Acadian Timber's Q3 2025 net income rises to $2.9 million, but operational disruptions in Maine and lower timber sales volumes raise concerns for investors.

Acadian Timber's operations and financial results for the third quarter of 2025 reflected a mix of stable market demand and operational challenges, while overall product demand remained relatively stable amid ongoing economic uncertainty. Performance varied across our operating regions. In New Brunswick, consistent contractor availability supported strong timber sales volumes. However, our main operations face challenges stemming from limited contractor capacity and reduced productivity, which impacted deliveries to our customers. Acadian Timber generated timber sales and services revenue of $23 million compared to $26 million in the prior year period. Timber sales volume excluding biomass decreased 8% compared to the third quarter of 2024 in New Brunswick. Timber sales volumes excluding biomass were consistent with the same period of 2024. Despite harvesting operations being temporarily disrupted by elevated fire risk resulting from dry conditions, sales volumes in Maine remain challenged. Softwood sawlog pricing increased 10%, primarily driven by modest improvements in end user markets, a higher value product mix, and longer hauling distances. Hardwood sawlog prices decreased 11% as compared to the prior year period due to a lower value product mix and continued weakness in lumber markets. Pulpwood pricing remained relatively consistent with the prior year period. Lower fuel adjustment surcharges resulting from lower fuel prices, particularly in New Brunswick, also impacted pricing. Overall, the weighted average selling price excluding biomass remained consistent year over year. Biomass sales volumes were lower compared to the prior year period due to timing differences across quarters and pricing was consistent. Operating costs and expenses decreased $2 million compared to the prior year period. The impact of decreased timber sales volumes and timber services activity was partially offset by higher average operating costs and expenses per cubic meter produced in Maine, a result of the transition to internal logging operations and a more fixed cost structure. Adjusted EBITDA and adjusted EBITDA margin were $3.5 million 15% during the third quarter compared to $4 million and 16% respectively in the prior year period. Our net income for the third quarter totaled $2.9 million, or $0.16 per share, compared to $2.2 million or $0.13 per share in the same period of 2024. Higher non cash fair value adjustments and lower income tax expense were partially offset by lower operating income and higher interest expense. Acadian Timber generated $1 million of free cash flow and declared dividends of $5.3 million to our shareholders during the third quarter or $0.29 per share. I will now move into the third quarter results for our New Brunswick operations. Sales for our New Brunswick Timberlands were $20.5 million compared to $21.8 million during the prior year period. Harvesting operations were temporarily disrupted by dry conditions and elevated fire risk however, targeted total freehold volumes were achieved the year over year. Decrease in total sales primarily reflects reduced timber services activity. Softwood sawlog volumes decreased 13% but were offset by an increase in softwood pulpwood volumes of 168% compared to Q3 2024. Pricing for softwood sawlogs increased 12% due to modest improvements in end user markets, a higher value product mix and longer hauling distances. Pricing for softwood pulpwood increased 5% due to solid demand. With regards to hardwood, demand for sawlogs remained strong. However, volumes decreased 21% due to the temporary shutdown of operations caused by dry conditions and elevated fire risk. Hardwood pulpwood volumes decreased 8% for the same reason. Pricing for hardwood sawlogs decreased 9% due to a lower value product mix and weakness in lumber markets while hardwood pulpwood pricing remained consistent as compared to the prior year period. Lower fuel adjustment surcharges resulting from lower fuel prices also impacted pricing overall for New Brunswick, the weighted average selling price excluding biomass was 3% higher as compared to Q3 2024. Operating costs and expenses were $16.2 million during the third quarter compared to $17.1 million in the prior year period. Additional costs related to increased freehold harvesting activity were offset by lower timber services activity and decreased weighted average variable costs as compared to the third quarter of 2024. Weighted average variable cost excluding biomass decreased 2% as a result of a higher proportion of softwood products which carry lower variable costs and lower fuel adjustment costs, partially offset by increased contractor rates and longer hauling distances. New Brunswick's adjusted EBITDA for the quarter was $4.4 million compared to $4.8 million in the prior year period. Adjusted EBITDA margin was 21% compared to 22% switching over to Maine. Sales during the third quarter totaled $2.5 million compared to $4.2 million in the same period last year. Timber sales volume decreased 42% primarily due to limited trucking capacity which impacted our ability to deliver to our customers combined with short term harvesting productivity constraints. Softwood sawlog volumes decreased 41%. However, pricing increased 4% in US dollar terms due to a favorable change in product mix. Hardwood sawlog volumes were minimal during the third quarter of the year. Hardwood pulpwood volumes decreased 38% due to lower demand and pricing decreased 7% in US dollar terms as compared to Q3 2024. Softwood pulpwood volumes were negligible in Maine due to the extended shutdown of a major softwood pulpwood customer. Overall, the weighted average selling price Excluding biomass in US dollar terms was consistent with the same quarter in the prior year. Operator operating costs and expenses for the third quarter were $3.4 million compared to $4.4 million during the same Decreased costs resulting from lower timber sales volumes were partially offset by higher average operating costs and expenses per cubic meter produced. This increase is attributable to the lower production during the ramp up of internal logging operations as well as the transition to a more fixed cost structure. Adjusted EBITDA for the quarter was negative $500,000 compared to negative $200,000 during the prior year period. With respect to Acadian Timber's financial position at the end of the quarter, it remains strong, ending with a net liquidity position of $15.1 million including cash balances and our revolving credit facilities which remain undrawn. With that, I'll turn the call over to Adam.

