West Fraser Timber Q4 2024 Earnings Report

West Fraser Timber EPS Results

• Actual EPS: $0.08
• Consensus EPS: -$0.55
• Beat/Miss: Beat by +$0.63
• One Year Ago EPS: N/A

West Fraser Timber Revenue Results

• Actual Revenue: N/A
• Expected Revenue: $1.41 billion
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

West Fraser Timber Announcement Details

• Quarter: Q4 2024
• Date: 2/12/2025
• Time: After Market Closes
• Conference Call Date: Thursday, February 13, 2025
• Conference Call Time: 11:30AM ET

West Fraser Timber (NYSE:WFG) Co. Ltd., a diversified wood products company, engages in manufacturing, selling, marketing, and distributing lumber, engineered wood products, pulp, newsprint, wood chips, and other residuals and renewable energy. It offers spruce-pine-fir, douglas fir-larch, hem-fir, and southern yellow pine lumber, treated wood products, medium density fiberboard panels and plywood, oriented strand board, and laminated veneer lumber wood products, as well as particleboards. The company also provides northern bleached softwood Kraft pulp and bleached chemical thermo-mechanical pulp used to produce various paper products, including printing and writing papers, paperboard products, tissue and towel products, and a variety of other paper grades. Further, it offers bioproducts, including bioenergy and biomaterial. Its products are used in home construction, repair and remodeling, papers, tissue, and box materials, and industrial applications. The company sells its products to major retail chains, contractor supply yards, and wholesalers, as well as industrial customers for further processing or as components for other products in Canada, the United States, the United Kingdom, Europe, and internationally. West Fraser Timber Co. Ltd. was founded in 1955 and is headquartered in Vancouver, Canada.

West Fraser Timber Q4 2024 Earnings Call Transcript

Presentation

[Operator]

Good morning, ladies and gentlemen, and welcome to the West Fraser Q4 twenty twenty four Results Conference Call. At this time, all lines are in listen only mode. Following the presentation, we will conduct a question and answer session. This call is being recorded on Thursday, 02/13/2025. During this conference call, Wes Frasers representatives will be making certain statements about Wes Frasers future financial and operational performance, business outlook and capital plans.

[Operator]

These statements may constitute forward looking information or forward looking statements within the meaning of Canadian and United States securities laws. Such statements involve certain risks and uncertainties and assumptions, which may cause Quest Phaser's actual or future results and performance to be materially different from those expressed or implied in these statements. Additional information about these risk factors and assumptions is included both in accompanying webcast presentation and in our 2024 annual MD and A and annual information form, which can be accessed on Wes Fraser's website or through CEDAR Plus for Canadian investors and EDCARD for United States Investors. And I would now like to turn the conference over to Mr. Sean McLaren.

[Operator]

Thank you. Please go ahead.

[Sean McLaren, CEO, President & Director at West Fraser Timber]

Thank you, Elin. Good morning, everyone, and thank you for joining our fourth quarter twenty twenty four earnings call. I am Sean McLaren, President and CEO of West Fraser. And joining me today are Chris Virostek, Senior Vice President and Chief Financial Officer Matt Tobin, Senior Vice President of Sales and Marketing and other members of our leadership team. On the earnings call this morning, I will begin with a brief overview of Wes Frasier's Q4 and fiscal twenty twenty four financial results and then pass the call to Chris for additional comments before I share some thoughts on our outlook and offer concluding remarks.

[Sean McLaren, CEO, President & Director at West Fraser Timber]

Wes Frasier generated $140,000,000 of adjusted EBITDA in the fourth quarter of twenty twenty four, representing a 10% margin. Results were varied across our business in Q4 with strength in our North American Engineered Wood Products segment and stronger than expected demand for SPF lumber offset by reduced Southern Yellow Pine lumber volumes. In the fourth quarter, levels of new home construction in The U. S. Showed further signs of improved stability on the back of recent U.

[Sean McLaren, CEO, President & Director at West Fraser Timber]

S. Central Bank rate cuts that appear to be supportive of housing, as well as demand for OSB and SPF lumber. That said, mortgage and interest rates remain relatively elevated and we believe this continues to shape existing home sales activity and repair and remodeling spending. For full year 2024, we generated $673,000,000 of adjusted EBITDA, representing an 11% margin and a meaningful improvement from the $561,000,000 reported in 2023. This level of 2024 EBITDA, while still below our view of mid cycle EBITDA, was able to cover our capital expenditures, dividends and much of our share buyback program.

