During the first quarter of 2025, we generated net income of $0.6 million or $0.02 per share compared to a net loss of $7.8 million or $0.19 per share in the previous quarter and net loss of $4.5 million or $0.11 per share in the first quarter of 2024.
Lumber Operations
Our lumber production in the first quarter of 2025 totalled approximately 46.3 million board feet, representing operating rates of approximately 77% of annualized capacity. The first quarter production was negatively impacted by one week of single shift configuration during the first week of the quarter as we began ramping back up to a two-shift basis. Hourly throughput achieved 100% of annualized capacity by March month end and we have continued to see that progress into the second quarter of 2025. Our production of 46.3 million board feet represented an increase of 87% from the 24.8 million board feet produced in the previous quarter on a single shift operation, and an increase of 4% from the 44.5 million board feet produced in the first quarter of 2024.
Shipments of Conifex-produced lumber totaled 38.0 million board feet in the first quarter of 2025, representing an increase of 53% from the 24.8 million board feet shipped in the previous quarter, primarily due to increased operating days from resumption of a two shift operating configuration, and a decrease of 15% from the 44.5 million board feet of lumber shipped in the first quarter of 2024 due to transportation challenges specifically related to rail.
Our wholesale lumber shipments were nil in the first quarter of 2025, and first and fourth quarters of 2024, as we have not engaged in wholesale lumber sales since the fourth quarter of 2023.
Revenues from lumber products were $31.3 million in the first quarter of 2025, representing an increase of 47% from the previous quarter and a decrease of 6% from the first quarter of 2024. Compared to the previous quarter, higher shipment volumes due to the return to a two-shift operating configuration and higher mill net realizations on higher lumber market prices contributed to increased revenue. The revenue increase in the current quarter over the same period in the prior year was higher mill net realizations, partially offset by lower sales volume by transportation related challenges in quarter one of 2025.
Cost of goods sold in the first quarter of 2025 increased by 18% from the previous quarter and decreased by 3% from the first quarter of 2024. The increase in cost of goods sold from the prior quarter and decrease from the first quarter of 2024, were primarily driven by shipment volumes. Unit manufacturing costs in the first quarter of 2025 decreased in comparison to both of the comparative quarters due to lower delivered log costs and the benefit of spreading fixed charges over a two-shift configuration versus single shift configuration. We recorded inventory valuation reserves of nil in the first quarter of 2025 compared to nil in the fourth quarter of 2024 and $1.1 million in the first quarter of 2024. Lower inventory cost per unit and higher lumber prices in the current quarter versus the first quarter of 2024 are the reasons for the variance.
We expensed CV and AD duty deposits of $2.8 million in the first quarter of 2025, $1.7 million in the previous quarter and expensed of $1.4 million in the first quarter of 2024. In September of 2024, the duty rate increased from a combined rate of 8.05% to a combined rate of 14.4%. Export taxes during the first quarter of 2025 were higher than the previous quarter due to an increase in overall shipped volume and lumber prices, and higher than the first quarter of 2024 due to the change in duty rate of 8.05% to 14.4%, partially offset by lower shipped volume. In total we have deposited US$40.3 million net of duty sales.
Bioenergy Operations
Our Power Plant sold 47.6 GWh of electricity under our EPA with BC Hydro in the first quarter of 2025 representing approximately 88% of targeted operating rates. Our Power Plant sold 54.2 GWh in the fourth quarter of 2024 and 56.0 GWh of electricity in the first quarter of 2024. Production in the first quarter of 2025 was lower than in the two comparative quarters as a result of operational challenges, primarily driven by an extreme cold snap, that resulted in lost operating days relative to the previous quarter and the first quarter of 2024. The lost operating days were partially offset by above target generation for the remaining days in the quarter that were not impacted by the downtime occurrences.
Electricity production contributed revenues of $7.0 million in the first quarter of 2025, $7.6 million in the previous quarter and $8.2 million in the first quarter of 2024. The reduced operating days were reason for the lower revenues.
