Net earnings at Ainsworth plummeted into the red with a C$59.2 million (US$55.7 million) loss in the third quarter, a far cry from the C$10.4 million (US$9.8 million) income the company posted during the same period a year ago. Net sales fell 12% to C$71.8 million (US$67.5 million), the company reported today.
Net earnings from continuing operations at the Vancouver, British Columbia-based wood products manufacturer also tumbled to a C$58.9 million (US$55.4 million) loss, compared with a C$10.5 million (US$9.9 million) profit during last year's third quarter. The company noted it had incurred a C$60.5 million (US$56.9 million) increase in unrealized foreign exchange loss on long term debt and a C$9.5 million (US$8.9 million) decrease in gross profit. These were partially offset by a C$5.7 million (US$5.4 million) increase in income tax recovery.
The decrease in gross profit, which finished at C$4.7 million (US$4.4 million) and was helped by a strong Canadian dollar, was the result of a decline in western Canadian pricing for oriented strand board (OSB). The fall in OSB pricing also impacted EBITDA margin, described as adjusted EBITDA divided by sales, which fell more than 11 percentage points to 1%.
Adjusted EBITDA, which the company defines as net (loss) income from continuing operations before amortization, gain on disposal of property, plant, and equipment, costs of curtailed operations, stock option expense, finance expense, foreign exchange loss (gain) on long-term debt, other foreign exchange (gain) loss, income tax expense (recovery) and non-recurring items, fell 93% to C$700,000 (US$658,000).
"In the third quarter of 2011, Ainsworth recorded positive EBITDA from continuing operations despite facing considerable market challenges, including an unfavorable foreign exchange position, historically low North American OSB prices, and an expected decline in overseas sales," said president and COO Jim Lake. "We achieved this on the strength of ongoing market share gains with our value added products segments and several operational successes."
Cost of products sold remained relatively flat with a gain of only C$200,000 (US$188,000).
The quarter also brought about management changes at the company as Rick Huff, former president and CEO, announced his retirement and Lake was promoted to president and COO.
"Despite the difficult conditions we continue to face, I believe Ainsworth is well positioned to emerge this period well positioned for growth and continued value creation," said Lake.