[Sean McLaren, CEO, President & Director at West Fraser Timber]

On a pro form a basis with the inclusion of Norbord, our 2024 EBITDA was approximately $430,000,000 higher than that of the significant down cycle in 2019, reflecting positive synergies from the Norbord acquisition, benefits from our capital investment program, proactive acquisitions and finally mill portfolio optimization initiatives to improve performance and lower costs. In terms of our balance sheet, we had nearly $1,700,000,000 of available liquidity at year end, which offers us the financial flexibility and strength to support a consistent capital allocation strategy through the cycle. With that overview, I'll now turn the call to Chris for additional detail and comments.

[Chris Virostek, Chief Financial Officer at West Fraser Timber]

Thank you, Sean, and good morning, everyone. A reminder that we report in U. S. Dollars and all my references are to U. S.

[Chris Virostek, Chief Financial Officer at West Fraser Timber]

Dollar amounts unless otherwise indicated. The Lumber segment posted adjusted EBITDA of $21,000,000 in the fourth quarter compared to $62,000,000 adjusted EBITDA in the third quarter. This is a significant sequential improvement even after excluding the $32,000,000 export duty expense in the third quarter, which had related to the 2022 calendar year. Our North America EWP segment achieved $127,000,000 of adjusted EBITDA in the fourth quarter, up slightly from $121,000,000 in the third quarter. The Pulp and Paper segment incurred a $10,000,000 adjusted EBITDA loss in the fourth quarter compared to $2,000,000 of positive EBITDA reported in the third quarter.

[Chris Virostek, Chief Financial Officer at West Fraser Timber]

Q4 loss for this segment was largely owing to the previously disclosed major maintenance shutdown at the mill, the first we've undertaken at Caribou since obtaining a 100% control of the facility. With this catch up on investment, we expect the mill to be well positioned moving forward. In our Europe business, adjusted EBITDA was $2,000,000 in the fourth quarter versus $1,000,000 in the third quarter as that business continues to face relatively tempered demand markets. You will also have seen that we reported a $70,000,000 non cash impairment of goodwill in this segment in the fourth quarter, which was driven primarily by weaker macroeconomic conditions in The UK and Europe and expectations of an extended recovery to mid cycle profitability for the business. In terms of our overall results, higher product prices were the largest factor for the sequential EBITDA improvement across our lumber and North American Engineered Wood Products businesses, partially offset by lower North American OSB shipments.

[Chris Virostek, Chief Financial Officer at West Fraser Timber]

As noted in recent quarters, our lumber business continued to benefit from the actions we took earlier in 2024 to curtail production at three of our higher cost mills, essentially replacing that higher cost volume with production from other lower cost mills, which is positive for our overall cost structure. Specifically in The U. S. South, our 2024 SYP shipments declined more than 10% from 2023 levels. With regard to softwood lumber duties, late in the fourth quarter, the U.

[Chris Virostek, Chief Financial Officer at West Fraser Timber]

S. Department of Commerce issued a tolling notice extending the deadlines for certain ADD and CVD proceedings, including softwood lumber of up to ninety days. This extension affects the AR6 preliminary and final determination deadlines for both ADD and CVD cases. As a result of this extension, the preliminary determination decision for AR6 antidumping is expected to be published 02/20/2025 and the CVD preliminary determination decision is anticipated to be published 05/07/2025. Cash flow from operations was $173,000,000 in the fourth quarter with our cash balance net of debt and lease obligations at $412,000,000 dollars moderately below the $463,000,000 reported last quarter.

[Chris Virostek, Chief Financial Officer at West Fraser Timber]

The sequential decrease in our net cash balance reflects higher operating cash flows being more than offset by $156,000,000 of capital expenditures and approximately $50,000,000 of cash deployed towards share buybacks and dividends. In terms of our outlook for 2025, we are providing initial operational guidance for the year as shown on slide seven and detailed further in our earnings release where we discussed targeted ranges for key product shipments. We are also providing our forecast for capital expenditures in the range of $400,000,000 to $450,000,000 dollars This reflects a moderate decrease from 2024 capital spending levels, but is still aligned with our strategy of countercyclical investing representing significant investment in our assets above sustaining capital needs of approximately $225,000,000 per year. I would note that as the U. S.

