Interfor (TSE:IFP) executives told investors the company is focused on protecting liquidity and reducing leverage as it navigates what management described as historically weak lumber pricing and ongoing market volatility. On its fourth-quarter 2025 earnings call, President and CEO Ian Fillinger said Interfor took “decisive portfolio actions” during the year, including permanently closing two high-cost facilities in the U.S. South that had been indefinitely curtailed in 2024 and adjusting operating postures at several mills to better align production with demand.
Fillinger also pointed to working capital performance as a key highlight in the down cycle, noting log and lumber inventories were reduced significantly. He said Interfor advanced the final phase of its Thomaston Mill project in Georgia, with commissioning of the new sawmill expected in early March. Fillinger said the company anticipates the upgraded facility will be a “top decile performer” and contribute to long-term cost competitiveness. He also noted employee turnover continued to improve, reflecting engagement and retention efforts.
Fourth-quarter results and operating factors
On the revenue side, Mackay said realized selling prices were weaker on average due to slightly lower market pricing in most regions, a full quarter of higher countervailing and antidumping duties, and the introduction of a 10% Section 232 tariff in October. On the cost side, he said production cost per unit improved 4%, as higher conversion costs from downtime were more than offset by positive inventory valuation adjustments as lumber prices improved toward the end of the year.
Despite the negative adjusted EBITDA, Mackay said cash flow from operations was break even for the quarter due to working capital recovery driven by reduced inventories and lower receivables. He added that over the last three years (2023 through 2025), cash flow from operations has been positive each year, totaling “just over CAD 300 million,” which he attributed to working capital management, tax recoveries, cost structure initiatives, and operating platform optimization.
Liquidity actions, leverage, and planned asset sales
Mackay said Interfor completed a series of financing transactions during and after the quarter, including a previously announced equity raise and “net debt-neutral refinancing initiatives.” He said the actions bolstered liquidity and “effectively clear out our debt maturity runway for 2026 and 2027,” giving the company flexibility amid volatile markets.
At year-end, Mackay said net debt to capitalization was 36.5% and Interfor had pro forma available liquidity of CAD 482 million. He said that liquidity, along with anticipated divestiture proceeds “over the next year or so,” should provide financial flexibility. Those divestitures include the sale of the company’s B.C. Coast forest tenures and potential sales of real estate at former Summerville and Meldrim facilities in the U.S. South.
In the Q&A, Mackay told analysts prior guidance of CAD 30 million to CAD 35 million for the B.C. Coast tenure sale still stands, though timing is less certain; he suggested a planning range over the next 12 to 18 months. On potential real estate divestitures, he was more cautious about providing guidance but said proceeds are expected to be “meaningful,” in the same general order of magnitude as the B.C. Coast transaction, and referenced attractive locations in growing cities.
Capital spending and balance sheet priorities
With major capital investments largely complete, Mackay said Interfor expects lower spending ahead. Total capital spending in 2026 is expected to be CAD 75 million to CAD 80 million, and preliminary estimates for 2027 are around CAD 60 million, focused “almost entirely on maintenance.”
Both Fillinger and Mackay emphasized that any free cash flow will be directed solely toward leverage reduction, with timing dependent on lumber prices and market conditions. Fillinger said the company has implemented “clear, measurable balance sheet guardrails” and is benchmarking cost structure targets to trough-cycle pricing to ensure further price weakness can be absorbed without eroding liquidity.
Asked about additional balance sheet actions, Mackay said the moves completed in the quarter—particularly the equity raise—were “very meaningful” and largely complete in terms of improving flexibility. On borrowing costs, he said new notes were priced higher than the existing structure, but overall interest costs are in the 6.5% range, with incremental expense “in a couple million dollar range.” He added that duties monetization is “lower down the list” given uncertainty around the file and political developments.
Market outlook: housing uncertainty and tightening supply
Senior Vice President of Sales and Marketing Bart Bender said the outlook for 2026 remains uncertain, with trade and geopolitical developments adding risk and potentially slowing interest rate easing and broader economic activity. He said the U.S. economy continues to show resilience, but expectations for meaningful interest rate easing may shift later into 2026. Bender added that housing affordability remains challenged, mortgage rates are expected to remain at or near current levels early in 2026, and repair-and-remodel demand is expected to be relatively flat.
On supply, Bender said curtailments across the industry are beginning to have an impact, including both announced and unannounced downtime. He pointed to Canadian lumber shipments into the U.S. as an indicator, saying that over the last six months shipments annualized to about 8.5 billion board feet, compared with just over 10 billion in 2025 and 11.5 billion in 2024. He said those reductions, combined with U.S. curtailments, are starting to balance lumber markets.
Bender also said customer destocking appeared to occur in the back half of 2025, as there was little incentive to carry extra inventory amid uncertainty. He said that could set up an “interesting” backdrop as the industry enters seasonally higher spring consumption. Logistics have been relatively stable, he said, though winter conditions have caused shipment delays and affected service levels; in response to an analyst question, Bender said he expects the disruption to clear in “a couple weeks, three weeks.”
In the Q&A, Fillinger said Interfor is adding incremental hours in the Pacific Northwest, but described the approach as conservative and dependent on pricing, demand, and building an order file that is cash positive over a multi-week period. He also said Interfor’s inventories are “very lean” and appropriate for current market conditions, and management believes dealer and distribution channel inventories appear lean as well, with limited willingness to build stocks.
- Q4 adjusted EBITDA: negative CAD 29 million
- Year-end liquidity (pro forma): CAD 482 million
- Net debt to capitalization: 36.5%
- 2026 capex guidance: CAD 75 million to CAD 80 million
- Expected B.C. Coast tenure sale proceeds (previous guidance reiterated): CAD 30 million to CAD 35 million over 12–18 months (timing uncertain)
About Interfor (TSE:IFP)
Interfor Corp produces and sells lumber, timber, and other wood products. The company operates sawmills to convert timber into lumber, logs, wood chips, and other wood products for sale. The firm also harvests timber for its sawmills on forest land owned by the Canadian government. Interfor pays the Canadian government stumpage fees based on the number of trees it harvests. The company’s primary customers are in the construction and renovation industries. The majority of revenue is generated from the sale of lumber.
