TSE:WEF Western Forest Products Q2 2024 Earnings Report C$0.38 +0.01 (+1.35%) As of 04/25/2025 03:59 PM Eastern Earnings HistoryForecast Western Forest Products EPS ResultsActual EPS-C$0.01Consensus EPS -C$0.03Beat/MissBeat by +C$0.02One Year Ago EPSN/AWestern Forest Products Revenue ResultsActual Revenue$309.50 millionExpected Revenue$258.00 millionBeat/MissBeat by +$51.50 millionYoY Revenue GrowthN/AWestern Forest Products Announcement DetailsQuarterQ2 2024Date7/31/2024TimeN/AConference Call DateThursday, August 1, 2024Conference Call Time12:00PM ETConference Call ResourcesConference Call AudioConference Call TranscriptInterim ReportEarnings HistoryCompany ProfilePowered by Western Forest Products Q2 2024 Earnings Call TranscriptProvided by QuartrAugust 1, 2024 ShareLink copied to clipboard.There are 6 speakers on the call. Operator00:00:00Good morning, ladies and gentlemen. Welcome to Western Forest Products Second Quarter 20 24 Results Conference Call. During this conference call, Western's representatives may make forward looking statements within the meaning of applicable securities laws. These statements can be identified by words like anticipate, plan, estimate, will and other references to future periods. Although these forward looking statements reflect management's reasonable beliefs, expectations and assumptions, they are subject to inherent uncertainties and actual results may differ materially. Operator00:00:42There are many factors that could cause actual outcomes to be different, including those factors described under Risks and Uncertainties in the company's annual MD and A, which can be accessed on SEDAR and is supplemented by the company's quarterly MD and A. Forward looking statements are based only on information currently available to Western and speak only as of the date on which they are made. Except as required by law, Western undertakes no obligation to update forward looking statements. Accordingly, listeners should exercise caution in relying upon forward looking statements. I would now like to turn the meeting over to Mr. Operator00:01:28Stephen Hoefer, President and CEO of Western Forest Products. Mr. Hoefer, please go ahead. Speaker 100:01:35Thank you, Patrick, and good morning, everyone. I would like to welcome you to Western Forest Products' 2024 Second Quarter Conference Call. Joining me on the call today, Glenn Nontel, our new Chief Financial Officer Steve Williams, our Executive Vice President and Bruce Alexander, our Senior Vice President, Sales, Marketing and Manufacturing. We issued our 2024 Q2 results yesterday, which included the announcement that Glenn Nontel will be our next CFO. In deciding who should fill the role of CFO, we looked both internally and externally. Speaker 100:02:17We wanted someone with the right mix of leadership, industry experience and technical skills to help navigate through near term macroeconomic conditions and advance our strategic priorities. Glenn's financial acumen, forward thinking and laser focus on execution made him a clear choice from a number of strong candidates and speaks to the strength of the internal talent at Western. Steve Williams will remain in the role of Executive Vice President until his previously communicated retirement date of December 31, 2024. We look forward to benefiting from Steve's advice and judgment as he moves to an advisory role thereafter. Turning to our Q2 financial results. Speaker 100:03:06We successfully navigated through more challenging conditions to return our business to positive EBITDA in the 2nd quarter, generating $9,400,000 This was the result of a huge effort across all of our operating divisions and driven by a focused effort on execution and safety. In Timberlands, despite facing ongoing harvesting permitting delays, we continue to improve the stratification of our specialty log sorts such as pull and peer logs to support incremental margin. In manufacturing, our continued focus on operational uptime and reliability supported improved results despite tight log supply at certain facilities. In sales and marketing, we continue to make progress growing key strategic accounts, while developing value added products and programs targeted with the end user in mind. In Engineered Wood Products, we delivered another quarter of positive EBITDA despite labor and lamb stock availability challenges. Speaker 100:04:17In addition, we remain focused on accelerating our transition to higher value products. Our new Saltair kiln dried 14,500,000 board feet of lumber in the 2nd quarter and is achieving our uptime, production and value performance targets. We also continue to advance pre engineering and permitting related to our 2 previously announced continuous kilns. Each kiln will have a capacity of approximately 70,000,000 board feet and are expected to be completed in 2025. The continued focus on safety and maintaining a strong balance sheet while advancing our key strategic priorities remains our key focus in the near term. Speaker 100:05:00I will now turn it over to Glen to review our key financial results. Speaker 200:05:04Thanks, Stephen. 