[Chris Virostek, Chief Financial Officer at West Fraser Timber]

Administration's tariffs and other policies evolve, we will evaluate the impact of the tariffs on our operations and consider whether any revisions to our 2025 forecasts are warranted. With that overview, I will pass the call back to Sean.

[Sean McLaren, CEO, President & Director at West Fraser Timber]

Thank you, Chris. We remain confident in our strategy and proud of the company we have built. With the geographic and product diversification that has allowed us to weather the challenging lumber markets we've experienced over the last two years. As Chris mentioned earlier and as shown on the left side figure on Slide eight, we generated $673,000,000 of adjusted EBITDA in 2024, an improvement of nearly three times the level of pro form a EBITDA we saw at the bottom of the last lumber industry downturn in 2019. A key reason for this strong relative performance was the diversity in our wood building products offering, specifically led by the strength of our North American EWP segment, which has experienced healthy levels of demand during a period of challenging cyclical conditions for our other segments.

[Sean McLaren, CEO, President & Director at West Fraser Timber]

Turning to liquidity on Slide nine, we have a strong balance sheet with nearly $500,000,000 of net cash and total liquidity approaching $1,700,000,000 exiting 2024. This financial strength provides a shock absorber to potential economic issues that may unfold in the face of looming tariffs and trade wars, while still allowing us to pursue cost improvement objectives and the return of surplus capital to shareholders. Before I shift to my concluding remarks, I want to briefly reflect upon the history of attractive returns generated for our shareholders. As you can see in the figure at the bottom of Slide 10, our shareholders have been rewarded for their patience as we have continued to execute on our plans to grow the business, optimize our portfolio through dispositions and or closures of highly variable or underperforming assets and return surplus capital through dividends and buybacks. With the total annuitized return approaching 10% since the beginning of 02/2006, which includes share price appreciation and reinvested dividends, we remain proud of what the West Fraser team has been able to accomplish.

[Sean McLaren, CEO, President & Director at West Fraser Timber]

And you should expect us to do more of the same on our journey to create future shareholder value. I'll now shift to our outlook and add some concluding remarks. We remain encouraged that the Fed's rate hiking cycle appears to be in the rearview mirror despite the risk of inflationary pressures from a potential trade war between U. S. And some of the largest trading partners.

[Sean McLaren, CEO, President & Director at West Fraser Timber]

At West Fraser, we currently view our overall inflation risk to be relatively modest with costs having stabilized across much of our supply chain. In fact, in some instances such as labor availability and capital equipment lead times, we have seen modest improvements in supply chain tension, which is likely to offer disinflationary effects. As such and based on what we can see today, we do not currently expect to experience meaningful upward cost pressures over the near term. For our lumber operations in The U. S.

[Sean McLaren, CEO, President & Director at West Fraser Timber]

South, as we described last quarter, we continue to make progress refining and optimizing our operations by removing costs and looking for additional margin opportunities. And although market conditions for Southern Yellow Pine remain challenging today, we continue to reduce costs, execute on our modernization program and have our assets well positioned for when supply demand returns to balance. In Canada, demand for our SPF products continues to improve relative to Southern Yellow Pine, as new housing markets appear to be proving more resilient than repair and remodeling markets in which we tend to see a greater demand pull for our Southern Pine products. As a reminder, our portfolio optimization strategy has included the reduction of higher cost capacity across our lumber platform through permanent ship reductions, mill closures and indefinite curtailments of more than 800,000,000 board feet since the beginning of twenty twenty two. We have also reduced the number of shifts or hours of operations at various lumber mills across our platform as a means to manage cost.

[Sean McLaren, CEO, President & Director at West Fraser Timber]

Taking a proactive approach to portfolio management like this has continued to strengthen our cost position and competitiveness. In our North American EWP business, we continue to ramp up production at our Allendale OSB mill, where we are pleased with the cost progression of that facility. We expect that mill to be among our lowest cost OSB facilities when it achieves full operating rate. In conclusion, there is considerable macro uncertainty in the form of potential tariffs and global trade that may impact inflation expectations and demand for our products. However, we believe our low cost platform and diverse portfolio of lumber and OSB mills situated in The U.

