Ainsworth Lumber Co. Ltd.'s sales jumped 35.7% in the second quarter from the year before to reach C$96.1 million (US$94.6 million), but the effect of changes in the U.S.-Canadian dollar exchange rate caused the Canadian lumber company's net profit to swing to a loss of C$17.8 million (US$17.5 million) in the second quarter from a profit of C$24.7 million in the year-earlier period, Ainsworth reported late Thursday.
The higher prices collected for goods sold meant that income actually would have been 46.6% higher had it not been for a 7.4% decrease in volume. The cost of products sold dropped 14.7% from the April-June 2009 period to hit C$57.5 million.
Ainsworth prefers to view its results in terms of adjusted EBITDA--earnings before interest, taxation, depreciation, and amortization as well as: gains on the disposal of property, plants and equipment; stock options expenses; finance expenses; foreign exchange loss or gain on long-term debt, other foreign exchange gains or losses, income tax factors, and non-recurring items. By that measure, Ainsworth swung to positive adjusted EBITDA of C$34 million in the quarter from a C$900,000 negative count the year before. The major reason why, Vancouver-based Ainsworth said, was a C$75.2 million increase in the unrealized foreign exchange loss on long-term debt and a C$9.2 million increase in income tax expense.
"Based on the work we have done to streamline the business and execute on our strategy, we were able to take full advantage of what proved to be very favorable demand conditions in the first six months of the year," company president Rick Huff said in a statement.
Ainsworth is a major producer of oriented strand board, and the company noted that the average publicly reported price for 7/16-inch OSB more than doubled during the second quarter to US$294. They were as high as US$395 per thousand square feet but finished the quarter at US$205.
"As OSB prices return to what forecasters predict will be more modest and sustainable prices, we believe the same qualities that benefited us in the first half of 2010--being customer-oriented and committed to working safely and efficiently--will serve us well in the second half of the year," Huff said. "Our aim is to continue building the foundations of a business at Ainsworth that can be strong and profitable over the long term."
Ainsworth also noted that Brookfield Special Situations II (OSB) L.P., a unit of Toronto-based Brookfield Asset Management, on May 11 became the 53.5% owner of Ainsowrth. Shortly after, Brookfield managing partner Peter Gordon became chairman of Ainsworth's board of directors, and Pierre McNeil, senior vice president of the Brookfield Special Situations Group, also joined the board.