2Q out after bell any good? Ainsworth loses $11.5-million in Q2
2012-08-02 18:25 ET - News Release
Mr. Rob Feustel reports
AINSWORTH ANNOUNCES 2012 SECOND QUARTER RESULTS
Ainsworth Lumber Co. Ltd. has released its financial results for the second quarter ended June 30, 2012.
Second quarter highlights:
- Achieved positive adjusted earnings before interest, taxes, depreciation and amortization of $17.1-million -- $7.1-million higher than the prior quarter and $14.4-million higher than the second quarter of 2011;
- Maintained liquidity balances from the beginning of the year despite the seasonal working capital demands of the log inventory build and the company's semi-annual interest payment on the senior notes;
- Achieved a significant safety milestone -- Barwick and Grande Prairie mills have operated accident-free for one full year.
Ainsworth performance improves in second quarter
Ainsworth president and chief operating officer, Jim Lake, said: "I am pleased to report that Ainsworth recorded positive financial results and achieved another safety milestone in the second quarter of 2012. The company recorded positive EBITDA of $17.1-million, which was $7.1-million higher than the prior quarter and $14.4-million higher than the same quarter last year. Our EBITDA improvement reflects a stronger pricing environment and better operating results. In addition, for the first time in Ainsworth's history, our Grande Prairie, Alta., mill and our Barwick, Ont., mill have both operated accident-free for one year and counting."
Financial results
Sales were $90.5-million in the second quarter of 2012, an increase of $10.0-million from the second quarter of 2011 due to an improvement in market prices, most notably in Western Canada, partially offset by a decrease in sales volumes. Adjusted EBITDA for the second quarter of 2012 was $17.1-million compared with adjusted EBITDA of $2.7-million in the same quarter last year. Ainsworth recorded a net loss from continuing operations of $11.3-million in the second quarter of 2012, compared with a loss of $12.9-million in the second quarter of 2011. This change is primarily the result of a $14.4-million improvement in gross margin, partially offset by unrealized foreign exchange losses on long-term debt.
Year-to-date sales of $175.6-million for 2012 were $23.6-million higher than 2011 as a result of market prices increases, most notably in Western Canada, and higher shipment volumes. Adjusted EBITDA for the six months ended June 30, 2012, was $27.1-million compared with adjusted EBITDA of $9.0-million in the same period last year. Results from continuing operations decreased from net income of $64.8-million in the first half 2011 to a net loss of $10.6-million in the first half of 2012. The decrease resulted from a one-time gain of $72.5-million on the High Level acquisition in 2011.
Margins
Adjusted EBITDA margin for the second quarter of 2012 was 18.9 per cent compared with an adjusted EBITDA margin of 3.4 per cent for the same period in 2011. For the year to date, the 2012 adjusted EBITDA margin of 15.4 per cent was 9.5 per cent better than the same period of 2011.
In the second quarter of 2012, the Western Canadian price for the OSB benchmark of seven-16ths of an inch averaged $232 (U.S.) per thousand square feet, a 54-per-cent increase relative to the second quarter of 2011. The north-central price for the OSB benchmark of seven-16ths of an inch averaged $235 (U.S.) per thousand square feet, an increase of 35 per cent relative to the second quarter of 2011. Compared with the first quarter of 2012, the Western Canadian price for the OSB benchmark of seven-16ths of an inch increased by 15 per cent in the second quarter of 2012 from $201 per thousand square feet in the first quarter of 2012.
Selected financial information is presented in the attached table.
FINANCIAL HIGHLIGHTS (in $ millions) Three months ended Six months ended June 30, June 30, 2012 2011 2012 2011Sales $ 90.5 $ 80.5 $ 175.6 $ 151.9Cost of products sold 69.5 73.9 140.9 134.8Net (loss) incomefrom continuingoperations (11.3) (12.9) (10.6) 64.8Net (loss) income (11.5) (13.0) (10.9) 64.7Adjusted EBITDA (1) 17.1 2.7 27.1 9.0Adjusted EBITDAmargin (2) 18.9% 3.4% 15.4% 5.9%Basic and diluted(loss) earnings pershareNet (loss) incomefrom continuingoperations (0.11) (0.13) (0.10) 0.64Net (loss) income (0.11) (0.13) (0.10) 0.64(1) Adjusted earnings before interest, taxes, depreciation and amortization, a non-international financial reporting standardsfinancial measure, are defined as net income from continuing operations before amortization, gain on disposal of property, plant and equipment, cost of curtailed operations, stock option expense (recovery), finance expense, foreign exchange (gain) loss on long-term debt, other foreign exchange loss (gain), income tax (recovery) expense, and non-recurring items. (2) Adjusted EBITDA margin, a non-IFRS financial measure, is defined asadjusted EBITDA divided by sales.
Liquidity
At June 30, 2012, Ainsworth's available liquidity, consisting of cash and cash equivalents, restricted cash, and short-term investments, was $59.4-million, slightly lower than $62.5-million at Dec. 31, 2011. The company's strong operating results year to date allowed the company to substantially maintain its liquidity position from the beginning of the year, despite the seasonal working capital demands of the log inventory build and the company's semi-annual interest payment on the senior notes.
Although the company is encouraged by its improved financial performance and reduced working capital use, the company continues to review various alternatives, which could enhance the company's liquidity, which could include the sale of non-core assets, cost reduction initiatives, refinancing or repayment of debt, and issuance of new debt or equity.
Ainsworth is permitted, under the terms of its senior unsecured notes and senior secured term loan, to borrow an additional $125-million (U.S.) of senior secured debt and $75-million (U.S.) of senior unsecured debt. The availability of additional sources of capital will depend on capital markets at the time and may not be available on acceptable terms.
Outlook
The U.S. housing indicators continue to show positive signs, with total housing starts, building permits and single-family starts up sharply by 29 per cent, 23 per cent and 23 per cent, respectively, year over year (commencing from a low base). On a regional basis, the West experienced the largest year-over-year gains compared with all other regions, with total housing starts, building permits and single-family starts up 37 per cent, 30 per cent and 32 per cent, respectively. This same trend was experienced on a year-to-date basis, with the West leading the year-over-year growth across all regions.
Industry forecasts for 2012 housing starts now range between 723,000 and 800,000, which are 19 per cent to 27 cent higher than last year's 610,000 starts. Provided that improvements in U.S. housing starts continue, the company expects demand to trend incrementally better for the rest of the year, particularly in the company's key Western markets.