VANCOUVER, BC, Feb. 14, 2024 /PRNewswire/ – West Fraser Timber Co. Ltd. (“West Fraser” or the “Company”) (NYSE:WFG) reported today the fourth quarter results of 2023 (“Q4-23”). All dollar amounts in this news release are expressed in U.S. dollars unless noted otherwise.
Fourth Quarter Highlights
Sales of $1.514 billion and loss of $153 million, or $(1.87) per diluted share
Adjusted EBITDA1 of $97 million, representing 6% of sales
Lumber segment Adjusted EBITDA1 of $(51) million
North America Engineered Wood Products (“NA EWP”) segment Adjusted EBITDA1 of $143 million
Pulp & Paper segment Adjusted EBITDA1 of $2 million
Europe Engineered Wood Products (“Europe EWP”) segment Adjusted EBITDA1 of $3 million
Repurchased 1.495 million shares for aggregate consideration of $104 million
Completed acquisition of Spray Lake Sawmills located in Cochrane, Alberta and associated timber tenures
Annual Highlights
Sales of $6.454 billion and loss of $167 million, or $(2.01) per diluted share
Adjusted EBITDA1 of $561 million, representing 9% of sales
Lumber segment Adjusted EBITDA1 of $2 million, including $62 million of export duty recovery attributable to finalization of AR4
NA EWP segment Adjusted EBITDA1 of $589 million
Pulp & Paper segment Adjusted EBITDA1 of $(77) million
Europe EWP segment Adjusted EBITDA1 of $46 million
Repurchased 1.835 million shares for aggregate consideration of $129 million
1. Adjusted EBITDA is a non-GAAP financial measure. Refer to the “Non-GAAP and Other Specified Financial Measures” section of this document for more information on this measure.
Subsequent to Quarter End
Effective January 1, 2024, Sean McLaren succeeded Ray Ferris as President and Chief Executive Officer and joined the Board of Directors
Announced permanent closure of lumber mill in Maxville, Florida and indefinite curtailment of operations at lumber mill in Huttig, Arkansas
Announced permanent closure of lumber mill in Fraser Lake, B.C., following an orderly wind-down
Completed sale of Hinton pulp mill
“The fourth quarter of 2023 saw continued weakness in demand for our North American lumber and European panel products. In contrast, demand for our North American OSB, plywood and other engineered products experienced resilient demand as new home construction markets were surprisingly robust with mortgage rates showing signs of stabilizing after moving meaningfully higher earlier in the year,” said Sean McLaren, West Fraser’s President and CEO. “On balance, while 2023 was a challenging year financially, it was also a period marked by significant progress in our ongoing portfolio optimization strategy, which we advanced through acquisitions, announced divestitures, mill curtailments and major capital investments.”
“Although demand markets face a measure of uncertainty in the near term, we will continue to look for opportunities that improve West Fraser over the longer term. We have been prudent and purposeful in preparing the Company for what may lie ahead as we transition into 2024. And we believe our people and our culture combined with our diversified manufacturing platform and financial flexibility will continue to provide competitive advantages that are important to the business and our stakeholders, and that will allow us to continue to successfully execute our business strategy.”
Results Summary
Fourth quarter sales were $1.514 billion, compared to $1.705 billion in the third quarter of 2023. Fourth quarter earnings were $(153) million, or $(1.87) per diluted share, compared to $159 million, or $1.81 per diluted share in the third quarter of 2023. Fourth quarter Adjusted EBITDA1 was $97 million compared to $325 million in the third quarter of 2023. Restructuring and impairment charges of $134 million were recorded in Q4-23.
Full year sales were $6.454 billion, compared to $9.701 billion in 2022. Full year earnings were $(167) million, or $(2.01) per diluted share, compared to $1.975 billion, or $20.86 per diluted share in 2022. Adjusted EBITDA was $561 million in 2023 compared to $3.212 billion in 2022. Restructuring and impairment charges of $279 million were recorded in 2023.
Liquidity and Capital Allocation
Cash and short-term investments decreased to $900 million at December 31, 2023 from $1.162 billion at December 31, 2022.
Capital expenditures in the fourth quarter were $157 million. Full year capital expenditures were $477 million in 2023 and $477 million in 2022.
We paid $25 million of dividends in the fourth quarter, or $0.30 per share, and declared a $0.30 per share dividend payable in the first quarter of 2024. We paid $100 million of dividends in 2023.
In the fourth quarter of 2023, we repurchased 1,494,801 shares under our Normal Course Issuer Bid (“2023 NCIB”) for aggregate consideration of $104 million. For the full year, we repurchased 1,834,801 shares under the current 2023 NCIB for aggregate consideration of $129 million. As of February 13, 2024, 1,878,648 shares have been repurchased under the bid, leaving 2,185,048 shares available to purchase at our discretion until the expiry of the 2023 NCIB.
As of February 13, 2024, we have repurchased for cancellation 41,620,442 of the Company’s shares since the closing of the acquisition of Norbord on February 1, 2021 through the completion of a substantial issuer bid (“SIB”) in 2021, completion of a SIB in 2022 and normal course issuer bids, equalling 76% of the shares issued in respect of the Norbord Acquisition.
