Interfor (TSX:IFP) held its first-quarter earnings conference call on Friday. Below is the complete transcript from the call.
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Summary
IFP reported a significant improvement in Q1 2026 with EBITDA of $31 million, a $60 million increase from Q4 2025, driven by higher lumber prices and lower conversion costs.
The Thomaston, Georgia project was completed and is ramping up ahead of expectations, enhancing the company’s US footprint and cost position.
IFP announced an $80 million manufacturing cost reduction initiative over the next two years, aiming for a 5% reduction in total manufacturing costs.
Market outlook remains volatile with challenges such as elevated interest rates and geopolitical developments, but the company remains profitable and has strong liquidity to navigate potential risks.
The company plans to focus on divestitures, including BC coast forest tenures and real estate sales, to support the balance sheet and reduce net debt to invested capital ratio to 20% or below.
Full Transcript
Operator
Good morning, My name is Joanna and I will be your conference operator today. Welcome to IFP’s first quarter 2026 results conference call. As a reminder, all participants are in listen only mode today and the conference is being recorded. Following prepared remarks, there will be an opportunity for analysts to ask questions. During this conference call, IFP representatives may make forward looking statements within the meaning of applicable securities laws. Additional information regarding the risks, uncertainties and assumptions of such statements can be found in IFP’s most recent press release and MD&A. I would now like to turn the call over to Mr. Ian Felinger, IFP’s President and CEO. Mr. Fellinger, please go ahead. Thank you operator and good morning everyone. Joining me today is Mike Mackay, our Executive Vice President and Chief Financial Officer.
Ian Fillinger (President and CEO)
We’re both calling in from our Peachtree City office in Georgia where earlier this week we toured our completed strategic project, the fully operational Thomaston Mill. I’ll begin with an overview of the quarter, provide an update on Thomaston, outline our cost reduction and operational priorities, and share our near term and medium term outlook. Mike will then talk you through the quarter in more detail, including segment performance, working capital and capital allocation. Turning to our quarterly overview, Q1 delivered a meaningful improvement compared to the back half of 2025. We reported EBITDA of $31 million, up $60 million from Q4, driven by higher lumber prices across all five regions up 5 to 20% and lower conversion costs despite winter weather conditions. This performance came even as duties, tariffs and logistical constraints, particularly in the U.S. South, remained elevated. Seasonal tightening and industry rationalization has helped rebalance supply and demand to start the year. Turning to Thomaston, our Thomaston, Georgia project was completed in Q1 and the mill started up this quarter. The ramp up is ahead of expectations, reflecting excellent execution by the team. We expect Thomaston to be a top performer in our portfolio and remain on track to achieve full pro forma performance across all KPIs within the next four months. Strategically, Thomaston strengthens our US footprint and enhances our cost position in key markets. As we entered 2026, we set company wide manufacturing cost reduction targets aimed at materially improving our cost position without significant capital requirements. These initiatives represent an $80 million earnings improvement over the next two years, roughly a 5% reduction in total manufacturing costs versus 2025. This program builds on our ongoing productivity and portfolio optimization efforts and will enhance operating leverage as markets recover. Importantly, these benefits are cost driven and not dependent on market conditions. While still early, we’ve made good progress operationally. We continue to optimize working capital in Canada with log inventory carrying values down 36% year over year at a time when inventories typically rise despite winter conditions, conversion costs improved and we continue to adjust mill operating schedules in real time to respond to cost movements and broader macro inputs. Turning to our market outlook, near term markets remain volatile. We are closely monitoring elevated interest rates, trade uncertainty, fuel price volatility and geopolitical developments, all of which can influence pricing.
