Acadian Timber Corp. (TSX:ADN)
All figures in Canadian dollars unless otherwise noted
Investors, analysts and other interested parties can access
Acadian Timber Corp.'s 2013 First Quarter Results conference call
via webcast on Friday, May 10, 2013 at 1:00 p.m. ET at
www.acadiantimber.com or via teleconference at 1-800-319-4610, toll
free in North America. For overseas calls please dial
+1-604-638-5340, at approximately 12:50 p.m. ET. The teleconference
taped rebroadcast can be accessed at 1-800-319-6413 or
+1-604-638-9010 and enter passcode 2826.
Acadian Timber Corp. ("Acadian" or the "Company") (TSX:ADN)
today reported financial and operating results(1) for the three
months ended March 30, 2013 (the "first quarter"). Acadian
generated net sales of $18.3 million on sales volume of 339
thousand m3, which represents a $0.4 million, or 2%, decrease in
net sales compared to the same period in 2012.
Historically, Acadian's first quarter has accounted for more
than 40% of annual sales. However, as in the prior year, results
for the first quarter were impacted by the vendor managed inventory
program ("VMI") with one of our larger softwood sawlog customers.
At the end of the first quarter, Acadian held 54 thousand m3 (March
31, 2012 - 72 thousand m3) of softwood logs in inventory related to
this VMI. As purchase commitments are filled under the VMI during
the second quarter of 2013, additional sales of approximately $2.9
million (2012 - $3.4 million) and Adjusted EBITDA of approximately
$1.6 million (2012 - $1.5 million) are expected to be realized.
Adjusted EBITDA of $4.7 million for the first quarter was $0.1
million lower than in the first quarter of 2012, and Adjusted
EBITDA margin at 26% was unchanged from the same period of last
year.
"Operating conditions were favourable for the first quarter with
harvest volumes coming in slightly ahead of the same period in the
prior year and prices for most primary products showing modest
improvement" said Reid Carter, Chief Executive Officer of
Acadian.
(1) This news release makes reference to Adjusted EBITDA and
Free Cash Flow which are key performance measures in evaluating
Acadian's operations and are important in enhancing investors'
understanding of Acadian's operating performance. Acadian's
management defines Adjusted EBITDA as earnings before interest,
taxes, fair value adjustments, recovery of or impairment of land
and roads, unrealized exchange gain/loss on debt, depreciation and
amortization and Free Cash Flow as Adjusted EBITDA less interest
paid, current income tax expense, additions to, and gains from the
sale of, fixed assets plus losses on, and proceeds from, the sale
of fixed assets. As these performance measures do not have
standardized meanings prescribed by International Financial
Reporting Standards ("IFRS"), they may not be comparable to similar
measures presented by other companies. As a result, we have
provided in this news release reconciliations of net income, as
determined in accordance with IFRS, to Adjusted EBITDA and Free
Cash Flow.
Review of Operations
Financial and Operating Highlights
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Three Months Ended
March 30, March 31,
($000s except per share information) 2013 2012
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Sales volume (000s m3) 339.2 351.5
Net sales $ 18,252 $ 18,648
Operating earnings 4,514 4,629
Net income 1,291 4,368
Adjusted EBITDA 4,655 4,770
Free cash flow 3,911 4,035
Dividends declared 3,451 3,451
Per share (fully diluted)
Net Income 0.08 0.26
Free cash flow 0.23 0.24
Dividends declared 0.21 0.21
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Net income totaled $1.3 million, or $0.08 per share, for the
period ended March 30, 2013, a decrease of $3.1 million, or $0.18
per share, compared to the prior year with the change primarily
attributable to a $1.8 million unrealized exchange loss on
long-term debt compared to a $1.8 million gain in the same period
of the prior year. Operating earnings for the period at $4.5
million were almost unchanged compared to the prior year.
Acadian's weighted average selling price across all log products
during the first quarter increased 1% year-over-year. Improving
prices across most primary products were partially offset by a
lower quality product mix due to the proportion of softwood
pulpwood increasing to 13% of sales from 7% in the first quarter of
2012 as the current year VMI program excludes softwood pulpwood.
