CanWel Building Materials Reports Record Full Year 2018 Financial Results

NOT FOR RELEASE OR DISSEMINATION INTO THE UNITED STATES

Full Year 2018 Financial Highlights⁽¹⁾:

• Revenues increased by 13.7% to $1.29 billion
• Gross Margin increased to 14.9% versus 13.4% in 2017
• Adjusted EBITDA⁽³⁾ increased by 13.1% to a record $72.0 million
• Net Earnings⁽⁴⁾ increased by 4.2% to $30.0 million
• Total quarterly dividends of $0.56 per share paid

Q4 2018 Financial Highlights⁽¹⁾:

• Revenues amounted to $264.0 million
• Gross Margin at 14.6%
• Adjusted EBITDA⁽³⁾ amounted to $8.9 million
• Net Earnings⁽⁴⁾ totaled $370,000
• Quarterly dividend of $0.14 per share paid

VANCOUVER, British Columbia, March 05, 2019 (GLOBE NEWSWIRE) -- CanWel Building Materials Group Ltd. (“CanWel” or “the Company”) (TSX:CWX; CWX.NT.A) announced today its fourth quarter and full year 2018 financial results⁽¹⁾ for the period ended December 31, 2018.

For the year ended December 31, 2018⁽¹⁾, consolidated revenues increased by 13.7% to $1.3 billion when compared to $1.1 billion in the same period in 2017.  Sales for the Distribution segment increased by $160.5 million or 14.9%, largely due to the inclusion of the results from the Honsador Acquisition, higher construction materials pricing earlier in 2018, and the Company’s continuing focus on its product mix strategies and target customer base. Overall results were however impacted by a significant downturn in construction material pricing in the second half of 2018, which was also a factor in reduced demand across the Company’s markets. The Company’s sales by product group in the year were made up of 58% construction materials, compared to 61% last year, with the remaining balance resulting from specialty and allied products of 34%, and forestry and other of 8%.

For 2018, gross margin increased by 26.7% to $192.9 million, compared to $152.2 million during the corresponding period in 2017.  Gross margin percentage also increased to 14.9% of revenues versus 13.4% in 2017.  This increase in margin dollars and margin percentage reflects the positive impacts from the Honsador Acquisition, as well as higher construction materials pricing earlier in 2018, which were impacted by the significant decline in the second half of 2018.

Adjusted EBITDA⁽³⁾ for the full year increased by 13.1% to a record $72.0 million, compared to $63.6 million in 2017. EBITDA⁽²⁾ was impacted by one-time acquisition costs in both 2018 and 2017, and one-time restructuring costs and an impairment loss on property, plant and equipment in 2017, resulting in EBITDA amounting to $71.2 million in 2018, versus $58.8 million in 2017. As a result, net earnings increased by 4.2% to $30.0 million in 2018, when compared to $28.8 million in 2017.

For the three-month period ended December 31, 2018⁽¹⁾, revenues decreased 4.4% to $264.0 million when compared to $276.2 million in the same period in 2017. Sales for the Distribution segment decreased by $9.8 million or 3.8% compared to the same period in 2017, largely due to the impact of a significant fall in construction materials pricing in the second half of 2018. This decrease was partially offset by the strength of the Company’s US operations due to more favorable market conditions, and continuing focus on product mix strategies and target customer base. The Company’s sales by product group in the quarter were made up of 52% construction materials, with the remaining balance of sales resulting from specialty and allied products of 39% and forestry and other of 9%. The pricing environment for construction materials experienced a significant decline throughout the fourth quarter. After experiencing approximately eighteen months of generally increasing prices since the beginning of 2017, lumber prices peaked in June 2018, then experienced significant declines towards the end of the third quarter of 2018, and continued to decline into the fourth quarter of 2018.

Gross margin dollars decreased by 10.5% to $38.6 million, compared to $43.1 million during the corresponding period in 2017.  Gross margin percentage was lower at 14.6% of revenues versus 15.6% during the same period in 2017.  The decrease in margin dollars and percentage mainly reflects the aforementioned impact of the significant declines in lumber prices which continued during the quarter. This pricing decline resulted in Adjusted EBITDA⁽³⁾ amounting to $8.9 million, compared to $13.4 million in 2017. EBITDA⁽²⁾ was impacted by one-time acquisition costs in both 2018 and 2017, as well as an impairment loss on property, plant and equipment in 2017, resulting in EBITDA amounting to $8.1 million in 2018, versus $10.5 million in 2017. As a result, net earnings decreased to $370,000 in 2018, when compared to $5.8 million in 2017. 

CanWel paid a total of $0.56 per share in dividends in 2018, or $0.14 per share in quarterly dividends.

