Interfor Corp T.IFP

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Extract from their 128 page Q221 Global report.
Interfor is rated Outperform with a $47.00 target. GLTA

Interfor is the fourth largest lumber producer in North America by capacity. Approximately 50% of the company's 3.0 billion board feet of lumber capacity is located at eight sawmills in the US Southeast, 21% of capacity is at five sawmills in the US Pacific Northwest, 25% at three sawmills in the BC southern interior and 5% at one specialty sawmill located on the BC Coast.

Interfor has added almost 900 million board feet of capacity: “We've added about 900 million board feet of high quality lumber production capacity through two acquisitions this year. Collectively the five mills we've acquired generate above average EBITDA margin, provide significant economies of scale and increase the concentration of our asset base in the attractive US south and northwest regions.”

Management still has a positive view on repair & remodel demand: “In terms of repair and remodel annual sector, outlook remains positive. Our short-term DIY buying patterns have shifted. Every quarter we always make the statement that we expect lumber prices to be volatile in this quarter is obviously no exception.”

Distributors faced risk with prices being so high: “On top of this at such high prices distribution risk increased substantially. You can't underestimate this side of the equation. No one wanted to be caught with such high cost inventories. Purchasing became very cautious given the risks. Reduced demand and DIY, increased availability, result – which resulted in increased availability to other distribution channels, reducing replenishments weights.”

The company expects that it has capacity to integrate more acquisitions: “... as far as readiness for future opportunities we're ready today. We can and we feel very strongly about the team that we have and the integration capability that we have that if the right opportunity was in front of us and it was available and it met our thresholds we go after it and make it happen.”

New home construction and pro contractor business remains strong: “... the demand side on the new home construction is solid. We've got the housing starts to support that. And we're seeing that through those distribution channels. On the repair and remodel side of the business, we'd say that the pro contractor business continues to be quite strong. It's the DIY sector that that appears weak. And I think that there was some fairly decent inventories built up in anticipation of a fairly strong spring on that segment and that didn't necessarily materialize.”

Logging activity is curtailed in BC due to wildfires: “... in British Columbia there's no logging activity happening in the provinces, it's under a state of emergency with the wildfire situation. So typically log inventories in the British Columbia region are pretty low in September and then build through the fall and in winter for spring breakup.”