GreenFirst Forest Products Inc.

Thank you very much, Joanna. And good morning, everyone.

And welcome to our Q4 2024 earnings call. I'm Joel Fournier, the Chief Executive Officer of GreenFirst Forest Products.

And today I'm joined by Peter Ferrante, our CFO; and Michel Lessard, our President. Overall, much of the work started earlier in the year came to fruition during Q4.

In fact, during the quarter, GreenFirst significantly improved its debt position and strengthened its balance sheet. Many of the initiatives launched in previous quarter materialized in Q4.

In Q4, we completed a right offering, backstopped by Ravenwood, Bob Robotti, a value investor, raising over $25 million. We also sold our 2021 and 2022 duties for CAD24 million and we also sold the Kenora lands for another $5 million.

So in total, we generated approximately $55 million in cash during the quarter, positioning ourselves for future growth. By the end of the quarter, we also had no drawdown on the ABL and we held $27 million in cash on our balance sheet.

So all of those things are a significant accomplishment from previous quarter. With the capital raised in Q4 and despite a readiness to execute our $50 million strategic plan, the company will pause selected aspects of the plan while we monitor and better understand the potential impact of the US tariff.

On a positive note, Lumber futures have risen as high as $680 a thousand, covering the full potential 25% tariff expected in early 2025, indicating that it potentially absorbed the tariff. The company ended the fourth quarter with a net loss from continuing operation adjusted for one-time events.

However, our EBITDA improved compared to Q3 2024 with a loss of $900,000 versus $4.9 million in Q3. To summarize the quarter relative to Q3 2024, our production was higher.

In fact, Q4 production reached $103 million FDM higher than Q3 2024 and slightly above Q4 last year. However, the rate of improvement slowed down due to weather related events.

The mitigation plans have been implemented for next time. Our cost of goods sold was slightly higher due to lower sales volume, which was impacted by weather related disruption of the supply chain typical in northern Ontario.

And to finish, the SG&A remained below our announced target of $40 per thousand and we did finish the Q4 at $29 a thousand, so a significant improvement. If I want to focus a little bit more on the 2024 highlights.

In addition to improving our debt position as mentioned previously and rising cash flow initiatives mentioned earlier, the company achieved several key milestones in 2024. Cost reduction, we did reduce the cost of goods sold by $15 per thousand FDM, a significant improvement and we did also lower our SG&A by another $12 per thousand with futures figure savings expected in 2025.

Inventory management. We were able to reduce our log inventory without compromising our operation.

On the products, quality and pricing, we did improve the quality of the product we produce, leading to another $12 per thousand increase in our mill net due to better high quality mix or product we produce. Operational achievement.

We successfully executed the Kap Paper spin-out as we previously announced last year and we did broke over 30 production records in 2024 in our sawmills. Manufacturing efficiency.

We did achieve the lowest manufacturing cost in the company's history in Q2 of 2024. Leadership and financing.

We did hire a highly experienced CFO, Peter Ferrante, and we did extend our ABL for an additional four years. GreenFirst will continue to foster a culture of continuous improvement, which we see as essential for maximizing returns on capital investment.

During our last earnings call, as some of you recall, we announced a projected $8 million in potential cost savings with various initiatives. By year end, we exceeded this target achieving $9.1 million in site improvement compared to 2023.

And those improvements are excluding CapEx related, so it's purely initiative non-CapEx driven. In addition, with everything mentioned above, the company improved its competitiveness by approximately $40 per thousand.

So creating a culture of continuous improvement is essential in the lumber sector and we intend to continue this momentum into 2025. The market did improve in Q4 compared to Q3 with strong price increase during the quarter.

Price rose from $606 to $680 per thousand in Q4. The western based price also rebounded significantly, increasing from a low of $338 in July to $570 by March 10th, so a significant increase.

We are currently operating well above our breakeven EBITDA. Housing starts for January were slightly below expectation and lower compared to December but we are forecasting a slight increase into 2025.

The demand for repair and remodeling remains high compared to historical norm, driven by higher home equity, aging housing stocks and other factors. Finally, as mentioned earlier, GreenFirst achieved significant improvement in 2024 compared to 2023 and we are well prepared to navigate the upcoming potential US tariffs that have been mentioned.

We have a comprehensive plan in place, focusing on prudent cash flow management and government relation initiatives to support the industry. We remain committed to executing the strategy effectively.

I will pass it over to Peter. Thank you.

Thank you, Joel. And good morning to everybody.

