VANCOUVER, British Columbia, Feb. 13, 2024 (GLOBE NEWSWIRE) — Western Forest Products Inc. (TSX:WEF) (“Western” or the “Company”) reported a net loss of $14.3 million in the fourth quarter of 2023, as compared to a net loss of $17.4 million in the third quarter of 2023, and net loss of $21.4 million in the fourth quarter of 2022.
Results in the fourth quarter of 2023 reflect lower realized pricing and shipment volumes on a stronger lumber sales mix, offset by lower stumpage rates as compared to the same period last year.
Adjusted EBITDA was negative $1.2 million in the fourth quarter of 2023, as compared to negative $11.6 million in the third quarter of 2023, and negative $11.9 million in the fourth quarter of 2022.
Operating loss prior to restructuring and other items was $14.4 million in the fourth quarter of 2023, as compared to operating losses of $25.8 million in the third quarter of 2023, and $23.6 million in the fourth quarter of 2022.
Despite the more challenging operating environment, highlights in 2023 included:
Celebrated the one-year anniversary of the acquisition of the glulam business from Calvert Company, Inc., that continues to perform to expectations and generated EBITDA margins in excess of 20%.
Advanced strategic investments to support value-added manufacturing on the British Columbia (“BC”) Coast and grow our value-added wood products, all while continuing to improve Western’s long-term competitiveness. We completed the installation of a machine stress rated lumber grader at the Duke Point sawmill location to support increased production of higher value lumber. The continuous kiln at the Saltair sawmill is anticipated to commence commissioning in the first quarter of 2024.
Announced a $35.9 million agreement to sell a 34% interest in a new forestry limited partnership to four Vancouver Island First Nations, further demonstrating Western’s commitment to First Nation partnerships and meaningful reconciliation.
Advanced joint and collaborative planning of forestry activities with First Nations in whose traditional territories we operate in BC, building upon Western’s well-established forestry practices and in support of greater long-term clarity for the stewardship and management of the land base.
(millions of Canadian dollars except per share amounts
and where otherwise noted)
Q4
2023
Q4
2022
Q3
2023
Annual
2023
Annual
2022
Revenue
$
246.6
$
291.0
$
231.1
$
1,017.5
$
1,444.0
Export tax expense
4.1
4.7
5.2
20.2
38.9
Export tax recovery
–
–
(4.3
)
(4.3
)
(18.0
)
Stumpage expense
8.7
27.9
5.9
44.4
118.0
Adjusted EBITDA (1)
(1.2
)
(11.9
)
(11.6
)
(29.9
)
136.9
Adjusted EBITDA margin (1)
(0%
)
(4%
)
(5%
)
(3%
)
9%
Operating income (loss) prior to restructuring and other items
$
(14.4
)
$
(23.6
)
$
(25.8
)
$
(83.4
)
$
86.7
Net income (loss)
(14.3
)
(21.4
)
(17.4
)
(70.1
)
61.8
Earnings (loss) per share, diluted
(0.04
)
(0.07
)
(0.05
)
(0.22
)
0.19
Net debt (cash) (2), end of period
82.4
(15.8
)
59.5
Liquidity (1), end of period
147.8
249.8
170.2
(1)
Refer to Adjusted EBITDA, Liquidity, Adjusted EBITDA margin in the Non-GAAP Financial Measures section.
(2)
Net cash (debt), a supplemental measure, is defined as cash and cash equivalents less long-term debt and bank indebtedness.
Senior Leadership Change
The Company announced today that Stephen Williams will step down from his role as Executive Vice President and Chief Financial Officer of the Company by the end of 2024.
“Since joining Western in 2014, Steve has made significant contributions to our Company’s financial governance and overall success in an ever-changing and dynamic forest sector landscape,” said Steven Hofer, President and CEO of the Company, on behalf of himself and the Board of Directors of the Company. “In his time at Western, Steve has played a critical role in our strategic transition to become a leading specialty wood products supplier and I want to personally thank him for his leadership over a tremendous 10-year career at Western.”
Western has commenced an executive search for a new Chief Financial Officer. Mr. Williams will remain in his role as Chief Financial Officer until his replacement is found, and thereafter be available until the end of 2026 in a limited advisory capacity to support a seamless transition process.
Summary of Fourth Quarter 2023 Results
We reported Adjusted EBITDA of negative $1.2 million in the fourth quarter of 2023, as compared to negative $11.9 million in the same period last year. Results in the fourth quarter of 2023 reflect lower realized pricing and shipment volumes on a stronger lumber sales mix, offset by lower stumpage rates as compared to the same period last year.
