Interfor Q2 Earnings Call Highlights

Interfor (TSE:IFP) reported a sharp improvement in second-quarter operating performance, generating C$92 million in adjusted EBITDA as stronger lumber pricing, higher production volumes and lower manufacturing costs supported one of the company’s strongest quarterly results in nearly four years.

President and CEO Ian Fillinger said the quarter reflected “strong execution across our business,” citing improved lumber markets, progress on a company-wide cost-reduction effort, stronger mill productivity and disciplined inventory management. He said the company remains cautious amid uncertainty surrounding the softwood lumber trade dispute and is focused on further strengthening its balance sheet.

Pricing, Production and Costs Improve

Executive Vice President and CFO Mike Mackay said realized selling prices rose about 11% from the first quarter, with all five operating regions benefiting from stronger market conditions. Production increased by more than 70 million board feet, or 8% sequentially, led by higher output in the U.S. South following the ramp-up of the Thomaston, Georgia, mill and more normalized operations in the U.S. Northwest.

The increased output was partly offset by the indefinite curtailment of two Ontario mills. Shipments exceeded production during the quarter, helping Interfor reduce inventories despite continued logistics challenges in some markets.

Manufacturing costs per unit declined about 1% from the first quarter and were down 6% from full-year 2025 levels, Mackay said. He attributed the improvement to higher operating rates, the Thomaston ramp-up and productivity gains from performance-improvement initiatives. He said manufacturing costs were down about C$41 per thousand board feet compared with 2025 levels.

Fillinger said Thomaston has been transformed into one of Interfor’s top-performing assets and is expected to be fully ramped up by year-end. The mill was operating at roughly 97% of its pro forma production target, he said, adding that it had recorded several periods above that target.

Cost Program Tracks Toward C$80 Million Target

Interfor’s previously announced two-year, company-wide cost-reduction program remains on track toward its C$80 million annualized target, according to management. Fillinger said first-half results were strong enough to indicate the company is currently operating at a run rate consistent with achieving the full target this year, but emphasized that the initiative remains a two-year program.

When asked about the expected timing of savings, Fillinger agreed that a roughly even split between 2026 and 2027 was a reasonable baseline assumption.

Mackay said much of the benefit has already been captured through productivity efforts, performance improvements and portfolio optimization. The company’s focus now is on sustaining those gains over the longer term rather than expecting substantial additional structural reductions.

Balance Sheet, Capital Spending and Divestitures

Improved earnings, working-capital management and lower capital spending contributed to a stronger financial position in the quarter. Net debt declined, while Interfor’s net debt-to-invested-capital ratio improved to 36.7% from 38.3% at the end of the first quarter. Available liquidity rose to just over C$440 million.

Interfor expects total 2026 capital expenditures of approximately C$90 million. Mackay said spending in the second half will be almost entirely maintenance capital, representing an implied quarterly run rate of roughly C$15 million to C$16 million, or C$60 million to C$65 million annually.

The company continues to prioritize leverage reduction. Mackay said Interfor expects proceeds from planned asset sales, including C$20 million to C$25 million from the sale of British Columbia coastal forest tenures and approximately C$40 million from real estate associated with two former U.S. South facilities. He said the main uncertainty is the timing of the transactions, though Interfor expects the proceeds over the next 12 months.

Looking toward 2027, Fillinger said the company has identified potential smaller, high-return projects in Eastern Canada and the U.S. South, but will remain cautious on timing until balance-sheet objectives are met.

Market Outlook and Corporate Support Changes

Mackay said benchmark lumber prices maintained positive momentum into the beginning of the third quarter and order files remained solid. However, management said it is planning cautiously for the second half because the summer construction season can bring increased volatility in demand and pricing.

Fillinger said Interfor’s order file extends several weeks into August and remains solid, although conditions differ by region and some markets are more exposed to typical August seasonal softness. He said the company does not currently anticipate the need for capacity reductions, but would adjust production if market conditions warranted it.

Management said industry supply rationalization that began in prior years continued through the first half of 2026, contributing to a more balanced lumber market despite macroeconomic, trade and geopolitical uncertainty. Fillinger also described repair-and-remodeling demand as steady, while saying customer inventory positions across sales channels appear more “hand-to-mouth” than in the prior year.

Interfor also recently announced plans to transition certain corporate support roles to its Peachtree City, Georgia, office, where many of its operations are located in the Central, Eastern and Atlantic time zones. Fillinger said the changes will occur gradually, primarily through attrition and future hiring, and are intended to better align support functions with the business.

He said the shift does not represent a re-domiciling of the company and does not alter Interfor’s commitment to Canadian operations, employees or communities. Burnaby will continue to serve as the company’s corporate headquarters, he said.

About Interfor (TSE:IFP)

Interfor is a forest products company with operations in Canada and the United States. The Company has annual lumber production capacity of approximately 4.4 billion board feet and offers a diverse line of lumber products to customers around the world.

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