VANCOUVER, BRITISH COLUMBIA--(Marketwired - Nov. 7, 2014) - Ainsworth Lumber Co. Ltd. (TSX:ANS) today announced its financial results for the third quarter ended September 30, 2014.
Highlights:
- Generated adjusted EBITDA of $4.7 million ($28.0 million year to date) reflecting weaker North American housing markets
- Year to date shipment and production volumes 12% and 10% higher than prior year, respectively
- Significant growth in key export markets in Asia
Ainsworth President and Chief Executive Officer, Jim Lake said, "North American OSB market conditions were disappointing during the third quarter of 2014 as the pace of recovery in the U.S. housing market fell short of expectations. However, we are optimistic that the recovery will regain traction in 2015.
"With the ramp-up of our High Level mill, we are confident that we are well-positioned to capitalize on both the U.S. housing recovery and continued growing demand in our export markets."
Financial Results
Sales of $116.3 million in the third quarter of 2014 were $2.0 million higher than sales of $114.3 million for the same period in 2013. The increase in sales was mainly due to a 12% increase in sales volumes due to additional production from High Level, partially offset by a 9% decrease in realized pricing. Sales volumes increased notwithstanding downtime taken at High Level and 100 Mile House during the third quarter to complete maintenance and other projects. The impact of the U.S. benchmark declines on our realized pricing was moderated by factors including the effect of a weaker Canadian dollar relative to the third quarter of 2013 and stable export pricing in Japan.
In the first nine months of 2014, sales were $341.5 million compared to $383.6 million in the same period of 2013. The $42.1 million decrease was related to a 20% decrease in realized pricing, partially offset by a 12% increase in sales volumes and the same factors noted above. The increase in volume from High Level was partially offset by downtime taken during the third quarter at our High Level and 100 Mile House mills to complete maintenance and other projects.
Adjusted EBITDA was $4.7 million in the third quarter of 2014 compared to $24.4 million in the same period of 2013, due to a decrease in realized pricing and higher overall unit costs. The increase in unit costs was attributable to a number of factors including raw material price increases, costs associated with the ramp-up phase of High Level, and additional costs incurred due to downtime. Net loss of $35.4 million from continuing operations in the third quarter of 2014 was $46.1 million lower than net income of $10.7 million in the prior year. Excluding the foreign exchange fluctuations on long-term debt, the loss on derivative financial instrument and the related income tax effects, adjusted loss for the third quarter of 2014 was $7.3 million. This represents a decrease of $7.2 million compared to the prior year.
Adjusted EBITDA for the first nine months of 2014 was $28.0 million compared to $137.6 million in 2013, due to a decrease in realized pricing and higher overall unit costs. Net loss from continuing operations in the first nine months of 2014 was $37.7 million, compared to net income of $50.0 million for the same period in 2013, representing a decrease of $87.7 million. Excluding the key non-cash accounting gains and losses noted above, adjusted loss for the first nine months of 2014 was $11.5 million. This represents a decrease of $70.9 million compared to adjusted earnings of $59.4 million for the same period in 2013.
Margins
Adjusted EBITDA margin on sales for the third quarter of 2014 was 4.0% compared to 21.3% in the same period of 2013 (8.2% in the first nine months of 2014 compared to 35.9% in the same period of 2013). The decreases were largely related to lower realized pricing in North America.
Benchmark OSB pricing decreased slightly during the third quarter of 2014. The North Central and Western Canadian pricing for 7/16" OSB averaged U.S.$216 and U.S.$187 per msf, respectively, representing a decrease of 14% and 19% versus the third quarter of 2013. Sequentially, the North Central and Western Canadian benchmark prices decreased 1% and 9%, respectively, versus the prior quarter.
Liquidity
At September 30, 2014, Ainsworth's available liquidity, consisting of cash and cash equivalents, was $98.6 million, a reduction of $38.8 million since December 31, 2013 resulting from our capital expenditures, interest payments and debt repayments combined with working capital requirements.
Outlook
While the pace of improvement in U.S. housing starts in 2014 has thus far been slower than previously expected, we remain optimistic about the medium to long-term outlook as U.S. housing starts continue to recover to more historical levels. The recently restarted High Level mill will allow us to meet the growing requirements of our existing customer base in North America and Asia as well as service new market segments.
Selected financial information is presented in the tables below. The full financial report is available to be viewed at the following link: http://media3.marketwire.com/docs/Q3ReportANS.pdf.
