Mark Bishop - President and Chief Executive Officer Mabel Wong - Chief Financial Officer

Hamir Patel - CIBC Paul Quinn - RBC Capital Markets

Thank you operator and good afternoon everyone. Welcome to Acadian's second quarter 2017 conference call.

As we noted in our press release effective July 27 after a year in the role of two financial officers Wyatt Hartley has agreed to take on new responsibilities with Brookfield Asset Management and will be transitioning from his role in Acadian. We have been very fortunate to have such a confident, intelligent senior manager in Wyatt.

So on behalf of the entire Acadian team, I want to thank him personally for his dedication and significant contribution to Acadian and wish him well and all the best going forward. Effective July 27, Mabel Wong has replaced Wyatt as Acadian’s Chief Financial Officer and is also based in Toronto.

Ms. Wang has also been a key member of Brookfield’s infrastructure team for the past ten years and has held a number of senior finance roles for the organization.

Mabel is a chartered accountant and worked at one of the big four accounting firms prior to joining Brookfield. I'm completely confident that Acadian will remain in very confident hands, Mabel’s transition to the CFO role will be immediate and seamless.

So with that introduction, I will pass the call over to Mabel to introduce the quarter.

Thank you Mike and good afternoon everyone. Before we get started, I would like to remind everyone that in responding to question and speaking about our second quarter financial and operating performance, as well as our outlook for the remainder of 2017, we may make forward-looking statements.

Our business activities are subject to known and unknown risks and as a result future results may differ materially from our forward-looking statements. And for further information on known risk factors, I encourage you to review Acadian's annual information form dated March 29, 2017 and other public filings of Acadian which are available on sedar.com and on our Web site.

I will begin by outlining the financial highlights for the second quarter, and then Mark will provide comments about operations, market conditions, and our outlook for the balance of the year. So to start, Acadian continue to perform well and recorded solid results for the three-month period ended June 24, 2017.

Adjusted EBITDA was $2.6 million and benefited from strong seasonal demand, favorable spring conditions and sales of higher and better use land in May. However, this is well below than $3.3 million of adjusted EBITDA generated in the prior year.

While log sales volumes and the weighted average log selling price for the quarter were largely consistent year-over-year operating cost increased primarily due an increased average haul distances. I should also add as many of you would be aware that Acadian traditionally experiences low levels of operating, marketing and selling activity during the second quarter of each year, owing to the spring saw period that causes much of the infrastructure to be temporary inoperable.

And so as a results, year-over-year various across the second quarter due tend to be less meaningful. First the first six months of 2017, our payout ratio was 98% which is relatively consistent with our long-term target of 95%.

In the quarter net sales were $12.6 million compared to $13.7 million in the prior year, primarily due to lower selling prices for biomass products. Total log scale volumes increased 1% compared to prior year driven by a 30% in hardwood, pulpwood sales volume from favorable spring harvest conditions and largely offset by the impact of the softwood sawlogs inventory management program that was not in place this year with one of our major customer.

The weighted average log selling price remains flat as the benefit from the favorable change in mix in foreign currency were offset by weaker pricing for hardwood products. Adjusted EBITDA margin decreased to 21% from 24% in the prior year primarily due to the higher operating cost from longer average haul distance that I mentioned previously.

However, the impact of this was partially offset by a contribution from sales higher and better use land in May. Moving into segment results, New Brunswick net sales for the second quarter were $9.8 million compared to $11.7 million in the prior year, excluding biomass, log sales volumes of 132,000 cubic meter represent a 7% decrease from the prior year.

Our softwood sales volumes were impacted by the absence of the inventory management program with a major customer as I mentioned. This was partially offset by the benefit from increase demand for hardwood, pulpwood primarily reflecting stronger than normal sales in the beginning of the quarter due to favorable winter harvest conditions.

The average selling price for the quarter of $70 per cubic meter was largely in line in prior year period. Although the average price of softwood sawlogs increased 3% over the same quarter of 2016, the average pricing also benefited from the sales mix achieved in the period and these positive effect were offset by weaker pricing for hardwood product.

New Brunswick’s adjusted EBITDA was $2 million even during the quarter compared to $3.9 million in the prior year primarily reflecting two items I previously mentioned. First the absence of an inventory management program at one of our major customers and secondly an increase in variable cost due to longer average haul distances.

