Good morning, ladies and gentlemen. Welcome to the Conifex Timber Inc. Q2 2025 Results Call. I would now like to turn the meeting over to Mr. Ken Shields. Please go ahead.
Thank you, Patrick, and good morning, everyone, and welcome to our call covering our second quarter and first half 2025 results. Right next to me, we've got President and Chief Operating Officer Andrew McLellan, and I'm also joined by Chief Financial Officer Trevor Pruden. The three of us look forward to responding to any questions shareholders and analysts may have after we run through our prepared remarks. Dealing quickly with the housekeeping item, we will be making forward-looking statements and references to non-IFRS measures, and therefore, call your attention to the warning statements set out on pages one and two of the MD&A that was released earlier this morning. Our second quarter results are typically weaker than our first quarter results, and there's two main reasons for that.
One is that BC Hydro paid the reasonably high power prices in Q1, when the reservoir levels are low, but they pay us the lower prices in Q2 when the reservoir levels are high as a result of the spring snowmelt. The second reason is that we always work to schedule our annual maintenance shutdown at our power plant in Q2 when power prices are low, and this enables us to optimize our average price realization and improve EBITDA on an annual basis. Our Q2 results were below the guidance we provided you on our last call, and an important reason was that our maintenance shutdown was extended compared to what you're thinking. You will note that our Q2 power production was 38% lower than in Q1 and 22% lower than in Q2 of last year. Our maintenance costs in the most recent quarter were higher as well.
The negative EBITDA that we incurred in our power generation business contributed to the $3.2 million consolidated EBITDA loss we reported in Q2 of 2025. In the quarter, benchmark prices for SPF 2x4s averaged something like 5% lower in Q2 than in Q1, while the prices that we received for the wider width dimensions were more than 10% lower in Q2. Those were the two main factors that led to lower revenues. However, our Q2 revenues and EBITDA were further hampered by the 4% strengthening of the Canadian dollar relative to the U.S. dollars that occurred during the quarter. Tallying up the first six months of 2025, we reported a positive EBITDA of $1.7 million, and that's after taking a foreign exchange translation loss of $800,000 on U.S. dollar- denominated overpayments for duties that are lodged with the U.S. government.
Speaking of duties, net of rights, the duty deposits that we sold a few years ago, we paid $41.7 million, which is something like CAD $57 million in cumulative duty deposits. Over the 2017- 2022 period, the cash deposit rates exceeded the final duty rates established by the U.S. Department of Commerce. This resulted in some overpayments building up, and the overpayments, coupled with the interest we're owed on the overpayments, presently total approximately CAD $11 million. This amount is shown as a long-term receivable on our balance sheet. All of the other duty deposits have been fully expensed. Looking at our current equity market capitalization, these refundable overpayments are equivalent to almost 80% of our present market cap, while the $57 million in cumulative duty payments we've paid are equivalent to approximately four times our current market cap.
If there is a future trade settlement, which includes the partial repayment of duties on deposits, we believe that Conifex shareholders will capture a proportionately greater value of pre-shown benefits compared to the shareholders of the other publicly traded lumber companies. The potential for our superior results reflects our ability to shelter income taxes as well as our extremely low trading price of something like 20% of our book value per share. Having quickly reviewed our recent results and duty balances, we'd like to move on and share with you some thoughts we have on the key drivers shaping our EBITDA outlook for the second half of 2025. We're aware that some leading forward product analysts in Canada are forecasting negative EBITDA in the second half of 2025 for certain publicly traded lumber producers.
We believe we will generate positive EBITDA in the second half of 2025, excluding one-time or any non-recurring charges. An important reason for this belief is that our power plant has been running very well since it came back online early in July. I saw the biggest challenge we face is the need to pay combined countervailing and anti-dumping duties on U.S. lumber exports of 35.19%, up from 14.4% in the first half. When we record our results for Q3, this duty-raised decision by the U.S. Department of Commerce is expected to trigger a one-time non-cash charge to our income statement of approximately $8 million. We've looked at a variety of scenarios to estimate our results for the balance of 2025. A mid-case projection assumes that higher duty deposit rates remain in effect, but there are no additional Section 232 or other tariffs imposed.
We continue to believe that many lumber industry observers have underestimated the magnitude and consequences of the recent yields and curtailments and supply contraction in SPF lumber in the region that we operated in, namely the northern interior of BC . Year-to-date lumber production in that region is 24% lower than it was in 2024. Against that backdrop, let me take a minute of your time to illustrate how increases in lumber prices are offsetting increases in duty deposit rates, and this is occurring at a period when U.S. lumber consumption is experiencing some softening in demand. If you go back to Q2, at a 14.4% deposit rate and an average benchmark lumber price for SPF of around $470, after paying duties, we would have realized $411 per thousand board feet.
At the current 35.19% deposit rate and the current benchmark price of $535, our absolute duty price realization is $396 per thousand board feet on U.S. exports. It follows that, to date, there's been a $65 per thousand increase in the benchmark price, and that price relief has been sufficient to enable us to recoup all but $15 per thousand board feet of the increase in duty deposits on exports to the U.S. Looking at lumber futures, they're suggesting that cash SPF prices may soften in the very near term, but there's evidence that we will be at higher levels at year-end. To us, this suggests that there's a potential for a full pass-through of the increase in duty deposit rates and that our customers will be paying the preponderance of the higher duty burden.
We trust that this review helps explain our view why the supply contraction in SPF is likely to support SPF lumber prices that will enable cost-competitive sawmillers in Northern BC to achieve positive cash flow margins even at current duty rates. Before taking your questions, on our last call, I expressed our gratitude and deep appreciation for the support our company enjoys from our employees, lenders, the community of McKinsey, and other stakeholders. This morning, we wish to express our appreciation to the federal government for its recent announcement offering funding for loan guarantees and supporting investments in product and market diversification. One key point of differentiation of Conifex is that, unlike other forest products companies, we do not have a credit facility in place to finance our inventories and receivables, and consequently, we have modest levels of liquidity.
These federal government programs are coming, in our view, at exactly the right time given the challenges the British Columbia interior lumber industry is facing now. We have various initiatives underway to improve our economic sustainability, and the initiative we have underway may be accelerated once additional details are released about the federal government program. We will provide you additional updates on the federal government program as additional information becomes available. In conclusion, we believe our differentiated and high-quality fiber supply, coupled from the contributions under the $100 million we have invested in power generation assets, provide us the foundation we need to sustain a cash-flow positive lumber business at our site in Mackenzie.
We thank you for your interest in Conifex, and Andrew, Trevor, and I look forward to responding to any questions analysts and shareholders may have, and in that regard, we'll turn the meeting back over to Patrick.
Thank you. We'll now take questions from the telephone lines. If you have a question, please press star one. You may cancel your question at any time by pressing star two. Please press star one at this time. If you have a question, there will be a brief pause while the participants register for questions. Thank you for your patience. Once again, you may press star one if you have a question. There are no questions on the phone right now, and we'd like to turn the meeting back over to Mr. Shields.
Okay. Those of you that have listened in, thank you for your interest in our company, and we look forward to our next call, hopefully extending our ability to generate positive EBITDA. Enjoy the rest of your day.
Thank you. The conference has now ended. Please disconnect your lines at this time, and we thank you for your participation.