“We are very proud of our financial performance in 2018 with record results across all key metrics," commented Amar S. Doman, Chairman of the Board.  "Despite an ongoing weak pricing environment for lumber, OSB and panel products during the fourth quarter, we are pleased with our ability to generate strong EBITDA results in relative terms. We are encouraged by the recovery in the pricing environment so far in early 2019, from the lows which we saw in late 2018 and remain confident in CanWel’s growth opportunities and further value creation while we continue to pay an attractive dividend to our shareholders.”

Reconciliation of Net Earnings to Earnings before Interest, Tax, Depreciation and Amortization (EBITDA) and Adjusted EBITDA:

About CanWel

Founded in 1989, CanWel is headquartered in Vancouver, British Columbia and trades on the Toronto Stock Exchange under the symbol CWX and is Canada’s only fully integrated national distributor in the building materials and related products sector. CanWel operates: multiple treating plant and planing facilities in Canada and the United States; distribution centres coast-to-coast in all major cities and strategic locations across Canada; in the United States near Portland, Oregon (commissioning), San Francisco and Los Angeles, California and in 14 locations in the State of Hawaii through its wholly owned Honsador Building Products Group. CanWel distributes a wide range of building materials, lumber, renovation and electrical products. In addition, through its CanWel Fibre division, CanWel operates a vertically integrated forest products company based in Western Canada, operating from British Columbia to Saskatchewan, also servicing the US Pacific Northwest. CanWel owns approximately 136,000 acres of private timberlands, strategic Crown licenses and tenures, log harvesting and trucking operations, several post and pole peeling facilities and two pressure-treated specialty wood production plants and a specialty saw mill.

For further information regarding CanWel please contact:

