03:47:35 EST Thu 22 Feb 2024
Enter Symbol
or Name
USA
CA



West Fraser Timber Co Ltd
Symbol WFG
Shares Issued 81,273,936
Close 2023-02-14 C$ 110.48
Market Cap C$ 8,979,144,449
Recent Sedar Documents

West Fraser earns $1.97-billion (U.S.) in 2022

2023-02-14 17:18 ET - News Release

Mr. Robert Winslow reports

WEST FRASER ANNOUNCES FOURTH QUARTER 2022 RESULTS

West Fraser Timber Co. Ltd. has released its fourth quarter results of 2022 (Q4 2022). All dollar amounts in this news release are expressed in United States dollars unless noted otherwise.

Fourth quarter highlights

  • Sales of $1,615-million and earnings of $(94-million), or $(1.13) per diluted share;
  • Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of $70-million, representing 4 per cent of sales;
  • Lumber segment adjusted EBITDA of $(77-million), including $39-million of inventory writedowns;
  • North America engineered wood products (NA EWP) segment adjusted EBITDA of $109-million;
  • Pulp and paper segment adjusted EBITDA of $15-million;
  • Europe engineered wood products (Europe EWP) segment adjusted EBITDA of $30-million;
  • Repurchased 1,557,000 shares for aggregate consideration of $117-million.

Annual highlights

  • Sales of $9,701-million and earnings of $1,975-million, or $20.86 per diluted share;
  • Adjusted EBITDA of $3,212-million, representing 33 per cent of sales;
  • Lumber segment adjusted EBITDA of $1,328-million;
  • NA EWP segment adjusted EBITDA of $1,677-million;
  • Pulp and paper segment adjusted EBITDA of $26-million;
  • Europe EWP segment adjusted EBITDA of $186-million;
  • Repurchased 22,373,000 shares for aggregate consideration of $1.99-billion.

"In the fourth quarter of 2022, we faced a challenging demand market as rising interest rates dampened new home construction activity in the U.S., most acutely impacting our lumber business. Despite these market conditions, West Fraser delivered another strong year of performance in 2022, recording more than $3.2-billion of adjusted EBITDA for the period and returning nearly $2.1-billion of capital to shareholders through share repurchases and dividends. We continued to benefit from our product and geographic diversification, particularly in the fourth quarter when our North American and European engineered wood panels and pulp and paper segments each made significant positive EBITDA contributions," said Ray Ferris, West Fraser's president and chief executive officer.

"Over the near term, we anticipate that the business will continue to experience moderating costs, although we expect continued labour constraints and potentially muted product demand as housing affordability and demand find a new equilibrium. Importantly, the West Fraser team has a proven track record of effectively managing through market cycles while maintaining a strong balance sheet, reinvesting in our operations and returning capital to shareholders. As we execute on our core strategy of being a low-cost producer in the key wood building products markets we serve, we will continue to prioritize financial discipline to ensure we capitalize on the favourable demand environment we expect over the medium and longer term."

Results summary

Fourth quarter sales were $1,615-million, compared with $2,088-million in the third quarter of 2022. Fourth quarter earnings were $(94-million), or $(1.13) per diluted share, compared with $216-million, or $2.50 per diluted share, in the third quarter of 2022. Fourth quarter adjusted EBITDA was $70-million compared with $426-million in the third quarter of 2022.

Full year sales were $9,701-million, compared with $10,518-million in 2021. Full year earnings were $1,975-million, or $20.86 per diluted share, compared with $2,947,000, or $27.03 per diluted share, in 2021. Adjusted EBITDA was $3,212-million in 2022 compared with $4,569-million in 2021.

Liquidity and capital allocation

Cash and short-term investments decreased to $1,162-million at Dec. 31, 2022, from $1,568-million at Dec. 31, 2021.

Capital expenditures in the fourth quarter were $149-million. Full year capital expenditures were $477-million in 2022 and $635-million in 2021. The 2021 capital expenditures included $276-million for the asset acquisition of the idled oriented strand board (OSB) mill near Allendale, S.C.

The company paid $25-million of dividends in the fourth quarter, or 30 cents per share, and declared a 30-cent-per-share dividend payable in the first quarter of 2023. The company paid $99-million of dividends in 2022.

