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Edited Transcript of CFF.TO earnings conference call or presentation 16-Feb-18 4:00pm GMT

Q4 2017 Conifex Timber Inc Earnings Call

Vancouver Jun 13, 2019 (Thomson StreetEvents) -- Edited Transcript of Conifex Timber Inc (Pre-Merger) earnings conference call or presentation Friday, February 16, 2018 at 4:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Hans Thur

Conifex Timber Inc. - EVP

* Kenneth A. Shields

Conifex Timber Inc. - Chairman, CEO & President

* Yuri Lewis

Conifex Timber Inc. - CFO & Corporate Secretary

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Conference Call Participants

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* Hamir Patel

CIBC Capital Markets, Research Division - Director of Institutional Equity Research & Paper and Forest Products Analyst

* Paul C. Quinn

RBC Capital Markets, LLC, Research Division - Analyst

* Sean Steuart

TD Securities Equity Research - Research Analyst

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Presentation

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Operator [1]

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Good morning, ladies and gentlemen, and welcome to the Q4 2017 Conifex Timber Results Conference Call.

I would now like to turn the meeting over to Mr. Ken Shields, CEO. Please go ahead, Mr. Shields.

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Kenneth A. Shields, Conifex Timber Inc. - Chairman, CEO & President [2]

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Well, thank you, Paul, and good morning, everyone, and welcome to this call covering our Q4 and full year 2017 results. Chief Financial Officer, Yuri Lewis, is here with me in Vancouver, while Executive VP, Hans Thur, is on the line from Arkansas. We will be making forward-looking statements and references to non-IFRS measures and therefore, call your attention to the disclaimer on the second slide.

2017 was a record year for us at Conifex. Revenues increased 15% to $470 million. We generated $46 million in EBITDA, which was up $12.4 million or 36% compared to last -- or the previous year 2016. Revenues and EBITDA benefited from improved lumber prices and solid performances at our power plant and our 2 Canadian sawmills. Earnings per share more than doubled in 2017. We generated net income after tax of $17 million, equivalent to $0.67 per share in 2016. After eliminating onetime nonrecurring gains and losses, we earned $6.4 million or $0.30 per share.

The other highlight of the year, clearly, was the success we achieved with the modernization and upgrade of our El Dorado site, which I will talk about later on this call.

These results are a testament to our employees on both sides of the border, who demonstrate their expertise and pride, working for Conifex on a daily basis. Q4 results were also a quarterly record with revenues of $133 million, representing a sequential increase of 10% and a year-over-year increase of 30%. We generated $17.5 million of EBITDA in the quarter, up 45% sequentially and 88% year-over-year. In the quarter, we had net income after tax of $8 million, and that's after an allowance for $3.1 million in income tax payments that will be paid at some time in the future. Earnings per share were $0.30 in the quarter versus $0.23 in Q3 and $0.24 in Q4 2016.

Power generation EBITDA was $12.5 million. Q4 power production and EBITDA were the highest for any quarter in our history. We expect to match Q4's performance in Q1 of '18 and expect full year power generation EBITDA to be stronger in 2018 than in 2017.

We're really pleased with our bioenergy segment performance. In the fall of 2014, many investors were unsettled by the force majeure event that delayed the startup of the plant by several months, and many questioned the potential returns available on the $100 million we invested in the plant. We trust the results we achieved over the past 2 years support the confidence we have at Conifex regarding the plant's ability to generate considerable cash flow each and every year over the remaining 17-year term of the electricity purchase agreement. We like power generation. Its cash flows are not impacted by fluctuations in exchange rates, lumber prices or duty impositions. Our power generation business gives us cash flow stability and comfortably supports the segment's financial leverage.