Selling, General and Administrative Costs
Selling, general and administrative ("SG&A") costs increased between the first quarter of 2025 and fourth quarter of 2024 and decreased between the first quarter of 2025 and the first quarter of 2024. SG&A costs were $1.8 million in the first quarter of 2025, $1.4 million in the previous quarter and $2.6 million in the first quarter of 2024. The increase in SG&A costs relative to the previous quarter was largely due to an increase in corporate expenses and the decrease relative to the first quarter of 2024 was largely due to a decrease in both regional and corporate related expenditures.
Finance Costs and Accretion
Finance costs and accretion totaled $2.3 million in the first quarter of 2024, $1.9 million in the previous quarter and $1.3 million in the first quarter of 2024. The increase in finance costs quarter over quarter was primarily related to the additional draws of $5 million in January and $3.5 million in March on the Pender Term Loan to facilitate our log inventory build in advance of spring break up. In relation to the first quarter in 2024, our financing costs would have been reflective of a now retired WF Facility, rather than the currently in place Pender Term Loan.
Gain or Loss on Derivative Financial Instruments
From time to time, we may enter lumber future contracts at times to manage our commodity lumber price or foreign exchange exposures. Gains or losses on derivative instruments are recognized as they are settled or as they are marked to market for each reporting period.
There were no outstanding futures contracts in place as at March 31, 2025.
Other Income
We recognized minimal other income in the first quarter of 2025 and in the previous quarter. In the first quarter of 2024, we recognized $3.0 million in other income for insurance proceeds from the loss of our Osilinka logging camp. Insurance proceeds were received in the second quarter of 2024.
Foreign Exchange Translation Gain or Loss
The foreign exchange translation gain or loss recorded for each period on our statement of net income results from the revaluation of US dollar-denominated cash and working capital balances to reflect the change in the value of the Canadian dollar relative to the value of the US dollar. US dollar-denominated monetary assets and liabilities are translated using the period end rate.
The US dollar averaged US$0.697 for each Canadian dollar during the first quarter of 2025, a level which represented a weakening of the Canadian dollar over the previous quarter1.
The foreign exchange translation impacts arising from the variability in exchange rates at each measurement period on cash and working capital balances resulted in a foreign exchange translation loss of $0.3 million in the first quarter of 2025, compared to a foreign exchange translation gain in the previous quarter of $1.0 million and a gain of $0.3 million in the first quarter of 2024.
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1 Source: Bank of Canada, www.bankofcanada.ca
Income Tax
We recorded income tax recovery of $0.7 million in the first quarter of 2025, a $0.6 million expense in the previous quarter and $0.5 million recovery in the first quarter of 2024. The increase in recovery in the first quarter of 2025 relative to the previous quarter is due to an adjustment related to the prior quarters at our fiscal year end 2024, and the recovery in the first quarter of 2024 was comparative relative to the current quarter.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities on our balance sheet and the amounts used for income tax purposes. As at March 31, 2025, we have recognized deferred income tax assets of $6.7 million, compared to $6.0 million in the previous quarter and $3.5 million in the first quarter of 2024.
Financial Position and Liquidity
Overall debt was $84.2 million at March 31, 2025, compared to $77.3 million at December 31, 2024, and $61.8 million at March 31, 2024. The increase in overall debt between the first quarter of 2025 and fourth quarter of 2024 was driven by an additional $8.5 million in draws against the Pender Term Loan, offset by payments against operating leases and repayments made against our loan supporting our bioenergy operations (the "Power Term Loan"). At March 31, 2025, we had $47.7 million outstanding on our Power Term Loan and $3.0 million in leases. The Power Term Loan is largely non-recourse to our lumber operations.
At March 31, 2025, we had available liquidity of $4.2 million, comprised of unrestricted cash. This is an increase from our available liquidity of $3.6 million as at December 31, 2024 and a decrease from our available liquidity of $10.2 million as at March 31, 2024. The change in liquidity in the first quarter of 2025 compared to the fourth quarter of 2024 is due to an amendment to extend the availability under the Pender Term Loan, offset by the additional draws to fund our inventory build. The change in liquidity in the first quarter of 2025 compared to the first quarter of 2024 is due to the addition of the Pender Term Loan offset by the retirement of the WF Facility.
