Reid Carter - President and CEO Brian Banfill - CFO

Andrew Kuske - Credit Suisse Paul Quinn - RBC Capital Markets

Thank you, operator and good afternoon everyone. Welcome to Acadian's first quarter conference call.

As you may have noted in the updated press release, Brookfield as Acadian's manager with the full support of Acadian's board we're bringing Mark Bishop on as President and Chief Executive Officer of Acadian effective May 1st. Mark is a key senior member of Brookfield Timberlands management team whose primary focused over the past seven years has been on business development activities outside of North America.

In addition to his leadership role at Acadian, Mark remained actively engaged in these business development initiatives. Mark brings over 25 years of forest industry experience of President and CEO position.

Prior to joining Brookfield, he was a top‐ranked paper and forest products research analyst and has also held various forest industry operating and financial positions with large paper and forest products companies. I will continue to be very engaged with Acadian as a leader of Brookfield Timberlands management and is an active board member, with the remainder of our operating leadership remaining unchanged.

Brian will now proceed with the full remarks, then I'll add my comments and take your questions. Brian?

Thanks Reid. Before we get started, I would like to remind everyone of the following.

The conference is being webcast simultaneously through our website at acadiantimber.com, where you can also find a copy of the press release including the financial statements. Please note that in responding to questions and talking about our first quarter 2015 financial and operating performance, as well as our outlook for the remainder of 2015, we may make forward-looking statements.

These statements are subject to known and unknown risks and future results may differ materially. For further information on known risk factors, I encourage you to review Acadian's annual information form dated March 24, 2015 and other filings of Acadian with securities and regulatory authorities which are available on CEDAR at cedar.com and on our website.

I will start by outlining the financial highlights for the first quarter, then Reid will provide comments about our operations, market conditions, business development activities and our outlook for the remainder of 2015. Acadian’s operations performed very well again this quarter, generating the highest first quarter adjusted EBITDA since 2009.

Operating conditions were good throughout the period and continued solid customer demand for our key products drove meaningful year-over-year price increases. Net sales for the first quarter totaled $24.7 million, a $3.4 million or 16% increase compared to the same period in 2014.

The year-over-year increase in net sales reflects a 14% increase in the weighted average log selling price. The selling price improvement was spread across of the log products produced by Acadian with softwood saw timber and hardwood pulpwood once again showing some of the biggest gains.

With costs continuing to be held firmly intact, this positive top line performance resulted in adjusted EBITDA climbing $2.1 million year-over-year to $8.8 million. Adjusted EBITDA margin increased to 35% from 32% in the same period of last year.

As noted in some prior quarters, it seems strange to report a net loss for the quarter after so much good news. But non-cash items including a larger negative share value adjustment to the higher harvest volumes and the year-over-year difference of $4.6 million and the unrealized exchange loss on our U.S.

dollar denominated long term debt resulted in a net loss of $2.9 million or $0.17 per share. This compares to net income of $0.7 million or $0.04 per share in the prior year.

Free cash flow was up $1.9 million from the first quarter of 2014 to $7.5 million or $0.45 per share pushing the payout ratio down to just 50% from 62% for the same period last year. I will now briefly review the segmented results for Acadian’s New Brunswick and Maine operations.

Net sales from our New Brunswick operations for the first quarter totaled $15.3 million compared to $14.4 million for the same period last year. An 8% increase in the average log selling price was partially offset by a 6% decrease in the sales volume.

The volume decrease reflects increased volumes sales in inventory at quarter end in relation to an inventory management program with one of our major customers. This volume will be sold in the second quarter generating approximately $1 million of adjusted EBITDA.

The weighted average log selling price was $65.90 per cubic meter in the first quarter of 2015, up $5.02 per cubic meter from the same period last year. This year-over-year average price increase reflects gains in both hardwood and softwood pulp prices and a higher proportion of hardwood sawlogs in the sales mix.