Let's move on to lumber. In Q1 of last year, our lumber segment performance was held back by extreme weather conditions, which adversely impacted productivity and unit costs. In each of Q2, Q3 and Q4, our lumber segment operated at annualized rates of production above our rated capacity. We're now capturing benefits from a number of initiatives undertaken to improve productivity and contain cash costs. Our lumber manufacturing and logistics -- our lumber marketing and logistics services businesses also performed well in 2017. The segment generated EBITDA of $43.3 million after deducting $9.9 million for duty payments in 2017. This exceeds the year-over-year and previous record for $28.4 million of EBITDA.

In my opinion, these results validate our belief that we presently achieved lumber segment EBIDTA per 1000 board feet of lumber produced and shipped that is in line with amounts achieved at other SPF mills in the interior region of BC.

If you look at our investment in property, plant and equipment at December 31, 2017, and I believe these are set out in notes attached to our financial statements, you'll see that we've got a total of $273 million invested. If we deduct $114 million invested in power generation and the $80 million at El Dorado that will come onstream in Q1 of 2018, our remaining fixed asset investment is approximately $80 million. With lumber segment EBITDA of $43 million generated on an $80 million investment in fixed assets, all of us at Conifex are pleased with the returns we achieved in 2017. These returns demonstrate how well our management team and workforce have optimized the performance of older assets purchased at rock bottom prices in 2008 and 2010.

Picking up on the above points. With 525 million board feet of annual lumber capacity and $80 million invested, our investment in fixed assets at December 31, 2017, is less than CAD 160 per thousand board feet of annual lumber capacity. Over the past few years, based on public announcements, sawmill acquisitions typically occur at a cost per unit of annual lumber capacity that is 2x to 4x higher than the amount we currently have invested. Clearly, the balance sheet carrying value of our lumber segment assets is unusually low by industry standards. And all of us at Conifex continue to believe that the fundamental value of our share at Conifex lies above our December 31, 2017, book value of $7.93.

Looking ahead to 2018, we anticipate U.S. housing starts to come in around 1.3 million units. And we expect repair and remodeling markets to remain strong. With this favorable demand backdrop, coupled with duties on Canadian lumber exports to the U.S., we expect lumber prices to remain strong and 2018. Low lumber inventories in the field, inventory restocking challenges faced by customers due to transportation delays and a strong demand outlook have led to higher lumber prices at the start of the year.

In terms of our volumes in 2018, we expect a similar quarterly pattern this upcoming year as we experienced last year. Q1 production shipments and unit costs will be held back by challenging winter weather conditions in Northern BC just as they were in 2017.

Aside from winter weather, we faced headwinds from 2 other sources. The first is the continued escalation in delivered log costs in the interior of BC. This, of course, reflects the culmination of higher stumpage rates and heightened competition for purchased wood. The second is that we anticipate paying export duties on shipments to the U.S. for 12 months in 2018 versus the equivalent of around 4 months or so in 2017. If lumber prices in 2018 are only moderately higher than in 2017, our view is that there will be some EBIDTA slippage for interior BC sawmills.

Having covered off our BC mills, let's move on to discuss El Dorado and recap the main reasons we are investing in the U.S. South. If you refer to Slide 8, you will note that our view is that lumber is a commodity and that we create the most value for shareholders by locating in regions with the most favorable supply-demand dynamics. U.S. South mills are freight-logical suppliers to the largest and fastest growing U.S. residential construction markets. This is one reason why average selling price realizations at lumber mills in the U.S. South are higher than they are at mills in the interior BC. Second main reason is that fiber accounts for a majority of the cash costs of producing lumber and the supply-demand dynamics for log supply in the U.S. South are highly favorable. Plentiful saw timber supplies are available within cost-effective delivery proximity of our mill. The region we draw from provides us a steady supply of affordable, healthy, fully grown trees in diameter classes that are attractive for sawmills.

The third reason is that we have less foreign exchange risks since costs and selling prices are denominated in the same currency. And lastly, the region is not adversely impacted by risks and uncertainties flowing from duty impositions on lumber exports from Canada to the U.S.