2nd quarter adjusted EBITDA was 9 point $4,000,000 as compared to negative $12,000,000 in the same period last year. As compared to the prior year, results in the Q2 benefited from higher lumber shipments, higher domestic log prices and a stronger log sales mix and lower stumpage and freight expenses. This was partially offset by a slightly weaker lumber specialty sales mix and higher timberlands and secondary processing costs. We closed the 2nd quarter with approximately 75,000,000 board feet of lumber inventory and 777,000 cubic meters of log inventory. Speaker 200:05:47Turning to CapEx and cash flow, our revised 2024 total CapEx spending is now expected to be approximately $40,000,000 This reflects the expectation that the majority of the $35,000,000 related to 2 new continuous kilns will be incurred in 2025. After the end of the second quarter, we received our income tax refund of approximately $23,000,000 which was utilized to reduce debt. From a balance sheet perspective, we ended the 2nd quarter with liquidity of approximately $142,000,000 and a net debt to cap ratio of 13%. Last week, we amended and extended our credit facility to July 2026. At the end of June, we had approximately $236,000,000 in duties on deposit, which equates to approximately $0.54 per share after tax. Speaker 200:06:42Turning to Q3 seasonality. Typical 3rd quarters can be challenging operationally as hot dry weather can restrict logging activity, reduce harvest volumes and impact cost. While we have yet to experience any significant forest fires in our area of operation, hotter and drier conditions combined with harvest permit delays may impact harvest volumes through the summer. We will continue to manage our manufacturing operating schedules to match production to market demand and available log supply. Stephen, that concludes my remarks. Speaker 100:07:16Thanks, Glenn. Turning to our market outlook. Cedar demand and prices for timber and premium appearance products are expected to remain stable. Demand and price for cedar decking have firmed up, while cedar trim products are expected to remain soft for the balance of the year. In Japan, weakness in wooden home starts, well stocked inventories and the weaker Japanese yen to the U. Speaker 100:07:41S. Dollar exchange rates are anticipated to impact lumber demand and prices in the near term. Demand for our industrial products is generally expected to remain stable. For commodity lumber, North American demand and prices are expected to remain volatile, while in China near term lumber demand and prices are expected to be seasonally weaker. Overall, we currently have a 3rd quarter order filed of approximately 108,000,000 board feet. Speaker 100:08:12Looking ahead, we remain focused on building our profitable quarter while executing on our strategic priorities and maintaining a strong balance sheet. With that operator, we can open the call up to questions. Operator00:08:27Thank you. We'll now take questions from the telephone lines. Speaker 300:08:50First question is from Ben Isaacson from Scotiabank. Please go ahead. Good morning, everyone, and thank you for taking my call. First, congrats see or very good to see the positive EBITDA this quarter. My first question is for Glenn. Speaker 300:09:08Congrats on the appointment to CFO. Can you talk a little bit about your vision for the role and any kind of wholesale wholesale changes that you want to make? Thank you. Speaker 200:09:21Thanks, Ben. I appreciate the comment. I think what I'd say is from a strategy perspective, we have a very well defined strategy and none of that is changing for the company, very high focus around operational execution, focus on our First Nation partnerships, continually growing the business when the balance sheet warrants. So there's definitely no change from a strategy perspective. I think what I hope to bring to the role and I know that I'm only one person in this broader organization that is important to the success of the business. Speaker 200:09:57But in my current in my prior roles and my prior roles that I've been at before Western, there's been a very high degree on execution and expediting execution. So, what I hope to bring to this is continue to executing on our strategic priorities, but bringing sort of a faster cadence of getting on with some of the priorities that we set. Speaker 300:10:19That's great. And then just as a follow-up question, can you guys just talk a little bit about where you are in terms of the overall capacity utilization rate? And how should we think about that rate through the back half of 'twenty four and into 'twenty 5? Thank you. Speaker 100:10:37Yes, I can maybe comment on that, Ben. Currently, what we're doing is being very disciplined in matching our operating rates relative to demand across all of our global markets and that's overlaid against overall log supply. As you know, we have 3 categories of fiber, small diameter chip and saw, the medium sized gang log and then the large diameter head rig log. And so each of those sorts have different challenges when it comes to cutting permits and cut blocks, but we'll be pretty disciplined just like we've shown over the last year and a half around making sure that our inventory levels are in balance overall, a match of capacity relative to lumber demand. So don't expect much material change here for the balance of the year relative to what we've been focused on for the first half. Operator00:11:45That makes sense. Thank you very much. Speaker 100:11:48Thanks Ben. Operator00:11:51Thank you. The next question is from Sean