Our Maine operation generated net sales for the second quarter of $2.8 million compared to $1.9 million in the prior year, as log sales volumes of 36,000 cubic meters increased 54%. This increase was driven primarily by favorable spring harvest condition relative to the same quarter of 2016.

Now for pricing, the weighted average log selling price in U.S. dollar translate approximately $56 per cubic meter down 4% year-over-year, mostly due to a 9% decline in softwood sawlog prices, resulting from weak customer demand for our softwood residual.

However, hardwood pulp prices stabilized during the quarter as demand strengthened, but customers replenishing inventory which were at higher than normal levels during the first quarter. Maine’s adjusted EBITDA for the quarter was $0.9 million compared to a loss of $0.2 million in the prior year quarter and adjusted EBITDA margin increased to 32% from negative 9%.

The overall improvements of these measures are mainly due to the benefit of higher and better use land sales coupled with the impact of the increase sales as I mentioned earlier. And looking at our balance sheet, Acadian’s cash position continues to be strong with $20 million of cash on hand at the end of the second quarter.

This represents a $1 million increase from the year-end as our operation generate strong cash flows net of dividend paid. Furthermore, our financial position is solid with net liquidity of $98 million which includes fund available under our revolving facility as well as standby equity commitment from the Brookfield.

During the quarter, our Board declared dividend of $0.2750 per share consistent with the prior quarter and up 10% in the prior year. That concludes my remarks on this quarter’s financial highlights and I will now turn the call back over to Mark.

Thank you, Mabel. During the quarter, Acadian’s operation had no recordable safety incidence among employees or contractors.

As you all are aware, Acadian takes safety in workplace very seriously and we continue to strive for continuous improvement in our employee contractor safety performance. Mabel did a thorough job of outlining the key elements of the quarter’s operation at each of Maine and New Brunswick, but I’ll make a few additional comments.

First relative to New Brunswick. I’ll note again, that we took advantage of strong hardwood markets and good operating conditions during the first half of the year with volumes ending up little higher than last year by comparison.

Again I’ll remind you that we remained very focused on managing to target annual harvest levels for the full-year. A couple of comments with respect to Maine, we have referred in past successive quarters on variance due to change in average haul distances.

It largely reflected changes in our pulpwood customer mix in the region. We do see our customer mix really on the pulp and paper side starting to stabilize, would expect minimal variances year-over-year going forward.

In some cases we are now serving certain customers with higher volumes or in some cases those that we did not traditionally supply. It’s important to note that we all recognize there is a long-term preferred supply to a solid core of quality counterparties who have continued to reinvest and upgrade their facilities.

Also on Maine, it’s important to highlight that we remain focused on several incremental initiatives to improve performance. For example, we have recently initiated used of a previously unutilized rail sighting, allowing us to economically move a portion of softwood, pulpwood into small sawlog markets and providing additional services, such as weigh scale which will enhance margins.

We continue to remain active in recreational real estate markets, but we will continue to progress in a measured fashion to ensure balance with demand. Finally, you will note from our results, we used a minor amount of cash this quarter $0.5 million to acquire a good value the last remaining common undivided interest in our Maine estate, that improves the flexibility overall value of that estate.

As you are aware one of the Acadian’s key strength is a highly diverse resource, which supplies well capitalized, deep and - end-use markets which includes softwood sawtimber, hardwood sawtimber and hardwood puplwood. Northeast, North American softwood dimension sawmills represent about one-third of Acadian’s end-use market and are the primary market for our softwood sawtimber.

Our hardwood timber market remains strong and stable and unaffected by U.S. trade initiatives.

We remain encouraged that hardwood pulpwood markets remain historically strong and that Acadian continues to be a preferred partner for hardwood fiber supply to this important market segment. Acadian’s domestic biomass markets appear to have stabilized although we anticipated recovery and export shipments for my New Brunswick operations appears to have been delayed until spring of 2018.

With the underlying fundamental driver, pent-up household formation continuing to strength, economic forecasters continue to call for steady growth in U.S. housing starts with year-over-year improvements averaging about 5% for 2017 and over 8% for 2018.