In the fourth quarter of 2022, the company repurchased 1,557,136 shares under its current normal course issuer bid (NCIB) for aggregate consideration of $117-million. For the full year, the company repurchased 10,194,000 shares under the current NCIB for aggregate consideration of $859-million, plus an additional 281,115 shares acquired under the company's previous NCIB for a total repurchase of 10,475,115 shares in 2022. As of Feb. 13, 2023, there are no further shares available to purchase under the current NCIB. A further 11,898,205 shares were repurchased under the company's substantial issuer bid (SIB) in 2022 for aggregate consideration of $1,130-million.

As of Feb. 13, 2023, the company has repurchased for cancellation 39,741,794 of the company's common shares since the closing of the Norbord acquisition on Feb. 1, 2021, through the completion of the 2021 SIB, the 2022 SIB and normal course issuer bids, equalling 73 per cent 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 the company's North America lumber, OSB and wood panel products are residential construction, repair and remodelling, and industrial applications. Over the medium term, the company expects that an aging housing stock, the backlog of homes to be built due to lagging completions of previously started new home construction and greater entrenchment of work-from-home flexibility will help to offset near-term headwinds and spur 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 United States housing starts averaged 1.38 million units in December, 2022, with permits issued averaging 1.33 million units, according to the U.S. Census Bureau. Demand for new home construction and the company's wood building products may decline in the near term should interest rates remain elevated or continue to rise and consequently impact consumer sentiment and housing affordability.

The demand for the company's European products is expected to remain robust 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 the company's wood building products. Near-term challenges, including relatively high and rising interest rates, continuing geopolitical developments, and inflationary pressures, are expected to cause a temporary slowing of demand for the company's products in Europe, however, the company is confident that it will be able to navigate through these periods and respond to opportunities for long-term growth ahead.

Operations

The company is providing the following operational guidance for 2023:

  • Spruce-pine-fir (SPF) shipments are expected to be 2.6 billion to 2.8 billion board feet;
  • Southern yellow pine (SYP) shipments are expected to be 2.9 billion to 3.1 billion board feet;
  • NA OSB shipments are expected to be 5.9 billion to 6.2 billion square feet (three-eighths-inch basis);
  • Pulp and paper segment shipments are not expected to increase from 2022 levels;
  • Europe OSB shipments are expected to be 1.0 billion to 1.2 billion square feet (three-eighths-inch basis);
  • Costs and availability constraints for transportation, raw materials such as resins and chemicals, and energy are expected to continue to moderate near term, while labour availability is expected to remain challenging;
  • Capital expenditures are expected to be $500-million to $600-million.

Dividend declared

The board of directors of the company has declared a dividend of 30 cents per share on the common shares and the Class B common shares in the capital of the company, payable on April 4, 2023, to shareholders of record on March 17, 2023. 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.

Management discussion and analysis (MD&A)

The company's 2022 annual MD&A and annual audited consolidated financial statements and accompanying notes are available on the company's website and SEDAR and EDGAR.

Sustainability report

West Fraser's 2021 sustainability report is available on the company's website. This report reviews the company's key environmental, social and governance (ESG) performance and includes information aligned with the Sustainable Accounting Standards Board (SASB), Global Reporting Initiative (GRI), the Task Force on Climate-Related Disclosures (TFCD) and CDP (formerly the Carbon Disclosure Project).

Conference call

West Fraser will hold an analyst conference call to discuss the company's Q4 2022 financial and operating results on Wednesday, Feb. 15, 2022, 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. Please let the operator know you wish to participate in the West Fraser conference call chaired by Ray Ferris, president and chief executive officer.

Following management's discussion of the quarterly results, investors and the analyst community will be invited to ask questions. The call will be recorded for webcasting purposes and will be available on the West Fraser website.

About West Fraser Timber Co. Ltd.

West Fraser is a diversified wood product company with more than 60 facilities in Canada, the United States, the United Kingdom and Europe. From responsibly sourced and sustainably managed forest resources, the company produces lumber, engineered wood products (OSB, LVL, MDF, plywood and particleboard), pulp, newsprint, wood chips, other residuals and renewable energy. West Fraser's products are used in home construction, repair and remodelling, industrial applications, papers, tissue, and box materials.

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