GreenFirst’s Earnings Call: Optimism Amid Challenges

GreenFirst Forest Products Inc. ((TSE:GFP)) has held its Q4 earnings call. Read on for the main highlights of the call.

GreenFirst Forest Products Inc.’s recent earnings call painted a picture of cautious optimism, highlighting both significant improvements and looming challenges. The company reported a strong improvement in cash generation and operational efficiency, with a notable rise in lumber prices. However, these positives were tempered by a significant net loss, potential challenges from US tariffs, and a decrease in sales volume. The company has paused some strategic plans to better understand the tariff impacts, reflecting a prudent approach amid uncertainties.

Significant Cash Generation

GreenFirst Forest Products Inc. demonstrated robust cash generation, amassing approximately $55 million during the fourth quarter of 2024. This was achieved through a rights offering and asset sales, underscoring the company’s strategic financial maneuvers to bolster its liquidity.

Improved Debt Position

The company significantly enhanced its debt position, ending Q4 2024 with no drawdown on the Asset-Based Lending (ABL) facility and $27 million in cash on the balance sheet. This improvement marks a pivotal step in strengthening GreenFirst’s financial stability.

EBITDA Improvement

GreenFirst reported an adjusted EBITDA improvement, narrowing its loss from $4.9 million in Q3 2024 to $900,000 in Q4 2024. This positive trajectory indicates effective cost management and operational efficiencies.

Cost Reduction Achievements

The company achieved notable cost reductions, decreasing the cost of goods sold by $15 per thousand FDM and SG&A by $12 per thousand. These savings are expected to continue into 2025, reflecting GreenFirst’s commitment to operational efficiency.

Increase in Lumber Prices

Lumber futures saw a significant increase, rising to $680 per thousand, with substantial price hikes in Q4 compared to Q3. This surge in prices positively impacted GreenFirst’s revenue streams.

Operational Efficiency

GreenFirst achieved the lowest manufacturing cost in its history during Q2 2024 and surpassed 30 production records throughout the year. These milestones highlight the company’s focus on enhancing operational efficiency.

Positive Year-over-Year EBITDA Improvement

The company reported a positive year-over-year EBITDA improvement of $38 million and a net income improvement of $18 million compared to 2023, showcasing a strong financial recovery.

Improved Cash Flow Management

GreenFirst enhanced its liquidity with a year-over-year cash flow improvement of over $50 million, reflecting effective cash flow management strategies.

Net Loss from Continuing Operations

Despite these improvements, GreenFirst reported a net loss from continuing operations of $26.6 million in Q4 2024, highlighting ongoing financial challenges.

Impact of US Tariffs

The potential impact of US tariffs poses a significant challenge, with concerns over their effect on cash flow and net income. This has led GreenFirst to pause certain strategic plans to better assess the situation.

Decrease in Lumber Sales Volume

The volume of lumber sold decreased by 12% due to weather-related conditions impacting the supply chain, presenting a challenge for the company.

Negative Impact from Byproduct Sales

The sale of byproducts negatively impacted GreenFirst by $11 million for the year, driven by difficulties in finding markets for chips.

Deferred Tax Expense

GreenFirst incurred a deferred tax expense of $4 million due to adjustments related to the defined pension plan, adding to the financial complexities of the year.

Challenges with US Tariffs

Concerns over new US tariffs continue to loom, with potential impacts on cash flow, net income, and demand due to higher prices. GreenFirst remains vigilant in navigating these challenges.

Forward-Looking Guidance

Looking ahead, GreenFirst plans to pause selected projects to assess the potential impacts of US tariffs but remains committed to its strategic growth plans. Despite reporting a net loss of $26.6 million from continuing operations in Q4 2024, the company achieved a positive year-over-year EBITDA improvement of $38 million. With lumber prices on the rise and improved production metrics, GreenFirst is poised to navigate the challenges ahead.

In conclusion, GreenFirst Forest Products Inc.’s earnings call reflects a balanced view of optimism and caution. While the company has made significant strides in cash generation and operational efficiency, challenges such as US tariffs and decreased sales volume remain. Investors will be keenly watching how GreenFirst maneuvers through these hurdles while maintaining its strategic growth trajectory.