| Selected Financial Information |
|
|
|
|
|
|
|
|
| |
Q3-14 |
|
Q3-13 |
|
YTD 2014 |
|
YTD 2013 |
|
| (in millions of Canadian dollars, except earnings per share ("EPS")) |
|
| Sales |
$ |
116.3 |
|
$ |
114.3 |
|
$ |
341.5 |
|
$ |
383.7 |
|
| Cost of products sold |
|
108.0 |
|
|
86.0 |
|
|
302.3 |
|
|
234.1 |
|
| Net (loss) income from continuing operations |
|
(35.4 |
) |
|
10.7 |
|
|
(37.7 |
) |
|
50.0 |
|
| Basic EPS (1) |
|
(0.15 |
) |
|
0.04 |
|
|
(0.16 |
) |
|
0.21 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Adjusted EBITDA (2) |
|
4.7 |
|
|
24.4 |
|
|
28.0 |
|
|
137.6 |
|
| Adjusted EBITDA margin (3) |
|
4.0 |
% |
|
21.3 |
% |
|
8.2 |
% |
|
35.9 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Adjusted (loss) earnings (4) |
|
(7.3 |
) |
|
(0.1 |
) |
|
(11.5 |
) |
|
59.4 |
|
| Adjusted earnings per share (5) |
|
(0.03 |
) |
|
- |
|
|
(0.05 |
) |
|
0.24 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| (1) |
240,941,309 common shares were outstanding on September 30, 2014. |
| |
|
| (2) |
Adjusted EBITDA, a non-IFRS financial measure, is defined as net income (loss) from continuing operations before amortization, (gain) loss on disposal of property, plant and equipment, cost of curtailed operations, share-based compensation expense, finance expense, foreign exchange (gain) loss on long-term debt, other foreign exchange (gain) loss, (gain) loss on derivative financial instrument, interest income earned on investments, income tax expense (recovery), and non-recurring items. |
| |
|
| (3) |
Adjusted EBITDA margin, a non-IFRS financial measure, is defined as adjusted EBITDA divided by sales. |
| |
|
| (4) |
Adjusted (loss) earnings, a non-IFRS financial measure, is defined as net income (loss) from continuing operations before (gain) loss on derivative financial instrument, foreign exchange (gain) loss on long-term debt, and the related income tax effects. |
| |
|
| (5) |
Adjusted earnings per share, a non-IFRS financial measure, is defined as adjusted (loss) earnings divided by the weighted average common shares outstanding. |
| |
|
| Reconciliation of Net Income to Adjusted EBITDA |
|
| |
Q3-14 |
|
Q3-13 |
|
YTD 2014 |
|
YTD 2013 |
|
| (in millions of Canadian dollars) |
|
|
|
|
|
|
|
|
|
|
|
|
| Net (loss) income from continuing operations |
$ |
(35.4 |
) |
$ |
10.7 |
|
$ |
(37.7 |
) |
$ |
50.0 |
|
| Add (deduct): |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Foreign exchange loss (gain) on long-term debt |
|
17.0 |
|
|
(7.6 |
) |
|
18.1 |
|
|
13.1 |
|
| |
Loss (gain) on derivative financial instrument |
|
12.7 |
|
|
(3.7 |
) |
|
9.3 |
|
|
(4.3 |
) |
| |
Amortization of property, plant and equipment |
|
6.9 |
|
|
6.2 |
|
|
21.7 |
|
|
18.8 |
|
| |
Finance expense |
|
6.6 |
|
|
6.7 |
|
|
20.0 |
|
|
21.0 |
|
| |
Stock-based compensation expense (recovery) |
|
0.2 |
|
|
0.4 |
|
|
(0.2 |
) |
|
1.5 |
|
| |
Other |
|
(0.1 |
) |
|
0.2 |
|
|
(1.3 |
) |
|
(2.9 |
) |
| |
Income tax (recovery) expense |
|
(3.2 |
) |
|
0.7 |
|
|
(4.3 |
) |
|
20.8 |
|
| |
Loss on repayment of long-term debt |
|
- |
|
|
3.1 |
|
|
- |
|
|
3.1 |
|
| |
Costs related to LP acquisition |
|
- |
|
|
1.7 |
|
|
2.2 |
|
|
1.7 |
|
| |
Loss on disposal of property, plant and equipment |
|
- |
|
|
0.4 |
|
|
0.2 |
|
|
0.3 |
|
| |
Cost of curtailed operations |
|
- |
|
|
5.6 |
|
|
- |
|
|
10.7 |
|
| |
Write-down of property, plant and equipment |
|
- |
|
|
- |
|
|
- |
|
|
3.8 |
|
| Adjusted EBITDA |
$ |
4.7 |
|
$ |
24.4 |
|
$ |
28.0 |
|
$ |
137.6 |
|
Conference Call Information
Ainsworth will hold a conference call on Monday, November 10, 2014 at 10:00 a.m. PT (1:00 p.m. ET). The dial-in phone number is 1-800-319-4610 from inside the USA or Canada, and +1-604-638-5340 from outside of the USA and Canada. To access the replay line, dial 1-800-319-6413, or +1-604-638-9010, Reservation 4176#. This recording will be available until the end of the day on November 17, 2014.
The financial results are based on International Financial Reporting Standards. Investors, analysts and other interested parties can access Ainsworth's 2014 Third Quarter Results as well as the Shareholders' Letter and Supplemental Information on Ainsworth's website under the Investors / Financial Reports section at www.ainsworthengineered.com.
Forward Looking Statements
Forward-looking information provided in this news release relating to the Company's expectations regarding OSB demand and pricing and the Company's future prospects and financial position are forward-looking information pursuant to National Instrument 51-102 promulgated by the Canadian Securities Administrators. The Company believes that expectations reflected in such information are reasonable, but no assurance is given that such expectations will be correct. Forward-looking information is based on the Company's beliefs and assumptions based on information available at the time the assumption was made and on management's experience and perception of historical trends, current conditions and expected further developments as well as other factors deemed appropriate in the circumstances. Investors are cautioned that there are risks and uncertainties related to such forward-looking information and actual results may vary. Important factors that could cause actual results to differ materially from those expressed or implied by such forward looking information include, without limitation, factors detailed from time to time in the Company's periodic reports filed with the Canadian Securities Administrators and other regulatory authorities. The forward-looking information is made as of the date of this news release and the Company assumes no obligation to update or revise them to reflect new events or circumstances, except as explicitly required by securities laws.
About Ainsworth
Ainsworth Lumber Co. Ltd. is a leading manufacturer and marketer of oriented strand board ("OSB") with a focus on value-added specialty products for markets in North America and Asia. Ainsworth's four OSB manufacturing mills, located in Alberta, British Columbia and Ontario, have a combined annual capacity of 2.5 billion square feet (3/8-inch basis). Ainsworth is a publicly traded company listed on the Toronto Stock Exchange under the symbol ANS.