Steuart. Please go ahead. Thanks. Speaker 400:11:56Good morning, everyone. One follow on question from Ben. It seems like a big part of the success story in the Q2 was you guys were able to draw down your finished good inventories quite Speaker 100:12:09a bit. And that's been Speaker 400:12:12the trend for most of the past couple of years. I guess, in terms of gauging sustainability of this momentum, can you comment on further room to lower finished good inventories at this point or are you tapped out on that front? Speaker 100:12:27Well, Sean, thanks for the question. Our focus is really around ensuring that we have an order file that matches production. So, I come from a bit of a background of everything that you make every day, you want to sell every day and kind of have 30 to 45 days' worth of inventory at the max. And so we've had some challenges historically on overall because of the lack of kiln dried capacity, having to take a lot of our volume outside that needs to be kiln dried. And by definition, that provides a bit more complexity as well as having to hold a bit higher levels of inventory. Speaker 100:13:15But our focus is really to continue to draw that down and we have some pretty aggressive targets here in Q3 that we continue to be focused on. So we're not done yet. Operator00:13:30Okay. That's good to hear. Speaker 400:13:32Stephen, any comments you can give with respect to negotiations with the union towards a new contract? Speaker 100:13:42Sure. I'll make a few general comments. We commenced negotiations in April and those continue today. The current agreement expired in mid June. So the prior collective agreement continues to apply as negotiations continue. Speaker 100:14:04We're committed to delivering a fair and balanced agreement that recognizes our employees' contributions, while also ensuring our long term competitiveness as a company. USW members represent about 1,000 of our team members, as well as additional members within our Timberland contractors. So there's ongoing discussions today, both timberland side and I continue to be optimistic. We've committed to these discussions and they're being led by Jennifer. And so far, I think we're making good progress and we'll keep everyone posted on those discussions. Speaker 400:15:01Thanks for that detail. One last one, Stephen. Bigger picture question, you guys have underperformed comps, both from a share price and valuation perspective the last couple of years. Aside from the discretionary CapEx plan and restructuring initiatives, have you or the Board considered bigger picture strategic initiatives to narrow the valuation gap? How much does that occupy your headspace really, I guess, is the question? Speaker 100:15:34Yes, it's a significant component of what I focus on every day and the discussions that I have with our Board. Our view is that we have a very clear, concise strategic plan. It has 5 key strategic priorities and I think we've communicated those publicly in previous calls and we can certainly do that directly with you Sean as well on a subsequent call. But we remain optimistic around our ability to execute the strategic plan and that involves getting our business that we currently have running better from overall reliability and uptime. It involves monetization of some of the tenures and we've shown that we can execute on those and we're going to continue to focus on those areas. Speaker 100:16:37We talked a bit about growth in the engineered wood business and we're making some progress organically with the Calvert acquisition. We're very careful on what we're prepared to bite off though for tuck in acquisitions just relative to the balance sheet. We have the new credit agreement that Steve and Glenn were successful in putting in place. And we just want to be mindful that that's an important piece of our business is the overall integrity of that balance sheet. So I continue to be focused on those strategic priorities and our team is very much focused on the operational execution piece of the business every day. Speaker 100:17:22So that's what I would say about that. Speaker 400:17:27That's great. Thanks very much for those responses and congrats, Glenn. Well deserved. Speaker 100:17:32Thanks, Sean. Operator00:17:35Thank you. The next question is from Matthew McKeur. Please go Speaker 500:17:39ahead. Hi, good morning. Thanks for taking my questions. You called out tight log supplies factor in Q2. And with that, I was wondering if you could provide just a bit more color on the warm weather and the impact on harvest levels you spoke to earlier in the call. Speaker 500:17:54Do you need to catch up to the balance of the quarter based on harvest volumes over the last couple of months to maintain production at a level you'd like? Or are you more calling out whether it's a risk factor as the summer progresses? Speaker 100:18:06Thanks, Matt. I appreciate the question. I would say that when we look at our Q3 forecast, we will have an increase in our log volume in Q3 here. And I'm not even though we ended the quarter at 770,000 cubic meters, I'm not overly concerned about that level. I think our team is also showing to ourselves that the days of having 1,500,000 to 2,000,000 cubic meters of log inventory are probably not needed. Speaker 100:18:50And when you look at the operating platform we have, our ability