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 Nov 07, 2022 8:39am

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Post# 35078373

TD

Interfor Corp.

(IFP-T) C$24.57

Q3/22 Results Near Expectations; Tempering Mid-Term Estimates Event

Interfor reported Q3/22 results after market close on November 3. Adjusted EBITDA of $129.5 million exceeded our estimate of $107.6 million and the consensus forecast of $109.0 million. Adjusted EBITDA included a $26.1 million duty recovery, related to a positive administrative review, which was not in our estimate. Adjusted EPS of $0.58 (including the duty benefit) was below our estimate of $0.74 (we matched consensus). The effective tax rate was higher than expected.

Impact: MIXED

There were no surprises in Interfor's Q3/22 results, but we are tempering our mid-term outlook to reflect more conservative volume, unit cost, and price spread assumptions.

Excluding the duty recovery, Interfor's Q3/22 operating results were near expectations. Interfor's aggregate adjusted EBITDA/Mfbm compared favourably to key peers, which we believe reflects the company's relative margin progress tied to discretionary capex and value-accretive M&A initiatives.
Average Q3/22 lumber price realization fell 28% q/q and was a little below our estimate. Q/Q pressure relative to benchmark prices was tempered by order- file timing lags, a weaker CAD, and mix. Aggregate lumber inventories declined 78 million board feet, which built on a 66 million board-feet inventory reduction in Q2/22.
Interfor is deploying capital quickly. The company completed a $100-million SIB in September and announced the renewal of its 10% NCIB. On October 3, Interfor announced an agreement to acquire Chaleur Forest Products for $325 million plus ~$50 million for 55% of Chaleur's after-tax softwood lumber duty deposits to-date. Interfor ended Q3/22 with net debt-to-cap of 10.5% (23.1% pro forma for Chaleur) and abundant available liquidity of $601.4 million.
We have lowered our 12-month target price to $35 from $39 and reiterate our Buy rating. We believe that Interfor's valuation discount is excessive.

TD Investment Conclusion

In our view, Interfor's current valuation represents a compelling entry point for investors with anything beyond a short-term investment horizon. The company has made strong relative ROCE progress over the past three years and retains a flexible balance sheet even as capital deployment has accelerated