Assisted by the implementation of the new pricing mechanism in
Acadian's fibre supply agreement in New Brunswick along with a
general strengthening of markets, softwood sawlog prices increased
5% over the prior year. While hardwood sawlog markets remain
stable, average realized prices for this product decreased by 3%
year-over-year as a result of changes in product mix. Prices for
softwood pulpwood and hardwood pulpwood, increased by 7% and 1%,
respectively, year-over-year. Market conditions for softwood
pulpwood continued to improve during the quarter with prices moving
up 11% quarter-over-quarter. Biomass markets remained stable,
however, realized gross margins decreased 15% year-over-year due to
a change in customer mix.
New Brunswick Timberlands
The tables below summarize operating and financial results for
New Brunswick Timberlands:
Three Months Ended Three Months Ended
March 30, 2013 March 31, 2012
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Harvest Sales Results Harvest Sales Results
(000s m3) (000s m3) ($000s) (000s m3) (000s m3) ($000s)
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Softwood 156.0 87.0 $ 4,573 155.5 82.2 $ 4,161
Hardwood 94.6 97.0 6,055 93.2 114.7 6,985
Biomass 44.9 44.9 819 59.8 59.8 1,120
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295.5 228.9 11,447 308.5 256.7 12,266
Other
sales 706 889
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Net sales $ 12,153 $ 13,155
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Adjusted
EBITDA $ 2,992 $ 3,116
Adjusted EBITDA
margin 25% 24%
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Softwood, hardwood and biomass shipments were 87 thousand m3, 97
thousand m3 and 45 thousand m3, respectively, for the first quarter
of 2013. Approximately 27% was sold as sawlogs, 53% as pulpwood and
20% as biomass. This compares to 31% sold as sawlogs, 46% as
pulpwood and 23% as biomass in the first quarter of 2012.
Net sales for the first quarter of 2013 were $12.2 million (2012
- $13.2 million) with an average selling price across all log
products of $57.77 per m3, which compares to an average log selling
price of $56.62 per m3 during the first quarter of 2012. This
year-over-year increase in the average log selling price reflects
higher prices for softwood sawtimber due to improved market
conditions and the implementation of a new pricing formula under
Acadian's fibre supply agreement with its largest softwood sawlog
customer, somewhat offset by a higher proportion of pulpwood in the
sales mix.
Costs for the first quarter were $9.2 million (2012 - $10.1
million). Variable costs per m3 were almost unchanged from the
first quarter of 2012.
Adjusted EBITDA for the first quarter was $3.0 million, compared
to $3.1 million in the first quarter of 2012 with this modest
difference reflecting lower sales volume and an increase in lower
margin softwood pulpwood in the sales mix. Harvest volume was
consistent with the prior year, however, sales volume decreased as
the prior year's volume had benefitted from unusually high sales of
hardwood from inventory and the biomass sales volume is lower this
year. Other sales decreased to $0.7 million from $0.9 million in
the comparable period of 2012 due to decreased harvesting activity
on the land Acadian manages on behalf of others. Adjusted EBITDA
margin was 25%, compared to 24% for the first quarter of 2012.
NB Timberlands experienced one recordable safety incident among
contractors and no recordable incidents involving employees during
the first quarter of 2013.
Maine Timberlands
The tables below summarize operating and financial results for
Maine Timberlands:
Three Months Ended Three Months Ended
March 30, 2013 March 31, 2012
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Harvest Sales Results Harvest Sales Results
(000s m3) (000s m3) ($000s) (000s m3) (000s m3) ($000s)
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Softwood 76.5 76.2 $ 4,342 76.0 74.6 $ 4,208
Hardwood 25.7 26.4 1,607 19.8 19.6 1,223
Biomass 7.7 7.7 81 0.6 0.6 19
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109.9 110.3 6,030 96.4 94.8 5,450
Other
sales 69 43
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Net sales $ 6,099 $ 5,493
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Adjusted
EBITDA $ 2,028 $ 1,808
Adjusted EBITDA
margin 33% 33%
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Softwood, hardwood and biomass shipments were 76 thousand m3, 26
thousand m3 and 8 thousand m3, respectively, for the first quarter
of 2013. Approximately 56% was sold as sawlogs, 37% as pulpwood and
7% as biomass. This compares to 63% sold as sawlogs, 36% as
pulpwood and 1% as biomass in the first quarter of 2012.
