Good morning, ladies and gentlemen, and welcome to GreenFirst's first quarter of 2025 results conference call. Please note that all lines are muted to prevent any background noise. During this conference call, GreenFirst representatives will be making certain statements about future financial and operational performance, business outlook, and capital plans. These statements may contain forward-looking information or forward-looking statements within the meaning of Canadian securities law. Such statements involve certain risks, uncertainties, and assumptions, which may cause GreenFirst's actual or future results and performance to be materially different from those expressed or implied in these statements. Additional information about these risks, factors, and assumptions is included in GreenFirst's MD&A and annual AIF, which can be accessed on the company's website or through SEDAR+. After the speaker's remarks, there will be a question-and-answer session. Please submit your questions through the online portal.
I will now pass it over to Joel Fournier to begin the management presentation.
Thank you very much, Joanna, and good morning, everyone, and welcome to our Q1 2025 earning call. I'm Joel Fournier, the Chief Executive Officer of GreenFirst Forest Products. Today, I'm joined by Peter Ferrante, our CFO, and Michel Lessard, our President. We are pleased to report a positive EBITDA of $5.1 million and a net income of $920,000 for Q1 2025. These results represent an improvement compared to last quarter, Q4 2024, when we recorded a negative EBITDA of $913,000 and a net loss from continuing operations of $26.6 million. The stronger performance this quarter was primarily driven by higher lumber prices. However, both shipment and production were lower than expected due to uncertainty created by tariff development and weather-related disruption in Northern Ontario. We began the quarter facing uncertainty following the announcement of the potential 25% tariff on Canadian lumber by the U.S. government on February 1st, 2025.
Just three days later, this tariff was removed. However, implementation was again threatened on March 6, and finally on April 2. April 2nd, lumber was officially excluded from the proposed tariff going forward, which is good news. This back-and-forth created a negative buyer sentiment for the quarter, which negatively impacted our sales volume. During the quarter, lumber price increased, effectively absorbing most of the potential tariff risk, which had been over and above the current duty we paid. While this helped mitigate the financial impact on producers, it unfortunately contributed to higher home construction costs for American consumers. Towards the end of Q1, as the market began to stabilize, we observed a return to a more normal sales level. We continue to exercise caution in our cash management strategy.
The U.S. Department of Commerce has initiated an investigation under Section 232 of the Trade Expansion Act to determine the effect on U.S. national security of import of wood products. The report with its findings is expected by November 2025, which could lead to potential imposition of new tariffs. We currently pay countervailing and anti-dumping duty, CVD and ADD, at a combined rate of 14.4%. This rate is expected to increase to approximately 34.45% starting late Q3, which will primarily impact the end consumer. As a reminder, GreenFirst made the strategic decision to sell its right for potential reimbursement for duty paid in 2021-2022 in Q4 2024. We continue to believe this was the right decision for the company. To summarize the quarter relative to Q4 2024, if we start with production, it was slightly lower. Q1 production reached 101 million FBM, slightly lower than Q4 with 103 million FBM.
Some of our mills finished under target due to extreme weather conditions, but we do have a mitigation plan to avoid downtime for next winter. January and February were lower for production, but we saw a pickup in March. In fact, the Kapuskasing sawmil l broke four production records during the month. On the sales volume side, we finished lower at 90 million FBM in Q1 versus 93 million FBM in Q4 2024 due to the economic uncertainty we mentioned previously. SG&A remained well below our announced target of $40 per thousand, and we finished the quarter at $29 per thousand. Inventory ended up the quarter higher than expected, overall with our finished goods up, mainly because of the uncertainty created by the tariff, and our log inventory was lower and in better position. Quality of wood continued to improve in Q1.
We did operational change, and the overall grade we're producing went up, driving our mill net approximately $30 per thousand higher overall. Capital expenditure and continuous improvement. From the previously announced $50 million capital investment program aimed to improve the company cost structure, GreenFirst will move forward with only selected strategic projects at this time. Specifically, we will proceed with the installation of the new line at the Chapleau facility, and we're going to do upgrades at the cogeneration plant at the Chapleau site. These projects represent a total investment of approximately $20 million. Other major capital initiatives will be temporarily paused to preserve a strong balance sheet and maintain an excellent debt position in anticipation of potential economic headwinds. However, the company has identified smaller, high-return capital projects with a payback period of less than one year.
These projects will continue, and we will report results to our shareholders as they are realized. GreenFirst remains deeply committed to fostering a culture of continuous improvement, which we view as essential to maximizing return on capital investment and driving long-term value. In 2024, the company successfully delivered $9.1 million in incremental EBITDA through operational improvement alone, non-CapEx related. For 2025, we have identified approximately $8 million in non-CapEx efficiency gain, and we are actively executing on these initiatives to capture their full potential. Market overview. The lumber market price saw a notable improvement in Q1 2025 compared to Q4 2024, with strong price increases throughout the quarter.
