As the pandemic continues to challenge the market, Argus will discuss their forecast for 2022 on Tuesday, December 14th at 2 pm Eastern Time.
Vancouver, British Columbia, October 27, 2021/CNW/-West Fraser Timber Co. Ltd. ("West Fraser" or "Company") (TSX: WFG) (NYSE: WFG) ) Today reports the results for the third quarter of 2021. Unless otherwise stated, all U.S. dollar amounts in this press release are expressed in U.S. dollars.
The operating results introduced and discussed below include Norbord's operating results from February 1, 2021 (the date of completion of the acquisition of Norbord).
Sales of 2.358 billion U.S. dollars, profit of 460 million U.S. dollars, accounting for 20% of sales
Adjusted EBITDA was US$786 million, accounting for 33% of sales
The adjusted EBITDA of the European EWP division's record is US$90 million
Repurchased US$100 million of WFG common stock for cancellation under the normal issuer bid ("NCIB")
Completed a 1 billion Canadian dollar major issuer tender ("SIB")
At the end of the quarter, liquidity was US$3.13 billion, and the ratio of net debt to total capital was (27)%
Host virtual analyst and investor events
Announced agreement to acquire Angelina Forest Products Lumber Plant for approximately US$300 million and Georgia Pacific Oriented Strand Board Plant for approximately US$280 million, both after the end of the quarter
"Despite the many challenges, the third quarter of 2021 is one of the strongest quarters in West Fraser's history," said Ray Ferris, West Fraser's president and chief executive officer. "We operate responsibly throughout our business, facing higher tariffs and standing timber in British Columbia in a cyclical commodity environment, as well as the complexity of managing transportation and factory disruptions in the context of weak demand."
"Due to the relative strength of our North American OSB performance and the record performance of the European EWP, the advantages of product and geographic diversification after the acquisition of Norbord this quarter are particularly obvious. The adjusted EBITDA of the European EWP has more than doubled from the previous quarter. And we need some of ours. Products weakened in the third quarter and housing fundamentals remained favorable. We saw early signs of a recovery in demand for repairs and renovations. As always, we still pay attention to the health and safety of our employees, and manage our business flexibly to meet the changing needs of customers."
Results compared to previous periods (millions of dollars, excluding earnings per share ("EPS"))
The results of Norbord's operations from the date of acquisition on February 1, 2021 are included in West Fraser's financial results.
The cost of selling products increased, and adjusted EBITDA reduced the one-time expense related to inventory purchase price accounting by US$93 million.
Please refer to the "Non-IFRS Measures" section in the MD&A for the third quarter of 2021.
4. Starting from January 1, 2021, during all comparison periods, the definition of adjusted EBITDA no longer excludes export duties.
Our timber division generated an operating profit of US$52 million (Q2 FY21-US$955 million) in the quarter and adjusted EBITDA of US$93 million (Q2 FY21-US$994 million). Due to lower timber prices, lower shipments and higher tariffs, adjusted EBITDA fell. Our timber mill in British Columbia operated at 79% of the specified capacity during the quarter. Adjusted EBITDA was also negatively impacted by rising manufacturing costs, partly due to increased SPF log costs, increased staff costs associated with managing the impact of COVID-19 in the southern United States, and other input cost inflation-related expenditures.
Our NA EWP division generated an operating profit of US$539 million (Q2-21-US$1.017 billion) and adjusted EBITDA of US$612 million (Q2-21-US$1.106 million) during the quarter. Due to reduced demand and wildfires in British Columbia disrupting transportation services, resulting in lower prices of oriented strand board and plywood and lower shipments, adjusted EBITDA fell. The increase in BC stumpage ratio led to the increase in log costs and the increase in resin costs, which also had a negative impact on adjusted EBITDA.
Our pulp and paper division generated negative US$15 million (Q2-21-US$17 million) in operating profit and negative US$7 million (Q2-21-US$25 million) in adjusted EBITDA during the quarter, The European EWP division created a record operating income of US$67 million (Q2-21-US$15 million) and a record of US$90 million (Q2-21-US$39 million) in adjusted EBITDA in the quarter. . The adjusted EBITDA growth of the European EWP sector was driven by rising panel prices and partially offset by rising resin costs.
Available liquidity decreased slightly from USD 3.392 billion at the end of the previous quarter to USD 3.130 billion at the end of the third quarter. The balance sheet remains strong and continues to provide great flexibility for strategic capital investment, debt repayment and stock repurchase.
In the third quarter of 2021, we repurchased approximately 1.3 million shares of NCIB at an average stock price of 97.56 Canadian dollars (77.60 US dollars) for a total consideration of 100 million US dollars. All shares purchased by the company under NCIB will be cancelled.