[Sean McLaren, CEO, President & Director at West Fraser Timber]

S. Will help mitigate some of this risk. In the meantime, we continue to take positive actions that we expect will make us even stronger for the period when industry demand begins its rebound from the current downturn. We will continue to focus on operational excellence in order to build more robust and sustainable business through the cycle, while maintaining the type of financial strength that gives us the flexibility to be able to take advantage of growth opportunities if and as they arise. We remain optimistic about the longer term demand prospects for West Fraser and look forward to continuing to build one of the world's leading wood product buildings companies.

[Sean McLaren, CEO, President & Director at West Fraser Timber]

And now before we wrap up our prepared remarks, I'd like to briefly address the elephant in the room, which is the prospect of the U. S. Administration's new tariffs that were announced earlier this month and that while on pause for now have created considerable uncertainty for the outlook of our business. I expect many of you have questions about these potential tariffs and the implications for West Fraser. And while it's fair to say we have many questions too, as this situation continues to evolve, what we can say is the following: We can confirm that we are taking a number of actions within the company to prepare for potential tariffs.

[Sean McLaren, CEO, President & Director at West Fraser Timber]

First, we are ensuring that we remain policy current. This situation is fluid and considerable time and effort is being spent separating fact from fiction so that we may better prepare actionable analysis. This includes maintaining close communications with our provincial and federal governments to ensure we have a handle on the latest engagements between Canada and The U. S. Second, we are actively scenario planning to prepare for a range of outcomes, including U.

[Sean McLaren, CEO, President & Director at West Fraser Timber]

S. Tariffs, Canadian countermeasures and other possibilities. Third, we are preparing our business operations and updating our operational plans so they can be quickly aligned to various scenarios. We have long maintained a variable operating strategy and recognize certain tariff scenarios may require us to action such plans. And finally, we are preparing and engaging our employees, our communities and our customers for what may lie ahead.

[Sean McLaren, CEO, President & Director at West Fraser Timber]

While we are unable to provide any kind of certainty to our stakeholders, we believe it's important to be as transparent as possible and to commit to regular communication should events warrant. Thank you. And with that, we'll turn the call back to the operator for questions.

[Operator]

Thank you. Your first question comes from the line of Ben Isaacson from Scotiabank. Please go ahead.

[Ben Isaacson, Managing Director - Equity Research at Scotiabank]

Thank you very much and good morning everyone. I have a two part question on tariffs. So the first question is, what are you doing and what are you seeing from both your peers and those downstream in terms of preparing for the tariffs? Are you seeing lumber move differently than you would normally see it? Are you seeing stockpiling right now?

[Ben Isaacson, Managing Director - Equity Research at Scotiabank]

Can you just talk about kind of how the channel is positioning for tariffs?

[Sean McLaren, CEO, President & Director at West Fraser Timber]

Yes. Good morning, Ben. I'll maybe make a comment or two here and then Matt to step in. First off, very difficult for us to see exactly what others are doing. I would say from our perspective, we have maintained normal, below normal inventory levels.

[Sean McLaren, CEO, President & Director at West Fraser Timber]

We are selling normally in the market every day. Hard to really kind of get good visibility on the channel inventories. And I would say our buying patterns appear to be within normal ranges. And I would say our focus is really of being having our ability to be flexible with our operating schedules given whatever scenarios may or may not may come to pass. But with that, maybe I'd ask Matt to add anything I missed there.

[Matt Tobin, Senior VP of Sales & Marketing at West Fraser Timber]

Thanks, Sean. No, I think that's exactly right. Customer purchasing just appears to be within normal range that we would normally that we see. No shifts there and I would just make a comment maybe that generally uncertainty doesn't drive purchasing.

[Ben Isaacson, Managing Director - Equity Research at Scotiabank]

Thank you. And then just as my second follow-up question. In your scenario planning for the tariffs, what is the kind of general frame of mind that you have in terms of The U. S. Portfolio versus the Canadian portfolio, do you expect The U.

[Ben Isaacson, Managing Director - Equity Research at Scotiabank]

S. Portfolio to meaningfully benefit? I mean, I know we don't know exactly what's going to come, but just from a high level, will The U. S. Portfolio largely offset any risk in Canada?

[Sean McLaren, CEO, President & Director at West Fraser Timber]

Yes, Ben, really difficult to inhale that one. I would say, unfortunately, we do have quite a bit of experience dealing with duties and in particular anti dumping duties, which can move quite quickly depending on the price in the marketplace. And we react accordingly in our business depending on the demand of our customers. There's a lot of moving parts here. Of course, what actually will be in place, what our customer preferences, what substitution is available.