Cost for the first quarter of 2015 were $10 million in line with the comparable quarter of 2014. First quarter adjusted-EBITDA for the New Brunswick operation was $5.3 million, up $0.8 million from the first quarter of 2014, again reflecting improved prices and mix, partially offset by lower sales volumes.

Adjusted-EBITDA margin increased to 35% from 31% in the prior year. The Maine operations had another impressive quarter with sales volumes were up 11% year-over-year and Canadian dollar based log selling prices jumping 21%.

As a result net sales for the first quarter of 2015 were up significantly year-over-year, increasing $2.6 million or 38% to $9.4 million. The weighted average log selling price in Canadian dollar terms was $81.71 per cubic meter in the first quarter, up 21% from $67.75 in the same period of 2014.

Weighted average log selling prices in U.S. dollar terms increased 7% year-over-year.

First all of the foreign exchange driving good news on the top line does have a downside. Canadian dollar basis cost for the first quarter climbed $1.2 million year-over-year to $5.5 million.

While increased harvest volume played a role, this increase primarily reflects foreign exchange movements during the year as variable cost per cubic meter increased 13% year-over-year in Canadian dollars remained stable in U.S. dollar terms.

Adjusted-EBITDA for the Maine operation was up 56% to $3.9 million. Improved log prices increased the adjusted-EBITDA margin to 41% from 36% in the prior year.

Switching over from the operations to our cash position. At the end of the first quarter, Acadian had cash on hand totaling approximately $16.5 million which is $5.5 million higher than the cash balance at the same time last year.

The primary driver of the increased cash balance was the generation of $5.7 million of free cash in excess of dividend payments over the last 12 months. The current cash balance was $3.9 million higher than the balance at the end of 2014, again reflecting the significant free cash in excess of dividend payments during the quarter.

As of March 28, 2015 Acadian had net liquidity of $89.9 million, including funds available under Acadian’s revolving facility and our standby equity commitment with Brookfield. The balance sheet remained strong leaving Acadian well positioned for the future.

During the first quarter, we distributed $0.21 per share to our shareholders and declared a dividend of $0.0225 per share for the second quarter reflecting the increase announced last quarter. This increased rate is fully supported by our increasingly strong performance.

I will now turn the call back over to Reid.

Thank you, Brian. During the quarter Acadian’s operations experienced three recordable instance involving contractors and no recordable instance among its employees.

I'm pleased to be able to confirm that none of the resulting injuries were serious, although two did result in last time. We continue to work with our contractors and employees to ensure the highest standards of workplace safety are maintained.

As Brian noted, Acadian’s weighted average log selling price for the first quarter increased by 14% year-over-year, realized Canadian dollar prices improved for all log products with gains of 2% for hardwood soft timber, 11% for hardwood pulp logs, 13% for softwood pulp logs and 17% for softwood sawlogs. While a big portion of the credit goes to the stronger U.S.

dollar, base currency gains are realized for all log products except for Hardwood sawlogs in Maine which were impacted by a mix change. Softwood pulpwood markets improved year-over-year, but this product remains our most challenging as the number of groundwood pulp customers operating in the region has declined over last few years.

As we have noted many times in the past, however, this product makes up a very small portion of our total sales, 8% in the first quarter and even smaller portion of our gross margin at 5% in the quarter. Biomass gross margin more than doubled year-over-year with the majority of the change coming from the New Brunswick corporations for a larger portion of the volume was sold to the higher margin expert market during the prior year.

Acadian’s financial outlook for 2015 remains positive. Despite the recent weakness in housing starts and its negative impact on lumber pricing, markets for softwood sawlogs in Acadian's operating region remained very strong throughout the quarter.

Almost all regional mills continued to operate on full shifts and appeared to be carrying inventories consistent with historic season of practices. We continue to expect some modest improvements in lumber demand as weather improves, meaning softwood sawlog markets should remain positive throughout the summer.