On July 12, 2021, we started a major issuer bid, pursuant to which the company proposed to purchase common stock of up to 1 billion Canadian dollars from shareholders for cancellation. On August 20, 2021, SIB completed and subscribed and purchased a total of 10,309,278 common shares for cancellation at a price of 97.00 Canadian dollars (76.84 US dollars) per share.
Acquired Texas Lumber Mill and South Carolina OSB Mill
On October 12, 2021, we announced an agreement to acquire the SYP timber plant of Angelina Forest Products in Lufkin, Texas for approximately US$300 million, subject to certain post-transaction adjustments. We intend to use cash on hand to fund this acquisition. Construction of the new turnkey facility began in 2018 and will begin operations at the end of 2019. The facility is expected to achieve a production capacity of approximately 305 million board feet in the next three to four years. The transaction is expected to be completed after the U.S. regulatory review is successfully completed and customary closing conditions are met.
On October 26, 2021, we announced an agreement to acquire Georgia Pacific's oriented strand board plant near Allendale, South Carolina for approximately US$280 million. We intend to use cash on hand to fund this acquisition. The Allendale plant began production in 2007 and has been idle since the end of 2019, with an estimated production capacity of approximately 760 million square feet (3/8 inches). The company intends to invest approximately US$70 million in additional funds to upgrade and optimize the facility in preparation for the restart. The transaction is expected to be completed after the U.S. regulatory review is successfully completed and customary conditions are met.
Since most of our shareholder base is now outside of Canada and most of our cash flows are denominated in U.S. dollars, we have decided that future dividends will be declared and paid in U.S. dollars. Registered shareholders who wish to continue to receive dividends in Canadian dollars ("CAD") can choose to use our transfer agent (please refer to the "Transfer Agent and Registrar Change Notice" below). Beneficial shareholders who wish to continue to receive dividends in Canadian dollars should contact their brokers. More information will be posted on our website www.westfraser.com as it becomes available.
The most important uses of our wood and oriented strand board products are residential construction, repair and renovation, and industrial applications. Low mortgage interest rates, the small number of resale homes, and the increasing acceptance of remote work seem to have a positive impact on the demand for new housing in North America. The aging housing stock and maintenance and renovation expenditures should also continue to drive demand for wood, plywood and oriented strand board. The increasing market penetration of large amounts of wood in industrial and commercial applications will also support the growth of medium and long-term demand for wood construction products.
As European demand for OSB as a substitute for plywood continues to grow, demand for our European products is expected to remain strong. It is expected that the aging housing stock in Europe will also drive maintenance and renovation expenditures, thereby supporting the growing demand for our wooden construction products.
Our balance sheet remains strong and we are prepared to deal with potential market volatility in the coming quarters to support capital expenditure plans and return capital to shareholders.
Due to the wildfires in British Columbia, the slowdown in orders for forest products, the limited supply of resins used to manufacture panel products, the disruption of transportation services and overall inventory levels, West Fraser's British Columbia SPF, the southern United States SYP, and the northern United States will reduce production in 2021 U.S. OSB and Canadian plywood facilities in the third quarter. West Fraser has since started to increase the operating schedule and expects the operating rate for the remainder of the fourth quarter to increase, depending on developments related to the above factors and economic log supply due to the continued impact of COVID-19, weather conditions and labor supply .
On January 1, 2021, due to market adjustments related to timber prices and log procurement costs, British Columbia’s standing timber rate increased. On July 1, 2021 and October 1, 2021, the BC stubbing rate further increased, but we expect the BC stubbing rate to decrease on January 1, 2022. In Alberta and Ontario, the standing timber rate has fallen from the level earlier this year because they are closely related to the price of wood and oriented strand board, and they react quickly to changes in the price of wood and oriented strand board. We expect SYP log costs to increase moderately in the fourth quarter. We also plan to perform routine maintenance shutdowns in several of our EWP facilities in the fourth quarter.
British Columbia is facing extremely hot and dry ground conditions, resulting in a large number of wildfires in the second and third quarters of 2021. As of September 30, approximately 869,000 hectares of British Columbia were destroyed by wildfires in 2021, only lagging behind the province's losses caused by wildfires in 2017 and 2018. The short- and medium-term impact of these losses on our future production and shipments remains to be determined.
We continue to look forward to advancing an additional capital project of approximately US$180 million determined in accordance with West Fraser's strategic capital plan. Work on these projects has already begun and will continue until 2023. As we continue to focus on capital execution and operational excellence, this investment plan will support safety, cost improvement and strategic growth plans. The average project investment payback period of the strategic capital plan is expected to be three to four years. Despite the addition of these capital items, due to the extended delivery time of the currently ongoing projects, we have reduced our 2021 capital expenditure target to approximately US$400 million, which is the low-end million in the range of approximately US$400 we previously guided To 450 million U.S. dollars.