[Sean McLaren, CEO, President & Director at West Fraser Timber]

So it's really hard to predict. I would say we feel like we're whatever comes, we're well positioned to not only react in Canada if we need to, but have some reaction in The U. S. As well to try to meet the needs of our customers.

[Ben Isaacson, Managing Director - Equity Research at Scotiabank]

Thanks so much. I appreciate it.

[Operator]

Thank you. And your next question comes from the line of Sean Steuart from Citicawen. Please go ahead.

[Sean Steuart, Managing Director at TD Securities]

Thanks. Good morning, guys. Couple of questions also starting with tariff potential. Just want to understand that the SPF and OSB volume guidance for 2025, the bottom end of those ranges do not have any consideration for tariffs. Is that the correct read?

[Sean McLaren, CEO, President & Director at West Fraser Timber]

I'm going to let Chris to tack on here what I missed. But I think when we thought about the guidance for the year, we thought of current conditions. I think once you overlay any change to a border measure, we have not tried to build in and speculate what that may or may not be. Chris, would anything to add to that?

[Chris Virostek, Chief Financial Officer at West Fraser Timber]

No, that's exactly right. And I think as we've done in the past as the year goes on and situations evolve, I think we know both of these markets are fluid and have been fluid the last kind of two or three years with interest rate changes and demand profile and we update that guidance as the year goes on as the situation clarifies. So what we've got out there is our target of where we think the range is for the year and very difficult to sort of piece in one item versus another when there's not even clarity on how some of those uncertainties are going to get resolved. So that's the guidance as it stands today and as the situation evolves as we said if there's a need to update that guidance then we would update that guidance.

[Sean Steuart, Managing Director at TD Securities]

Okay. Thanks for that guys. Just a follow on, it was reported that when it felt like tariffs were imminent at the beginning of the month, you were telling customers that your intent was to increase prices immediately to fully offset a tariff if it were to

[Sean McLaren, CEO, President & Director at West Fraser Timber]

be imposed. I

[Sean Steuart, Managing Director at TD Securities]

guess I'd be interested in your perspective on that ability. There's seemingly still slack in wood product markets in North America. Perspective on the supply response for lumber or OSB that might be needed to fully offset the tariffs in terms of passing it on to customers?

[Sean McLaren, CEO, President & Director at West Fraser Timber]

Sean, I'll make a couple of comments here and then ask Matt to just add on or fill in what I miss. So really not prepared to talk about pricing in any kind of detail. What I would say is that there's a lot of things that go into the cost floor across North America, fiber costs, duty rates, exchange rates, tariffs are another element to that. And all those things impact what people are prepared to buy at, what people are prepared to sell at. And ultimately those two things have to find each other, find a trading level.

[Sean McLaren, CEO, President & Director at West Fraser Timber]

So really, really hard to say exactly how it's going to play out. I would say that additional cost is generally not helpful. It's going to add to the cost floor and drive different decisions across the supply chain. So maybe I'll just leave it there. And Matt, anything else we might want to add there?

[Matt Tobin, Senior VP of Sales & Marketing at West Fraser Timber]

No. I think for your comments, we're monitoring the situation and talk to our customers, but it's just really too early to say until we have clarity. And I think whatever the outcome of the tariffs, our focus is supplying customers with the products that we make and meeting their needs.

[Sean Steuart, Managing Director at TD Securities]

Understood. One last quick one. Sean, you mentioned potential for modest labor cost relief, which little surprising and encouraging. I guess our perception was it was still a really tight labor market in The U. S.

[Sean Steuart, Managing Director at TD Securities]

In particular. A little more context on what you're seeing, I assume it's specific to The U. S. Market, relief that you're seeing there, expected magnitude of cost reduction on labor for those sawmills in particular, it feels like this is pretty minor, but any additional context you can give there?

[Sean McLaren, CEO, President & Director at West Fraser Timber]

Not much to add to that comment. I think it's probably against the backdrop of what we've just come through, which was a lot of pressure on labor, a lot of pressure on cost, a lot of pressure on finding people. We still have in The U. S. South in particular, kind of meeting our kind of labor needs.

[Sean McLaren, CEO, President & Director at West Fraser Timber]

But there does feel it doesn't feel like it has the last two or three years. So I think that's probably context on that comment.

[Sean Steuart, Managing Director at TD Securities]

That's great. Thanks very much, Sean.

