Mr. Ray Ferris reports

WEST FRASER ANNOUNCES THIRD QUARTER 2023 RESULTS

West Fraser Timber Co. Ltd. has released the third quarter results of 2023. All dollar amounts in this news release are expressed in U.S. dollars unless noted otherwise.

Third quarter highlights:

• Sales of $1,705-million and earnings of $159-million, or $1.81 per diluted share;
• Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of $325-million, representing 19 per cent of sales;
• Lumber segment adjusted EBITDA of $44-million, including $62-million of export duty recovery;
• North America engineered wood products segment adjusted EBITDA of $289-million;
• Pulp and paper segment adjusted EBITDA of ($12-million);
• Europe engineered wood products segment adjusted EBITDA of $4-million;
• Announced an agreement to acquire Spray Lake Sawmills in Cochrane, Alta., for $140-million (Canadian);
• Announced an agreement to sell two BCTMP pulp mills to Atlas Holdings for $120-million;
• Announced the planned retirement of Ray Ferris, president and chief executive officer, on Dec. 31, 2023, and appointment of Sean McLaren, current chief operating officer, to the president and CEO role, effective Jan. 1, 2024.

"While the third quarter of 2023 marked a continuation of the challenging demand markets we experienced in recent quarters, particularly in the lumber segment, where we executed curtailments at several locations for planned capital upgrades and to meet customer needs, our North American EWP business had its best result in several quarters against a backdrop of rising mortgage rates that remain well above year-ago levels," said Mr. Ferris.

"In the face of the current economic environment, we will continue to focus on those items we can control, such as safety, operational excellence and sustainability initiatives that improve our production flexibility and lower costs. Importantly, we will continue our approach of countercyclical investment in our assets during these times of softer demand while we manage our balance sheet conservatively. We are always looking for opportunities to improve our company over the longer term, such as the announced acquisition of a sawmill in Southern Alberta, which expands our Canadian treated lumber business and provides access to high-quality timber. As we move into the latter part of 2023 and into 2024, we believe our financial flexibility and low-cost position will remain competitive advantages that position us well to execute on the opportunities that lie ahead."

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 its North America lumber, OSB and wood panel products are residential construction, repair and remodelling, and industrial applications. Over the medium term, it expects that an aging housing stock, stabilization of inflation and interest rates, and greater entrenchment of work-from-home flexibility will help to offset current headwinds from higher interest rates and historically low levels of existing home sales, spurring 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 1.36 million units in September, 2023, with permits issued of 1.47 million units, according to the U.S. Census Bureau. While there are near-term headwinds to new home construction, owing in large part to the upward reset in interest rates and the impact on housing affordability, unemployment remains relatively low in the United States, and central bankers across North America have indicated that the current rate hiking cycle may be nearing an end. However, demand for new home construction and its 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 it continues to experience near-term softness, it expects demand for its 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 its wood building products. Near-term risks, including relatively high and rising interest rates, continuing geopolitical developments, and the lagged impact of recent inflationary pressures, may cause further temporary slowing of demand for its products in Europe. Despite these risks, it is confident that it will be able to navigate through this period and capitalize on the long-term growth opportunities ahead.

Operations

It continues to expect total lumber shipments in 2023 will be largely similar to 2022 levels since it has not experienced in 2023 the type of severe transportation challenges faced last year although this has been partially offset by the permanent B.C. mill curtailments announced in August, 2022, and the indefinite curtailment of the Perry, Fla., sawmill announced in January, 2023. However, while it is reiterating its 2023 SPF shipments guidance of 2.6 billion to 2.8 billion board feet, market demand in the U.S. south has begun to show signs of cooling, and as such, it expects 2023 SYP shipments to be at the bottom end of its guidance range of 2.9 billion to 3.1 billion board feet.

In its NA EWP segment, demand has remained relatively robust, and as such, it is reiterating its 2023 OSB shipments guidance of 6.1 billion to 6.4 billion square feet (three-eighth-of-an-inch basis). Its modernization capital investment in Allendale, S.C., is effectively complete as the start-up phase of the mill, which began in late second quarter 2023, progresses in line with expectations. It anticipates a ramp-up period of up to three years to meet targeted production, and as such, it does not anticipate the Allendale mill contributing materially to shipments in 2023.

In its Europe EWP segment, it expects near-term demand weakness to continue and thus expects 2023 OSB shipments to be near the bottom end of the guidance range of 1.0 billion to 1.2 billion square feet (three-eighth-of-an-inch basis).

In the pulp and paper segment, activities in respect of the closing conditions for the previously announced sale of Hinton pulp mill are proceeding, and it anticipates closing the transaction in early 2024. Activities in respect of the closing conditions for the sale of the Quesnel River pulp mill and the Slave Lake pulp mill are proceeding, and it anticipates closing of the transaction in early 2024.

In third quarter 2023, it experienced continued moderation of costs and improved availability for inputs across its supply chain, including resins, chemicals, transportation and energy, although labour availability and some capital equipment lead times remained challenging. It expects these trends to largely continue over the near term.

Based on its current outlook and owing to lengthened lead times for projects under way or planned, it anticipates that there will be a carry-over of capital spending into 2024 for projects in progress, and as such, it expects to invest approximately $450-million in 2023.

Management's discussion and analysis

Its Q3 2023 MD&A, interim consolidated financial statements and accompanying notes are available on its website, and on the SEDAR+ and EDGAR websites under the company's profile.

Sustainability report

West Fraser's 2022 sustainability report is available on the company's website. This report summarizes its environmental, social and governance performance with a focus on its people, communities and role of its products in the carbon cycle. It is aligned with the Sustainable Accounting Standards Board, Global Reporting Initiative, the Task Force on Climate-related Financial Disclosures and CDP (formerly the Carbon Disclosure Project).

Conference call

West Fraser will hold an analyst conference call to discuss the company's Q3 2023 financial and operating results on Thursday, Oct. 26, 2023, 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 viewed through West Fraser's website. Please let the operator know you wish to participate in the West Fraser conference call chaired by Mr. Ferris.

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.

We seek Safe Harbor.