The integration of Norbord's business is progressing smoothly and will continue to be the company's focus. We are still on track to achieve the annual synergy goal of US$61 million by the end of 2022.
Notification of Change of Transfer Agent and Registrar
Starting from November 1, 2021, Computershare Investor Services Inc. will replace AST Trust Company (Canada) as West Fraser's transfer agent registrar, dividend payment agent and shareholder rights plan agent. No action is required for this conversion. The contact information for the new transfer agent will be provided in the "Investor/Stock Information/Transfer Agent" section of www.westfraser.com.
Risk and uncertainty disclosures are included in our 2020 MD&A, 2020 annual report, and public documents we submit to securities regulators, including disclosures under the heading "Risk Factors" in our basic shelf prospectus. These risks and uncertainties include the risks and uncertainties related to Norbord's business and the integration of Norbord's business with our business.
Our third quarter 2021 MD&A, financial statements and financial statement notes are available on our website www.westfraser.com and electronic document analysis and retrieval system ("SEDAR") www.sedar.com and electronic data collection, analysis and retrieval The system ("EDGAR") website www.sec.gov/edgar.shtml is located under the company profile.
Financial information related to the Norbord acquisition
Our acquisition of Norbord applied purchase price accounting, resulting in a significant increase in Norbord’s historical cost base and $1.326 billion in goodwill. Note 3 to our financial statements provides detailed information on the allocation of purchase prices. For more information, please see the section titled "The Norrbord Acquisition" in our MD&A for the third quarter of 2021.
West Fraser's complete sustainability report is available on the company's website www.westfraser.com. This report reviews the company’s main environmental, social and governance (ESG) themes, opportunities and performance, including information consistent with the recommendations of the Sustainable Accounting Standards Board (SASB), Global Reporting Initiative (GRI) and the Climate Working Group-related Disclosure (TFCD).
West Fraser is a diversified wood products company with more than 60 factories in Canada, the United States, the United Kingdom and Europe. The company uses responsibly sourced and sustainably managed forest resources to produce wood, engineered wood products (oriented strand board, LVL, MDF, plywood and particleboard), pulp, newsprint, wood chips, other residues and renewable energy. West Fraser's products are used in house construction, repair and renovation, industrial applications, paper, tissues and box materials.
West Fraser will host an analyst conference call on Thursday, October 28, 2021 at 8:30 a.m. Pacific time (11:30 a.m. Eastern time) to discuss the company's financial and operating results for the third quarter of 2021. To participate in the conference call, please dial: 1-888-390-0605 (toll free in North America) or 416-764-8609 (toll call) or connect via webcast. Conference calls and earnings reports can also be accessed through West Fraser's website www.westfraser.com. Please let the operator know that you would like to participate in the West Fraser conference call hosted by Mr. Ray Ferris, President and CEO.
After the management discusses the quarterly results, investors and analyst groups will be invited to ask questions. The call will be recorded for webcast and can be viewed on the West Fraser website www.westfraser.com.
This press release contains "forward-looking information" and "forward-looking statements" referred to in the Canadian Provincial Securities Act, as well as "forward-looking statements" referred to in the U.S. Securities Act of 1933, the U.S. Securities and Exchange Act of 1934, and the U.S. Private Securities Act of 1995. The "safe harbor" provisions of the Securities Litigation Reform Act. Forward-looking statements include statements that are predictive, depend on or involve future events or conditions, including statements that reflect management’s views on West Fraser and its subsidiaries (including Norbord)’s operations, business, financial conditions, expected financial results, performance, prospects, Opportunities, priorities, goals, goals, continuing goals, strategies and prospects, as well as the prospects of North America and the international economy are used in the current fiscal year and subsequent periods, and include words such as "expected", "anticipated", "plan", etc. "Believe ", "estimate", "seek", "intend", "target", "project", "forecast" or its negative version and other similar expressions, or future or conditional verbs, such as "may", "will, "" Should", "will" and "can".
In particular, this press release contains forward-looking statements under the heading "Capital Allocation" (regarding the flexibility of making strategic capital investments, repaying debts and repurchasing shares, as well as financing and financing transactions between Angelina Forest Products Timber Plant and Georgia Pacific OSB Plant. Closed) and the production capacity of the respective factories), "Outlook-Market" (regarding timber, oriented strand board and plywood demand, timber exports, and our balance sheet strength and ability to withstand potential market fluctuations), "Outlook-Operation" (regarding activity levels In our operations, the impact on production and transportation and the negative impact on operations and results, including COVID-19, fiber costs and other factors), "Outlook-British Columbia Wildfires" (about the estimated impact on production and transportation ), "Outlook"-Strategic Capital Plan" (on the amount and timing of planned capital expenditures and the payback period) and "Outlook-Norbord Integra Update" (on the realization of Norbord's synergy and integration).
