During the 1Q 2022, Acadian Timber Corp. generated sales of $26.6 million, compared to $25.9 million in the prior year period. The weighted average selling price, excluding biomass, increased 6% year-over-year benefiting from strong sawlog prices and improved pulpwood prices, driven by strong demand. Sales volume, excluding biomass, increased 6% due to higher softwood sales. Biomass sales volume decreased 12% due to lower domestic sales.
Adjusted EBITDA of $6.9 million during the 1Q 2022 was in-line with the prior year period. Adjusted EBITDA margin for the quarter was 26% compared to 27% in the prior year period. Free Cash Flow was $5.0 million, consistent with the prior year period.
Net income for the 1Q 2022 totaled $4.2 million, or $0.25 per share, compared to $5.8 million, or $0.35 per share, in the same period of 2021. The variance in net income compared to the prior year period was primarily the result of the application of hedge accounting during the 1Q 2022, which resulted in changes in the unrealized foreign exchange gain of $1.4 million on Acadian’s U.S. dollar-denominated debt being recorded in other comprehensive income rather than through profit and loss.
“Acadian posted a solid start to the year benefiting from strong pricing and demand for sawlogs, together with improved pricing and demand for softwood pulpwood. Deliveries were negatively impacted by reduced trucking capacity, but we expect to catch up on this volume through the remainder of the year,” commented Adam Sheparski, President and CEO. “Although we faced significant inflationary pressures during the quarter, our focus on merchandizing our products to obtain the highest margins available and making improvements throughout the business has begun to take hold.”
Market Outlook
Interest rates have begun to rise, which may have an impact on longer term demand for end use products. However, a large cohort of the U.S. population is entering their home buying years, a low inventory of homes is for sale, and repair and remodel activity is steady; together, these are expected to drive strong demand in the short to medium term. Consensus forecast is for approximately 1.61 million U.S. housing starts in 2022, as compared to 1.60 million in 2021.
Inflation is expected to continue weighing on financial results, as operating costs such as fuel have increased significantly. Acadian is in the process of recovering some of these additional costs from its customers, although there is a delay in the flow through. Positive end use market dynamics combined with benefits from new customer relationships is expected to support demand and pricing for softwood and hardwood sawlogs for the remainder of the year. Significant demand and pricing for high grade hardwood sawlogs is expected to have positive impacts as inventory is merchandized and delivered to customers during the 2Q.
Hardwood pulpwood demand is expected to remain stable through 2022 with increasing customer confidence and market demand for hardwood pulp. Meanwhile, markets for softwood pulpwood are beginning to improve, although an abundance of regional inventories of both softwood pulpwood and sawmill residuals may impact demand over the long term.
Acadian Timber Corp. is one of the largest timberland owners in Eastern Canada and the Northeastern U.S. and has a total of approximately 2.4 million acres of land under management.
