Interfor Inc., a Canadian forest products company that tops Georgia’s list of lumber producers, has bounced back after the pandemic forced it to slash production and signal the prospect of suspending more than 400 jobs.
The Vancouver firm with its Southern U.S. regional office in Peachtree City issued notices to the Georgia Department of Labor in March that it could cut many of the jobs at three out of seven Georgia mills in Eatonton, Bloomingdale and Baxley.
Aimed at matching output with a swift drop in demand after the pandemic was declared in March, the capacity cuts initially totaled 35 million board feet per week, about 60 percent of Interfor’s overall output.
By March 26, the cuts were expanded to 50 million board feet per week. The amount was reevaluated weekly until about midway in the quarter, when mills were brought back online in response to rising demand.
In an earnings call, Senior Vice President for Sales J. Barton Bender called the shutdown-hit second quarter possibly the “most surreal in history for our lumber markets.”
By the end of June, production had declined by about a third to 421 million board feet versus the previous year, but affected mills were back up and running at pre-pandemic levels, helping the company swing to a $3.2 million quarterly profit even as output dropped and sales slid about 17.5 percent to $397 million.
Locations for Interfor’s Georgia mills include the three cities above, plus Swainsboro, Meldrim, Perry and Preston. The Southern U.S., the center of Interfor’s yellow pine production, accounts for about half of the company’s 3 billion board feet per year, including lone mills in Arkansas and South Carolina. It also has mills in the Northwest and in British Columbia.
Bringing Workers Back
While production has recovered, reopening hasn’t come without challenges.
Outbreaks of COVID-19 among the workforce along with federal subsidies have slowed the hiring process, CEO Ian Fillinger said, presumably referring to the expanded federal benefit of $600 per week the congressional Republicans have recently argued is keeping workers from returning to the job.
“It’s a struggle in some regions to get employees, but we’re working on that,” Mr. Fillinger said.
Still, Mr. Fillinger assured analysts that Interfor faces few operational hurdles that would hamper its ability to increase supply, other than losing hours due to planned capital projects that will pay off significantly down the road.
“The labor availability relative to COVID is the other factor. And then there is, particularly in the South, a lot of employees that are either self-quarantined or in some cases have tested positive. So our team in the South is really adjusting operating schedules to match that,” he said.
Demand, meanwhile, has surged back as strong as ever as consumers have undertaken home improvement projects during their lockdowns.
“In North America, repair and remodel, new home construction remained vibrant with both sectors resting a growth stance. Time at home, low interest rates and a desire to seek less densified living has driven the demand for lumber. These tailwinds continue into Q3,” Mr. Bender said in remarks on the call.
Interfor said it would spend $120 million on capital projects in 2020 after noting in the first quarter that the completion of its Eatonton expansion would be deferred until 2021. That project is part of a $240 million phase II capital plan through 2022 that was also set to see a rebuild of a sawmill in Thomaston, a project that is now being reevaluated in light of overall uncertainty.
The company is also watching global trade developments closely. Exports to China only makes up 4 percent of the company’s sales, representing a significant growth opportunity — especially in pine lumber from the South — when low-cost alternatives are no longer available, executives said.
According to the Q2 report, exports so far this year have made up about 29 percent of Interfor’s sales, with Canada being the largest market by far, followed by Japan, China and miscellaneous markets.
Interfor, which operates its Canadian mills in the Pacific province of British Columbia, also finds itself hit by what it sees as politically motivated taxes on softwood lumber, a constant irritant in the U.S.-Canada trade relationship.
The company has paid more than $106 million in countervailing and anti-dumping duties since November 2017, when a U.S. Commerce Department investigation held that Canadian producers were selling softwood lumber at “3.2 percent to 8.89 percent less than fair value.” U.S. Customs and Border Protection continues to hold the amount in trust while the decision is appealed.
Interfor opened its Atlanta-area regional headquarters after acquiring Tolleson Lumber Co. in Perry in 2013.