[Operator]

Thank you. And your next question comes from the line of Ketan Mamtora from BMO Capital Markets. Please go ahead.

[Ketan Mamtora, Director - Building Products Equity Research at BMO Capital Markets]

Good morning and thanks for taking my question. Maybe to start with, can you give us a little bit of sort of context in terms of we are seeing a number of these pulp mill closures in The U. S. What sort of impact that is having on the residual income, the chip residues as you think about sort of The U. S.

[Ketan Mamtora, Director - Building Products Equity Research at BMO Capital Markets]

South saw mills?

[Sean McLaren, CEO, President & Director at West Fraser Timber]

Yes. Thanks, Keaton, and good morning. Yes, it is an issue across U. S. South and there's really two parts to it.

[Sean McLaren, CEO, President & Director at West Fraser Timber]

One, you read about the pulp mill closures, but also as North American lumber supply is contracted in other regions, it's come on in The U. S. Out. So you have more chip volume and less kind of pulp or pulp capacity or chip consumption, saying that it is very regional. So it will be if you happen to be next to one of those pulp mills, the impact is going to be more significant on that particular mill.

[Sean McLaren, CEO, President & Director at West Fraser Timber]

But I do think it's important unlike Western Canada and other parts of Canada, The U. S. South is still the pulp mills are still largely run on pulp wood. So chips don't make they make up the minority, not majority of the furnish into pulp mills. So there is replacement, but what happens is it takes more freight, it takes a lower price.

[Sean McLaren, CEO, President & Director at West Fraser Timber]

So there is pressure on chip pricing down and we've seen that now for the last three or four years as chip volumes have ramped up in the South.

[Ketan Mamtora, Director - Building Products Equity Research at BMO Capital Markets]

Understood. That's helpful. And then just switching to kind of 2025, if and correct me if I misunderstood here, but from what I heard, it sounded like your volume guidance does not bake in any potential tariff impact yet. So as I think about the low end and the high end of the guidance change, both in lumber and in OSB, can you tell us what you are kind of taking in terms of new residential construction growth and R and R in The U. S?

[Sean McLaren, CEO, President & Director at West Fraser Timber]

Yes, I think, and I'm going to ask Matt, Chris to just fill in a little bit more here. I would say we're largely our guidance largely reflects sort of how we finished the second half of last year and started this year, which is relatively flat at Keaton. So I think what you see in our guidance is kind of our run rates with some expected volume changes in our portfolio. But it's largely we're not making in a big move one way or the other in the demand levels. And we sure haven't tried to speculate on what may or may not be a border measure and what that might do to our volumes.

[Sean McLaren, CEO, President & Director at West Fraser Timber]

Chris, anything else there on the guidance?

[Chris Virostek, Chief Financial Officer at West Fraser Timber]

No, that's a good summary of it, right? I mean, we're not forecasting substantial changes in the underlying demand drivers from where they exist today or any of these other sort of externalities that are hovering out there that have yet to be resolved. And as I said, as the year goes on, we always tighten that band. And probably now we're dealing with more externalities than we normally do at this point in time of the year. So I think it's pretty hard to attribute 100,000,000 board feet to one thing or another as to being included or excluded.

[Chris Virostek, Chief Financial Officer at West Fraser Timber]

So it's quite reflective of the runway that we think we're at right now.

[Ketan Mamtora, Director - Building Products Equity Research at BMO Capital Markets]

Got it. That's very helpful. I'll jump back in the queue. Good luck.

[Sean McLaren, CEO, President & Director at West Fraser Timber]

Thanks, Ki Bin.

[Operator]

Thank you. And your next question comes from the line of Matthew Mckellar from RBC Capital Markets. Please go ahead.

[Matt McKellar, Vice President at RBC Capital Markets]

Hi, good morning. Thanks for all the details so far and for taking my questions. First for me, what are your hopes or expectations for the outcome of the BC government's review of its timber sales program, please?

[Sean McLaren, CEO, President & Director at West Fraser Timber]

Good morning, Matthew. I'll make a couple of comments on this. I think we always remain hopeful. I would say in British Columbia, there is a we are not harvesting the level of available fiber and access and stability in at least in our communities is a significant issue. And I know we are rolling up our sleeves with the BC government to play whatever role we can to help improve that and improve access.

