Conifex Timber Inc., a Canadian lumber producer with a sawmill and biomass power plant in Mackenzie, British Columbia, reported a second-quarter net loss of C$10 million, compared with C$8 million a year earlier, as reduced operating rates and higher U.S. trade costs affected its business. EBITDA was negative C$6 million, compared with negative C$3 million in the second quarter of 2025.

Market conditions for Canadian softwood lumber producers are expected to remain challenging through the rest of 2026 because of macroeconomic uncertainty, U.S. housing demand and trade conditions. Lumber prices improved during the first half, but the company expects volatility to continue as producers adjust supply to demand.

Several Canadian producers have curtailed production or reduced operating schedules. Further production cuts may be required if demand recovers more slowly than expected.

Conifex produced 14 million board feet of Western spruce-pine-fir lumber in the second quarter, down 60% from 35 million board feet a year earlier and 35% from 22 million board feet in the first quarter. The Mackenzie sawmill operated at about 23% of annualized capacity after the company temporarily curtailed production in May because of a shortage of available sawlogs during the seasonal spring breakup period.

The curtailment continued beyond the approximately seven weeks initially planned. Conifex plans to restart the sawmill and its 36-megawatt biomass power plant after it meets the conditions required for a restart, including obtaining financing, which is not assured.

Lumber shipments totaled 24 million board feet, down 39% from 39 million board feet a year earlier but up 10% from the first quarter. Shipments exceeded production as Conifex reduced finished-lumber inventories and kept its planer mill operating for several weeks after the sawmill curtailment.

Lumber revenue totaled C$19 million, up 27% from the first quarter as shipments increased and benchmark prices strengthened, but down 31% from a year earlier because of lower shipment volumes. The average Western spruce-pine-fir 2x4 #2 and Better lumber price increased to US$488 per thousand board feet, from US$463 in the first quarter and US$471 a year earlier.

Reduced production lowered total cost of goods sold, but unit log costs and cash conversion costs increased because the mill operated for fewer days. Conifex also recognized about C$3 million of inventory valuation recoveries as it sold lumber that had previously been written down.

U.S. trade measures added to operating costs. Conifex expensed C$4 million of countervailing and antidumping duty deposits in the second quarter, compared with C$3 million in the first quarter and C$2 million a year earlier. Deposits were made at a combined rate of 35%, while a separate 10% Section 232 tariff also applies to Canadian lumber exported to the U.S.

The U.S. Department of Commerce calculated a combined antidumping and countervailing duty rate of 25% for Conifex on 2024 shipments in its post-preliminary review. If the final rates match that calculation in the fourth quarter, Conifex expects to recognize a noncash export-duty expense of about C$9 million and about C$1.3 million of accrued interest.

Bioenergy operations also declined during the quarter. The Mackenzie power plant sold about 20 gigawatt-hours of electricity, compared with 37 gigawatt-hours in the first quarter and 30 gigawatt-hours a year earlier, after entering its annual maintenance shutdown. Bioenergy revenue fell to C$3 million from C$5 million in the previous quarter and C$4 million a year earlier.

Liquidity tightened as operating conditions remained difficult. Conifex had C$1 million of available liquidity at the end of June, down from C$4 million at the end of March, while total debt stood at about C$102 million. Lower cash generation from the power plant and debt-service costs contributed to the decline in liquidity.

Conifex also disclosed material uncertainty that may cast significant doubt on its ability to continue as a going concern. Net working capital was negative C$6.1 million at June 30, compared with positive C$4.8 million at the end of March, and the company said its ability to continue depends partly on obtaining additional financing and modifications to debt terms.

The company received C$6.4 million of additional bridge financing in July while pursuing government financing initiatives. Its ability to restart operations and generate positive operating cash flow depends on financing availability, lumber prices, product demand and operating productivity.

Conifex expects near-term lumber-market conditions to remain difficult but considers longer-term lumber fundamentals constructive. It plans to focus on operating efficiency, capital spending and cost management while awaiting improved lumber pricing and demand.