Net sales for the first quarter of 2013 were $6.1 million (2012
- $5.5 million) with an average selling price across all log
products of $57.95 per m3, compared to the average log selling
price of $57.79 per m3 during the first quarter of 2012. The
year-over-year average log selling price was consistent with the
prior year as increases in softwood sawtimber prices were offset by
decreases in hardwood pulpwood prices.
Costs for the first quarter were $4.1 million (2012 - $3.7
million). Variable costs per m3 increased 3% in Canadian dollar
terms as a result of a 2% increase in U.S. dollar-based contractor
rates and the year-over-year weakening of the Canadian dollar
compared to the U.S. dollar.
Adjusted EBITDA for the first quarter was $2.0 million, compared
to $1.8 million in the first quarter of 2012 primarily as a result
of increased sales volume. Adjusted EBITDA margin was 33% in the
first quarter of 2013, unchanged from the first quarter of
2012.
We are pleased to report that during the first quarter, Maine
Timberlands experienced no recordable safety incidents among
employees or contractors.
Market Outlook
The following Market Outlook contains forward-looking statements
about Acadian Timber Corp.'s market outlook for the remainder of
fiscal 2013. Reference should be made to the "Forward-looking
Statements" section of this news release. For a description of
material factors that could cause actual results to differ
materially from the forward-looking statements in the following,
please see the Risk Factors section of our management's discussion
and analysis of Acadian's most recent Annual Report and Annual
Information Form available on our website at www.acadiantimber.com
or filed with SEDAR at www.sedar.com.
The U.S. housing market continues to gain momentum. As of March
2013, seasonally adjusted annualized U.S. housing starts are 47%
above year-ago levels at 1,036,000 while permits are up 17%
year-over-year. Inventories of new homes available for sale remain
near 50-year record lows while household formations, forecast at
1.2 million in 2013, suggest that inventory shortages will persist.
According to the Corelogic March 2013 Home Price Index report, U.S.
home prices nationwide, including distressed sales, increased 11%
on a year-over-year basis. This change represents the biggest
year-over-year increase since March 2006 and the 13th consecutive
monthly increase in home prices nationally. The
S&P/Case-Shiller Home Price 20-City Composite index showed a 9%
increase for the 12 months ending February 2013. Mortgage rates
remain at record lows, housing affordability is at near-record
highs and mortgage underwriting standards are becoming more
accommodative. Most importantly, Acadian's key wood products
customers have benefited from exceptionally strong lumber and panel
prices over the past six months encouraging them to increase
production supporting demand and pricing for softwood sawtimber.
This improved market dynamic is expected to continue throughout
2013.
Markets for hardwood pulpwood continue to be reasonably strong
with Acadian's major hardwood pulp customers all operating and
actively competing for deliveries suggesting prices will remain
relatively stable in 2013. Global demand trends for market pulp
appear to be positive with relatively balanced inventories and
these markets are expected to tighten in the near-term as demand
continues to improve and supply is restricted owing to seasonal
maintenance. Demand for hardwood pulpwood in Acadian's operating
region is further supported by the current strong OSB demand and
prices as these operations rely on the aspen component of our
hardwood pulpwood.
Markets for hardwood sawlogs remain stable and appear to have a
similar outlook for the foreseeable future. Prices for softwood
pulpwood recovered on a year-over-year basis as demand came back
into better balance, but the market for this product remains
fragile. Acadian continues to be able to sell all of its biomass
with a stable outlook for customer-level prices.
Quarterly Dividend
Acadian is pleased to announce a dividend of $0.20625 per share,
payable on July 15, 2013 to shareholders of record on June 28,
2013.
Acadian Timber Corp. is a leading supplier of primary forest
products in Eastern Canada and the Northeastern U.S. With a total
of 2.4 million acres of land under management, Acadian is the
second largest timberland operator in New Brunswick and Maine.