Please refer to the cautionary language regarding forward-looking information in our Q4 MD&A. The company reported a net loss from continual operations of $26.6 million in the fourth quarter 2024 with an adjusted EBITDA of negative $900,000 on total revenues of $70 million.

While generating approximately [$3 million] from the sale of non-core assets during the quarter, we incurred losses of $16 million on the same sale of these assets and a deferred tax expense of $4 million due to adjustments related to the defined pension plan. Excluding these two items, the company's net loss from continuing operations would have been $6.6 million.

Before the quarter, revenue decreased by 1% quarter-over-quarter compared to Q3 2024, driven by a 12% increase in the average realized price per lumber, which averaged at approximately $680 million -- $680 per thousand board feet in Q4 2024 compared to $606 per thousand board feet in Q3 2024. The strengthening of the US dollar relative to the Canadian dollar accounted for 14 of the 74 per thousand board feet increase.

The volume of lumber sold was down 12%, primarily due to weather related conditions impacting our supply chain in Northern Ontario as Joel previously described. Turning over to the fiscal 2024 year.

We reported a net loss from continual operations of $21.6 million along with an adjusted EBITDA of positive $15 million. Lumber sales increased by $9.3 million, pricing at a positive impact of $17 million, with average prices for the year reaching $631 per thousand board feet in 2024 compared to $589 per thousand board feet in 2023.

Included in these positive price impact is the strengthening of the US dollar relative to the Canadian dollar, which contributed $3 million or $8 per thousand board feet. This was offset by volume, which had a negative impact of $8 million, a [shipments] drop from 422 million board feet to 409 million board feet.

The sale of byproducts had a negative impact of $11 million for the year as the entire industry in Ontario is facing a challenge in finding homes for chips, following the closure of several pulp and paper mills lately. Our 2024 manufacturing cost profile improved, resulting in a reduction of $15 million in our cost of goods sold before depreciation.

Higher production volumes combined with several production records achieved across the sawmills led to an average annual cost of sales of $674 per thousand board foot in 2024 compared to $689 per thousand board foot in 2023. This cost improvement contributed $7 million of the overall improvement while $10 million of the improvement came from lower shipments.

The company reported a year-over-year reduction in duties of $15 million as a result of cash deposit rates starting at 20.23% in 2023 and decreasing to 8.05% in August of '23. These rates were then adjusted upwards to 14.4% in August, September of 2024 in line with other peers in our industry.

Additionally, 2024 included a $14.2 million recovery related to 2022 duties paid following the US Department of Commerce final determination of its fifth administrative review while the similar recovery for 2023 was $6.9 million regarding the 2021 duties paid. Early in 2024, the company implemented several initiatives aimed at reducing selling, general and administrative expenses.

As a result of these initiatives, we delivered a savings of approximately $5.8 million in selling, general and administrative expenses compared to 2024. The combination of these factors contributed to a positive year-over-year EBITDA improvement of $38 million and net income from continuing operations, an improvement of $18 million versus 2023.

From a cash flow perspective, excluding cash used by the discontinuing operations of Kap Paper totaling $16.8 million in 2024 versus a cash provided of [200,000] in 2023, the company's cash used in operating activities from continuing operations was $6.2 million in 2024 compared to $58.3 million in 2023, an improvement of over $50 million year-over-year. We closed 2024 with working capital of $64.4 million.

This is inclusive of the $27.8 million of cash we had as compared to $47 million and inclusive of $2.4 million cash from continuing operations last year, representing a year-over-year improvement of $17.5 million. In addition, as of December 31, 2024, the availability under our revolving portion of our credit facility was $39.3 million less $8.3 million and outstanding letters of credit with no borrowings at year end, resulting in a net undrawn amount of $31 million.

As of December 31, 2023, the availability under our credit -- the revolving portion of our credit facility was $51.9 million less $5.4 million in outstanding letters of credits and at the end of last year -- 2023 had -- we had $23 million in drawings, resulting in a net undrawn of $23.5 million. This is an additional improvement of $7.5 million year-over-year.

We also utilized the equipment financing portion of our credit facility to finance purchases for key strategic projects. As of December 31, 2024, $13.7 million of the $25 million facility was drawn, leaving excess availability of $11.3 million in the months to come.

We continue to manage our liquidity through this volatile lumber markets and harvesting season, which requires significant investments in our materials. We do this prudently by maintaining tight inventory management at the mill level, supplemented by drawdowns against our asset based lending facility to cover seasonal expenses.