Our average realized lumber selling price rose from $680 in Q4 2024 to $729 in Q1 2025, and the Western-based price rebounded sharply from a low of $338 per thousand in July 2024 to an average of $492 per 1,000 US in Q1 2025. Despite this positive momentum, demand began to soften, and price started to decline towards the back half of the quarter. We believe the early Q1 price surge was largely driven by market reaction to the proposed 25% tariff on Canadian lumber announced previously in February. This sentiment was reflected in lumber futures, which climbed significantly following the announcement. As the threat of tariff eased, price began to normalize. US housing starts in March 2025 came at 1.3 million units, down 11.4% from January, but still 1.9% higher than March last year, suggesting year-over-year resilience despite the monthly fluctuation.
On a more positive note, the repair and remodeling market segment remained strong. Demand continued to outperform historical norms, driven by factors such as an increase in home equity, an aging housing stock, and favorable homeowner investment trends. Finally, GreenFirst remained committed to continuous improvement as a core strategy to enhance business performance. At the same time, we will maintain a prudent and disciplined approach to cash management to ensure the company is well-positioned to navigate potential economic headwinds and emerging market challenges. Over to you, Peter, for the financial section.
Thank you, Joel, and good morning to everyone. Please refer to our cautionary language regarding forward-looking information in our Q1 2025 MD&A. The company reported a net income of $920,000 in the first quarter of 2025, with an adjusted EBITDA of positive $5.1 million on total revenues of $72 million. Revenue decreased 3% quarter-over-quarter compared to Q4 2024, driven by a 7% increase in the average realized price of lumber, which averaged $729 per thousand board feet in Q1 2025, compared to $680 in Q4 2024, reflecting stronger market pricing conditions during the quarter, although demand remained subdued. The lumber industry continues to face headwinds, including reduced demand due to housing affordability challenges caused by elevated mortgage rates, compounded by ongoing uncertainty regarding the potential impact of U.S. trade tariffs despite production curtailments across North America, which translated in volume of lumber sold down by 4%.
For the first quarter ended March 29, 2025, the company reported cost of sales of $62.1 million compared to $68.5 million in the fourth quarter ended December 31, 2024. This represents a decrease of approximately 9%. The decrease in cost of sales was driven by a 4% reduction in shipment volumes, combined with a 6% improvement in average cost per unit as compared to the fourth quarter of 2024. Lumber production for the first quarter of 2025 was 101.4 million board feet compared to 102.9 million board feet in the fourth quarter of 2024. The slight decrease in production was primarily attributable to adverse weather conditions and related supply chain disruptions experienced during the first quarter of 2025. This impacted slightly our operational efficiency and output levels.
Duties expensed of $5.7 million in the first quarter of 2025 were lower than the fourth quarter of 2024 of $6.2 million due to lower shipments. During both quarters, the company was subject to a combined duty rate of 14.4%. Early in 2024, the company implemented selected initiatives aimed at reducing selling, general, and administrative expenses. These initiatives continued to deliver savings, whereby the company incurred $2.6 million of selling, general, and administrative expenses for the quarter compared to $2.8 million in the fourth quarter ended December 31st, 2024. The combination of these factors contributed to a positive EBITDA of $5.1 million versus a negative EBITDA of $900,000 in the prior quarter. This is an overall improvement at $6.1 million quarter-over-quarter.
Under our amended and restated credit agreement, the company's maximum borrowing capacity under the revolving portion of the credit facility is $60 million, and the equipment financing portion is $25 million. Taking into consideration that the first quarter of our fiscal year is our primary harvesting season, the company did draw down $12 million during the quarter against the revolving portion of the credit facility. As of March 29, 2025, there were also $8.6 million of outstanding letters of credit issued, which reduces the amounts available to draw under the revolving portion of the credit facility. As such, approximately $39 million was still available to be drawn on. Additionally, as of March 29, 2025, the company had a net aggregate amount of $13 million drawn under the equipment financing portion of its credit facility in the form of a term loan.
An additional $12 million was available to be drawn on. Overall, we continue to manage our liquidity through this volatile lumber market and harvesting season, which requires significant investments in raw materials. We do this prudently by maintaining tight inventory management at the mill level, supplemented by drawdowns against our asset-based lending facility to cover seasonal expenses. Our lending facility, which was amended and restated and extended to this September 2028, is secured by borrowings against our inventory and accounts receivable. As a result, higher levels of inventory are supported by the credit facility during this harvesting season. This concludes my remarks, and I will now pass it over back to Joel.
Thank you very much, Peter. I want to thank everyone for joining the call. We will now answer any questions that have come through. Thank you.
Ladies and gentlemen, as a reminder, should you have any questions, please submit your question using the Q&A pod through your online portal.
Okay, good morning again. This is Joel . We do have one question here. Can you speak to the high levels of inventory currently being held at the end of the quarter? Are you seeing any demand concern from buyers due to this potential increase in duty and tariff? I will answer that question. First off, you know our raw material went up by $23 million from Q4 2024, but this really aligned with our expectation with harvesting seasonality. As some of you know, you know we cut most of our wood during winter when the ground is frozen. Also, through our discussion with buyers during the quarter, we have seen an overall general sentiment of economic uncertainty. Some of the customers were on a holding pattern, but this led to a lumber inventory that went up close to $10 million from Q4 2024.