to execute on the timberland side very, very effectively, I don't anticipate us going back to the era of 1,000,000 cubic meters of log inventory. So is 777 a little light, maybe on a couple of sorts, but you can kind of see the results of the focus on timberlands with respect to stratification of different log sorts as well. We're really focused on the margin opportunity on what log sort should we do on every cup lock that is going to generate the highest margin for Western and our new financial partners and some of the partnerships that we have in place. So that's what I would share as far as our go forward log inventory strategy. Speaker 500:19:48Okay, thanks very much. Next, recognizing the apportionment hasn't been completed yet, do you expect any impact to your business from the recent reduction to AAC in the North Island Timber Supply Area? And how should we think about the range of outcomes here? Speaker 100:20:05Yes, I don't think you'll see any material change. Those are really those numbers are really catching up to the current reality that we've been operating under for the last number of years. So you won't see any material change in the actual volume that we're harvesting. Those are kind of indicative of what we've been faced with. Speaker 500:20:30And just one last clarifying question on really to follow-up on Sean's question around the union. Are you able to arrive at a resolution with the USW Union as a company independently or do you need a broader resolution includes more of the coastal forest products industry? Speaker 100:20:51No, this is a specific negotiation between Western and the USW. Great. Speaker 500:20:56Thanks very much. I'll turn Operator00:21:01it back. Thank you. There are no further questions at this time. I would like to turn the meeting back over to Mr. Speaker 100:21:06Hoefer. Okay. Well, thanks everyone for joining our call today. We appreciate your interest in our company and look forward to our next call in November. Operator00:21:18Thank you. The conference has now ended. Please disconnect your lines at this time and thank you for your participation.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallWestern Forest Products Q2 202400:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsInterim report Western Forest Products Earnings HeadlinesRoyal Bank of Canada Lowers Western Forest Products (TSE:WEF) Price Target to C$0.50April 24 at 2:21 AM | americanbankingnews.comWestern Forest Products (TSE:WEF) Given New C$0.45 Price Target at TD SecuritiesApril 19, 2025 | americanbankingnews.comURGENT: Someone's Moving Gold Out of London...People who don’t understand the gold market are about to lose a lot of money. Unfortunately, most so-called “gold analysts” have it all wrong… They tell you to invest in gold ETFs - because the popular mining ETFs will someday catch fire and close the price gap with spot gold. April 27, 2025 | Golden Portfolio (Ad)Kernaghan buying at Western Forest Products (WEF)March 14, 2025 | theglobeandmail.comWestern Forest Products IncJanuary 3, 2025 | morningstar.comWestern Forest Products Inc (TSX:WEF) Q3 2024 Earnings Report Preview: What to Look ForNovember 6, 2024 | finance.yahoo.comSee More Western Forest Products Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Western Forest Products? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Western Forest Products and other key companies, straight to your email. Email Address About Western Forest ProductsWestern Forest Products (TSE:WEF) Inc is a Canada-based softwood forest products company. The company's principal business activities include timber harvesting, reforestation, forest management, sawmilling logs into lumber and wood chips, and value-added lumber remanufacturing. Its operating business segment comprised of Timber harvesting, Log sales, and Lumber manufacturing and sales. The firm purchases and harvests logs which are then manufactured into lumber products at its sawmills, or sold. 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There are 6 speakers on the call. Operator00:00:00Good morning, ladies and gentlemen. Welcome to Western Forest Products Second Quarter 20 24 Results Conference Call. During this conference call, Western's representatives may make forward looking statements within the meaning of applicable securities laws. These statements can be identified by words like anticipate, plan, estimate, will and other references to future periods. Although these forward looking statements reflect management's reasonable beliefs, expectations and assumptions, they are subject to inherent uncertainties and actual results may differ materially. Operator00:00:42There are many factors that could cause actual outcomes to be different, including those factors described under Risks and Uncertainties in the company's annual MD and A, which can be accessed on SEDAR and is supplemented by the company's quarterly MD and A. Forward looking statements are based only on information currently available to Western and speak only as of the date on which they are made. Except as required by law, Western undertakes no obligation to update forward looking statements. Accordingly, listeners should exercise caution in relying upon forward looking statements. I would now like to turn the meeting over to Mr. Operator00:01:28Stephen Hoefer, President and CEO of Western