Acadian owns and manages approximately 1.1 million acres of
freehold timberlands in New Brunswick and Maine, and provides
management services relating to approximately 1.3 million acres of
Crown licensed timberlands. Acadian also owns and operates a forest
nursery in Second Falls, New Brunswick. Acadian's products include
softwood and hardwood sawlogs, pulpwood and biomass by-products,
sold to approximately 90 regional customers.
Acadian's shares are listed for trading on the Toronto Stock
Exchange under the symbol ADN.
Forward-Looking Statements
This News Release contains forward-looking information and other
forward-looking statements within the meaning of applicable
Canadian securities laws that involve known and unknown risks,
uncertainties and other factors that may cause the actual results,
performance or achievements of Acadian Timber Corp. and its
subsidiaries (collectively, "Acadian"), or industry results, to be
materially different from any future results, performance or
achievements expressed or implied by such forward-looking
statements. When used in this News Release, such statements may
contain such words as "may," "will," "intend," "should," "expect,"
"believe," "outlook," "predict," "remain," "anticipate,"
"estimate," "potential," "continue," "plan," "could," "might,"
"project," "targeting" or the negative of these terms or other
similar terminology. Forward-looking information in this News
Release includes, without limitation, statements regarding
management's beliefs, intentions, results, performance, goals,
achievements, future events, plans and objectives, business
strategy, access to capital, liquidity and trading volumes,
dividends, taxes, capital expenditures, projected costs, and
similar statements concerning anticipated future events, results,
achievements, circumstances, performance or expectations that are
not historical facts. These statements which reflect management's
current expectations regarding future events and operating
performance are based on information currently available to
management and speak only as of the date of this News Release. All
forward-looking statements in this News Release are qualified by
these cautionary statements. Forward-looking statements involve
significant risks and uncertainties, should not be read as
guarantees of future performance or results, should not be unduly
relied upon, and will not necessarily be accurate indications of
whether or not such results will be achieved.
Factors that could cause actual results to differ materially
from the results discussed in the forward-looking statements
include, but are not limited to: general economic and market
conditions; product demand; concentration of customers; commodity
pricing; interest rate and foreign currency fluctuations;
seasonality; weather and natural conditions; regulatory, trade or
environmental policy changes; changes in Canadian income tax law;
economic situation of key customers; and other risks and factors
discussed under the heading "Risk Factors" in each of the Annual
Information Form dated March 28, 2013 and the Management
Information Circular dated March 28, 2012, and other filings of
Acadian made with securities regulatory authorities, which are
available on SEDAR at www.sedar.com. Forward-looking information is
based on various material factors or assumptions, which are based
on information currently available to Acadian. Material factors or
assumptions that were applied in drawing a conclusion or making an
estimate set out in the forward-looking information may include,
but are not limited to: anticipated financial performance; business
prospects; strategies; regulatory developments; exchange rates; the
sufficiency of budgeted capital expenditures in carrying out
planned activities; the availability and cost of labour and
services and the ability to obtain financing on acceptable terms,
which are subject to change based on commodity prices, market
conditions for timber and wood products, and the economic situation
of key customers. Readers are cautioned that the preceding list of
material factors or assumptions is not exhaustive. Although the
forward-looking statements contained in this News Release are based
upon what management believes are reasonable assumptions, Acadian
cannot assure readers that actual results will be consistent with
these forward-looking statements. Certain statements in this News
Release may also be considered "financial outlook" for the purposes
of applicable Canadian securities laws, and such financial outlook
may not be appropriate for purposes other than this News Release.
The forward-looking statements in this News Release are made as of
the date of this News Release, and should not be relied upon as
representing Acadian's views as of any date subsequent to the date
of this News Release. Acadian assumes no obligation to update or
revise these forward-looking statements to reflect new information,
events, circumstances or otherwise, except as may be required by
applicable law.
Acadian Timber Corp.
