Workflow
West Fraser(WFG) - 2024 Q3 - Quarterly Report
WFGWest Fraser(WFG)2024-10-23 21:02
Transcript

Financial Performance - For Q3 2024, West Fraser reported sales of 1,437million,adecreasefrom1,437 million, a decrease from 1,705 million in Q2 2024 and 1,705millioninQ32023[20].−Thecompanyrecordedanoperatinglossof1,705 million in Q3 2023[20]. - The company recorded an operating loss of 108 million in Q3 2024, compared to an operating profit of 132millioninQ22024and132 million in Q2 2024 and 184 million in Q3 2023[20]. - Adjusted EBITDA for Q3 2024 was 62million,downfrom62 million, down from 272 million in Q2 2024 and 325millioninQ32023[20].−Lumbersalesdecreasedto325 million in Q3 2023[20]. - Lumber sales decreased to 518 million in Q3-24 from 616millioninQ2−24,andfrom616 million in Q2-24, and from 613 million in Q3-23, with year-to-date sales at 1.733billioncomparedto1.733 billion compared to 1.906 billion in YTD-23[23]. - Adjusted EBITDA for Q3-24 was a loss of 62million,downfromalossof62 million, down from a loss of 51 million in Q2-24 and a profit of 44millioninQ3−23,reflectingadecreaseof44 million in Q3-23, reflecting a decrease of 149 million compared to YTD-23[26]. - Operating earnings for the Lumber segment in Q3 2024 were reported at a loss of 126million,whiletheNAEWPsegmentgeneratedearningsof126 million, while the NA EWP segment generated earnings of 50 million[196]. - Adjusted EBITDA for Q3 2024 was 62million,adecreasefrom62 million, a decrease from 159 million in Q3 2023, reflecting a year-over-year decline of 61%[195]. - Year-to-date Adjusted EBITDA for 2024 reached 533million,comparedto533 million, compared to 464 million for the same period in 2023, indicating a 15% increase[198]. Production and Sales Volumes - SPF production volumes decreased by 11% from Q2-24 and 6% from Q3-23 due to the closure of the Fraser Lake lumber mill, impacting annual capacity by 160 million board feet[32]. - SYP production volumes decreased by 15% from Q2-24, 18% from Q3-23, and 10% from YTD-23 due to operational curtailments and mill closures[34]. - SPF shipment volumes were 689 million board feet in Q3-24, down from 799 million board feet in Q2-24, but comparable to 678 million board feet in Q3-23[30]. - OSB production volumes decreased from Q2-24 due to higher unscheduled downtime, but increased from Q3-23 and YTD-23 due to ramp-up of the Allendale mill[64]. Costs and Expenses - Cost of products sold decreased to 494millioninQ3−24from494 million in Q3-24 from 590 million in Q2-24, and from 551millioninQ3−23,influencedbylowershipmentvolumesandlogcosts[35].−Selling,generalandadministrationcostsdecreasedto551 million in Q3-23, influenced by lower shipment volumes and log costs[35]. - Selling, general and administration costs decreased to 34 million in Q3-24 from 37millioninQ2−24,andfrom37 million in Q2-24, and from 41 million in Q3-23, due to reduced corporate overhead allocation[48]. - The unfavorable impact from inventory valuation adjustments in Q3-24 was 3millioncomparedtoQ2−24andQ3−23[69].−FreightandotherdistributioncostsdecreasedinQ3−24duetolowerfuelcostsandfavorablechangesincustomergeographicmix[70].−CostofproductssoldincreasedfromQ2−24duetohigherfibrecostsandmaintenancecosts,butdecreasedcomparedtoQ3−23andYTD−23primarilyduetopulpmilldisposals[80].MarketConditions−TheU.S.housingstartsaveraged1.35millionunitsinSeptember2024,withpermitsissuedaveraging1.43millionunits,indicatingastabilizationinnewhousingconstruction[9].−ThepricingenvironmentforSYPlumberhasweakenedcomparedtoSPFandOSBproducts,influencedbysubdueddemandinrepairandremodelingapplications[10].−Thecompanyanticipatesthatanaginghousingstockandstabilizationofinflationandinterestrateswillstimulaterenovationandrepairspendinginthemediumtolongterm[10].