Our lending facility, which was amended and extended to September 2028 is secured by borrowings against our inventory. As a result, higher inventory levels are supported by the credit facility during this harvesting season.

This concludes my remarks and we'll now pass it over to Joel.

Thank you very much, Peter. I want to thank everyone for joining the call.

And we will now answer any questions that have come through. So we do have a couple of questions here.

This is Joel. I'll start with the first one.

With the recent announcement around tariffs, what does GreenFirst management believe the impact will be on the industry? I will pass this one over to Michel Lessard.

Thanks, Joel. And thanks for the question.

So I would start in mentioning that the Canadian industry has deposited more than $7 billion in duty, so that's a pretty big amount. So now about the new tariffs announced by President Trump, that could potentially impact the company directly on cash flow and net income.

So that means less funds available to reinvest, modernize and also upgrade mills to remain competitive. But in addition to that also this could potentially drive less demand due to the higher prices.

But that being said due to the uncertainties surrounding the imposition of tariffs and delays in their implementation, the lumber market is currently experiencing some call fusion. So that leads some buyer to adopt a wait and see approach in the short term.

About -- I would just add about the lumber supply chain that is very tight right now. So when the tariffs were announced, we saw -- so the lumber future prices go up to compensate for the 25% tariffs.

So unfortunately, because of this the US customers will be the one that's going to have to pay or will pay the impact for these tariffs. So whether -- greater questions is what will the impact on the US economy be knowing that there's an actual significant causing shortage that is estimated around 4 million units.

So the question is raised.

Thank you, Michel. We do have another question here.

It's around Trump and tariffs, no surprise here. So from -- as stated that the US does not need lumber from Canada.

I think we all heard that on the news. What is your opinion regarding whether the US lumber industry can meet US demand?

I will answer this question. I will start by sharing that the US market share represents 50 billion board feet, so it's a lot of wood.

Currently, US lumber production meet around 71% of lumber demand in the United States. Canada provide approximately 24% and there is some lumber coming from offshore to complete the demand.

Europe, mainly and other places. If some of you remember, in the best ever lumber market that we had during COVID, the US lumber industry was only able to increase their productivity by around 3%.

So when the price of lumber were very, very high, some US producers tried to increase their capacity but they were not able to because of high turnover, difficult to find people and other factors. So it's very difficult to see how they could add another 15 billion board feet of production or the equivalent of at least 60 brand new sawmill.

And I put -- so if the US wants to be to sufficient and they want to fill the gap of 15 billion board feet, which is what Canada sent them, building 60 new sawmill will take years and years to do. Our past history told us that four to six sawmill can be built in one year.

So it could take several years before we close that gap. In addition, they may not have the ability -- the availability for wood supply.

The manpower, we know it's an issue and the mill to consume chip and byproduct is a challenge as well. So to do this, it will require a substantial amount of capital expenditure and resources, which would take a significant amount of time to establish and operate the mills.

We do have another question here. What will the company do or has already done to mitigate the impacts of the recently announced tariff?

I will continue and answer this one as well. The company has built a solid balance sheet during 2024 to execute on its capital expenditure plan to grow the business as we previously mentioned.

However, going forward, we will pause certain elements of our plans temporary to better understand the impacts of the tariff and to continue to preserve our strong balance sheet. We believe we have enough cash to face the upcoming potential tariffs.

The company has a strong customer base in Canada and we will look at the opportunity to grow this market as well as explore international markets. However, the US remain the main market.

On a positive note, as already mentioned, when the tariffs were announced, lumber price went up quickly and lumber futures caught up with the full 25% tariff. Finally, we are working very closely with our provincial governments and wood associations in ways to better support the industry with the potential tariff.

The Ontario government has laid out a clear plan to support the industry. Okay.

This is Joel again. We do have a couple of more questions.

The one here is around Kap Paper. So with the completion of the Kap Paper spin-out, how does this impact the company?

And there's also a subsequent question with Kap Paper regarding, if anything happened to Kap Paper, what will be the situation with GreenFirst to find a place to send its wood chip. So I will start to answer the first part of the question.

The significant achievement will help GreenFirst to focus on its core business, which is the sawmill. We always wanted to separate the two entity so they can focus specifically on their strategic plan and execute it.

In the past, some of our assets were designed to produce wood chip for Kap, because it was the main driver. But with that spin out, it's not the case anymore.

We are now looking to improve our recovery and reduce our log cost in our mill as an example of better focus. However, Kap Paper is still a customer of GreenFirst for wood chip and residue.