In addition to our confident outlook to softwood sawlogs, markets for hardwood sawlogs have been very strong and are expected to remain positive. Well demanded pricing for hardwood pulpwood continues to be a very positive component for overall sales with most for our customers seeking additional volume.

Softwood pulpwood sales volumes during the first quarter increased year-over-year, but this market continues to be challenging as I mentioned a moment ago due to fewer customers. Biomass markets throughout the quarter, owing to improved demand from all customers.

Well this product makes a modest contribution to our operating results we believe that there is an opportunity for improved margins over the next few years as there are many indications of increase in demand and relatively tight supply. On the business development front, we continue to actively pursue opportunities in support of Acadian’s growth strategies in the U.S., Australasia and South America.

Although we're currently finding U.S. opportunities relatively few and expensive, we continue to work on several opportunities in the United States, Brazil, Chile, Uruguay and New Zealand during the first quarter with the majority of these products continuing into the current quarter.

Our goal is to build a balanced portfolio between current cash flow and capital appreciation with the ultimate focus being on our long-term total return target of 10% to 12%. Acadian shareholders can be confident that we'll stay focused and disciplined in our search for growth.

In closing, we remain very pleased with Acadian’s exceptionally strong operating performance over the past several quarters and look forward to reporting continued strong performance in the coming quarters. On a more personal note it's been an absolute pleasure to lead Acadian over the past nine years and I'm very proud of the company's strong track record.

You should all be very confident that the key operating leadership in both our New Brunswick and Maine operations remains very much in place and that Brookfield as Acadian's Manager and lead shareholder continuous to be very committed to Acadian's long-term success. We thank you for your continued support of Acadian.

That concludes our formal remarks and we're available to take any questions from participants on the line. Operator?

You had a very strong quarter and I'm just curious when you look into Q2 which is typically a weaker period of the harvest. Just what are your expectations given the severe weather we saw in much of Atlanta Canada?

How do you think about the harvest profile for Q2 and then maybe you can drift into the summer?

Thanks, Andrew. With external operating conditions as Reid mentioned, we didn't have anything, we didn't have the significant snowfall that was more prominent on the coastal areas.

So we had very cold weather not so much snow. It did allow us to continue delivering into early April, normally as you know we are able to operate really during most of April and May and sometime with the first weeks at June.

So we did have an opportunity to continue deliveries into April and we also as Brian mentioned, we differed some of our volume, first quarter volumes into the second quarter as resulted managed inventory program for one of our largest softwood sawlog customers. So while second quarter is always a very slow quarter for us, we mentioned the market appears to be reasonable and we will have probably more than a little -- historically being typical of volume and sales in the second quarter.

Okay, that's very helpful and then just on the pricing. The pricing improvements are really notable, even if we factor out the currency, what are your thoughts on the sustainability of pricing because we're at a point where we can argue the housing market data has been lackluster and you're posting really good price realizations.

So what happens if we actually saw the housing market come back? How do you think about the sustainability, where you are now and then in the scenario when things get really positive again from housing perspective?

I think there's a number of dynamics coming on, I think, many industry watchers would suggest that lumber prices have probably reached the bottom. I'm sure you're very aware a number of regions in North America are almost certainly operating below cash costs at today's lumber prices.

And I think that the inventory build up with the first quarter should alleviate significantly through this first half of the second quarter. So I think people will expect some modest improvements and probably only modest improvements in lumber are prices in the second quarter.

As I said, we don't deliver large volumes in the second quarter and most of our customers would appear to want, what we can deliver. In the dynamics that we deal with, our Canadian lumber customers, with the Canadian dollar where it is today are still quite competitive and we would expect that they would want to take volumes and look deep for those volumes but as we've mentioned before our -- the lumber selling prices, the selling prices we receive on a softwood sawlogs for New Brunswick operations are through a Fiber Supply Agreement that's on a six months training basis.

