false,pullDrag:false,nav:true})}var a=$("#display_full_text").val();if(a==0){$.ajax({url:"/ajax/set-article-cookie",type:"POST",data:{cmsArticleId:$("#cms_article_id").val()},dataType:"json",success:function(b){},error:function(b,d,c){}})}$(".read-full-article").on("click",function(d){d.preventDefault();var b=$(this).attr("data-cmsArticleId");var c=$(this).attr("data-productId");var f=$(this).attr("data-href");dataLayer.push({event:"paywall_click",paywall_name:"the_manila_times_premium",paywall_id:"paywall_article_"+b});$.ajax({url:"/ajax/set-article-cookie",type:"POST",data:{cmsArticleId:b,productId:c},dataType:"json",success:function(e){window.location.href=$("#BASE_URL").val()+f},error:function(e,h,g){}})});$(".article-embedded-newsletter-form .close-btn").on("click",function(){$(".article-embedded-newsletter-form").fadeOut(1000)})});$(document).on("click",".article-embedded-newsletter-form .newsletter-button",function(){var b=$(".article-embedded-newsletter-form .newsletter_email").val();var d=$("#ga_user_id").val();var c=$("#ga_user_yob").val();var a=$("#ga_user_gender").val();var e=$("#ga_user_country").val();if(validateEmail(b)){$.ajax({url:"/ajax/sendynewsletter",type:"POST",data:{email:b},success:function(f){$(".article-embedded-newsletter-form .nf-message").html(f);$(".article-embedded-newsletter-form .nf-message").addClass("show");setTimeout(function(){$(".article-embedded-newsletter-form .nf-message").removeClass("show");$(".article-embedded-newsletter-form .nf-message").html("")},6000);dataLayer.push({event:"newsletter_sub",user_id:d,product_name:"newsletter",gender:a,yob:c,country:e})},error:function(f,h,g){}})}else{$(".article-embedded-newsletter-form .nf-message").html("Please enter a valid email address.");$(".article-embedded-newsletter-form .nf-message").addClass("show");setTimeout(function(){$(".article-embedded-newsletter-form .nf-message").removeClass("show");$(".article-embedded-newsletter-form .nf-message").html("")},6000)}});$(document).on("click",".article-embedded-newsletter-form .nf-message",function(){$(this).removeClass("show");$(this).html("")});
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