We expanded our customer base for residue to include other provinces to mitigate the risk and achieve a greater customer diversity. I will -- for the next question to elaborate on chip and what will be the situation if something happens to Kap Paper.

I will pass it over to Michel Lessard.

Thanks Joel. I would start to say that in the last 20 years, so the -- in all entire years always, so there were 22 pulp and paper mills 20 years ago again, and that went down to three pulp and paper mill that we see actually, and Kap Paper is one of them and the only one also in the East of the province.

So that remains a [priority] for the Ontario government to remain these pulp and paper company. Again, I don't want to speak for the Ontario government but it's what we hear.

And also that remains also a priority for the sawmills company to see these pulp and paper company remains in operation. You saw -- so I was talking about and you saw also the government support that Kap Paper got, so that's a very good indication also for the support for the government also to maintain that mill long term.

Talking about us specifically for GreenFirst, we have a long term contract also with Rayonier Advanced Materials, it's something that we spoke in the past. So the contract also mentioned clearly that if Rayonier Advanced Materials, they don't use our chip supply so then they have to dispose it, so they can bring it to somewhere, but it's their responsibility to take care of it.

The other thing I would add also is the decrease that we saw in the Province of Quebec opening also some opportunities for us to be able to sell chips in Quebec. And there is also a program that came out from the government to aid -- to help on the longer distance also to people to sell the chips there.

So that's -- again, that was a very great opportunity. And the last point I would mention is we're looking also different -- our opportunities for our byproducts.

So again, there's many things on the table. We remain very confident and we have different plans, different opportunities.

So we don't see that as a problem in the future.

Thank you, Michel. We do have a couple of more questions here.

I will go with the next one. With your announced slowdown of capital expenditure spend, how does this impact your mission to become one of the top quartile lumber producer in North America?

I will answer this one quickly. The announcement regarding the CapEx only temporarily [passed] selected project until we better understand the impact of the tariff.

I think it's prudent to put a few projects on pause and see and understand what will be the impact of those potential upcoming tariffs in April. However, our goal remains the same.

We aim to be top quartile producer and become the largest wood producer in Ontario. And we're going to continue and remain focused on continuous improvement and projects with a high payback.

Quickly here, switching to another question. Do you see any trends in demands of SPF, southern yellow pine versus Europe wood?

I can take this one quickly as well. Eastern SPFs, spruce, pine, first -- has always been the preferred species for contractor and home centers in general and this is what we produce at GreenFirst.

This species is stronger, lighter and easier to work with. In fact, it transact at a premium on the market over southern yellow pine, which mainly are produced in United States.

Over the past few years, we saw a slight increase in SPF production, but this was driven by lower availability, a slight decrease of SPF production, but this was driven by lower available log supply mainly in BC and Quebec. So we saw all the [mill procurement] that have been in both of those products.

In addition, due to shortage of supply, we have seen a slight increase with Europe and part into North America. We do have another question here.

How satisfied are you with the results of the various cash generating activities in the quarter such as the Kenora asset sale, I will pass this one over to Peter Ferrante.

Good morning, everyone. And very good question.

I also think there's another add-on in terms of Kenora, so I'll try to answer that question at the same time. As it relates to the Kenora transaction, the [30.25] [Indiscernible] satisfied with the $5 million transaction for the land portion of it.

It's one of our elements of our continued effort to sell noncore assets at acceptable value to our shareholders. So the add-on question about a little bit more in terms of specifics on the sales of terms, we got $2.9 million at the contract and the remaining $2.1 million is in interest bearing vendor take back, $500,000 is to be collected or received in July of this summer and the last 1.5 million will be collected December 2024 -- [2034].

Just to add on to this question in terms of some of our activities, in addition to the sell of Kenora, we also sold during the quarter, $17 million of our entitlement to refunds, including accrued interest to duties of 2021 and 2022 exports to the US and a value comparable to what others in the industry also transacted. Our cash and liquidity generating activities during the quarter also consisted of $25 million rights offering that Joel shared and the extension of our revolving portion of our credit facility.

So all of these activities that we've done in the quarter, I think the combination of all this and also some otherwise, we've strengthened our financial position while remaining focused on our core business and enhancing our ability to continue to pursue strategic CapEx initiatives. So in general, yes, we are satisfied with our activities in the last quarter.

Okay. I think -- this is Joel.

I think this concludes all the questions that we received on the call or most of the questions that we received on the call today. So I would like, on behalf of GreenFirst and the team here, I would like to thank you very much for your time.

And have a good day. Thank you.