Simply put, with higher selling prices and lower log costs, returns on investment at mills in the U.S. South are superior to mills located in competing supply regions, with markets now referred to as [FBA] Canada, their global benchmarking surveys conclude the U.S. South is the highest margin sawmill region in North America, a place it has occupied since 2008.

In October, we largely completed the construction phase of our El Dorado mill modernization and upgrade. I spent last week at the mill and can confirm that the extensive testing and commissioning work undertaken over the past 3 months is largely complete. I can also confirm there are no material shortfalls in project design nor in the integration of the new state-of-the-art equipment with the existing equipment we upgraded.

Against this background, we're now positioned to include El Dorado's production, shipments revenue and EBITDA in our consolidated results starting this quarter, Q1 of '18.

El Dorado has an initial 2-shift capacity of 180 million board feet annually, and our target is to operate at 90% of this rate by the end of the calendar year.

As a reminder, we intend to proceed with a Phase 2 expansion at El Dorado and we plan to utilize the cash flow generated from Phase 1 production to fund Phase 2 capital outlays. We're not exactly sure what lumber production we will ultimately achieve at the site. However, we have permits in hand entitling us to produce up to 300 million board feet annually. Accordingly, we believe we've got potential to boost our consolidated lumber production by as much as 50% over the next 2 years.

Those of you who have participated in these calls over the past 18 months will recall how we solicited input from our manufacturing and marketing teams when we designed and engineered our El Dorado modernization and upgrade. Our manufacturing team stressed the importance of using proven technology that is capable of delivering top quartile lumber recovery and conversion cost performance. Our marketing team stressed the importance of, and I quote from some earlier remarks of mine. And the quote is, "Our equipment selection and operating configuration must enable us to produce dimensions and grades that yield superior lumber mill sales realizations." This input from our marketing partners is especially important today. Those of you who follow southern yellow pine lumber prices will be aware of the unusually wide lumber price differentials that have emerged by dimension. For example, Random Lengths reports that Westside prices for southern yellow pine, two and better, were $553 for thousand board feet for 2x4, but only $356 for 2x10. At a 2-shift production rate of 180 million board feet annually, there is huge upside for us if we have flexibility to produce less 2x10 and more 2x4. If we substitute 18 million board feet of 2x4 production for 18 million board feet of 2x10 production, we boost revenue by USD 197 million per thousand board feet, and this is equivalent to USD 3.5 million annually.

The challenge we face capturing this incremental revenue is the need to process 2.5x the number of 2x4 boards compared to 2x10 boards. Against this background, we're now prioritizing our Phase 2 capital expenditure plans at El Dorado towards those projects that further our objectives, as we said in the past, to produce dimensions and grades that yield superior lumber mill man sales realization.

We expect a growing contribution from El Dorado as we progress through 2018. Despite the log costs and duty imposition headwinds I mentioned earlier, all of us at Conifex expect 2018 will be another good year for our company. Beyond 2018, we continue to believe that our El Dorado site will host one of the most cost and revenue effective mills in the U.S. South. Let's quickly review finances.

In January of 2017, we completed our $130 million secured revolving credit facility with the syndicate of lenders. Back then, our total liquidity was $84.5 million. Since then, we committed $70.8 million to the El Dorado site and got a mill up and running in just over 12 months. Despite funding these outlays, our liquidity at the end of the year of $49.2 million is robust, while lumber and corporate segment net debt is very manageable at less than 30% of capitalization.

Turning to the trade file. Conifex continues to support and appreciate the efforts by the Canadian government to reach a new softwood lumber agreement with the U.S. that is fair. And we also appreciate the efforts of the British Columbia government in advocating for its provincial softwood lumber industry. We're pleased to see that Canada is pursuing appeal on dispute resolution processes through NAFTA and the World Trade Organization to overturn unjustifiably punitive trade actions imposed on us by the U.S.

In closing, I'd like to briefly summarize the progress we've made derisking our business and growing our cash flows over the past few years.