Forest Products. Mr. Hoefer, please go ahead. Speaker 100:01:35Thank you, Patrick, and good morning, everyone. I would like to welcome you to Western Forest Products' 2024 Second Quarter Conference Call. Joining me on the call today, Glenn Nontel, our new Chief Financial Officer Steve Williams, our Executive Vice President and Bruce Alexander, our Senior Vice President, Sales, Marketing and Manufacturing. We issued our 2024 Q2 results yesterday, which included the announcement that Glenn Nontel will be our next CFO. In deciding who should fill the role of CFO, we looked both internally and externally. Speaker 100:02:17We wanted someone with the right mix of leadership, industry experience and technical skills to help navigate through near term macroeconomic conditions and advance our strategic priorities. Glenn's financial acumen, forward thinking and laser focus on execution made him a clear choice from a number of strong candidates and speaks to the strength of the internal talent at Western. Steve Williams will remain in the role of Executive Vice President until his previously communicated retirement date of December 31, 2024. We look forward to benefiting from Steve's advice and judgment as he moves to an advisory role thereafter. Turning to our Q2 financial results. Speaker 100:03:06We successfully navigated through more challenging conditions to return our business to positive EBITDA in the 2nd quarter, generating $9,400,000 This was the result of a huge effort across all of our operating divisions and driven by a focused effort on execution and safety. In Timberlands, despite facing ongoing harvesting permitting delays, we continue to improve the stratification of our specialty log sorts such as pull and peer logs to support incremental margin. In manufacturing, our continued focus on operational uptime and reliability supported improved results despite tight log supply at certain facilities. In sales and marketing, we continue to make progress growing key strategic accounts, while developing value added products and programs targeted with the end user in mind. In Engineered Wood Products, we delivered another quarter of positive EBITDA despite labor and lamb stock availability challenges. Speaker 100:04:17In addition, we remain focused on accelerating our transition to higher value products. Our new Saltair kiln dried 14,500,000 board feet of lumber in the 2nd quarter and is achieving our uptime, production and value performance targets. We also continue to advance pre engineering and permitting related to our 2 previously announced continuous kilns. Each kiln will have a capacity of approximately 70,000,000 board feet and are expected to be completed in 2025. The continued focus on safety and maintaining a strong balance sheet while advancing our key strategic priorities remains our key focus in the near term. Speaker 100:05:00I will now turn it over to Glen to review our key financial results. Speaker 200:05:04Thanks, Stephen. 2nd quarter adjusted EBITDA was 9 point $4,000,000 as compared to negative $12,000,000 in the same period last year. As compared to the prior year, results in the Q2 benefited from higher lumber shipments, higher domestic log prices and a stronger log sales mix and lower stumpage and freight expenses. This was partially offset by a slightly weaker lumber specialty sales mix and higher timberlands and secondary processing costs. We closed the 2nd quarter with approximately 75,000,000 board feet of lumber inventory and 777,000 cubic meters of log inventory. Speaker 200:05:47Turning to CapEx and cash flow, our revised 2024 total CapEx spending is now expected to be approximately $40,000,000 This reflects the expectation that the majority of the $35,000,000 related to 2 new continuous kilns will be incurred in 2025. After the end of the second quarter, we received our income tax refund of approximately $23,000,000 which was utilized to reduce debt. From a balance sheet perspective, we ended the 2nd quarter with liquidity of approximately $142,000,000 and a net debt to cap ratio of 13%. Last week, we amended and extended our credit facility to July 2026. At the end of June, we had approximately $236,000,000 in duties on deposit, which equates to approximately $0.54 per share after tax. Speaker 200:06:42Turning to Q3 seasonality. Typical 3rd quarters can be challenging operationally as hot dry weather can restrict logging activity, reduce harvest volumes and impact cost. While we have yet to experience any significant forest fires in our area of operation, hotter and drier conditions combined with harvest permit delays may impact harvest volumes through the summer. We will continue to manage our manufacturing operating schedules to match production to market demand and available log supply. Stephen, that concludes my remarks. Speaker 100:07:16Thanks, Glenn. Turning to our market outlook. Cedar demand and prices for timber and premium appearance products are expected to remain stable. Demand and price for cedar decking have firmed up, while cedar trim products are expected to remain soft for the balance of the year. In Japan, weakness in wooden home starts, well stocked inventories and the weaker Japanese yen to the U. Speaker 100:07:41S. Dollar exchange rates are anticipated to impact lumber demand and prices in the near term. Demand for our industrial