Eacom announced the reconstruction of its Timmins mill; - Eacom concluded the negotiation of a global settlement with its insurer for the fire at its Timmins mill.
Market conditions have improved compared with 2011. In the United States, housing starts averaged 781,000 units in 2012, up 28 per cent from 2011. In Canada, a similar pattern emerged with housing starts averaging 215,000 units, up 11 per cent from 2011. This improvement in housing activity had a positive impact on lumber consumption, and contributed to a much stronger pricing environment and higher mill realizations for the company. As a result, the company recorded a positive adjusted EBITDA of $2,481,000 for the year ended Dec. 31, 2012, against a negative adjusted EBITDA of $26,285,000 in 2011.
During the second half of 2012, the company completed capital upgrades targeted at increasing the production capacity at two of its mills, Nairn Centre and Elk Lake. These upgrades are expected to partially offset the capacity lost at Timmins and mitigate some of the damages incurred as a result of the fire. On Dec. 12, 2012, the company entered into an agreement with USNR Kockums Cancar Inc. to rebuild the Timmins mill. The total cost of the project is estimated at $25-million, of which $18.9-million will be financed from the proceeds of insurance. Construction is expected to be completed in the third quarter of 2013.
Subsequent to year-end, the company concluded with its insurer the negotiation of a global settlement in the amount of $48.25-million for the fire at its Timmins mill. The company received advances for a total amount of $30.6-million in 2012, and, subsequent to year-end, collected the remaining proceeds of $17.4-million (net of a $250,000 deductible).
"The company generated a positive adjusted EBITDA of $3.4-million in the fourth quarter and $2.5-million in 2012. Current lumber markets have improved due to a stronger U.S. housing market. In 2013, the company will focus on its cost-reduction efforts to increase productivity and improve recovery," stated Rick Doman, president and chief executive officer.
Year ended Dec. 31, 2012, versus year ended Dec. 31, 2011
For the year ended Dec. 31, 2012, net earnings attributable to shareholders amounted to $4,285,000, or one cent per common share, against a net loss of $47,412,000, or 10 cents per common share, in 2011. The 2012 results include a gain of $15,183,000 on disposal of property, plant and equipment destroyed by fire, whereas the 2011 results included an impairment charge of $15-million, partially offset by a gain of $4,339,000 on the sale of the Big River mill and a $3,769,000 recovery of income taxes.
In 2012, the company recorded sales of $248,937,000, down 11 per cent against sales of $279,967,000 in 2011. The company's sales include both lumber and byproduct sales. In 2012, the company shipped 506 million board feet of lumber (621 million board feet in 2011) and 476,000 oven-dried metric tonnes of byproducts (568,000 oven-dried metric tonnes in 2011). Compared with 2011, shipments reflect lower production volumes.
Pricing has improved in 2012 with benchmark lumber prices averaging $371 (U.S.) per thousand board feet for studs and $395 (U.S.) per thousand board feet for random lengths delivered Great Lakes, up 17 per cent and 15 per cent from $316 (U.S.) per thousand board feet and $343 (U.S.) per thousand board feet, respectively, in 2011. Mill realizations also benefited from a slightly softer Canadian dollar with the exchange rate averaging 1.001 U.S./Canadian dollar in 2012, down 1 per cent against an average of 1.011 U.S./Canadian dollar in 2011. The mix of lumber grades sold during those periods has remained similar. However, the overall prices of byproducts decreased during the fourth quarter as a result of Val d'Or and Matagami resuming operations within the context of a competitive byproducts market generating lower chip prices.
Lumber production in 2012 was 447 million board feet of lumber against 522 million board feet in 2011. In 2012, the company operated at 44 per cent of its capacity with two of its eight mills idled (53 per cent in the corresponding period of 2011 with no change to idled mills). Operations in Val d'Or and Matagami, which had been temporarily shut down since the second half of 2011 due to weak market conditions, resumed in the third quarter of 2012, and the Timmins mill closed on Jan. 22, 2012, due to the fire at the mill site. The volume lost in respect of these closures has been partially offset by the additional production at Elk Lake following the acquisition of the remaining one-third interest in that mill in the third quarter of 2011, and by the addition of a third shift at Nairn at the end of the first quarter of 2012.
Quarter ended Dec. 31, 2012, versus quarters ended Sept. 30, 2012, and Dec. 31, 2011
For the quarter ended Dec. 31, 2012, the net loss attributable to shareholders amounted to $388,000, or nil per common share, against a net loss of $964,000, or nil per common share, in the previous quarter, and a net loss of $27,055,000, or six cents per common share, in the corresponding quarter of 2011. In the corresponding quarter of 2011, the company recorded an impairment charge of $15-million.
During the fourth quarter of 2012, housing starts in the United States averaged 898,000 units, up 16 per cent from the previous quarter and, more significantly, 32 per cent from the fourth quarter of 2011. In Canada, housing starts were mixed, down 8 per cent from the previous quarter but up 2 per cent from the corresponding quarter of 2011. The improvement in the U.S. housing activity had a positive impact on lumber consumption and contributed to a strong pricing environment. As a result, the company recorded a positive adjusted EBITDA of $3,383,000 for the fourth quarter ended Dec. 31, 2012, against a positive adjusted EBITDA of $1,482,000 in the previous quarter and a negative adjusted EBITDA of $8,554,000 in the corresponding quarter of 2011.