−Theoverallpricevarianceresultedinadecreaseinoperatingearningsof3 million compared to Q2-24 and Q3-23[69]. - Freight and other distribution costs decreased in Q3-24 due to lower fuel costs and favorable changes in customer geographic mix[70]. - Cost of products sold increased from Q2-24 due to higher fibre costs and maintenance costs, but decreased compared to Q3-23 and YTD-23 primarily due to pulp mill disposals[80]. Market Conditions - The U.S. housing starts averaged 1.35 million units in September 2024, with permits issued averaging 1.43 million units, indicating a stabilization in new housing construction[9]. - The pricing environment for SYP lumber has weakened compared to SPF and OSB products, influenced by subdued demand in repair and remodeling applications[10]. - The company anticipates that an aging housing stock and stabilization of inflation and interest rates will stimulate renovation and repair spending in the medium to long term[10]. - The overall price variance resulted in a decrease in operating earnings of 22 million compared to Q2-24 and 70millioncomparedtoQ3−23[26].DebtandLiquidity−Thecompanyrepaid70 million compared to Q3-23[26]. Debt and Liquidity - The company repaid 300 million in senior notes on October 15, 2024, using cash on hand[18]. - Available liquidity as of September 27, 2024, was 2,042million,anincreasefrom2,042 million, an increase from 1,954 million as of December 31, 2023[145]. - The company has a 200milliontermloanmaturinginJuly2025,withinterestpayableatfloatingratesbasedonBaseRateAdvancesorSOFRAdvances[152].−InterestrateswapswereamendedinJanuary2024,extendingtheirmaturitytoJuly2025,withanewweightedaveragefixedinterestrateof2.61200 million term loan maturing in July 2025, with interest payable at floating rates based on Base Rate Advances or SOFR Advances[152]. - Interest rate swaps were amended in January 2024, extending their maturity to July 2025, with a new weighted average fixed interest rate of 2.61%, up from 0.91%[153]. Shareholder Actions - The company has repurchased 1,414,985 Common shares under the 2024 NCIB, leaving 2,556,395 available for purchase until February 28, 2025[134]. - The company repurchased 1,907,510 common shares for cancellation under its 2023 NCIB program and 446,460 shares under its 2024 NCIB program[160][161]. - Cash used in financing activities increased to 39 million for Q3-24 due to common share repurchases, compared to no cash used for repurchases in the same period of 2023[175]. Tax and Financial Reporting - Income tax recovery of 26millionwasrecordedinQ3−24,comparedtoanexpenseof26 million was recorded in Q3-24, compared to an expense of 34 million in Q2-24 and 56millioninQ3−23[112].−ThetaxprovisionforQ32024wasarecoveryof56 million in Q3-23[112]. - The tax provision for Q3 2024 was a recovery of 26 million, contrasting with a provision of 34millioninQ22024[195].−ThecompanymaintainednochangesininternalcontroloverfinancialreportingduringthethreemonthsendedSeptember27,2024[186].StrategicInitiatives−TheindefinitecurtailmentoftheLakeButlerLumberMillwillreduceU.S.lumbercapacitybyapproximately110millionboardfeetannually,withrestructuringandimpairmentchargesof34 million in Q2 2024[195]. - The company maintained no changes in internal control over financial reporting during the three months ended September 27, 2024[186]. Strategic Initiatives - The indefinite curtailment of the Lake Butler Lumber Mill will reduce U.S. lumber capacity by approximately 110 million board feet annually, with restructuring and impairment charges of 18 million recorded in Q3 2024[15]. - Anticipated capital expenditures for 2024 are narrowed to approximately 475millionto475 million to 525 million, focusing on optimization and automation projects[132]. - The modernization of the Henderson, Texas lumber manufacturing facility is expected to be ready for ramp-up in the first half of 2025, with a ramp-up period of 18 to 24 months[132]. - The company continues to expect long-term demand growth for its European products as the use of OSB as an alternative to plywood increases[122].