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. It operates through the solid wood products segment. The Company’s product categories include Dimension Lumber, Specialty Lumber and Engineered Wood Products. Its products include Spruce-Pine-Fir, Douglas Fir-Larch, Hem-Fir, Southern Yellow Pine, Western Red Cedar, Douglas Fir-Larch, and P3-Joist. Its sawmills provide a diverse range of sustainable products to supply North American markets with a complete offering of framing materials. Its Western Red Cedar products include Elite Decking, Elite Fascia & Boards, Elite V-Joint Paneling, Elite Fineline Paneling, Elite Channel/Lap Siding, Elite Bevel Siding and Elite Shadow Gap Siding. It has an annual lumber production capacity of approximately 5.0 billion board feet and offers a diverse line of lumber products to customers around the world.

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Post by retiredcfon May 13, 2021 2:28pm

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Post# 33196012

TD

Interfor Corp.

(IFP-T) C$34.40

Special Dividend of $2.00/Share Close to Interfor's April FCF Event

Last night, Interfor announced plans for a special dividend of $2.00/share (almost 6% of yesterday's closing price). For context, management disclosed that the dividend of $130 million compares to the company's April free cash flow (FCF) of $137 million. Interfor's Q1/21 FCF was $252 million. It is unclear how much of that April total relates to core operating cash flow growth versus seasonal inventory reductions but the total is still remarkable. The dividend is payable on June 28 to shareholders of record on May 28.

Impact: POSITIVE

The special dividend - qualified as a one-time event - is consistent with management's balanced capital allocation plan outlined on last week's Q1/21 earnings conference call. Interfor is biased to asset base growth (mostly organic) but complements those initiatives with opportunistic returns of capital to shareholders. Activity on the NCIB has continued into Q2/21 and management had identified discretionary dividends as an option given the unprecedented balance sheet transition.
Interfor retains a strong balance sheet. Adjusted for the special dividend, pro forma available liquidity at the end of April is >$950 million and the company's net cash balance is $243 million. Capex guidance is $150 million in 2021 and $150 million-$180 million in 2022, up from $111 million in 2020. The budget includes newly announced projects at the Castlegar, B.C. ($35 million) and Perry, Georgia (US$30 million) sawmills which target increased capacity, improved lumber recovery/grade mix, and lower conversion costs upon project completion in Q3/22. The multi-year rebuild of the Eatonton, Georgia sawmill is on track for Q4/21 completion. The company repurchased 0.8 million shares during Q1/21 for $20 million (cumulative $44 million repurchased during Q4/Q1).
Lumber futures prices have pulled back, but cash markets continue to climb. The nearest Western SPF 2x4 futures contract price of US$1,495/Mfbm has declined 14% the past two days, but mid-week cash market prices for that grade (released Tuesday evening) increased another 3% from last Friday to set a new high at US$1,605/Mfbm (66% above the Q1/21 average and almost 2.5x the precedent cyclical peak in June 2018)