Prior to 2015, our EBITDA was entirely dependent on the contributions from our BC lumber facilities. In 2015, our power plants came onstream and our EBITDA now includes a stable and predictable contribution from our $100-plus million fixed asset investment in renewable power. In 2018, our consolidated EBITDA will include the contribution from our significant investment in lumber and the U.S. South.

Thank you all for your attention. Yuri Lewis, Hans Thur and I would be pleased to respond to your questions. So we'll turn the program back to Paul, our operator.

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question is from Hamir Patel from CIBC Capital Markets.

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Hamir Patel, CIBC Capital Markets, Research Division - Director of Institutional Equity Research & Paper and Forest Products Analyst [2]

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Ken, could you update us on your latest thinking about the timing and potential attractiveness of proceeding with Phase 2 at El Dorado?

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Kenneth A. Shields, Conifex Timber Inc. - Chairman, CEO & President [3]

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Okay. Well, that ties into our capital expenditure plans for this year. And basically in Canada, we have approximately $10 million a year of annual depreciation and amortization. And that is about equal to our capital spending intentions for our Canadian mill. And about half of that will be oriented to maintenance of business type expenditures and the other half of that will have a fairly reasonable return on it. In the El Dorado, for planning purposes right now, we are penciling again, USD 5 million as the estimate of the capital outlay at that site for the current year. As I mentioned when I was talking earlier, we are spending the money on those machine centers that need to be upgraded and modified to allow us to produce a higher portion of narrow wood lumber, because it looks like the pricing premiums on the narrow wood lumber will persist for some time. So when we look at El Dorado, it's going to be difficult for people such as yourself and your fellow analysts to really model our performance. And the reason I say that is that when the differentials by dimension are normal, our EBITDA is actually closely tied to the production volume that we achieved. But in markets like this, we believe that we will be ramping up our EBITDA without necessarily having a proportionate increase in our total reported lumber production. And so simply put, we're doing things that allow us to get more boards through our trim, sort and stack stations at both the sawmill complex and at the planer complex. If we continue to enjoy good prices and our startup goes as planned, there should be additional cash flow in 2018 and no doubt we'll be moving forward on some additional capital items. And those -- the second batch of capital items will be mainly oriented to improving the millions of board feet that we produce on an annual basis rather than improving the product mix, which the initial expenditures are oriented towards.

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Hamir Patel, CIBC Capital Markets, Research Division - Director of Institutional Equity Research & Paper and Forest Products Analyst [4]

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And can you still think of 300 million board feet as the long-term goal?

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Kenneth A. Shields, Conifex Timber Inc. - Chairman, CEO & President [5]

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Well, looking at the capabilities of the machine centers and I can tell you that the mill is run at that clip for short periods of time. And if we get 85% uptime reliability on a 2-shift basis, yes, it's awfully close to 300 million board feet. And it's -- it should be comfortably at the 250 million board foot range eventually.

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Hamir Patel, CIBC Capital Markets, Research Division - Director of Institutional Equity Research & Paper and Forest Products Analyst [6]

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Maybe a quick question for Hans. Based on what you guys are saying about taking advantage of the pricing spreads amongst your grades, maybe for this year in the south, what do you think your mix would be between 2x4 mid-widths and wider widths?

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Hans Thur, Conifex Timber Inc. - EVP [7]

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Yes. So Hamir, and just to kind of continue with what Ken was saying here earlier, we're just in the early stages of doing the analysis on how we can move more of our product to the narrows, whether it be 2x4, 2x6, 2x8. And then as you probably looked at Random Lengths, those tend to fluctuate even on a weekly or monthly basis. So we want to ensure that as the market changes, we have that flexibility to adjust. So it's a little bit early right now to put a number on exactly how far we can drive that in the 2x4. We're doing a lot of simulations and testing to see where we might get. But it's little premature to put a number on it.

