Canfor Corporation

Good morning. My name is Pam and I will be your conference operator today. Welcome to the Canfor and CanforPulp second quarter analyst call. All lines have been placed on mute to prevent any background noise. During this call, Canfor and CanforPulp's chief financial officer will be referring to a slide presentation that is available in the investor relations section of the company's website. Also, the company would like to point out that this call will include forward-looking statements, so please refer to the press release for the associated risks of such statements. I would now like to turn the meeting over to Mr. Don Kane, Canfor Corporation's President and Chief Executive Officer. Please go ahead, Mr. Kane.

All right. Thanks, Pam, and good morning, everyone. Thank you for joining the Canfor and Canfor Pulse Q2 2022 Results Conference Call. I'm going to make a few comments before I turn things over to Kevin Edgson, Canfor Pulp's President and CEO, and Pat Elliott, Chief Financial Officer of Canfor Corporation and Canfor Pulp, and our Senior Vice President of Sustainability. In addition, we are joined by Kevin Pankratz, our Senior Vice President of Sales and Marketing. Increasingly, when I meet with members of the investment community with customers and partners, Sustainability is at the top of the list of topics to discuss and it should be because it's critically important to all of us. We are in the second year of our ambitious sustainability journey. Sustainability is core to our strategy and it's becoming increasingly embedded in all areas of our business. At the end of June, we released our 2021 sustainability report. A few highlights for the year, including setting our climate change goal and targets, planting 54 million seedlings, having 80% of our energy come from renewable resources, and having 20% of our new hires come from underrepresented groups. Our employees across the company have demonstrated that they are committed to achieving our sustainability goals and targets, and we sincerely appreciate their hard work and dedication in developing a very comprehensive report. We will continue to keep you updated on our sustainability progress. Turning to our financial results, despite ongoing supply chain challenges which resulted in reduced operating rates in Western Canada, our lumber business benefited from strong North American lumber prices early in the quarter, increasing shipments reflected improved transportation networks in June, and a full quarter of production from our recently acquired assets from Miller Western. Our European lumber business continued to generate strong financial results with improved sales realizations reflecting solid demand in that region. While lumber markets saw significant volatility in the second quarter, lean inventories throughout the supply chain and solid underlying demand fundamentals have supported improved markets in recent weeks, with current North American lumber prices trading well ahead of pre-pandemic levels. While rising interest rates and inflationary pressures are likely to temper lumber demand in the near term, market fundamentals remain supportive. by stolen underlying demand in the repair and remodel sector and pent-up demand for new home construction in the United States particularly. Notwithstanding the current macro environment, we remain focused on growing our lumber business on a global basis and believe our diversification strategy will support our financial results throughout the cycle. Yesterday, we announced plans to construct a second state-of-the-art greenfield sawmill This $210 million facility is aligned with our sustainability goals and decarbonization targets and will have annual production capacity of 250 million board feet when completed in 2024. Following the construction and startup of this facility, we will have an orderly wind down of our existing sawmill and mobile, allowing us to maximize cash flows during construction. All of the employees at our mobile plant will be offered jobs to stay with the company. In addition to this new facility, we have made significant capital investments in the U.S. South in recent years, including an organic growth program completed in 2021, ongoing construction of our DeRitter Greenfield Sawmill, and planned investment in Urbana. Together, these investments significantly improve our cost structure to grow our production capacity in the U.S. South by approximately 800 million board feet through increased automation, innovation, and manufacturing flexibility with a focus on high-value products. Notwithstanding our recent acquisition of assets from Miller Western and a number of significant capital projects planned through 2024, our balance sheet remains strong. While we are prepared to remain patient and disciplined until the right opportunities present themselves, we are well positioned to grow our lumber business on a global basis and continue to review a number of additional internal and external growth opportunities. So with that, I'll now turn it over to Kevin to provide an overview of Kemp or Pulp.

Thanks, Don, and good morning, everyone. Results in the second quarter continue to reflect the impact of significant transportation challenges, as well as operational downtime at Northwood as a result of capital upgrades to RB1 and scheduled maintenance turnaround, which was successfully completed in July. While transportation networks improved slightly towards the end of the second quarter, we continue to closely manage inventory levels at our mills as we work to optimize available transportation. Supported by strong global pulp pricing, We anticipate improved results in the third quarter, however, are prepared to adjust future operating plans to match available logistics. Despite significant challenges in recent quarters, Canfor Pulse has preserved its strong balance sheet. As a management team, we remain focused on improving operational reliability, closely managing inflationary cost pressures, and optimizing available transportation as we look to capitalize on strong pulp markets. As Don mentioned, Our 2021 sustainability report was recently released. Canfor Pulse is actively engaged in our sustainability strategy. It's important to our communities and customers, and it's important to us. Canfor and Canfor Pulse have committed to set near and long-term company-wide reductions in line with achieving net zero emissions. Our targets will undergo validation with the science-based targets initiative within the next two years. Our Canfor Pulse leadership team has been focused on reducing our carbon footprint for the last couple of years, and we are assessing several initiatives that will have a meaningful impact on reducing our carbon emissions. I will now turn it over to Pat to provide an overview of our financial results.