Investors, analysts and other interested parties may access Acadian Timber Corp.’s 2023 Fourth Quarter Results conference call and webcast on Thursday, February 8, 2024 at 1:00PM ET. Please register here or follow the link on our website at www.acadiantimber.com/presentations_and_webcasts, to receive your unique PIN. For those unable to participate, a recorded rebroadcast will be available until 4:00PM ET February 8, 2025.
EDMUNDSTON, New Brunswick, Feb. 07, 2024 (GLOBE NEWSWIRE) — Acadian Timber Corp. (“Acadian” or the “Company”) (TSX:ADN) today reported financial and operating results1for the three months ended December 31, 2023 (the “fourth quarter”) as well as for the full 2023 fiscal year.
“Acadian performed well and generated solid results for 2023, despite challenges resulting from labour shortages, unfavourable weather conditions, and inflationary pressures. Demand and pricing for our products remained stable, reflecting the favourable attributes of Northeast regional log markets,” commented Adam Sheparski, President and Chief Executive Officer. “We are also pleased with the progress made early in 2024 toward our growth objectives, including executing our first long-term agreement related to renewable energy.”
Adjusted EBITDA for the year was $20.6 million, compared to $18.2 million in 2022. Acadian generated $15.0 million of Free Cash Flow during the year, compared to $12.2 million in 2022, and declared dividends of $19.8 million or $1.16 per share to our shareholders. Acadian’s balance sheet remains solid with $14.8 million of net liquidity as at December 31, 2023, which includes funds available under our credit facilities.
Solar Land Lease Agreement
On February 6, 2024, Acadian executed an agreement for the option to lease approximately 10,000 acres of its Maine timberlands for the purpose of the development, construction, operation, and maintenance of a solar powered electric generating facility. The agreement includes inspection, development, construction, and commercial operations terms with escalating leasing fees. The incremental cash flows attributable to the inspection and development terms are modest. However, should the project reach the construction term, which is not expected to occur for several years, the incremental cash flows may become material to Acadian.
Carbon Credit Project
On June 8, 2023, 770,071 voluntary carbon credits were registered on the American Carbon Registry and made available for sale under the project name Anew – Katahdin Forestry Project. The total volume of credits expected to be generated from the project over the 10-year crediting period is 1.9 million credits. Our focus has now turned to the marketing and sale of these credits as well as the registration of future tranches. We completed our first sale in December 2023. While the volume sold was modest at 1,500 credits, the sale demonstrated solid pricing of $24.85 U.S. per credit.
This project has provided valuable experience to the Acadian team and has formed the foundation for potential further carbon credit developments in the future.
Dividend Reinvestment Plan
Macer Forest Holdings Inc. (“Macer”), which owns approximately 47% of the outstanding common shares of Acadian, has to date participated in the Dividend Reinvestment Plan for 50% of dividends payable to it. Macer intends to increase its participation to 100% of dividends payable to it beginning with the next dividend payable on April 15, 2024.
Normal Course Issuer Bid
On February 7, 2024, the Company renewed its Normal Course Issuer Bid by filing a notice of intention with the TSX to purchase for cancellation up to 862,739 common shares representing 5% of the 17,254,798 common shares outstanding as of January 31, 2024. The TSX has approved the Company’s NCIB. The purchases will be made through the facilities of the TSX and/or any alternative Canadian trading systems to the extent they are eligible. The price that the Company will pay for any such shares will be the market price at the time of acquisition. The Company believes that repurchasing shares at the prevailing market prices from time to time is a worthwhile use of funds and in the best interests of the Company and its shareholders. Purchases may commence on February 14, 2024 and shall terminate not later than February 13, 2025. Based on average daily trading volume (“ADTV”) of 5,524 over the last six months, daily purchases will be limited to 1,381 common shares (25% of the ADTV of the common shares), other than block purchase exemptions.