Like other Canadian lumber producers, we were required to begin depositing cash on account of softwood lumber duties imposed by the US government in April 2017. Cumulative duties of US$40.3 million paid by us, net of certain prior sales of such deposits, since the inception of the current softwood lumber trade dispute remain held in trust by the US pending administrative reviews and the conclusion of all appeals of US decisions. We expect future cash flows could be adversely impacted by the CV and AD duty deposits to the extent additional costs on US destined shipments are not mitigated by higher lumber prices.
While there are signs that the macro-environment for the lumber industry is starting to improve, Conifex continues to review its options to improve liquidity. In the event of a sustained market downturn, Conifex maintains flexibility to significantly reduce expenditures and working capital levels and to proactively adjust its lumber production to match demand. At present, we are working collaboratively with our existing lenders to fund our operational working capital investments. We are also evaluating additional financing opportunities to help ensure that we retain sufficient liquidity to fund log and lumber inventories and receivables from the sale of lumber and residual chips, including obtaining additional debt facilities or the sale of assets, including duty deposits.
The Company endeavors to ensure that it has sufficient cash on demand to meet its obligations as they become due by preparing annual capital and administrative expenditure budgets, which are regularly monitored and updated as considered necessary. The Company monitors its risk of shortage of funds by monitoring the maturity dates of existing trade and other accounts payable as well as its credit facilities. The Company’s trade and other accounts payable are subject to normal trade terms.
We monitor our expected liquidity levels and compliance with debt covenants under our Power Term Loan and Pender Term Loan by regularly preparing rolling cash flow forecasts to help ensure sufficient resources are available to meet operational requirements, debt service commitments, and to sustain future business development. Our Power Term Loan also contains certain restrictions on the ability of our power subsidiaries to transfer funds outside of the power entities. We did not have any material commitments for capital expenditures at March 31, 2025. As at March 31, 2025, we had cash of $4.2 million and had drawn $33.5 million from the Pender Term Loan. After adjustments for working capital items, cash flow utilized from operations totalled $6.6 million for the quarter ended March 31, 2025. Working capital as at March 31, 2025, was $22.4 million as compared to $15.5 million as at December 31, 2024, and $14.4 million at March 31, 2024. The Company expects to be able to meet its obligations as they become due in the normal course of business for at least twelve months from March 31, 2025, however, there is a heightened uncertainty due to, among other things, uncertain market conditions including tariffs and rising softwood lumber duty rates
Outlook
North American lumber markets are anticipated to experience continued volatility and uncertainty throughout the remainder of 2025. Duty deposit rate increases, and potential tariffs represent significant challenges. With a robust fibre basket and a steady power generation cash flow stream supporting our lumber manufacturing operations, Conifex is looking to sustain two-shift operations through the balance of 2025.
Conference Call
We have scheduled a conference call on Monday, May 12, 2025 at 8:00 AM Pacific time / 11:00 AM Eastern time to discuss the first quarter 2025 financial and operating results. To participate in the call, please dial toll free 1-800-806-5484 and enter the participant passcode 6042635#.
Our management's discussion and analysis and financial statements for the quarter ended March 31, 2025, are available under our profile on SEDAR+.
For further information, please contact:
Trevor Pruden
Chief Financial Officer
(604) 216-2949
About Conifex Timber Inc.
Conifex and its subsidiaries' primary business currently includes timber harvesting, reforestation, forest management, sawmilling logs into lumber and wood chips, and value added lumber finishing and distribution. Conifex's lumber products are sold in the United States, Canadian and Japanese markets. Conifex also produces bioenergy at its power generation facility at Mackenzie, B.C.