products is generally expected to remain stable. For commodity lumber, North American demand and prices are expected to remain volatile, while in China near term lumber demand and prices are expected to be seasonally weaker. Overall, we currently have a 3rd quarter order filed of approximately 108,000,000 board feet. Speaker 100:08:12Looking ahead, we remain focused on building our profitable quarter while executing on our strategic priorities and maintaining a strong balance sheet. With that operator, we can open the call up to questions. Operator00:08:27Thank you. We'll now take questions from the telephone lines. Speaker 300:08:50First question is from Ben Isaacson from Scotiabank. Please go ahead. Good morning, everyone, and thank you for taking my call. First, congrats see or very good to see the positive EBITDA this quarter. My first question is for Glenn. Speaker 300:09:08Congrats on the appointment to CFO. Can you talk a little bit about your vision for the role and any kind of wholesale wholesale changes that you want to make? Thank you. Speaker 200:09:21Thanks, Ben. I appreciate the comment. I think what I'd say is from a strategy perspective, we have a very well defined strategy and none of that is changing for the company, very high focus around operational execution, focus on our First Nation partnerships, continually growing the business when the balance sheet warrants. So there's definitely no change from a strategy perspective. I think what I hope to bring to the role and I know that I'm only one person in this broader organization that is important to the success of the business. Speaker 200:09:57But in my current in my prior roles and my prior roles that I've been at before Western, there's been a very high degree on execution and expediting execution. So, what I hope to bring to this is continue to executing on our strategic priorities, but bringing sort of a faster cadence of getting on with some of the priorities that we set. Speaker 300:10:19That's great. And then just as a follow-up question, can you guys just talk a little bit about where you are in terms of the overall capacity utilization rate? And how should we think about that rate through the back half of 'twenty four and into 'twenty 5? Thank you. Speaker 100:10:37Yes, I can maybe comment on that, Ben. Currently, what we're doing is being very disciplined in matching our operating rates relative to demand across all of our global markets and that's overlaid against overall log supply. As you know, we have 3 categories of fiber, small diameter chip and saw, the medium sized gang log and then the large diameter head rig log. And so each of those sorts have different challenges when it comes to cutting permits and cut blocks, but we'll be pretty disciplined just like we've shown over the last year and a half around making sure that our inventory levels are in balance overall, a match of capacity relative to lumber demand. So don't expect much material change here for the balance of the year relative to what we've been focused on for the first half. Operator00:11:45That makes sense. Thank you very much. Speaker 100:11:48Thanks Ben. Operator00:11:51Thank you. The next question is from Sean Steuart. Please go ahead. Thanks. Speaker 400:11:56Good morning, everyone. One follow on question from Ben. It seems like a big part of the success story in the Q2 was you guys were able to draw down your finished good inventories quite Speaker 100:12:09a bit. And that's been Speaker 400:12:12the trend for most of the past couple of years. I guess, in terms of gauging sustainability of this momentum, can you comment on further room to lower finished good inventories at this point or are you tapped out on that front? Speaker 100:12:27Well, Sean, thanks for the question. Our focus is really around ensuring that we have an order file that matches production. So, I come from a bit of a background of everything that you make every day, you want to sell every day and kind of have 30 to 45 days' worth of inventory at the max. And so we've had some challenges historically on overall because of the lack of kiln dried capacity, having to take a lot of our volume outside that needs to be kiln dried. And by definition, that provides a bit more complexity as well as having to hold a bit higher levels of inventory. Speaker 100:13:15But our focus is really to continue to draw that down and we have some pretty aggressive targets here in Q3 that we continue to be focused on. So we're not done yet. Operator00:13:30Okay. That's good to hear. Speaker 400:13:32Stephen, any comments you can give with respect to negotiations with the union towards a new contract? Speaker 100:13:42Sure. I'll make a few general comments. We commenced negotiations in April and those continue today. The current agreement expired in mid June. So the prior collective agreement continues to apply as negotiations continue. Speaker 100:14:04We're committed to delivering a fair and balanced agreement that recognizes our employees' contributions, while also ensuring our long term competitiveness as a company. USW members represent about 1,000 of our team members, as well as additional members within our Timberland contractors. So there's ongoing discussions today, both timberland side and I continue to be optimistic. We've committed to these discussions and they're