Release Date: October 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- West Fraser Timber Co.Ltd (WFG, Financial) generated $62 million of adjusted EBITDA in Q3 2024, despite a $32 million lumber export duty expense.
- The company maintained a trailing four-quarter EBITDA above $500 million, showing resilience during a down cycle.
- West Fraser Timber Co.Ltd (WFG) has over $2 billion in total liquidity, providing financial flexibility for consistent capital allocation.
- The North American engineered wood product segment showed relative strength, with stronger than expected demand for SPF lumber.
- The company is optimistic about the longer-term demand prospects, supported by expected rate cuts and stabilized costs across the supply chain.
Negative Points
- The lumber segment posted an adjusted loss of $62 million in Q3 2024, impacted by a $32 million export duty expense.
- There was a sequential decline in EBITDA across North American engineered wood products and lumber businesses due to lower prices.
- The pulp and paper segment generated only $2 million of adjusted EBITDA in Q3, down from $9 million in the previous quarter.
- The European business reported a decline in adjusted EBITDA to $1 million in Q3 from $6 million in Q2.
- Market conditions for Southern Yellow Pine (SYP) lumber remain challenging, with shipments down nearly 12% versus the prior quarter.
Q & A Highlights
Q: Can you give some additional color on how the R&R demand is trending as we think about lumber? Did we see any signs of stabilization as the quarter progressed?
A: Sean McLaren, President and CEO, noted that there was a slight improvement in Southern Yellow Pine demand as the quarter progressed, largely due to supply-side adjustments. Matt Tobin, Senior VP of Sales & Marketing, added that long-term R&R demand is expected to grow at a GDP-like rate.
Q: Why haven't we seen a bigger price response in SPF lumber given that new residential is holding up better relative to R&R?
A: Sean McLaren explained that the supply-demand balance for SPF is different due to more curtailments and that wider width products like 2x6 and 2x8 have better pricing for SPF, which has led to more volume from West Fraser.
Q: How should we think about CapEx for next year? Will it be similar to 2024, lower, or higher?
A: Christopher Virostek, CFO, indicated that while specific guidance will be provided at year-end, the bias is likely towards a slight decrease in CapEx as major projects like Henderson wrap up, although they are considering more opportunities.
Q: Can you provide context on the recent price momentum for Southern Yellow Pine lumber due to capacity closures?
A: Sean McLaren stated that the impact of their supply-side actions was quick, with inventory exhaustion happening in days or weeks in the South, unlike the North where it takes months.
Q: What are your updated thoughts on the softwood lumber trade file and potential resolutions?
A: Sean McLaren mentioned that West Fraser supports managed trade but noted the complexity of political factors. The company focuses on controlling costs and litigating for duty refunds, with no immediate resolution expected.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