Ali Mahdavi
Investor Relations
416-962-3300
ali.mahdavi@canwel.com

Certain statements in this press release may constitute “forward-looking” statements. When used in this press release, forward looking statements often but not always, can be identified by the use of forward-looking words such as, including but not limited to, “may”, “will”, “would”, “should”, “expect”, “believe”, “plan”, “intend”, “anticipate”, “predict”, “remain”, “estimate”, “potential”, “continue”, “could”, “might”, “project”, “targeting’, "future" and other similar terminology or the negative or inverse of such words or terminology. These forward-looking statements reflect the current expectations of CanWel’s management regarding future events and operating performance, but involve other known and unknown or unpredictable risks, uncertainties and other factors which may cause the actual results, performance or achievements of CanWel, including but not limited to sales, earnings, cash flow from operations, dividends or EBITDA⁽²⁾ generated or paid by CanWel, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such forward-looking statements should therefore be construed in the light of such factors. Actual events could differ materially from those projected herein and depend on a number of factors. These factors include, but are not limited to, (i) the risk that CanWel may not be able to operate the lumber pressure treating plant and related equipment and business formerly owned by Western Wood Treating, Inc. (the “Plant”) or integrate the Plant into its operations successfully, or without negative impact on its business, or without requiring spending significant or unexpected amounts of time, money or other resources thereon, or at all; (ii) the risk that CanWel may not be able to obtain the final permits and operational authority to operate the Plant, or on terms and conditions or at a cost satisfactory to it, or at all; (iii) the risk that the construction and completion of CanWel’s plant in Oregon (originally announced in quarter 2, 2018 (the “Oregon Plant”)) originally expected to be in Q4 2018, may not be able to completed or operated within expected timelines or costs, or on other terms, conditions or costs satisfactory to it, or at all; (iv) the risk that CanWel may not be able to obtain the final permits and operational authority to operate the Oregon Plant on the terms and conditions satisfactory to it, or at all, or at a cost satisfactory to it; (v) the acquisition of Honsador Acquisition Corp. (“Honsador”) in quarter 3, 2017, the assets of Total Forest Industries Ltd. (“TFI”) in quarter 3, 2016, Jemi Fibre Corp. (“Jemi”) in quarter 2, 2016, or the assets of California Cascade Industries and California Cascade-Fontana, Inc. (“CCI”) in quarter 3, 2015, (collectively with the Plant and the Oregon Plant, the “Acquisitions”) may result in significant challenges, and management of CanWel may be unable to accomplish the integration of the Acquisitions smoothly or successfully or without spending significant or unexpected amounts of time, money or other resources thereon; (vi) the risk that any inability of management to successfully integrate the operations of the businesses or combined businesses discussed above, including, but not limited to, operational, information technology, financial reporting systems or environmental matters, any of which could have a material adverse effect on the business, financial condition and results of operations of CanWel; (vi) the risk that revenues, profits and margins of CanWel may not remain consistent with historical levels or be as expected, (vii) the risk that competing firms which manufacture or distribute competitive product lines will aggressively defend or seek market share, or that potential customers of the Oregon Plant and existing customers or suppliers of the Plant, Honsador, TFI, Jemi or CCI (some of whom are competitors of CanWel) will change, reduce or cease doing business with CanWel, in each case reducing, eliminating or reversing any potential positive economic impact on CanWel of the Acquisitions; (viii) the risk that any increased sales, margin, profit or distributable cash resulting from the Acquisitions may not be fully realized, realized at all or may take longer to realize than expected; (ix) the risk of disruption from the introduction, implementation and/or integration of the Acquisitions making it more difficult to maintain relationships with customers, employees or suppliers; (x) risks related to the operation of pressure treatment facilities, including but not limited to environmental and remediation risks, labour risks, risks related to maintenance capital expenditures for manufacturing and processing facilities and risks related to capital expenditures for environmental risks; (xi) the potential inability of CanWel to complete the formal documentation and satisfy the other conditions required to complete the Oregon Plant; and (xii) other statements other than historical facts. As indicated above, completion of the transaction described herein are subject to various conditions, including (among others) obtaining related necessary governmental operating and regulatory permits and approvals. Although CanWel believes that the expectations and the conditions reflected in such forward-looking statements are reasonable, CanWel can give no assurance that each of these conditions will be satisfied to the satisfaction of CanWel or that expectations will prove to be correct. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. There are a number of additional risks and uncertainties affecting or that could affect CanWel, which could cause actual results and developments to differ materially from those described in, expressed or implied by these forward-looking statements, include, among others: regulatory and legal risk, increased debt and interest costs, general economic and business conditions, product selling and prices, product performance, consumer preferences, design and liability risk, environmental risks, remediation risks, software and software design risk, commodity price fluctuations, information systems risk, interest rate changes, operating costs, political or economic instability in local or national markets, chemical or commodity prices, exchange rate risks for product inputs, tariffs and tax risks and general competitive conditions. Factors also include, but are not limited to, dependence on market and economic conditions, sales and margin risk, competition, information system risks, availability of supply of products, risks associated with the introduction of new product lines, product design risk, product liability risks, environmental risks, regulatory risk, trade and tariff risks, differing law or regulations across jurisdictions, volatility of commodity prices, inventory risks, resource industry risks, resource extraction risks, risks relating to remote operations, forestry management and silviculture risks, fire, flood and natural disaster risks, customer and vendor risks, contract performance risks, acquisition and integration risks, availability of credit, credit risks, performance bond risks, litigation risks and interest rate risks. A further description of these additional factors and other risks which could cause results to differ materially from those described in these forward looking statements can be found in the periodic and other reports filed by CanWel with Canadian securities commissions and available on SEDAR (http://www.sedar.com). In addition, a number of material factors or assumptions were utilized or applied in making the forward-looking statements, and may include, but are not limited to, assumptions regarding the performance of the Canadian and US economies, the relative stability of or level of interest rates, exchange rates, volatility of commodity prices, availability or more limited availability of access to equity and debt capital markets to fund, at acceptable costs, CanWel’s future growth plans, the implementation and success of the integration of the Acquisitions, the ability of CanWel to refinance its debts as they mature, the Canadian and United States housing and building materials markets; the direct and indirect effect of the U.S. housing market and economy; international trade and tariff risks, political risks, the amount of CanWel’s cash flow from operations; tax laws; and the extent of CanWel’s future acquisitions and capital spending requirements or planning as well as the general level of economic activity, in Canada and the US, and abroad, discretionary spending and unemployment levels; the effect of general economic conditions, including market demand for CanWel's products, and prices for such products; the effect of forestry, land use, environmental and other governmental regulations; and the risk of losses from fires, floods and other natural disasters and unemployment levels. There is a risk that some or all of these assumptions may prove to be incorrect. These and other factors could cause or contribute to actual results differing materially from those contemplated by forward-looking statements. Accordingly, readers should not place undue reliance on any forward-looking statements or information. There are numerous risks associated with an investment in CanWel’s common shares or senior unsecured notes, which are also further described in the “Risk Factors” sections of CanWel’s annual information form dated March 29, 2018 as well as its other public filings on SEDAR. These forward-looking statements speak only as of the date of this press release. We caution that the foregoing factors that may affect future results are not exhaustive. When relying on our forward-looking statements to make decisions with respect to CanWel, investors and others should carefully consider the foregoing factors and other uncertainties and potential events.

Neither CanWel nor any of its associates or directors, officers, partners, affiliates, or advisers, provides any representation, assurance or guarantee that the occurrence of the events expressed or implied in any forward-looking statements in these communications will actually occur. You are cautioned not to place undue reliance on these forward-looking statements. Except as required by applicable securities laws and legal or regulatory obligations, CanWel is not under any obligation, and expressly disclaims any intention or obligation, to update or revise any forward looking statements, whether as a result of new information, future events or otherwise.