For the quarter ended Dec. 31, 2012, the company recorded sales of $60.36-million, down 5 per cent against sales of $63.38-million in the previous quarter and 11 per cent against sales of $67,445,000 in the corresponding quarter of 2011. During the quarter, the company shipped 120 million board feet of lumber (125 million board feet in the previous quarter and 156 million board feet in the corresponding quarter of 2011) and 110,000 oven-dried metric tonnes of byproducts (127,000 oven-dried metric tonnes in the previous quarter and 129,000 oven-dried metric tonnes in the corresponding quarter of 2011). Compared with the previous quarter and the corresponding quarter of 2011, shipments reflect lower production volumes and inventory changes.
Pricing has improved again in the fourth quarter of 2012 with benchmark lumber prices averaging $426 (U.S.) per thousand board feet for random lengths delivered Great Lakes, up 5 per cent from $404 (U.S.) per thousand board feet in the previous quarter. However, pricing for studs was somewhat mixed during the quarter, averaging $375 (U.S.) per thousand board feet against $394 (U.S.) per thousand board feet in the previous quarter. The Canadian dollar remained stable with the exchange rate relative to the U.S. dollar, averaging 1.009 in the fourth quarter against an average of 1.005 U.S./Canadian dollar in the previous quarter. Compared with the corresponding quarter of 2011, random lengths and studs are trading at prices 31 per cent and 23 per cent above the levels achieved last year.
Lumber production in the fourth quarter of 2012 was 113 million board feet of lumber, against 112 million board feet in the previous quarter and 111 million board feet in the corresponding quarter of 2011. During the fourth quarter, the company operated at 46 per cent of its capacity (45 per cent during the previous quarter and 45 per cent in the corresponding quarter of 2011). The most significant changes include some downtime taken at Elk Lake during the fourth quarter of 2012 when the mill went through a substantial capital upgrade, the mills in Val d'Or and Matagami resuming their operations in the third quarter of 2012, and the capacity lost at Timmins as a result of the fire.
Financial position
At Dec. 31, 2012, the company had cash and cash equivalents of $27,028,000, and restricted cash of $6,664,000 ($14,268,000 and nil, respectively, at Dec. 31, 2011). Its credit facility was undrawn against a borrowing availability of $10.2-million ($2-million drawn against a borrowing availability of $3,822,000 at Dec. 31, 2011).
During the second quarter of 2012, the company closed a $40-million senior secured debenture financing and repaid the remaining $2-million of advances under its revolving credit facility. Pursuant to the terms of the $40-million senior secured debentures, insurance proceeds of $10-million received in respect of the property damage claim have been segregated and shown as restricted cash pending the reconstruction of the Timmins mill. This amount was reduced to $6,664,000 following the initial payment made upon signature of the USNR contract in the fourth quarter of 2012.
In 2012, a substantial portion of the $24,658,000 in capital spending was targeted at improving the production capacity at two of the company's mills, Nairn Centre and Elk Lake, to partially offset the capacity lost at Timmins and mitigate the losses incurred as a result of the fire. A portion of these investments will be reimbursed under the business interruption claim.
Selected financial information and operating statistics (year)
The attached table provides an overview of the company's financial results for the years ended Dec. 31, 2012, and 2011, along with some key operating metrics.
SELECTED FINANCIAL INFORMATION (YEAR) (in thousands of dollars, except where otherwise noted) 2012 2011Sales $ 248,937 $ 279,967Operating income (loss) (7,436) (54,263)Net earnings (loss) attributable to shareholders 4,285 (47,412)Average lumber price in U.S. dollars -- RL 2A 4 Nos. 1 and 2 (1) 395 343Average lumber price in U.S. dollars-- Stud 2A 4A 8 (1) 371 316Average exchange rate (U.S.$ per C$1) 1.001 1.011Production -- SPF lumber (mmfbm) 447 522Shipments -- SPF lumber (mmfbm) 407 535Shipments -- wholesale lumber (mmfbm) 99 86Canadian housing starts (thousands of units) 215 194U.S. housing starts (thousands of units) 781 612(1) Eastern spruce/pine/fir, per thousand board feet delivered Great Lakes (source: Random Lengths Publications Inc.).
SELECTED FINANCIAL INFORMATION AND OPERATING STATISTICS (QUARTER)
The attached table provides an overview of the company's financial results for the quarters ended Dec. 31, 2012, Sept. 30, 2012, and Dec. 31, 2011, along with some key operating metrics.
SELECTED FINANCIAL INFORMATION (QUARTER) (in thousands of dollars, except where otherwise noted) Q4, Q3, Q4, 2012 2012 2011Sales $ 60,360 $ 63,380 $ 67,445Operating income (loss) 891 (900) (27,347)Net earnings (loss) attributable to shareholders (388) (964) (27,055)Average lumber price in U.S. dollars -- RL 2A 4 Nos. 1 and 2 (1) 426 404 326Average lumber price in U.S. dollars-- Stud 2A 4A 8 (1) 375 394 304Average exchange rate (U.S.$ per C$1) 1.009 1.005 0.977Production -- SPF lumber (mmfbm) 113 112 111Shipments -- SPF lumber (mmfbm) 98 100 133Shipments -- wholesale lumber (mmfbm) 22 25 23Canadian housing starts (thousands of units) 204 222 200U.S. housing starts (thousands of units) 898 774 678(1) Eastern spruce/pine/fir, per thousand board feet delivered Great Lakes (source: Random Lengths Publications Inc.).
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