being led by Jennifer. And so far, I think we're making good progress and we'll keep everyone posted on those discussions. Speaker 400:15:01Thanks for that detail. One last one, Stephen. Bigger picture question, you guys have underperformed comps, both from a share price and valuation perspective the last couple of years. Aside from the discretionary CapEx plan and restructuring initiatives, have you or the Board considered bigger picture strategic initiatives to narrow the valuation gap? How much does that occupy your headspace really, I guess, is the question? Speaker 100:15:34Yes, it's a significant component of what I focus on every day and the discussions that I have with our Board. Our view is that we have a very clear, concise strategic plan. It has 5 key strategic priorities and I think we've communicated those publicly in previous calls and we can certainly do that directly with you Sean as well on a subsequent call. But we remain optimistic around our ability to execute the strategic plan and that involves getting our business that we currently have running better from overall reliability and uptime. It involves monetization of some of the tenures and we've shown that we can execute on those and we're going to continue to focus on those areas. Speaker 100:16:37We talked a bit about growth in the engineered wood business and we're making some progress organically with the Calvert acquisition. We're very careful on what we're prepared to bite off though for tuck in acquisitions just relative to the balance sheet. We have the new credit agreement that Steve and Glenn were successful in putting in place. And we just want to be mindful that that's an important piece of our business is the overall integrity of that balance sheet. So I continue to be focused on those strategic priorities and our team is very much focused on the operational execution piece of the business every day. Speaker 100:17:22So that's what I would say about that. Speaker 400:17:27That's great. Thanks very much for those responses and congrats, Glenn. Well deserved. Speaker 100:17:32Thanks, Sean. Operator00:17:35Thank you. The next question is from Matthew McKeur. Please go Speaker 500:17:39ahead. Hi, good morning. Thanks for taking my questions. You called out tight log supplies factor in Q2. And with that, I was wondering if you could provide just a bit more color on the warm weather and the impact on harvest levels you spoke to earlier in the call. Speaker 500:17:54Do you need to catch up to the balance of the quarter based on harvest volumes over the last couple of months to maintain production at a level you'd like? Or are you more calling out whether it's a risk factor as the summer progresses? Speaker 100:18:06Thanks, Matt. I appreciate the question. I would say that when we look at our Q3 forecast, we will have an increase in our log volume in Q3 here. And I'm not even though we ended the quarter at 770,000 cubic meters, I'm not overly concerned about that level. I think our team is also showing to ourselves that the days of having 1,500,000 to 2,000,000 cubic meters of log inventory are probably not needed. Speaker 100:18:50And when you look at the operating platform we have, our ability to execute on the timberland side very, very effectively, I don't anticipate us going back to the era of 1,000,000 cubic meters of log inventory. So is 777 a little light, maybe on a couple of sorts, but you can kind of see the results of the focus on timberlands with respect to stratification of different log sorts as well. We're really focused on the margin opportunity on what log sort should we do on every cup lock that is going to generate the highest margin for Western and our new financial partners and some of the partnerships that we have in place. So that's what I would share as far as our go forward log inventory strategy. Speaker 500:19:48Okay, thanks very much. Next, recognizing the apportionment hasn't been completed yet, do you expect any impact to your business from the recent reduction to AAC in the North Island Timber Supply Area? And how should we think about the range of outcomes here? Speaker 100:20:05Yes, I don't think you'll see any material change. Those are really those numbers are really catching up to the current reality that we've been operating under for the last number of years. So you won't see any material change in the actual volume that we're harvesting. Those are kind of indicative of what we've been faced with. Speaker 500:20:30And just one last clarifying question on really to follow-up on Sean's question around the union. Are you able to arrive at a resolution with the USW Union as a company independently or do you need a broader resolution includes more of the coastal forest products industry? Speaker 100:20:51No, this is a specific negotiation between Western and the USW. Great. Speaker 500:20:56Thanks very much. I'll turn Operator00:21:01it back. Thank you. There are no further questions at this time. I would like to turn the meeting back over to Mr. Speaker 100:21:06Hoefer. Okay. Well, thanks everyone for joining our call today. We appreciate your interest in our company and look forward to our next call in November. Operator00:21:18Thank you. The conference has now ended. Please disconnect your lines at this time and thank you for your participation.Read morePowered by