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Hamir Patel, CIBC Capital Markets, Research Division - Director of Institutional Equity Research & Paper and Forest Products Analyst [8]

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And do you have a sense, maybe, of where a typical mill in the south is running amongst the various grades?

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Hans Thur, Conifex Timber Inc. - EVP [9]

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It depends on the mill. There are some mills that just focus on 2x4, 2x6, 4x4s, 4x6s, and that's their pattern. And then there is the other segment that is the wider mills. And in the wider mills, at times, if you look back in history, they were maybe only 10% to 20% 2x4. And then if you look at the 2x10, 2x12, probably in about the 50% range. I think the difficulty that some others may have is just the inability to have the flexibility, going forward, to change that mix. And that's what we're working on.

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Hamir Patel, CIBC Capital Markets, Research Division - Director of Institutional Equity Research & Paper and Forest Products Analyst [10]

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Okay. Great. That's helpful. And just final question I had for Ken, was in terms of the supply-demand balance, there's been a fair number of capacity announcements already in the south. Just curious, given the time you spent in the south, do you think that there is additional projects out there by maybe some of the private companies that are underway that perhaps the market is unaware of?

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Kenneth A. Shields, Conifex Timber Inc. - Chairman, CEO & President [11]

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Well, let me come to that question in a moment. I just wanted to piggyback on Hans' comment. Hamir, we're looking at El Dorado as more of a marathon than a sprint, to use a runner's term. And we think if we have the right product mix by dimension that over, I would say, a 20-year period that, that El Dorado project could pay back its capital investment probably by 6x or 7x. But if we just ran a simple mill and didn't have product flexibility, the payout over that period would be 3x or 4x in all likelihood. And Hamir, you have to ask yourself, why is there so much 2x10 being produced when it's at a $200 discount to 2x4. And the answer is that a lot of mills do not have the primary and secondary breakdown capabilities augmented by resaws and edgers to make the narrower products. And we've always believed that it was an important feature of this mill that we have that flexibility and the move in the markets have simply reinforced that. So that is our main focus today. And that's taking precedence over the near-term volume. In terms of the U.S. South, Hamir, there are 2 private entities that I have some knowledge of that are looking at some potential expansions. But I have not seen anything publicly released by either of the private parties. And so you're quite right. There could be more mills being planned than we've got knowledge of today. But a few things don't change. And that is, although there is plentiful saw timber to support many new mills in the U.S. South, there simply isn't the capital equipment available for timely delivery of new installations, the residuals and coproducts produced at mills. There isn't the demand growth to support all the new lumber capacity that's potentially available. There are labor shortages in trucking and harvesting that will limit the pace of the ramp-up of getting harvest levels. And as we see it, certainly for the next 18 months to 36 months, our best guess is that the growth in demand is going to outstrip the growth in supply of lumber in the U.S. South and that although prices could very well remain volatile, the primary trend will be pointing upwards, not down.

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Hamir Patel, CIBC Capital Markets, Research Division - Director of Institutional Equity Research & Paper and Forest Products Analyst [12]

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Fair enough, Ken. And just the final question I had was couple of your competitors have mentioned very high turnover rates in the sawmilling industry in the U.S. South. Just curious what's your experience been so far. We've seen a lot of retailers now start to raise wages, which, I'm guessing, would put some upward pressure on wages in the lumber industry as well. How do you think about potential wage cost inflation in the south?

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Kenneth A. Shields, Conifex Timber Inc. - Chairman, CEO & President [13]

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Well, I've just heard some of the public reports referring to 30% to 60% turnover rates. And we don't plan to be at the 30% level on our first year of operation based on everything we see. We are going to be lower than that in year 1. And just -- so much of this depends on the local community that hosts the mill, and we are in a community of 19,000 people. And we expect that our turnover at El Dorado will not be materially different than we have in Northern BC.

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Hamir Patel, CIBC Capital Markets, Research Division - Director of Institutional Equity Research & Paper and Forest Products Analyst [14]

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And just in terms of wage cost inflation going forward?

