Interfor Q2 Rebounds to $92M EBITDA-Can Higher Lumber Prices Survive the Tariff Threat?

Q2 recovery improved earnings and pricing together

This quarter stands out because the rebound was not only seasonal. Interfor posted adjusted EBITDA of $92.3 million on $804.4 million of sales, up from $30.7 million of adjusted EBITDA on $643.2 million in Q1'26 and $17.2 million of adjusted EBITDA on $780.5 million in Q2'25. Net earnings also improved to $1.0 million from a $63.3 million loss in Q1'26, though they remained below $11.1 million in Q2'25. The more important signal was pricing: average selling price reached $739 per mfbm, up $73, or 11%, from Q1'26. When revenue, EBITDA, and prices all improve together, the quarter looks more like a real recovery than a temporary bounce.

The key question now is whether that pricing strength can hold. Bulls see a business that is benefiting from firmer prices and an industry still tightened by prior curtailments. Bears will note that one strong quarter does not close the gap to Q2'25 earnings. If average selling prices stabilize, Interfor has a credible path to a higher earnings base. If prices fade, this looks more like a sharp reset than a lasting turnaround.

Why tighter supply can still lift earnings

If prices hold, the next leg up may depend more on market tightness than on a major demand surge.

How constrained supply can favor larger producers

This market has been tightened for years by industry-wide production curtailments over the last several years. When supply stays constrained, even a modest demand improvement can support higher prices. Larger producers can benefit disproportionately because they are often better placed to maintain operating rates, spread fixed costs across more volume, and capture margin improvement before competitors expand output.

Interfor's quarter showed elements of that setup. The company produced 927 million board feet and shipped 941 million board feet, meaning sales exceeded production and inventories likely decreased during the quarter. In a firmer price environment, that is what investors want to see.

Operating leverage also helped. Q2 production rose from the prior quarter, supported by the ramp-up at the rebuilt Thomaston, Georgia sawmill and higher operating rates at other sites after temporary curtailments early in Q1'26. At the same time, Production costs per mfbm decreased versus Q1'26, marking the third straight quarterly decline. If lumber prices remain firm, margin expansion can come from both better selling prices and lower unit costs.

What could keep the upside going

• Lumber prices remain firm as summer demand continues.
• Shipments stay ahead of production, reducing inventory pressure.
• U.S. ramp-ups help offset any hesitation around Canadian supply.
• Cost reductions continue, helping more of the price improvement flow through to earnings.

Tariffs and earnings quality still limit the bull case

Even after a much stronger quarter, the main concerns are tariff exposure and whether earnings have improved enough to support a durable rerating.

Tariff headlines matter, but the applied rate matters more

The market can overreact to political headlines, but the direct issue is which tariff rate actually hits cash flow. The new Section 338 tariffs of 50% and the Section 301 tariffs of 10% or 12.5% do not apply to the Company's products exported to the U.S. That limits the immediate breadth of the tariff threat, even if headline risk still pressures sentiment.

The narrower risk investors need to watch is the Commerce Department's combined all others rate of 25.18%. If that rate holds, tariff pressure remains a margin issue. If it rises, the overhang gets heavier. If it improves, the stock may get more room to re-rate.

Why the rebound still looks fragile

The tougher bear point is earnings quality. Interfor recovered strongly from Q1, but Q2'26 still delivered only $1.0 million of net earnings and $0.02 per share, compared with $11.1 million and $0.22 per share in Q2'25. That is progress, not a full return to prior profitability. If investors focus only on the EBITDA rebound, they may miss how much work remains on the earnings base.

• Bulls: tariffs are less damaging than headlines suggest, and the quarter showed the business can rebound when prices firm.
• Bears: the earnings recovery is still too shallow to call this a true turnaround.

What would confirm or challenge the thesis

The quarter improved the setup, but the next confirmation points are straightforward.

Note that the full Q2 package is already public, and the call recording is available until September 7, so the source material is still accessible.

Signals that would strengthen the case

• Management describes pricing as durable rather than just a short summer spike.
• Shipments continue to run ahead of production, showing demand is still absorbing supply.
• Cost pressure stays contained enough that the third sequential quarterly decrease in production costs continues to support margins.
• Tariff commentary centers on the already-discussed combined all others rate of 25.18% rather than broader escalation.

Signals that would weaken the case

• Inventories rebound quickly as shipments no longer stay ahead of production.
• Pricing gains fade even as operating rates improve.
• Earnings remain shallow relative to the EBITDA rebound, suggesting margins are still being pinched.

For now, this still looks more like a watchlist-to-selective-conviction setup than a fully confirmed turnaround. The clearest trigger is another quarter where pricing, shipments, and costs all improve together.