Net loss was $14.3 million in the fourth quarter of 2023, as compared to $21.4 million in the same period last year. Operating loss prior to restructuring and other items was $14.4 million in the fourth quarter of 2023, as compared to $23.6 million in the same period last year.
Sales
Lumber revenue was $178.3 million in the fourth quarter of 2023 as compared to $219.7 million in the same period last year. The decrease of 19% was due to lower lumber shipment volumes and lower average lumber prices, partially offset by a stronger sales mix and stronger US Dollar (“USD”) to Canadian Dollar (“CAD”) average exchange rate. Our average realized lumber price decreased by 8% to $1,313 per thousand board feet in the fourth quarter of 2023, as compared to $1,420 per thousand board feet in the same period last year.
Specialty lumber shipments represented 60% of total lumber shipment volumes in the fourth quarter of 2023, as compared to 40% in the same period last year, yielding a stronger sales mix. Japan lumber shipment volumes more than doubled compared to the same period last year, due to a fire-related curtailment at one of Japan’s largest sawmills. Cedar and Industrial lumber shipment volumes were generally flat compared to the same period last year. Commodity lumber shipment volumes declined by 41% compared to the same period last year due to weaker market demand.
Log revenue was $51.1 million in the fourth quarter of 2023, as compared to $54.9 million in the same period last year. The decrease of 7% was due to lower log prices and weaker sales mix, partially offset by higher log sales volumes.
By-products and other revenue were $17.2 million, as compared to $16.4 million in the same period last year. The increase of 5% was due to higher revenue from harvesting services provided to third parties, and higher chip volumes partially offset by lower chip prices.
Operations
Lumber production was 125 million board feet in the fourth quarter of 2023, as compared to 139 million board feet in the same period last year. Contributing to this reduction, quarter over quarter, was a shift in production from North American markets measured on a gross (“nominal”) volume basis to export markets measured on a net volume basis. In the fourth quarter of 2023 we curtailed certain sawmill operations to match production to market demand and manage inventory levels. A higher specialty mix of production led to increased value-added processing volumes and costs as compared to the fourth quarter of 2022.
We harvested 718,000 cubic metres of logs from our BC coastal operations in the fourth quarter of 2023, as compared to 658,000 cubic metres in the same period last year. Log harvest was reduced in the fourth quarter of 2022 to more closely match log volumes to our sawmill requirements.
Timberlands operating costs per cubic metre decreased 20% compared to the same period last year primarily due to lower stumpage rates.
BC Coastal sawlog purchases were 200,000 cubic metres in the fourth quarter of 2023, as compared to 173,000 cubic metres in the same period last year. We managed sawlog purchases to match mill fibre requirements.
Freight expense was $16.3 million in the fourth quarter of 2023 as compared to $19.7 million in the same period last year. The decrease of 17% was due to lower lumber shipments and reduced container and trucking rates, partially offset by higher-cost breakbulk vessels to Japan in the fourth quarter of 2023 and a stronger USD to CAD average exchange rate.
Adjusted EBITDA and operating loss included $4.1 million of countervailing duty (“CV”) and anti-dumping duty (“AD”) expense in the fourth quarter of 2023, as compared to $4.7 million in the same period of 2022. Export tax expense declined due to lower duty rates, lumber prices and US-destined lumber shipment volumes, partially offset by the stronger USD.
Corporate and Other
Selling and administration expense was $10.8 million in the fourth quarter of 2023 as compared to $10.5 million in the same period last year.
Restructuring costs were $0.9 million in the fourth quarter of 2023 for retirement and other benefits related to rightsizing of various operational functions within our business. The $3.9 million in restructuring costs in the comparative period of 2022 consisted of $2.0 million in environmental provisions and $1.9 million in retirement and other benefits.
Other expense was $2.5 million in the fourth quarter of 2023 as compared to $2.0 million in the same period last year, resulting primarily from higher unrealized foreign exchange losses on revaluation of our export tax receivable.
Finance costs were $1.8 million in the fourth quarter of 2023 as compared to finance income of $0.1 million in the same period last year. Interest expense on higher average borrowings and interest rates were partially offset by interest revenue from the export tax receivable.
Income Taxes
Income tax recovery was $5.3 million on a net loss before tax of $19.6 million in the fourth quarter of 2023, as compared to income tax expense of $8.0 million on income before tax of $29.4 million in the same period last year.
Net Loss
Net loss was $14.3 million in the fourth quarter of 2023, as compared to $21.4 million for the same period last year. Lower stumpage, freight and export tax rates partially offset the impact of lower lumber demand and product prices quarter over quarter.
Summary of Annual 2023 Results
We reported Adjusted EBITDA of negative $29.9 million for 2023, as compared to positive Adjusted EBITDA of $136.9 million for the same period last year. Results in 2023 reflect more challenging macroeconomic conditions, as compared to the same period last year.