But this inventory increase is temporary, and we expect a decrease during the course of Q2. Joel again here. We do have another question around pricing. Pricing has started to decline towards the back half of the quarter. Can you talk a little bit about what you are seeing in demand right now, both on the repair and remodeling side and also on the new residential construction side? During Q1 2025, the price average on a Western Base was $492 per 1,000 US for the whole quarter, and we are currently at $437 per thousand at the beginning of May, which we believe has bottomed out. We saw U.S. housing start in March, like I said earlier, 2025 came in at 1.3 million units, down 11.4% from January, but still 1.9% higher than March last year, suggesting a year-over-year resilience despite the monthly fluctuation.
Also, as I mentioned previously, the repair and remodeling market segment remains strong. Demand continued to outperform historical norms, driven by factors such as increased home equity and aging housing stock and favorable homeowner investment trends. We do see with our customer on the home centers a very steady continued demand during the quarter.
Thank you.
We have another question here. You've spoken about making a $50 million in capital expenditure investment in the past. How confident are you in being able to execute your CapEx plan with the company's current capital allocation and strength of the balance sheet? I will let Peter, the CFO, answer this question.
Thank you. Good question. Based on current economic uncertainties, we are taking a prudent approach with our capital projects and only executing selective initiatives. Our main strategic capital project is our new saw line at the Chapleau location, which is on schedule and planned for implementation late summer 2025. We feel that our balance sheet is in a strong position. We ended the quarter with excess liquidity of $51.4 million, including both the revolving and equipment portion of our credit facility. We've worked very hard for this in the last 12 months, and we've put ourselves in a good position, and we will continue to be very much focused on managing the balance sheet as it stands today.
Okay, we have a couple of questions here around tariff and duty, so I'll go with the first one. What are the company thoughts on the recently announced duty increase from 14.4% to 34.45% for Canadian shipment to U.S. from the preliminary results of the AR6? What will be the impact on the business? I will let Michel Lessard, our President, answer the question.
Thanks, Joel. You know I'll start to say that the increased duties rate is very concerning for the industry, not only for GreenFirst, but the industry in general. However, we've seen in the past that the majority of the costs of these rates increases have been passed on to the end customers. At the end of the day, you know this will drive an increase in the cost of the housing in the U.S. As mentioned, at the end of the day, it's always the end consumer who's paying for that. That said, we're hoping that the new Prime Minister of Canada and also President Trump will come to a resolution shortly before these new tariffs become into effect.
The other thing that is important to mention also is the forest industry in Canada has already paid around more than $7 billion in duties since 2017, and for sure, we're ready for a settlement in the very near term. We remain available anytime to meet with the new government to discuss further and help also to find a resolution to those conflicts again that have been there for so long.
We do have another question around the tariff here. What is the company position on the timing for resolution of U.S. Department of Commerce under Section 232 investigation? I will let Michel continue to answer those questions.
Thanks, Joel. As mentioned also in Joel's presentation, the U.S. Department of Commerce initiated the investigation against Section 232 of the Trade Expansion Act to determine the effects on U.S. national security of imports of wood products. The investigation is expected to be completed by November 2025. We're presently not paying any additional tariffs, as has been ensured, other than the duties that we're paying. We're hoping also that this report will demonstrate that lumber from Canada is not a threat to U.S. national security. We hope that the U.S. and Canada governments will be able to sit together and reach an agreement prior to this deadline of the reports coming out and before, as I mentioned earlier, before the new tariffs are coming in.
Okay, good morning again. This is Joel. We do have a question here around Boreal. So, update on GreenFirst Forest Products, Boreal Carbon Corp holding. Any chance of monetizing that position and using that money for buybacks? I will let Peter Ferrante, our CFO, answer the question.
We've held that position in Boreal for several years now. We're pretty content, satisfied with it, and there's no short-term intentions of monetizing that asset.
We do have another question here. How do you see production costs trending throughout the year due to the elevated inventory level? Will production volume come down to sell down existing inventory? Yes, I'll take this one on. We believe and we anticipate the cost will come down for various reasons, but one of them is where we operate. It's north of Ontario, and historically, the monthly or the winter quarter, the production is always a little bit lower, therefore, costs are higher. When we go into the summer season, we normally see a positive trend on the cost side. That's one reason, but there are other reasons as well. As far as the sales volume, we believe it's going to go down because when we're going to install the line at Chapleau , we're expecting to take some downtime to install the line.
Therefore, we're looking to catch up on sales volume and be more at a normal level. Okay, I'll look at the screen here, and there's no more questions. Again, I would like to thank everyone on the call for your participation and your interest on GreenFirst, and have a good day. Thank you.
Ladies and gentlemen, this concludes your conference for today. We thank you for participating, and we ask that you please disconnect your lines.