Interfor Corporation Exits Québec Operations for Greater Focus
Interfor Corporation (“Interfor” or the “Company”) (TSX: IFP) has decided to exit its operations in Québec, Canada. This strategic shift includes the sale of its three manufacturing facilities and the closure of its corporate office in Montréal. As the forest products industry continues to evolve, this move allows Interfor to channel its efforts towards the most promising areas for future growth.
Details of the Divestiture
As part of this exit strategy, Interfor is set to finalize an agreement to sell its sawmills located in Val-d’Or and Matagami, along with the Sullivan remanufacturing plant based in Val-d’Or, to Chantiers Chibougamau Ltée (“CCL”), a well-established forestry company based in Québec. This sale represents a significant restructuring of Interfor’s operations, aligning with the Company’s long-term vision.
Estimated Transaction Price and Terms
The estimated purchase price for the facilities is approximately $30 million in cash, contingent upon adjustments based on certain working capital items as of June 30, 2024. CCL will also assume specific liabilities pertaining to the acquired businesses. Furthermore, Interfor has entered into a multi-year supply contract for Machine Stress Rated (“MSR”) lumber to support its I-Joist engineered wood products facility in Sault Ste. Marie, Ontario.
Impact of Trade Disputes
It is worth noting that this transaction does not encompass any countervailing or anti-dumping duty deposits linked to the ongoing softwood lumber trade disputes between the US and Canada. Interfor retains all historical duty deposits accrued up to the closing date, which currently total approximately US$56 million.
Closure of Corporate Office and Focus on Remaining Operations
Alongside the sale, Interfor intends to permanently close its corporate office in Montréal in the near future. This decision aims to fully leverage the synergies created by the acquisition of EACOM Timber Corporation, which was announced in November 2021, and improve operational efficiencies across its remaining locations.
Ongoing Operations in Other Regions
Despite this exit, Interfor remains committed to its operations in Ontario and New Brunswick, where it owns and operates five sawmills and one I-Joist EWP facility in Ontario, as well as two sawmills and a woodlands management business in New Brunswick. The Company aims to optimize these operations moving forward.
Management Statements Regarding the Transition
“After careful consideration of our options concerning the Québec operations, we believe the sale to CCL serves the best long-term interests of Interfor,” stated Ian Fillinger, President & Chief Executive Officer. Ongoing limitations on the availability of economic fiber, exacerbated by record forest fires, have played a crucial role in this challenging decision. By divesting from Québec, Interfor can concentrate resources on its Eastern Canadian sawmills, which are competitively positioned to thrive in an evolving market.
Production Capacity and Recent Performance Metrics
The Val-d’Or and Matagami sawmills have a combined production capacity, rated for two shifts, of about 255 million board feet annually. However, these facilities produced only 206 million board feet over the twelve months leading to June 30, 2024, reflecting an 80% utilization rate. Recent performance has further declined, with utilization plummeting to approximately 50% since early August.
Future Outlook and Impairment Charges
The completion of this sale is subject to standard conditions, including regulatory approvals, and is anticipated to close in the fourth quarter of 2024. In addition, Interfor expects to report an impairment charge related to this transition in its third-quarter results.
Professional Guidance and Advisory Support
To navigate this complex divestiture process, Interfor has engaged RBC Capital Markets as its exclusive financial advisor. Their expertise will provide crucial support as the Company transitions away from its Québec operations.
About Interfor Corporation
Interfor is recognized as a growth-driven forest products company with extensive operations across Canada and the United States. With an annual lumber production capacity of approximately 5.0 billion board feet, Interfor presents a varied range of lumber products that cater to markets worldwide. For further insights into Interfor, visit their website.
Frequently Asked Questions
What prompted Interfor to exit its Québec operations?
Interfor’s decision was influenced by challenges in accessing economic fiber and the desire to focus on more profitable operations in Ontario and New Brunswick.
What facilities are included in the sale to CCL?
The sale includes the Val-d’Or and Matagami sawmills, as well as the Sullivan remanufacturing plant in Val-d’Or and all associated operations.
How will this sale affect Interfor’s lumber production capacity?
The sale of these facilities will reduce production capacity by approximately 5% of Interfor’s total capacity but allows the company to concentrate on more efficient operations.
When is the expected closure date for the corporate office in Montréal?
Interfor plans to close its Montréal corporate office within the next few months as part of its strategic realignment.
What type of support is Interfor receiving during this transition?
Interfor has retained RBC Capital Markets as its exclusive financial advisor to assist with the divestiture process and ensure a smooth transition.