Under the Company’s current NCIB, which commenced on February 14, 2023 and expires on February 13, 2024, the Company received approval from the TSX to purchase up to 847,944 common shares during the period commencing February 14, 2023 and ending February 13, 2024, representing 5% of the 16,958,881 common shares outstanding as of January 31, 2023. The Company has not purchased any of its common shares over the past 12 months.
Review of Operations
Financial and Operating Highlights
Three Months Ended
Year Ended
(CAD thousands, except per share information)
December 31,
2023
December 31,
2022
December 31,
2023
December 31,
2022
Sales volume (000s m3)
231.9
230.5
894.2
917.8
Sales
$
23,815
$
23,755
$
93,477
$
90,473
Operating income
4,312
3,937
19,566
17,865
Net income
11,593
22,002
29,434
35,507
Adjusted EBITDA
4,418
$
4,058
$
20,586
$
18,194
Adjusted EBITDA margin
19%
17%
22%
20%
Free Cash Flow
$
2,811
$
2,000
$
14,999
$
12,151
Dividends declared
4,983
4,897
19,802
19,468
Dividends paid in cash
3,702
3,721
14,868
16,002
Payout Ratio
177%
245%
132%
160%
Payout Ratio with DRIP
132%
186%
99%
132%
Per share – basic and diluted
Net income
$
0.68
$
1.30
$
1.72
$
2.11
Free Cash Flow
0.16
0.12
0.88
0.72
Dividends declared
0.29
0.29
1.16
1.16
Three Months Ended December 31, 2023
During the fourth quarter, Acadian generated sales of $23.8 million, consistent with the prior year period. Sales volume, excluding biomass, increased 4% over the prior year. New Brunswick experienced improved contractor availability and increased volumes, however, contractor availability remained a significant challenge in Maine and resulted in decreased volumes.
The weighted average selling price, excluding biomass, decreased 3% year-over-year mainly due to decreased softwood sawlog prices in Maine and decreased hardwood sawlog prices in both regions caused by weak hardwood lumber markets. Biomass pricing increased 4% over the prior year, but sales volume decreased 17% due to limited processing capacity combined with fiber availability as biomass represents a by-product of our harvesting operations.
Operating costs and expenses were $19.5 million during the fourth quarter, compared to $19.8 million during the fourth quarter of 2022 as a result of lower weighted average variable costs. Weighted average variable costs, excluding biomass, decreased 3% due to lower hauling and fuel costs, partially offset by higher contractor rates, compared to the prior year period.
Adjusted EBITDA was $4.4 million during the fourth quarter, compared to $4.1 million in the prior year period and Adjusted EBITDA margin for the quarter was 19% compared to 17% in the prior year period as a result of lower variable costs. Free Cash Flow was $2.9 million compared to $2.0 million in the same period of 2022 due to lower current income tax expense.
Net income for the fourth quarter totaled $11.6 million, or $0.68 per share, compared to $22.0 million, or $1.30 per share in the same period of 2022. The decrease in net income was largely due to the impact of lower gains on non-cash fair value adjustments in 2023 compared to 2022.
Year Ended December 31, 2023
Acadian generated sales of $93.5 million, compared to $90.5 million in the prior year as a result of increased pricing partially offset by decreased sales volumes. Demand for all products remained stable, however, sales volume, excluding biomass, decreased 5% as a result of challenging operating conditions in Maine including continued limited contractor availability and unfavourable weather conditions.
Acadian’s weighted average selling price, excluding biomass, increased 5%, benefiting from strong softwood sawlog and pulpwood prices, partially offset by decreased hardwood sawlog prices stemming from weakness in hardwood lumber pricing.
Operating costs and expenses were $73.9 million during 2023, compared to $72.6 million in the prior year, reflecting higher variable costs and increased investment in silviculture. Weighted average variable costs, excluding biomass, increased 2% over the prior year due to higher contractor rates partially offset by lower fuel prices.