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Kenneth A. Shields, Conifex Timber Inc. - Chairman, CEO & President [15]

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Well, we have, I think, 780 people asked to come work at our mill. And we're probably getting 20 or 30 people a week leaving their names with us. So we don't feel any pressure to change our wage structure.

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Operator [16]

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The next question is from Sean Steuart from TD Securities.

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Sean Steuart, TD Securities Equity Research - Research Analyst [17]

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Couple questions. Ken, wondering if you can comment on your expectations for BC log cost inflation in 2018 in your region?

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Kenneth A. Shields, Conifex Timber Inc. - Chairman, CEO & President [18]

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Well, in our region, I think that we probably will have -- I doubt that our sector can contain log cost inflation to below 10% in the current year. And so given that logs account for 70% or so of the total manufacturing costs, you can see what my earlier comment was about the need to have a reasonable amount of lumber price relief to absorb the higher input costs.

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Sean Steuart, TD Securities Equity Research - Research Analyst [19]

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Okay. And just circling back on your CapEx guidance for this year. So $10 million in Canada, U.S. $5 million at El Dorado related to optimizing mix. And the balance then, just so I understand it, and maybe I'm answering my own question here, but it will depend on how much free cash you generate with strong lumber pricing to dictate how fast you spend on the productivity gains at El Dorado. Is that the right way to think about it?

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Kenneth A. Shields, Conifex Timber Inc. - Chairman, CEO & President [20]

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Yes. That's a good way to look at it, Sean. We are irrevocably committed to funding the flexibility improvements because we're looking at spending $5 million at the site this year. And the figures that I mentioned earlier indicate that we have $3.5 million return -- or $3.5 million of incremental revenue if we can move 10% of the volume out of the lowest price category into the highest price category. So there's an incredibly high return on the capital directed towards improving the dimensional flexibility at the mill. So that's why we're irrevocably committed to that. And then as we progress through the year and if the cash flow starts coming in at levels the mill's capable of, it will be easy for us to do more of Phase 2. We actually changed the scope of the plant a little bit in Phase 1. And we've already funded about $1 million of items that we originally thought we'd do in Phase 2. So we're making progress towards Phase 2 already.

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Sean Steuart, TD Securities Equity Research - Research Analyst [21]

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Okay. One last question, just housekeeping for Yuri. Was there any reversal of the preliminary duty accruals embedded in your adjusted EBITDA this quarter?

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Yuri Lewis, Conifex Timber Inc. - CFO & Corporate Secretary [22]

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Sean, not for this quarter. We actually released that after the final rates were announced in Q3. So the adjustment was actually made in Q3.

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Operator [23]

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(Operator Instructions) The next question is from Paul Quinn from RBC Capital Markets.

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Paul C. Quinn, RBC Capital Markets, LLC, Research Division - Analyst [24]

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Just couple of questions. Maybe, Ken, El Dorado timing of the second shift, and can you remind us what the budget is on Phase 2?

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Kenneth A. Shields, Conifex Timber Inc. - Chairman, CEO & President [25]

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We spoke about Phase 2 having a budget of approximately $20 million. We haven't refreshed our numbers on Phase 2. But there is an indication that it will be less than that. It might be as little as $15 million, but it's less than $20 million in all likelihood. And in terms of the second shift, if our mill operates over the next couple of weeks at the pace that it has operated in the first 4 days of this week, we could have second shift under consideration in 3 months' time or so.

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Paul C. Quinn, RBC Capital Markets, LLC, Research Division - Analyst [26]

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Okay. And then as Phase 2, besides an additional kiln, what's the other equipment that -- that's coming in for that $15 million and $20 million budget?