So benefits of recovery lumber would likely be -- more likely to be realized in the first half of next year and second half of this year. Our main softwood sawlog sales are very much direct drive into the market and the question -- a lot of that goes to Eastern Township Canadian saw mills.

We've been very pleased with their ability to prepay for to pay good price in Maine. They have Canadian dollar cost, they don't typically pay export taxes and like owing to their, much of theur log volumes in purchase in the states.

Probably FX is and the competitiveness of U.S. saw millers ability to -- with our highest cost structures and U.S.

log prices in U.S. dollar is what we watched most and so far it's behind us, it's gone very well and does give us some real optimism for how to go on a much stronger market.

That's extremely helpful, thank you.

Good morning and great result. Just a question on -- following up Andrew on log prices, kind of understand what's going on softwood but maybe you can give us some color into what's happening in the northeast there on the hardwood side?

They seem to be particularly strong and -- where do you think that strength last through the balance for the year?

I assume, we mostly talk about hardwood pulpwood that we're making and it's about 35% of our sales. Very strong -- very strong pricing and we had quite a discussion about this in our board yesterday and there is a long standing view that the pulp industry in the North-East is in decline.

Having said that, overall pulp consumption in the region went to closure of the various pulp mills that have closed over last decade, total consumption is pretty much equivalent to what it was 10 years ago and what's happened over the last, again couple of decades as that -- any forest area that could support softwood saw logs have been converted. And also lot of the hardwood inventories that had built up back in the 70's and 80's have been harvested and overall -- and we've got significant conservation areas brought on that have reduced overall supply.

And so really have here a very tight supply of hardwood pulpwood with a fairly stable demand and as a result we've got very good pricing and this has been just a steady increase in pulpwood prices over the last five years since 2010. And we don’t expect it to go much higher, but, if the dynamics would suggest it, we'll continue to be an expensive, a relatively full priced products going forward.

Okay, thanks for that. And just on the growth opportunities, you guy still remain pretty optimistic, although we’ve been talking about this for a little bit.

I wonder if you could rank those areas that you are pursuing that growth in terms of your likelihood of trying to get a meaningful transaction between the U.S., Australasia and Latin America.

Well, to make a comment on your first point, we have been in the Timberlands, we meaning Brookfield's Timberlands management -- in Timberlands acquisition operational ownership for long time now and we certainly believe that we will be successful but we also know we have to be patient and very disciplined and we -- so while we are frustrated with the current pace of acquisitions, we're also very comfortable we're making the decisions. I think the U.S.

is very-very competitive great now as a tremendous amount of capital and large number of managers and almost everything goes to auction. We're certainly very focused on trying to make acquisitions in the U.S.

but we also believe that -- for last year few years has been -- given us any good evidence. Timberlands we went from very full value and may not be the best buyer but we'll continue to try to create proprietary opportunities.

I think our pipeline and it really is a testament to market activity over the last seven years. We have a very active Latin American pipeline.

Brazil as most know the economies struggling very significantly, the currency reais is weak and in Brazil and Uruguay we have some interesting opportunities, I think they would together rank on the top. We are looking in New Zealand, New Zealand is almost all under financial ownership now, opportunities tend to go for a pretty full price but New Zealand would have at least equal opportunities to do anything in the U.S.

right now. There are some larger opportunity expected in Australia, we'll certainly be keenly participating in those, if and when they become opportunities.

These are government sales and crowned probably long term leases to crown harvest rates and we'll definitely be very involve in those. But in the last three of those privatizations they've been very aggressive in competitive processes.

Those are the jurisdictions that we're most focused on. We have looked at a few things in Columbia and Ecuador but those are really very small and it's likely this time.

Great, thanks for the additional details. Cheers.

Thank you, operator. And thank you to all the participants on the call for your interest in Acadian.

We look forward to delivering good results going forward and wish you the best rest of the day. Thank you, bye-bye.