[Sean McLaren, CEO, President & Director at West Fraser Timber]

And you'll see a number of initiatives we are doing inside of West Fraser with our indigenous partners to try to improve access and get more visibility and more stability on timber coming to our mills, which is for long term viability for our people, for investment, for the industry, that's what's needed. So, hopeful and we're prepared to do our part and we'll just see what happens.

[Matt McKellar, Vice President at RBC Capital Markets]

Okay, great. Thanks for the color there. Switching gears a bit and just looking at your quarter over quarter waterfall on I think it's Slide six and focusing on costs. Are you able to give us a sense of how much of that $30,000,000 headwind quarter on quarter was attributable to each of engineered wood products and lumber? And then regarding the low log inventory issue,

[Ketan Mamtora, Director - Building Products Equity Research at BMO Capital Markets]

can you give us a sense

[Matt McKellar, Vice President at RBC Capital Markets]

of how this is evolved into Q1, please?

[Sean McLaren, CEO, President & Director at West Fraser Timber]

Chris, do you want to take that one

[Matt McKellar, Vice President at RBC Capital Markets]

or? Yes.

[Chris Virostek, Chief Financial Officer at West Fraser Timber]

I think, Matthew, there's some more details in the MD and A and I'd recognize that was a whole pile of documents we laid on people yesterday afternoon and maybe haven't had the chance to kind of get through all them yet. But I would say there's a couple of things flagged there in lumber. In lumber there was past service pension adjustment that was one time in nature that came through on Canadian Lumber really around staying competitive in the labor market. As we finished our planting season through the summer, there was some additional civiculture costs that came through. I think that's flagged in the MD and A as well.

[Chris Virostek, Chief Financial Officer at West Fraser Timber]

Expect that to be largely behind us as well. And then in the fourth quarter, as you know in EWP and you'll see it reflected in the lower shipments that's a bigger portion of where all of our maintenance is done because it's a seasonally softer quarter from a demand standpoint. So we plan most of our maintenance downtime in EWP in the fourth quarter. And so, that results in those fixed costs kind of just flowing straight through in the fourth quarter because we don't have as much production in the fourth quarter. With respect to the low log inventory, I would say just in simple terms how it affects the cost is really on the efficiency side is when you're feeding the logs directly into the mill almost as you get them that's not as an efficient way as if you've been able to organize your log yard and feed the mill efficiently with the diameter and the specie that you want on a more consistent basis.

[Chris Virostek, Chief Financial Officer at West Fraser Timber]

So I think it's been it was a slow start to the logging season. I think we're trying really hard to make up ground here with some colder weather recently. But still challenging around challenges around access and things like that. So we think we're making improvements and we're catching up on that log inventory, but there's still another month and a half to go here before we hit breakout.

[Matt McKellar, Vice President at RBC Capital Markets]

Great. Very helpful. Thank you. And if I could just sneak in one last cleanup. It just looks like expected CapEx at Anderson is up about $20,000,000 Could you just help us understand the moving parts there, please?

[Sean McLaren, CEO, President & Director at West Fraser Timber]

Yes, you bet, Matthew. Yes, so I would say, so that project, I mean, these projects are big and they take a long time to bring to fruition. And largely, there's kind of a couple areas. I would say, there has been more civil work early in the project than we expected. And it really was the timeline of the project, the construction, the civil work was really impacted by heavy rains we experienced in East Texas right through the first half of last year.

[Sean McLaren, CEO, President & Director at West Fraser Timber]

That combined with even though we have seen general contractor availability improve, equipment delivery times improve, The one area that seems to not have we're not seeing the same type of improvement is the electrical installation. So those are the two main issues, the civil work delay due to rain and some weather conditions, as well as pressure on electrical costs relative to what we had planned them to be a couple of years ago.

[Matt McKellar, Vice President at RBC Capital Markets]

Okay. Thanks very much for the help. I'll turn it back.

[Operator]

Thank you. Your next question comes from the line of Hamir Patel from CIBC. Please go ahead.

[Hamir Patel, Executive Director - Equity Research at CIBC Capital Markets]

Hi, good morning. Sean, over the course of the current, Lumber five dispute, have Lumber customers in Canada generally paid the same prices as U. S. Customers or has there been a discount there at times just given where the duties are? And then kind of related to that, if there are additional tariffs applied, would you expect a greater discount if any for Canadian customers?

[Sean McLaren, CEO, President & Director at West Fraser Timber]

I'm going to hand this one over to Matt to make a few comments on Canada.