Ian Fillinger (President and CEO)
Single family construction and repair remodel demand remain challenged, but we saw a seasonal price improvement through Q1 that has continued into early Q2. While pricing in the south has softened somewhat in recent weeks, we remain profitable. On the supply side, industry curtailments this year have been significant, roughly four times the pace of 2025. At the same time, landed costs for third country imports into the US have risen materially. Combined with industry’s willingness to curtail production, these dynamics create the potential for a constructive setup once housing and RR activities stabilize. For Interfor, the implications are clear. Our proactive portfolio management, adjusting operating rates
Ian Fillinger (President and CEO)
at higher cost mills and our relative margin performance positions us to remain cash positive even during deep pricing downturns.
Ian Fillinger (President and CEO)
Our balance sheet and Priorities Our recent balance sheet actions combined with strong liquidity position allows us to navigate the potential pricing and demand risks. We remain disciplined in our capital allocation, completing high return projects while preserving flexibility to respond to market conditions. Our near term priorities are clear. Deliver the Thomason ramp up to full
Ian Fillinger (President and CEO)
pro forma performance, execute the 80 million manufacturing cost reduction program, maintain operating flexibility and adjust production to market signals. Protect the balance sheet and preserve liquidity for volatility and value creation opportunities. With that, I’ll turn the call over to Mike for a deeper review of the quarter.
Mike Mackay (Executive Vice President and Chief Financial Officer)
Thanks Ian and good morning all. From an earnings standpoint, IFP posted positive 31 million of adjusted EBITDA in the first quarter, a significant improvement over the past 2 negative EBITDA quarters. The notable sequential improvement in our results was driven by several factors. From a sales perspective, IFP’s realized selling prices after paying duties and tariffs were approximately 8% higher as higher selling prices in all regions were partially offset by the full quarter of Section 232 tariffs, that came into effect last October.
Mike Mackay (Executive Vice President and Chief Financial Officer)
From a cost perspective, production cost per unit improved by about 2.5% quarter over quarter, continuing the trend in cost improvements that we achieved in Q4. These improvements were driven by higher production volumes due to less market downtime, but also from significant improvements in productivity driven by the company wide manufacturing cost reduction initiatives that Ian alluded to earlier. As a result, production Volumes increased by just over 100 million board feet or 14% over Q4.
Mike Mackay (Executive Vice President and Chief Financial Officer)
A large portion of the increase came from our US Northwest operations which had taken considerable market downtime in Q4 and inventory valuation adjustments did not have a meaningful impact on our change in cost this quarter. However, despite the increase in production, shipments were essentially unchanged from the fourth quarter as logistics continued constraints, particularly trucking availability in the US south drove higher lumber inventory levels compared to year end. The logistics constraints have not been unique to IFP and have impacted most industrial activities across this region. In recent weeks our teams have been making good progress with our strategic trucking partners while also utilizing our flexibility for increased rail shipments. The situation has stabilized today and we’re making slow but steady progress towards reducing inventory levels. Based on current conditions, we’d expect the catch up in shipments could take the balance of Q2 and possibly into early Q3 to fully unwind.
Mike Mackay (Executive Vice President and Chief Financial Officer)
Turning to fuel costs, we’ve seen relatively small impacts to the bottom line. Despite the dramatic rise in oil prices, Inflationary pressure in this area for us is driven mostly by fuel surcharges from log hauling activities in Canada as well as minimal amounts of direct consumption at our facilities. From a cost perspective, we estimate the run rate impact of current oil prices to be approximately Canadian $6 per thousand board feet of production impact and despite these cost headwinds, we were able to reduce our production costs in the quarter.
Mike Mackay (Executive Vice President and Chief Financial Officer)
As I mentioned earlier, from a sales perspective, fuel surcharges are incorporated into our daily and weekly price quotes to our customers and have not and are not expected to going forward have any meaningful impact to the bottom line. Turning to cash flows in our balance sheet, the first quarter almost always sees a notable building working capital in our business and this year was no different. The combination of seasonal logging activities, rising lumber prices and the logistics constraints I spoke to earlier all contributed to our working capital usage of about $23 million in the quarter.
Mike Mackay (Executive Vice President and Chief Financial Officer)
This temporary working cap build combined with the heightened CAPEX …
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