Net loss was $70.1 million for 2023, as compared to net income of $61.8 million for the same period last year. Operating loss prior to restructuring and other items was $83.4 million in 2023, as compared to income of $86.7 million in the same period last year.
Sales
Lumber revenue was $781.6 million in 2023 as compared to $1,152.5 million in the same period last year. The decrease of 32% was due to lower lumber shipment volumes and lower average prices, partially offset by a stronger sales mix and stronger USD to CAD average exchange rate. Our average realized lumber price decreased by 17% to $1,329 per thousand board feet in 2023, as compared to $1,609 per thousand board feet in the same period last year.
Speciality lumber shipments represented 51% of total lumber shipment volumes in 2023, as compared to 44% in the same period last year, yielding a stronger sales mix. Cedar lumber shipments decreased 9% compared to the same period last year as buyers managed inventory levels to market conditions. Japan lumber shipment volumes decreased 10% compared to the same period last year due to increased supply from Japan, Europe and Russia. Domestic supply in Japan declined in the fourth quarter of 2023 due to a fire-related curtailment at one of Japan’s largest sawmills. Industrial lumber shipment volumes increased 15% compared to the same period last year, benefitting from a full year from our Calvert engineered wood products division and growth in Douglas fir timbers. Commodity lumber shipments decreased 29% compared to the same period last year due to weaker market demand.
Log revenue was $180.9 million in 2023, as compared to $230.9 million in the same period last year. The decrease of 22% was due to lower average domestic log prices, partially offset by higher log sales volume.
By-product and other revenue were $55.0 million in 2023 as compared to $60.6 million in the same period last year. The decrease of 9% was due to lower chip prices and lower chip volumes as the result of reduced sawmill production, partially offset by higher revenue from harvesting services provided to third parties.
Operations
Lumber production was 561 million board feet in 2023, as compared to 655 million board feet in the same period last year. Contributing to this reduction, year over year, was a shift in production from North American markets measured on a gross (“nominal”) volume basis to export markets measured on a net volume basis. During 2023 we took operating curtailments at certain sawmills to match production to market demand and manage inventory. We also did not operate our Alberni Pacific Division (“APD”) facility in 2023, which had lumber production of 27 million board feet in 2022.
We harvested 3.0 million cubic metres of logs from our BC coastal operations in 2023, comparable to 3.1 million cubic metres harvested in the same period last year. Harvest volumes were managed to market conditions to match log supply to mill requirements.
Timberlands operating costs per cubic metre decreased by 18% compared to the same period last year due to lower stumpage rates.
BC Coastal sawlog purchases were 0.7 million cubic metres in 2023, as compared to 1.1 million cubic metres in the same period last year. We managed sawlog purchases to match fibre requirements at our BC manufacturing facilities.
Freight expense was $75.6 million in 2023 as compared to $102.4 million in the same period last year. The decrease of 26% was due to lower lumber shipments, proportionately lower export-destined lumber shipments, and reduced container and trucking rates, partially offset by the stronger USD. Additionally, global logistics challenges in 2022 constrained container availability in that period and necessitated the use of higher cost breakbulk vessels to Japan.
Adjusted EBITDA and operating loss included $15.9 million of CV and AD expense in 2023, as compared to $20.9 million in the same period of 2022. In 2023, we recognized a recovery of $4.3 million on the finalization of duty rates from 8.99% to 8.05% for shipments made in 2021. The comparative period of 2022 included a recovery of $18.0 million on the finalization of duty rates from 20.23% to 8.59% for shipments made in 2020. Excluding recognition of recoveries on finalization of duty rates, export tax expense declined due to lower average duty rates, lumber prices and US-destined lumber shipment volumes, partially offset by the stronger USD.
Corporate and Other
Selling and administration expense was $42.8 million in 2023 as compared to $44.5 million in the same period last year, primarily on reduced incentive compensation resulting from declines in earnings and share price year-over-year, partially offsetting increased infrastructure costs.
Restructuring costs were $7.5 million in 2023 for retirement and other benefits related to our APD facility and rightsizing of various operational functions within our business. In 2022 the Company recognized a $2.0 million environmental provision, $1.9 million of retirement and other benefits and $0.6 million of shutdown costs related to the Somass Division closure.
Other expense was $1.2 million in 2023 as compared to income of $2.1 million in the same period last year. Unrealized foreign exchange losses on revaluation of a higher export tax receivable resulted from a 2% depreciation of the closing US to Canadian Dollar exchange rate in 2023 as compared to gains on a 7% appreciation in closing exchange rates in the comparable period …