Thank you Susan and good afternoon everyone. As always, Acadian Timber remains committed to health and safety as our number one priority and as we said before, we believe that emphasizing and achieving an excellent safety record is a leading indicator of success in the broader business. Acadian Timber's operations experienced two recordable safety incidents during the quarter among employees which were minor in nature and none among our contractors. Incident reduction will always be a primary focus for Acadian Timber and we have been very pleased with our new logging operations and their commitment to safety. As Susan mentioned, we experienced mixed results across our operations. While New Brunswick had a very solid quarter, operational performance in Maine continued to be challenged. A significant portion of our trucking operations in Maine continues to rely on contractors as we had planned. During the third quarter we experienced a shortfall in contractor capacity which impacted our ability to meet delivery demands. To address this challenge, we are actively expanding our contractor network and exploring options within our internal operations to ensure greater reliability moving forward. Our strategic transition in Maine from contractor based logging to internal logging operations has also temporarily reduced production volumes. During the first nine months of 2025, production volumes were below anticipated long term levels and operating costs per cubic meter timber produced were elevated relative to long term targets. Additionally, the transition to a more fixed cost structure has resulted in changes from historical cost patterns with costs less directly tied to revenue generated. This impact is amplified during periods of lower sales volumes. Acadian Timber is actively investing in operator training programs and optimizing equipment utilization to enhance efficiency, build long term capabilities and ensure sustained cost improvements. During the third quarter we expanded the operational workforce and as we exited the quarter production levels continued to improve with just last week being our highest production week this year. Turning to our outlook, near term pressures on end use markets have continued with trade policy developments adding further complexity for forest products companies in both the US And Canada. The recent escalation of US Duties on Canadian softwood lumber along with new tariffs on select wood based products poses a potential risk to Canadian exporters and may dampen cross-border demand. Despite these headwinds, macroeconomic indicators remain positive. North American interest rates are easing and the consensus forecast for US housing start is steady at approximately 1.35 million start in 2025. Consistent with 2024. We remain confident that the stability of the northeastern forestry sector combined with long term demand for new homes and repair and remodel activity will support the long term demand for our products. We maintain sufficient contractor availability in New Brunswick through the third quarter which is expected to continue for the remainder of the year. As I mentioned, we expanded the workforce within our internal harvesting operations in Maine and have already noted improvements in production levels. As internal operations continue to scale. Acadian Timber expects to see meaningful gains in production levels while advancing toward our targeted cost structure. Demand for Acadian Timber sawlogs is mainly driven by regional supply and demand. Near term sawlog demand is expected to remain stable while pricing may remain challenged until end use markets improve demand and pricing for softwood, pulpwood and hardwood pulpwood is expected to remain at reduced levels in the near term. With respect to voluntary carbon credits, demand and pricing are expected to remain stable. Issuance of the next tranches of carbon credits from Acadian Timber's current project has been delayed due to the transition to ACRs updated improved forest management protocol, which is fundamentally the same approach as the previous protocol but introduces dynamic baselines. The transition to the new protocol may result in slightly fewer total carbon credits being issued than was expected under the initial protocol. However, all credits generated will be higher valued carbon removal credits and no conservation credits will be generated. Carbon credits assessed using the new protocol are expected to be more appealing to customers, thereby commanding higher pricing. Registration is expected in the last quarter of 2025 or early in 2026 and we continue to evaluate the opportunities to develop carbon projects under both the compliance protocol in Canada and the current ACR voluntary protocol. With respect to real estate, we will remain busy through the rest of 2025. We have initiated development projects in New Brunswick and Maine, including the listing of a modest number of residential lots. These efforts are just the beginning of a broader strategy and we will continue advancing these and other developments with a long term view. Looking ahead, we anticipate expanding our real estate footprint with additional listings, new site planning and strategic investments that align with our growth objectives. In closing, backed by a strong balance sheet, access to diverse and resilient markets, and the dedication of a highly skilled team, Acadian Timber is well positioned to navigate the evolving operational and economic landscape. Our high quality, sustainably managed timberlands, together with our disciplined approach to capital allocation, provide a stable foundation for long term value creation. As we look ahead to the remainder of 2025 and into 2026, we see meaningful opportunities to advance both our operational efficiency and financial performance. With that, we are now available to take your questions Operator thank you.

As a reminder to ask a question, please press star 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 again. Again, as a reminder to ask a question, please press star 1 on your telephone. I'm showing no questions in the queue at this time, so I will turn it back to Adam Shaparsky, President and co, for closing remarks.

Thank you Operator. That makes it easy. On behalf of the Board and management of Acadian, I would like to thank all of our shareholders for their ongoing support. Thank you. Stay safe and we look forward to you joining us for our fourth quarter of 2025 conference call on February 12th.

Goodbye.

This concludes today's conference call. Thank you for participating and you may now disconnect.