Adjusted EBITDA for the year ended December 31, 2023 was $20.6 million, compared to $18.2 million in the prior year, as a result of higher operating income for the reasons discussed above, combined with higher gain on sale of timberlands from the sale of 21 acres of timberlands. Adjusted EBITDA margin was 22% compared to 20% in the prior year. Free Cash Flow was $15.0 million compared to $12.2 million in 2022 due to higher Adjusted EBITDA and lower current income tax expense.
Net income for the year ended December 31, 2023 totaled $29.4 million, or $1.72 per share, compared to net income of $35.5 million, or $2.11 per share, in 2022 with higher operating income offset by lower non-cash fair value adjustments in 2023 compared to 2022.
Segment Performance
New Brunswick Timberlands
The table below summarizes operating and financial results for New Brunswick Timberlands for the fourth quarter:
Three Months Ended December 31, 2023
(CAD thousands)
Harvest (000s m3)
Sales (000s m3)
Sales Mix
Results
Softwood
97.0
98.9
54
%
$
7,490
Hardwood
67.2
61.3
33
%
5,884
Biomass
0.1
23.5
13
%
982
164.3
183.7
100
%
14,356
Timber services and other sales
5,432
Sales
$
19,788
Adjusted EBITDA
$
4,942
Adjusted EBITDA margin
25%
Three Months Ended December 31, 2022
(CAD thousands)
Harvest (000s m3)
Sales (000s m3)
Sales Mix
Results
Softwood
93.8
94.5
53
%
$
6,523
Hardwood
60.8
51.8
29
%
5,334
Biomass
32.6
32.6
18
%
1,313
187.2
178.9
100
%
13,170
Timber services and other sales
5,389
Sales
$
18,559
Adjusted EBITDA
$
3,738
Adjusted EBITDA margin
20%
Sales for New Brunswick Timberlands were $19.8 million compared to $18.6 million during the prior year period. Sales volume, excluding biomass, increased 10%, primarily attributable to increased pulpwood volumes resulting from increased market demand and contractor availability. Biomass sales volume decreased 28% over the prior year quarter due to limited processing capacity combined with fiber availability as biomass represents a by-product of our harvesting operations. The weighted average selling price, excluding biomass, for the fourth quarter was $83.50 per m3, or 3% higher than the prior year period, as a result of strong pricing across all products, except hardwood sawlogs, which decreased 13% as compared to the prior year period due to weakness in hardwood lumber markets.
Operating costs and expenses were $14.9 million during the fourth quarter, consistent with the prior year period, with increased volumes offset by lower variable costs. Weighted average variable costs, excluding biomass, decreased 5% reflecting lower hauling and fuel costs, partially offset by higher contractor rates, compared to the prior year period.
Adjusted EBITDA for the quarter was $4.9 million compared to $3.8 million during the prior year period and Adjusted EBITDA margin was 25% compared to 20% as a result of higher operating income for the reasons discussed above.
The table below summarizes operating and financial results for New Brunswick Timberlands for the year:
Year Ended December 31, 2023 (CAD thousands)
Harvest (000s m3)
Sales (000s m3)
Sales Mix
Results
Softwood
375.8
374.1
52
%
$
27,675
Hardwood
244.5
249.2
35
%
23,977
Biomass
25.9
98.0
13
%
3,948
646.2
721.3
100
%
55,600
Timber services and other sales
21,499
Sales
$
77,099
Adjusted EBITDA
$
20,315
Adjusted EBITDA margin
26%
Year Ended December 31, 2022 (CAD thousands)
Harvest (000s m3)
Sales (000s m3)
Sales Mix
Results
Softwood
373.9
381.7
55
%
$
25,951
Hardwood
236.4
230.5
33
%
21,060
Biomass
85.1
85.1
12
%
3,685
695.4
697.3
100
%
50,696
Timber services and other sales
19,333
Sales
$
70,029
Adjusted EBITDA