Interfor Q3 Earnings Call Highlights

Key Points

• Interfor reported CAD 77 million in adjusted EBITDA for Q3 2026, supported by 3% higher lumber production, 2% improved realized prices and lower unit costs. Year-to-date production costs were down 4% from full-year 2025 levels.
• The company reduced its net debt-to-invested-capital ratio to 35.5% and ended September with more than CAD 460 million in available liquidity. Debt reduction remains the capital allocation priority, with potential asset-sale proceeds of CAD 20 million to CAD 25 million each from B.C. forest tenures and U.S. South real estate.
• Interfor expects a gradual lumber-market recovery, citing subdued demand but reduced industry supply; cost inflation remains a near-term headwind. Preliminary 2027 capital spending is CAD 75 million to CAD 100 million, primarily for maintenance.

Interfor TSE: IFP reported CAD 77 million in adjusted EBITDA for the third quarter of 2026 as higher lumber production, modestly improved selling prices and lower unit costs supported results, executives said on the company’s earnings call.

President and CEO Ian Fillinger said the company expects a gradual recovery in lumber markets rather than a significant near-term improvement. Demand remains subdued, he said, while industry curtailments and closures are reducing supply.

“While uncertainty remains elevated, we are making solid progress strengthening our business and our balance sheet,” Fillinger said.

Production and Cost Improvements

Executive Vice President and Chief Financial Officer Mike Mackay said realized selling prices increased 2%, with slight improvements across most regions. Production rose by 25 million board feet, or 3%, and shipments were essentially in line with production.

The production increase was driven primarily by the U.S. South, where the Thomaston mill ramped up, and by more normalized operating schedules in the British Columbia Interior. Lower production in Ontario partly offset those gains.

Fillinger said Thomaston reached full pro forma production ahead of schedule and that its transformation is complete. He described the mill as one of Interfor’s top-performing assets.

Production costs per unit remained below full-year 2025 levels, with year-to-date costs down 4%, Mackay said. He attributed the improvement to higher operating rates, the Thomaston ramp-up and productivity gains from a company-wide cost reduction program. Fillinger said the two-year program remains on track to achieve its CAD 80 million annualized target.

Mackay cautioned that fuel and other cost inflation has been notable this year and is expected to remain a headwind in the fourth quarter and potentially into 2027.

Debt Reduction and Asset Sales

Improved earnings and non-core asset sales helped strengthen Interfor’s financial position, Mackay said. Net debt declined, and the company’s net debt-to-invested-capital ratio improved to 35.5%, down 120 basis points from the second quarter and 330 basis points from the first quarter. Available liquidity exceeded CAD 460 million at the end of September.

Debt reduction remains the company’s capital allocation priority, although its pace will depend on lumber prices and market conditions, Mackay said.

Interfor also expects proceeds from the sale of British Columbia Coast forest tenures and U.S. South real estate. Mackay estimated each group of assets could generate CAD 20 million to CAD 25 million. He said the tenure sales were likely to occur over the next several months, most likely into early 2027, with some timing delays related to the British Columbia election.

For the real estate, Mackay said one sale closed in the third quarter and pointed to late in the fourth quarter or early in the first quarter for the remaining process.

Market Outlook and Spending Plans

Benchmark lumber prices have moderated in recent weeks, Mackay said. He cited housing affordability, consumer and builder confidence, broader economic uncertainty and normal seasonal softness as constraints on demand.

At the same time, he said continued supply reductions have contributed to a more balanced market. That supply discipline and a recent 10% reduction in duty rates on Canadian imports to the U.S. provide some optimism heading into 2027, he said.

Interfor’s preliminary 2027 capital spending plans range from CAD 75 million to CAD 100 million, primarily for maintenance. Fillinger said the company is also considering several small discretionary projects across the U.S. and Canada, with spending flexible depending on business performance. Many of those projects are supported by government grants, tax incentives or other benefits, he said.

Asked about Canada’s federal budget, Fillinger called it an important recognition of forestry as a strategic industry. He said Interfor expects more details on industry priorities when the federal Forest Sector Transformation Strategy is released in the coming weeks.

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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