Given the CEO Remi's financial background and this incoming influx of cash, I think there is not a meaningful chance of a new type of buyback. I can imagine that we average $875 lumber this year. That’s the Corten Capital forecast too. That would be huge. The duty knocks that down to $700, and cash costs are high $300s. Call it a USD margin of $300/unit on the 2.5 billion feet I expect to see. That’s $750m right there. There is only $480m of total debt and the pension needs $120m this year — that’s it.
So likely a Substantial Issuer Bid would become a thing then. I heard about this in the context of Conifex as it’s rare. Basically get the Ok from the exchange and board to buy back a whole batch of em at once - 20% or 30%’of the float. That’s the TSX concept at least and I suspect it’s got a parallel for the NYSE.
Or, maybe there is still room and this is not needed, but I don’t know how much that is. The mar 2020 approval was for 15% of the count up to $100m. They summarized the position as of Dec 31 this way:
“For the year, we spent $30 million to repurchase 6.9 million shares over 8% of the total outstanding. Net debt fell by $93 million to $448 million by year-end, bringing our net debt to last 12 months adjusted EBITDA down to 1.3 time”
So ignoring the opportunity of accelerating the buyback I could see sustained lumber long run at $700 for reasons I could write an essay about. This differs from the “consensus” which two or three dudes who in banking, who are copied but two or three others. It’s anchored in the past of the last decade plus which is fair, but that was an aberration largely. $750 lumber is the light side of most of the inflation adjusted pricing in all previous decades except for the past 15 years. The tarriffs remains... I doubt it long run, but plan for it. This means there is $500m in lumber earnings now at the core. So run rate $700m is a reasonable forecast. In a debt free co that spins off Newsprint perhaps it’s worth 7x. Worst cast... the current trash heap 5x. So that’s a range from $3.5B to $4.9B in EV... which is = market cap as no future debt. Divide by 80m shares and that’s pretty compelling. But by 70m or 60m shares?? Wow.
Call it 70m shares. That’s $50/share to $70/share range form my expected 2023 reality