By their nature, forward-looking statements involve numerous assumptions, inherent risks and uncertainties, whether general or specific, which leads to the possibility that forecasts, forecasts and other forward-looking statements will not occur. Factors that may cause actual results to differ materially from those expected or implied by forward-looking statements include, but are not limited to: (1) Assumptions related to the United States, Canada, Europe, and global economic and financial conditions and corresponding results that affect our products Demand; (2) the risks inherent in product concentration and cyclicality; (3) the impact of competition and product pricing pressures, including the reduction or delay of demand due to rising prices of wood and/or oriented strand board; (4) manufacturing input prices and The impact of availability changes, including continued access to log supplies and fiber resources at competitive prices, and the impact of third-party certification standards; (5) The availability of transportation services, including truck and rail services, port facilities, and the impact of wildfires on transportation services Impact; (6) Various events that may disrupt operations, including natural, man-made or catastrophic events, including wildfires and any emergency and/or evacuation orders issued by the government, as well as ongoing relationships with employees; (7) Relying on customers Inherent risks; (8) the impact of future cross-border trade rulings or agreements; (9) the implementation of important strategic measures and the identification, completion and integration of acquisitions; (10) the impact of environmental or other regulatory changes or non-compliance; (11) The impact of the COVID-19 pandemic on our operations and customer demand, supply and distribution; (12) government restrictions, standards or regulations aimed at reducing greenhouse gas emissions; (13) changes in government policies and regulations; (14) The impact of weather and climate change on our operations or the operations or needs of our suppliers and customers; (15) the ability to implement new or upgraded information technology infrastructure; (16) the impact of interruption or failure of information technology services; ( 17) The impact of any product liability claims beyond insurance coverage; (18) The inherent risks of capital-intensive industries; (19) The impact of tax risks on future results; (20) Potential changes in future tax laws, including tax rates; (21) The impact of currency exposure and exchange rate fluctuations; (22) future operating costs; (23) availability of financing, bank lines, securitization plans and/or other liquidity means; (24) integration of Norbord business; (25) successful completion U.S. regulatory review and meeting the customary closing conditions related to the acquisition of Angelina Forest Products timber plant; (26) Successful completion of the US regulatory review and meeting customary closing conditions related to the acquisition of the Georgia Pacific OSB factory; (27) In our submission to the securities regulatory agency And other risks detailed from time to time in the annual information sheet, annual report, MD&A, quarterly report and major change report provided to the securities regulatory agency.
In addition, the actual results and results of these statements will depend on many factors, including those described under "Risk and Uncertainty" in our 2020 MD&A, and may differ materially from what was expected or expected. This list of important factors affecting forward-looking statements is not exhaustive. Reference should be made to other factors discussed in public documents submitted to securities regulators. Therefore, readers should exercise caution when relying on forward-looking statements, and we have no obligation to publicly update or revise any written or oral forward-looking statements to reflect subsequent events or circumstances, unless required by applicable securities laws.
In this press release, reference is made to adjusted EBITDA, available liquidity, and the ratio of total debt and net debt to total capital (collectively referred to as "these non-IFRS measures"). We believe that in addition to earnings, these non-IFRS measurement indicators are also useful performance indicators for investors on business and financial performance. Adjusted EBITDA is also used to evaluate the operating and financial performance of our operating segments, formulate future business plans, and make strategic decisions. These non-IFRS measures are not generally accepted financial measures under the International Financial Reporting Standards, nor do they have the standardized meaning required by the International Financial Reporting Standards. Investors should note that none of these non-IFRS measures should be seen as an alternative to earnings, earnings per share, or cash flow determined under IFRS. Since there is no standardized method for calculating any of these non-IFRS indicators, our method of calculating each indicator may be different from that used by other entities. Therefore, our use of any of these non-IFRS indicators may not be directly related to similar titles used by other entities. The measures are compared. Therefore, these non-IFRS measures are intended to provide additional information and should not be considered in isolation or as a substitute for performance measures prepared in accordance with IFRS. The reconciliation between the non-IFRS measures used and reported by the company and the most directly comparable IFRS measures is contained in our third quarter 2021 MD&A, titled "Non-IFRS Measures."
West Fraser Investor: Robert B. Winslow, CFA Director, Investor Relations and Corporate Development Phone. (416) 777-4426 Shareholder@westfraser.com
West Fraser Media: Heather Colpitts Corporate Affairs Director Phone. (416) 643-8838 Shareholder@westfraser.com
View the original text: https://www.prnewswire.com/news-releases/west-fraser-announces-2021-third-quarter-results-301410345.html
Source: West Fraser Timber Co. Ltd.
View the original content: http://www.newswire.ca/en/releases/archive/October2021/27/c6668.html
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