Interim Consolidated Statements of Net Income
(unaudited)
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Three Months Ended
March 30, March 31,
(CAD thousands) 2013 2012
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Net sales $ 18,252 $ 18,648
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Operating costs and expenses
Cost of sales 11,988 12,447
Selling, administration and other 1,604 1,435
Reforestation 5 -
Depreciation and amortization 141 137
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13,738 14,019
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Operating earnings 4,514 4,629
Interest expense, net (739) (715)
Other items
Fair value adjustments 19 (401)
Unrealized exchange gain (loss) on long-term
debt (1,842) 1,769
Gain on sale of timberlands - 4
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Earnings before income taxes 1,952 5,286
Deferred tax expense (661) (918)
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Net income for the period $ 1,291 $ 4,368
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Net income per share - basic and diluted $ 0.08 $ 0.26
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Acadian Timber Corp.
Interim Consolidated Statements of Comprehensive Income
(unaudited)
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Three Months Ended
March 30, March 31,
(CAD thousands) 2013 2012
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Net income $ 1,291 $ 4,368
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Other comprehensive income (loss)
Items that may be reclassified subsequently to
net income 2,209
Unrealized foreign currency translation gain
(loss) (2,072)
Amortization of derivatives designated as cash
flow hedges (49) (49)
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Comprehensive income $ 3,451 $ 2,247
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Acadian Timber Corp.
Interim Consolidated Balance Sheets
(unaudited)
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As at March 30, December 31,
(CAD thousands) 2013 2012
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Assets
Current assets
Cash and cash equivalents $ 6,442 $ 6,136
Accounts receivable and other assets 5,534 6,619
Inventory 4,571 1,651
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16,547 14,406
Timber 232,080 230,686
Land, roads and other fixed assets 33,571 33,307
Intangible assets 6,140 6,140
Deferred income tax asset 117 696
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$ 288,455 $ 285,235
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Liabilities and shareholders' equity
Current liabilities
Accounts payable and accrued liabilities $ 5,207 $ 4,685
Dividends payable to shareholders 3,451 3,451
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8,658 8,136
Long-term debt 73,077 71,173
Deferred income tax liability 22,718 21,924
Shareholders' equity 184,002 184,002
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$ 288,455 $ 285,235
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Acadian Timber Corp.
Interim Consolidated Statements of Cash Flows
(unaudited)
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Three Months Ended
March 30, March 31,
(CAD thousands) 2013 2012
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Cash provided by (used for):
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Operating activities
Net income $ 1,291 $ 4,368
Adjustments to net income:
Deferred tax expense 661 918
Depreciation and amortization 141 137
Fair value adjustments (19) 401
Unrealized exchange (gain) loss on long-term debt 1,842 (1,769)
Interest expense, net 739 715
Interest paid, net (744) (720)
Gain on sale of timberlands - (4)
Net change in non-cash working capital balances
and other (154) 1,881
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3,757 5,927
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Financing activities
Dividends paid to shareholders (3,451) (3,451)
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(3,451) (3,451)
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Investing activities
Additions to timber, lands, roads and other fixed
assets - (15)
Proceeds from sale of timberlands - 4
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- (11)
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Increase in cash and cash equivalents during the
period 306 2,465
Cash and cash equivalents, beginning of period 6,136 4,019
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Cash and cash equivalents, end of period $ 6,442 $ 6,484
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Reconciliation of Net Income to Adjusted EBITDA and Free Cash
Flow
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Three Months Ended
March 30, March 31,
(CAD thousands) 2013 2012
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Net income $ 1,291 $ 4,368
Add (deduct):
Interest expense, net 739 715
Deferred tax expense 661 918
Depreciation and amortization 141 137
Fair value adjustments (19) 401
Unrealized exchange (gain) loss on long-term debt 1,842 (1,769)
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Adjusted EBITDA 4,655 4,770
Add (deduct):
Interest paid on debt, net (744) (720)
Additions to timber, lands, roads and other fixed
assets - (15)
Gain on sale of timberlands - (4)
Proceeds on sale of timberlands - 4
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Free cash flow $ 3,911 $ 4,035
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Dividends declared $ 3,451 $ 3,451
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Payout ratio 88% 86%
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Contacts: Acadian Timber Corp. Robert Lee Investor Relations and
Communications 604-661-9607rlee@acadiantimber.com
www.acadiantimber.com
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