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Kenneth A. Shields, Conifex Timber Inc. - Chairman, CEO & President [27]

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Okay. Well, the kiln is approximately $5 million and the kiln would be the last item that we would do in Phase 2. And so the remaining expenditures are primarily oriented towards the front end of the mill. As we're presently constituted, we've got plenty of saw timber availability and we're turning loggers away every day. We've got a linear crane system that can handle all the truck unloading and keep the mill fed without breaking a sweat. The challenge that we have is in the bucking system. And so we've got plans to speed that up and get more logs in front of the primary and secondary breakdown machines. And then the other part of the expenditure is to have faster lug speeds and trim speeds and stacking speeds, once the boards leave the secondary breakdown unit and go to be trimmed, sorted and stacked. So it's really, simply put, it's to speed up logs coming in the front end of the mill and boards coming out of the back end of the mill. The planer is largely in place and capable of handling the Phase 2 lumber production. And with 2 kilns operational, we should be able to produce at a 200 million board foot annual rate before we have to add the third kiln.

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Paul C. Quinn, RBC Capital Markets, LLC, Research Division - Analyst [28]

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Okay, great. And maybe just going back to, I think, something I read in your press release that you are expecting a 6% increase in lumber consumption. It's pretty similar to our number. But it sort of implies on 2017 consumption sort of a 2.9 billion increment, which is higher than some of your peers have mentioned, 2 billion to maybe on the high side, 2.5 billion. When I look at the data from last year, it looks like the U.S. South added 1.45 billion and Canada was flat. I suspect Canada can pick up something in 2018 given the fire situation in BC. But do you see this gap nearing anytime soon?

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Kenneth A. Shields, Conifex Timber Inc. - Chairman, CEO & President [29]

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Well, Paul, as you're well aware, there was about 1 billion board feet that arrived in the U.S. from offshore, which helped met some of the gap. But I don't see that figure rising a great deal. I can tell you that -- I agree with your comment about the potential for an uptick from BC. You mentioned because of the absence of or the low likelihood of additional fires. But the reality is that these high lumber prices are continuing to make -- be graded time spans more economics. So it's likely that harvest levels in BC at these lumber prices, the harvest reductions will be deferred, just as the harvest production will be accelerated if there is a collapse in lumber prices. So we see the market, the supply side and the demand side being pretty well balanced. We don't expect a huge shortfall to emerge here based on what we've seen nor do we expect to see a significant oversupply showing up in the cash lumber markets.

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Paul C. Quinn, RBC Capital Markets, LLC, Research Division - Analyst [30]

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Okay, great. And just last question just on your power asset. I see that being successful right now as you laid it out achieving the numbers. But is that some asset that you have to have long term? And is that something you consider selling because it doesn't -- valuation of that asset doesn't show up in your current stock value?

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Kenneth A. Shields, Conifex Timber Inc. - Chairman, CEO & President [31]

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Well, the asset is an important part of the whole economics of our Mackenzie site. And it's a good complement to providing an outlook for some of the lumber coproducts that are produced. But we're not happy with the 5x EBITDA multiple accorded to our company. We can understand that we would trade at some discount relative to the larger, more liquid companies who, say, might be trading at close to 7x. But we think that the -- there is plenty of precedence for power companies to have a premium multiple to the 7 that a commodity lumber producer is accorded. And so, Paul, if our multiple does not move in line with some of our peer group companies, then we'll have to consider some strategic alternatives in the ownership of that facility, which does not necessarily imply that there would be a sale of 100% of it or anything like that. And there's also some innovative financing techniques that we're looking at that are potentially available to us as well.

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Operator [32]

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There are no further questions registered at this time. I would now like to turn the meeting back to Mr. Shields.

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Kenneth A. Shields, Conifex Timber Inc. - Chairman, CEO & President [33]

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Okay. Well, thank you, everyone. We've taken up a fair bit of your time, and this is a busy morning for forest industry reporting. So thank you for your interest in our company and enjoy the upcoming weekend. Bye for now.

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Operator [34]

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Thank you. The conference has now ended. Please disconnect your lines at this time. And we thank you for your participation.