Residential home improvements are expected also to remain strong, as a result growth expectations for demand in North American sawtimber remain in 3% per year range over the next three years to support expanding domestic construction. As you are aware following the announcement in April of Preliminary Countervailing Duties averaging 19.9%.

Average Preliminary Anti-Dumping Duty of 6.9% were announced at the end of the second quarter. Notably, the U.S.

Department of Commerce also announced that the end of the quarter that all Atlantic provinces with the exception of New Brunswick would be excluded from duty investigation, a significant departure from past disputes. We standby with the rest of the Canadian industry and the Federal on Provincial governments and our significant disagreement with the Preliminary Countervailing and Anti-Dumping determinations.

In addition, we take significant exception to the DOC’s treatment of New Brunswick’s lumber producers. Subsequent to the DOC anti-dumping announcement, industry press reports have revealed that preliminary framework for negotiated market based 10 year settlement has been agreed to between Canadian and U.S.

government officials over the past weeks. And that both sides have a significant interest in resulting the dispute prior to the first round of talks aimed at revamping NAFTA.

At this time however, there is little visibility on a definitive final agreement being reached and importantly how Canadian officials were to portion market share restrictions across Canadian Provincial lumber producers and in fact whether the entire Atlantic region will again be exempted from any final settlement as in the past. We highlight that in past cycles during the period of strong U.S.

lumber demands duties and posts against Canadian softwood lumber producers were more easily pass through U.S. buyer in a form of higher prices.

Given the current robust U.S. housing market, we do not foresee any imminent material negative impact on Acadians business.

We would like to take this opportunity to remind that investors that Acadian benefits from a strong balance sheet, diverse and resilient markets and a high capable operating team that remains committed to continuously improving our financial and operating performance. We thank you for your continued support to Acadian Timber Corp.

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

Hi good morning. Mark could you speak to how sawlog prices and sawlog volumes have trended in New Brunswick this year, as the countervailing and then the anti-dumping duties came on for your sawmilling customers.

Well I think in terms of our performance, you have seen our first two quarters, we certainly saw in advance sort of the beginning of the spring break up period, higher inventories going into the ramp up out of that period than we have in the past and that was clearly in response to concerns about where duties are going to end up. But we continue to have all of our major customers operating and expected to operate through the construction season and certainly through year-end.

we've not seen any major downtime or minimal downtime other than the maintenance required downtime announced. So performance has really been in step with our expectations and reflective of strong markets.

Pricing, again I think you have heard before the impact of softwood pulpwood market and somewhat lower end-use opportunities for residuals impacting our sawtimber prices, but other than that your sawtimber prices remain strong and consistent with the strong market.

Thanks, that’s helpful and Mark I was just hoping to get your current thinking about the potential universe M&A opportunities out there right now and do you see any opportunities for Brookfield from the Eldorado asset sales that appear to be currently underway.

With respect to Eldorado, I'm not sure how aware you're with that company and I won’t spend a whole lot of time on it, but as I understand it and we know the company well, they have really a significant amount of standing timber but don’t own a lot of the underlying real estate anymore. Their business model is somewhat different than timber is and it probably does reflect overtime the access to capital that company has had and their focus on reinvesting in the second line rather than owning the land underneath.

So, they do participate in timer leases. Obviously u are aware we have operations in the area and we know the company well, and as I understand it, there is now and I think it’s been publicly announced that they are speaking with another major Latin American company for a potential transaction, but there is not much more than I can really comment or know about there.

Otherwise, I think you probably know as much as I do about sort of the major transactions that have recently gone on and are going on in the key markets and some of these are reported in the industry press. There is only very few large scale transactions currently in the U.S.

and I see that we would expect to come on stream but haven’t and appear somewhat delay, but most of the opportunities are that the timberlands on the market are very small estates and mostly in regions where we don’t see an interesting opportunities specifically for Acadian. And more broadly for Brookfield as I think you are aware, we continue to look at opportunities in each of the same jurisdictions that we have always talked about in terms of Oceania, Latin America and the U.S.

and every quarter do participate in both proprietary discussions and broader option processes. So, as we see opportunities potentially for Acadian to participate in those, obviously at the right time we will communicate what those opportunities might be and what our thoughts are.

Great. Thanks Mark.

That’s all I had. I’ll turn it over.

Thanks Hamir.

Yes. Thanks very much and good morning Mark and welcome Mabel.