Outlook
Markets
Several key trends that have served as positive drivers in recent years are expected to continue to support medium and longer-term demand for new home construction in North America.
The most significant uses for our North America lumber, OSB and engineered wood panel products are residential construction, repair and remodelling and industrial applications. Over the medium term, improved housing affordability from stabilization of inflation and interest rates, a large cohort of the population entering the typical home buying stage, and an aging U.S. housing stock are expected to drive new home construction and repair and renovation spending that supports lumber, plywood and OSB demand. Over the longer term, growing market penetration of mass timber in industrial and commercial applications is also expected to become a more significant source of demand growth for wood building products in North America.
The seasonally adjusted annualized rate of U.S. housing starts was 1.46 million units in December 2023, with permits issued of 1.50 million units, according to the U.S. Census Bureau. While there are near-term uncertainties for new home construction, owing in large part to interest rate expectations and the direction of changes to mortgage rates and the resulting impact on housing affordability, unemployment remains relatively low in the U.S. and central bankers across North America have indicated that the current rate hiking cycle appears to be nearing its end. However, demand for new home construction and our wood building products may decline in the near term should the broader economy and employment slow or interest rates remain elevated or increase further than currently expected, impacting consumer sentiment and housing affordability.
Although we continue to experience near-term softness, we expect demand for our European products will grow over the longer term as use of OSB as an alternative to plywood grows. Further, an aging housing stock supports long-term repair and renovation spending and additional demand for our wood building products. Near-term risks, including relatively high interest rates, ongoing geopolitical developments and the lagged impact of recent inflationary pressures, may cause further temporary slowing of demand for our panel products in the U.K. and Europe. Despite these risks, we are confident that we will be able to navigate through this period and capitalize on the long-term growth opportunities ahead.
In the Pulp & Paper segment, the Hinton pulp sale transaction closed on February 3, 2024 following the completion of the customary regulatory reviews and closing conditions. Activities in respect of the closing conditions for the sale of Quesnel River Pulp mill and Slave Lake Pulp mill are proceeding and we continue to anticipate closing of the transaction in early 2024.
Operations
The Company is providing the following operational guidance for 2024:
Spruce-pine-fir (“SPF”) shipments are expected to be 2.6 to 2.8 billion board feet
Southern yellow pine (“SYP”) shipments are expected to be 2.7 to 2.9 billion board feet
NA OSB shipments are expected to be 6.3 to 6.6 billion square feet (3/8-inch basis)
European OSB shipments are expected to be 0.9 to 1.1 billion square feet (3/8-inch basis)
Costs and availability constraints for transportation, raw materials such as resins and chemicals, and energy are expected to moderate over the near term, while labour availability and some capital equipment lead times are expected to remain challenging
Capital expenditures1 are expected to be $450 million to $550 million
1.
This is a supplementary financial measure. Refer to the “Non-GAAP and Other Specified Financial Measures” section of this document for more information on this measure.
Dividend Declared
The Board of Directors of the Company has declared a dividend of $0.30 per share on the Common shares and the Class B Common shares in the capital of the Company, payable on April 4, 2024 to shareholders of record on March 15, 2024. Dividends are designated to be eligible dividends pursuant to subsection 89(14) of the Income Tax Act (Canada) and any applicable provincial legislation pertaining to eligible dividends. Dividends are declared and payable in U.S. dollars. Shareholders may elect to receive their dividends in Canadian dollars. Details regarding the election procedure are available on our website at www.westfraser.com in the “Investors/Stock Information/Dividends” section.
Management Discussion & Analysis (“MD&A”)
Our 2023 Annual MD&A and audited annual consolidated financial statements and accompanying notes are available on our website at www.westfraser.com and the System for Electronic Document Analysis and Retrieval + (“SEDAR+”) at www.sedarplus.ca and the Electronic Data Gathering, Analysis and Retrieval System (“EDGAR”) website at www.sec.gov/edgar under the Company’s profile.
Sustainability Report
West Fraser’s 2022 Sustainability Report is available on the Company’s website at www.westfraser.com. This report summarizes our Environmental, Social, and Governance (“ESG”) performance with a focus on our people, communities and role of our products in the carbon cycle. It is aligned with the Sustainable Accounting Standards Board (“SASB”), Global Reporting Initiative (“GRI”), the Task Force on Climate-Related Financial Disclosures (“TCFD”) and CDP (formerly the Carbon Disclosure Project).
Risks and Uncertainties
Risk and uncertainty disclosures are included in our 2023 Annual MD&A, as well as in our public filings with securities regulatory authorities. See also the discussion of “Forward-Looking Statements” below.
Conference Call
West Fraser will hold an analyst conference call to discuss the Company’s Q4-23 financial and operating results on Thursday, February 15, 2024, at 8:30 a.m. Pacific Time (11:30 a.m. Eastern Time). To participate in the call, please dial: 1-888-390-0605 (toll-free North America) or 416-764-8609 (toll) or connect on the webcast. The call and an earnings presentation may also be accessed through West Fraser’s website at
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