Interfor Corp T.IFP

Alternate Symbol(s): IFSPF

Forest Products Lumber & Wood Production

Interfor Corporation is a Canada-based forest products company. The Company and its subsidiaries produce wood products in Canada and the United States for sale to markets around the world. The Company operates through solid wood products segment. The Company offers its products across two categories, which include Dimension Lumber and Specialty Lumber. The Company's products include Interfor machine-stress rated (MSR) Lumber, Interfor Western HQ Lumber, Interfor Stud Lumber, Interfor Elite Decking, Interfor Elite Fascia & Boards, Interfor Elite V-Joint Paneling, Interfor Elite Fineline Paneling, Interfor Elite Channel and Lap sidings, Interfor Elite Bevel Siding and Interfor Elite Shadow Gap Siding. It produces quality joist products for both residential and commercial floor and roof projects. The Company has annual lumber production capacity of approximately 5.2 billion board feet and offers a diverse line of lumber products to customers around the globe.

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Interfor Corp

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Post by retiredcfon Oct 21, 2022 8:26am

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Post# 35038326

TD

Maintain their $39.00 target. GLTA

Interfor Corp.

(IFP-T) C$23.51

Interfor Ramps Up Lumber Downtime in Q4/22 Event

Last evening, after market close, Interfor announced plans to curtail 200 million board feet of lumber production in Q4/22. This would comprise 17% of the company's quarterly capacity. Given the collapse in lumber prices since Q2/22, we are not surprised by this initiative and expect that competitors are following/will follow suit to manage inventories.

Impact: NEUTRAL

Details

Our forecasts already assume extensive H2/22 downtime. Interfor indicated that downtime will be taken across the company's portfolio, but will be concentrated in the U.S. around Thanksgiving and the holidays. The implied Q4/22 overall operating rate plan of 83% is consistent with 84% in Q1/22 and 83% in Q2/22. Management did not disclose formal downtime plans for Q3/22, but we believe that curtailments were prevalent. Management referenced that overall mill inventories are near normal levels now and that planned downtime is expected to sustain manageable inventories.
Lumber prices have capitulated since mid-March, but have levelled off in recent weeks. The Random Lengths Framing Lumber Composite (RLFLC) price of US$494/Mfbm has declined 63% over the past seven months as housing affordability has deteriorated (rapid interest-rate pressure), marginal supply has grown in the U.S. South, and downtime/closures in higher-cost regions were slow to arrive. Anecdotal reports indicate steady order activity from the repair and remodelling demand channel, but weaker shipments to new homebuilders. Cash lumber prices have stabilized over the past three weeks and the nearest Western SPF futures contract price has improved 32% to US$533/Mfbm since the end of September. We attribute some recent resilience to downtime across the industry and unexpected curtailments in the Pacific Northwest related to labour dispute.
Interfor has a flexible balance sheet to manage the expected earnings downturn. Adjusted for the pending Chaleur acquisition (New Brunswick sawmill portfolio) and the $100 million substantial issuer bid completed on September 12, Interfor's net debt-to-cap is ~18% (versus net debt-to-cap of 5% at the end of June 30). Pro forma available liquidity remains strong at $322 million.