Maybe a question just on softwood lumbering and your customers in New Brunswick. Whether you guys have taken a look at the economic viability of this operations now that they are paying the full 26.75% tax?

Yes. Obviously Paul, we’re not sure how this is all going to end up.

But currently we have I would say a small handful of customers that most of our volume goes to in New Brunswick and all are operating very well and don’t have any eminent plans to shutdown. They have certainly tried to refocus more of their volumes domestically and so far have been successful and continue to do that and run really on a two shift basis.

So, longer-term clearly a lot of this really depends on what happens with lumber demand and prices and where they end up and clearly the exchange rate is somewhat of a concern, but clearly will have something backed up pricing as well. But so far our customers continue to operate well and are not certainly talking about taking downtime or having concerns about needing to shut permanently in any way at all.

I mean I think all of them certainly believe that the combination of the Provincial and Federal government discussions will continue to represent their interest and ultimately we expect along with them that we will see the right outcome here. But again, I’ll emphasize that clearly softwood, sawtimber is important for us, it’s very important.

But we do have a very diversified market with a strong hardwood base and so the ultimate impact on Acadian for some reduced operations, if that comes to pass, it’s certainly less than many probably understand given the nature of our business.

Okay. And then you guys referenced potential deal between Canada and the U.S.

in softwood lumber, have you got any assurance that New Brunswick will be treated like past deals and be exempt?

Well I don’t think any of us have any assurance about any this Paul and certainly if we did we would be probably more optimistic in our tone. We are concerned and clearly this is going to be political, not just political between Canada and the U.S.

but political between the Feds and he Provinces and it is difficult to understand given a lot of political issues internally in Canada to see where this lands. The JDI investigation is an interesting additional data point, but I’m not sure that any of us including the BC companies have any assurances on where this is going to land.

Okay. And then just lastly maybe a couple of comments on overall timber markets.

Haven’t seen any transactions out in East Coast maybe you could comment if there is anything that’s small that you forecasted and then we’re seeing real volatility obviously a lumber, but a real divergence between Canadian lumber price whether its Eastern or Western [SCF] (Ph) and Southern, you know pinewood, selling pine really making it move significantly lower and we are also seeing in those marketplaces lower log price in which would suggest that the economics of timberland owners in the U.S. sales are compromise and there is a raging debate right now on timberland values why they are holding up and if they are holding up and just would like your opinion on where you think the future timberland markets are heading.

It’s a big question, Paul. I think in terms of addressing your last comment, I mean as you are aware we have had concerns about the valuation of the U.S.

southern markets for some time. I think we have had several conversations about that and Paul continue to be surprised given the a lack of strength and recovery in the Southern pine sawtimber markets.

And I guess it’s very well understood now, the drain or the [indiscernible] is going to cause a significant overhang for sometime of supply that will play into this, but clearly there has been a lot of step up in capacity and investment in newer more efficient capacity in the U.S. south and I think that will continue to allow them to put pressure on lumber prices.

More broadly, we continue to see very, very strong competition for timberlands in all regions and clearly that’s why we are not seeing the valuations in the U.S. south decline, but we do continue and are surprised by ultimately in our competition and valuations that are put on timberland and I think the most notable one that we have seen more publicly is Weyerhaeuser sale and Uruguay.

I think some of the analysts that also cover us certainly were aware and cover of Weyerhaeuser that that transaction would have traded somewhere in and around the 18 to 20 times range for an asset that has really I would say a much more challenged track record and a region that has challenging infrastructure. And when you compare it to the consistency that Acadian's delivered over the last decade, for instance the disparity and valuations between that transaction in the region versus what we're seeing in our own back yards its disturbing and it again reflects the amount of interest in the asset class globally and as you know this is a very small asset class relative to many of the other alternative infrastructure asset classes.

So we don’t see that competition going away, but we certainly are concerned about the lack of I think true understanding of the economics behind some of these valuations in some of the markets. So in short, we do think that we may see a correction in certain markets that is one that stands out by far the most and we do agree with your view there.

Great. Thanks for the additional detail.

Best of luck.

Thanks.

Again I would like to thank all of you for participating in the call, it’s clearly a busy reporting period certainly during the summer and again thanks for your participation and look forward to talking to you next quarter. Have a great day.