Forward-Looking Statements
Certain statements in this news release may constitute "forward-looking statements." Forward-looking statements are statements that address or discuss activities, events or developments that Conifex expects or anticipates may occur in the future. When used in this news release, words such as "estimates," "expects," "plans," "anticipates," "projects," "will," "believes," "intends," "should," "could," "may," and other similar terminology are intended to identify such forward-looking statements. Forward-looking statements reflect the current expectations and beliefs of Conifex's management. Because forward-looking statements involve known and unknown risks, uncertainties and other factors, actual results, performance or achievements of Conifex or the industry may be materially different from those implied by such forward-looking statements. Examples of such forward-looking information that may be contained in this news release include statements regarding: the availability and use of credit facilities or proceeds therefrom; our level of liquidity and our ability to service our debt; the realization of expected benefits of completed, current and any contemplated capital projects and the expected timing and budgets for such projects, including the build-out of any high-performance computing or data center operations; the growth and future prospects of our business; our expectations regarding our results of operations and performance; our planned operating format and expected operating rates; our perception of the industries or markets in which we operate and anticipated trends in such markets and in the countries in which we do business; our ability to supply our manufacturing operations with wood fibre and our expected cost of wood fibre; our expectation for market volatility associated with, among other things, the softwood lumber dispute with the US; potential negative impacts of duties or other protective measures on our products, such as antidumping duties or countervailing duties on softwood lumber, or tariffs, duties or other protective measures on the Canadian economy in general; the expected rates of such antidumping duties, countervailing duties, tariffs, and other duties imposed by the U.S. government; the outcome and/or effects of the U.S. government's investigation into the national security implications of importing timber, lumber, and related products; continued positive relations with Indigenous groups; the development of a longer-term capital plan and the expected benefits therefrom; demand and prices for our products; our ability to develop new revenue streams; the outcome of any actual or potential litigation; future capital expenditures; changes in stumpage fees and the uncertainty regarding future timber availability and costs resulting therefrom; our expectations regarding interest rates and U.S. dollar benchmark prices. Material factors or assumptions that were applied in drawing a conclusion or making an estimate set out in the forward-looking statements may include, but are not limited to, our future debt levels; that we will complete our projects in the expected timeframes and as budgeted; that we will effectively market our products; that capital expenditure levels will be consistent with those estimated by our management; our ability to obtain and maintain required governmental and community approvals; the impact of changing government regulations and shifting political climates; that new home construction demographics in the US will improve; that transportation services by third party providers will continue uninterrupted; our ability to ship our products in a timely manner; that there will be no additional unforeseen disruptions affecting the operation of our Mackenzie power plant and that we will be able to continue to deliver power therefrom; our ability to obtain financing on acceptable terms, or at all; that interest and foreign exchange rates will not vary materially from current levels; the general health of the capital markets and the lumber industry; and the general stability of the economic environments within the countries in which we operate or do business. Forward-looking statements involve significant uncertainties, should not be read as a guarantee of future performance or results, and will not necessarily be an accurate indication of whether or not such results will be achieved. A number of factors could cause actual results to differ materially from the results discussed in the forward-looking statements, including, without limitation: those relating to potential disruptions to production and delivery, including as a result of equipment failures, labour issues, the complex integration of processes and equipment and other similar factors; labour relations; failure to meet regulatory requirements; changes in the market; potential downturns in economic conditions; fluctuations in the price and supply of required materials, including log costs; fluctuations in the market price for products sold; foreign exchange fluctuations; trade restrictions or import duties imposed by foreign governments; availability of financing (as necessary); and other risk factors detailed in our 2024 annual information form dated March 12, 2025 and our management's discussion and analysis for the year ended December 31, 2024 available on SEDAR+ at www.sedarplus.ca and other filings with the Canadian securities regulatory authorities. These risks, as well as others, could cause actual results and events to vary significantly. Accordingly, readers should exercise caution in relying upon forward-looking statements and Conifex does not undertake any obligation to publicly revise them to reflect subsequent events or circumstances, except as required by applicable securities laws.
