Canfor Corporation

Good morning, my name is Sylvie and I will be your conference operator today. Welcome to CAN4 and CAN4PALPS fourth quarter analyst call. All lines have been placed on mute to prevent any background noise. During this call, CAN4 and CAN4PALPS 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 companies would like to point out that this call will include forward-looking statements, so please refer to the press releases 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.

Thank you, Sylvie, and good morning, everyone. Thank you for joining the Canfor and Canfor Pulp Q4 2022 results conference call. I'm going to make a few comments before I turn things over to Kevin Edson, 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. Before talking about Q4 in 2022, I'd like to begin by acknowledging the very difficult decisions we made to restructure our lumber and pulp operations in British Columbia in January. We have taken the necessary steps to right-size our BC operations to align with the available fiber supply to ensure a more sustainable footprint for the future. By doing this, we will create a more stable operating platform, which in turn will provide greater stability for our customers, our employees, our contractors, our suppliers, and our communities, while ensuring we continue to provide high-quality, low-carbon products to our global customers. After careful review, it is clear that there is not enough fiber in the Peace Region, and as a result, we made the difficult but necessary decision to permanently close our Chetwynd sawmill and pellet plant. The facility will cease operating in April. recognizing that while there are challenges operating in British Columbia, it remains a critical region in our diversified operating platform and allows us to fully serve our customers around the globe with the products they require. CanForce global operating regions are interdependent. Together with our lumber operations in Alberta, Sweden, and the U.S., our BC operations help create a diversified operating base with flexibility to be able to meet the needs of our global customers in an ever-changing supply chain environment. That's why we also announced a potential major investment at our Houston facility. Subject to a final investment decision currently anticipated by the end of the second quarter, our intention is to build a new state-of-the-art facility in Houston. The existing aging mill will be replaced with a modern facility utilizing the latest technology to process the high-quality fiber in the region into high-value products. The Houston facility will be closed for an extended period beginning in April 2023. We recognize and deeply regret that these decisions are significantly impacting our employees, contractors, and communities in British Columbia. We are working to mitigate job impacts and support our employees, communities, and contractors through this transition with a variety of programs and support measures. While Canfor will have a smaller footprint in British Columbia, we will be stronger and better positioned for the future. In terms of our financial results, despite a number of significant challenges within our lumber business, particularly in BC, we had another strong year, our second best ever, generating an operating income of $1.4 billion before adjusting items. Lumber markets continue to experience significant volatility in 2022 with near record high pricing in the first half of the year, supported by strong market fundamentals and demand in the new home construction and repair and remodel sectors. While underlying demand fundamentals remain strong, inflationary pressures, economic uncertainty and rising interest rates resulted in significantly reduced demand for new home construction, contributing to a sharp decline in lumber prices in the second half of 2022. While we anticipate these challenges to persist in the near term, we believe our longer-term market fundamentals remain very strong. supported by favorable demographic trends, pent-up demand for new home construction activity, and continued strength in the repair and remodel sector. Supported by our strong financial results over the past few years, we continue to focus on global diversification and made considerable progress on several strategic initiatives in 2022. This includes a significant acquisition in Alberta, announcement of two greenfield sawmills being constructed in the U.S. South, a major rebuild of our sawmill in Arkansas, organic growth in Europe and continued progress on our sustainability initiatives. Together, these investments significantly improve our cost structure, further improve our global diversification and grow our production capacity through increased automation, innovation and manufacturing flexibility with a focus on high-value products and sustainability. Notwithstanding these initiatives, we have maintained a strong balance sheet. We are prepared to remain patient, disciplined and strategic until the right M&A opportunities present themselves, and we are focused on proactively balancing production levels with market demand. We also continue to assess additional organic and value-added external growth opportunities as we look to grow our forest products business. I will now turn it over to Kevin to provide an overview of Canfor Pulp.

Thank you, John, and good morning, everyone. Like Canfor, Canfor Pulp has also made some difficult decisions due to the lack of fiber in our operating regions. In January, we announced that the pulp line at the Prince George pulp and paper mill will be permanently closed by the end of March. We sincerely regret the impact that the pulp line closure is having on our employees, and we are committed to supporting them through this difficult transition. In addition, as a result of the reduction in the long-term supply of fiber in the Peets region, we don't see a path to restarting our Taylor facility, which has been curtailed since February of 22, and we are currently exploring alternative uses for this site. By reducing our operating footprint, we have better aligned our operations with the available residual supply in the Prince George region. We believe these difficult decisions will support the long-term sustainability of the company and allow us to optimize the economically available fiber supply in British Columbia, operating on a more consistent basis to improve our operating margins and performance. While 2022 was a very challenging year, global pulp market fundamentals remained strong. For 2023, fiber-related curtailments in BC, coupled with the possibility of further supply disruptions, has helped stabilize markets, especially in China. We're also heading into spring maintenance for producers in the northern hemisphere, which will further limit supply. For the back half of 2023, we are projecting prices to correct off of peak levels as we head into the seasonally slower summer period, coupled with the market digesting approximately 5 million tons of new production capacity coming on stream this year. We remain focused on improving operational reliability, closely managing our cost structure, and optimizing available transportation as we look to capitalize on the strong pulp market fundamentals. I will now turn it over to Pat to provide an overview of our financial results.