[Matt Tobin, Senior VP of Sales & Marketing at West Fraser Timber]

I guess I would say about that is really Canada is an important market for us and certainly we have to compete in that market every day for our customer spend and we're going to focus on doing that through whatever, tariff or situations that we find ourselves in. So

[Hamir Patel, Executive Director - Equity Research at CIBC Capital Markets]

Okay, fair enough. But over

[Hamir Patel, Executive Director - Equity Research at CIBC Capital Markets]

the course of the current dispute, has there been much of a discount?

[Matt Tobin, Senior VP of Sales & Marketing at West Fraser Timber]

Normal course of business and we really just have to focus on each market to compete. And so those things I guess just change over time.

[Sean McLaren, CEO, President & Director at West Fraser Timber]

And I would say, Hamir, I'd add a little more to that, Hamir,

[Sean McLaren, CEO, President & Director at West Fraser Timber]

that clearly as it gets more expensive to go across the border into The U. S, whether that's duties, tariffs, what have you, there is separation between those markets.

[Hamir Patel, Executive Director - Equity Research at CIBC Capital Markets]

Right. Okay. Fair enough. And then are you able to tell us how much of your Canadian OSB goes to The U. S?

[Hamir Patel, Executive Director - Equity Research at CIBC Capital Markets]

And on the lumber side, I think you disclosed it sort of looks like it was 60% in 2024, but just curious on the OSB side.

[Sean McLaren, CEO, President & Director at West Fraser Timber]

Yes. And I don't have the exact disclosure in front of me. So Chris, just help me out here. But 40% of our production volumes in Canada, Ninety Percent of our total North American production ends up in The U. S.

[Sean McLaren, CEO, President & Director at West Fraser Timber]

So you can infer from that a large majority of our Canadian production crosses the border. I don't think we disclosed the exact number, but that's what our disclosure is. Chris, any more on that one?

[Chris Virostek, Chief Financial Officer at West Fraser Timber]

Yes. We added a couple anticipating that this was going to be sort of point of interest for folks. There's a disclosure there in the AIF around that about 40% of our OSB capacity is in Canada. And then the destination of shipments of OSB is in the MD and A. That's not sort of historically been there, but it's been added in.

[Chris Virostek, Chief Financial Officer at West Fraser Timber]

So I think there's enough there between those two data points that you can get to pretty close to what the number is there. And it does fluctuate from time to time based on the relative strength in the different markets and seasonal factors and things like that. But I think there's enough there to piece it together.

[Hamir Patel, Executive Director - Equity Research at CIBC Capital Markets]

Great. Thanks, Chris. And just last question I had was again kind of tariff related. Sean, if we did see tariffs come in, do you think we could see adjustments to provincial stumpage systems with respect to how they kind of incorporate product pricing?

[Sean McLaren, CEO, President & Director at West Fraser Timber]

I think really, really to talk about that. What I would say, as you can imagine, the government is I'm sure both federally and provincially with the prospect of broad based tariffs across all industries, doing specific measures for one particular industry. Not that that might not happen, but I think that there are so many things to talk about. It's really too soon to predict any policy changes as it relates to tariffs.

[Hamir Patel, Executive Director - Equity Research at CIBC Capital Markets]

Fair enough. Thanks. That's all I had. I'll turn it over.

[Sean McLaren, CEO, President & Director at West Fraser Timber]

Thanks, Sameer.

[Operator]

Thank you. There are no further questions at this time. I will now hand the call back to Mr. Sean McLaren for any closing remarks.

[Sean McLaren, CEO, President & Director at West Fraser Timber]

Thank you, Elaine. As always, Chris and I are available to respond to further questions as is Robert Winslow, our Director of Investor Relations and Corporate Development. Thank you for your participation today. Stay well and we look forward to reporting on our progress next quarter.

[Operator]

Thank you. And this concludes today's call. Thank you for participating. You may all disconnect.

Participants

Executives

• Sean McLaren, CEO, President & Director
• Chris Virostek, Chief Financial Officer
• Matt Tobin, Senior VP of Sales & Marketing

Analysts

• Ben Isaacson, Managing Director - Equity Research at Scotiabank
• Sean Steuart, Managing Director at TD Securities
• Ketan Mamtora, Director - Building Products Equity Research at BMO Capital Markets
• Matt McKellar, Vice President at RBC Capital Markets
• Hamir Patel, Executive Director - Equity Research at CIBC Capital Markets