Canfor Corporation

good morning my name is Michelle and I will be your conference operator today welcome to can for and can for pulp second quarter analyst call all lines have been placed on mute to prevent any background noise during this call can for and can for pulse 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's and 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, Michelle, and good morning, everyone. Thank you for joining the Canfor and Canfor PULP Q2 2023 Results Conference Call. I'm going to make a few comments before I turn things over to Kevin Edson, Canfor's pulp president and chief executive officer, and Pat Elliott, our chief financial officer of Canfor Corporation and Canfor Pulp, and our senior vice president of sustainability as well. In addition, we are joined by Kevin Pankratz, our senior vice president of sales and marketing. In the second quarter, we continued our strategy to align our operating footprint in British Columbia with the available timber supply as our treatment facility was permanently closed. In addition, our Houston facility was temporarily closed pending a potential reinvestment decision. We have worked in partnership with the USW to support our employees through this very difficult transition. These were very tough decisions and we recognize the impact on our employees, their families, our contractors, and the local communities. We are continuing to advance the Houston Brownfield project. We have completed our planning and technical work. We have also engaged in a series of discussions with the Ministry of Forests to understand the future fiber supply outlook for the region. We need to be sure that if we proceed and go forward with construction, we will have the required economic fiber to operate consistently and successfully. Our discussions with government are progressing well. We hope to complete these discussions in the coming weeks, and once satisfactorily concluded, we will be advancing this project to our board. Turning to the current wildfire situation in Western Canada, the 2023 fire season is the worst in Canadian history. Across Canada, over 12 million hectares has been burnt to date, making it the worst wildfire season on record. BC and Alberta have also set new records for the most hectares burned, with British Columbia at almost 1.5 million hectares and Alberta at over 1.7 million hectares. With respect to the wildfires, I'd like to acknowledge the two brave firefighters and pilot who have lost their lives this year battling wildfires in Canada. I want to acknowledge and thank our employees and contractors who are helping respond to the wildfires and are working to ensure continuity across our Canadian operations and protection of our assets. We also thank all of the firefighters, emergency responders, and military personnel who are working hard responding to wildfires across the country. While it is too early to determine the long-term fiber supply impacts, we have seen significant short-term disruptions to our operations, including a three-week curtailment of our facility in Fox Creek, Alberta, in the second quarter. Despite a challenging operating environment and depressed lumber markets in the second quarter, we continue to see positive results from our geographic diversification strategy, with our European and U.S. South operations performing well and generating improved results quarter over quarter. While high interest rates and affordability constraints are projected to persist through the third quarter, we have seen an improvement in lumber prices in the last few weeks, supported by better than anticipated demand and reduced supply. We are encouraged by the medium to long-term market fundamentals and remain focused on executing our diversification strategy and organic growth plans. Our new facility in Derrida, Louisiana continues to ramp up production and is performing well, with a second shift expected to be added late in Q3. Our other projects remain on schedule and on budget, including the rebuild of our sawmill in Urbana, Arkansas, our second greenfield sawmill in Alabama, and our organic growth in Sweden. In addition, we continue to review additional organic and external growth opportunities as we look to grow our lumber business on a global basis. I will now turn it over to Kevin, to provide an overview of Canfor Pulse.

Thank you, Don, and good morning, everyone. I want to start with an update regarding the impacts of the labour dispute at BC's ports. The 13-day strike, followed by an on-again, off-again job action, has severely impacted our supply chain. For reference, approximately 70% of our pulp shipped through these ports, both in Vancouver and Prince Rupert. As a result, we announced a curtailment at Northwood in July, which lasted a week and resulted in approximately 10,000 tons of reduced MBSK production. We anticipate the supply chain challenges to persist through much of the third quarter, and with our pulp mill inventory near capacity, we are closely following the union's ratification vote, which is expected to conclude today. Turning to our quarterly results, Kanfor pulp had a challenging second quarter with elevated global pulp inventories and tepid demand resulting in a significant decline in pulp pricing. We implemented the permanent closure of the pulp line at our Prince George pulp and paper mill on April 1st. I'd like to take a moment and thank our employees for their commitment to safety and dedication and resiliency as we navigate the current challenges facing our business. With our operational footprint now better aligned with the current available fiber supply, we anticipate an improvement in our cost structure going forward. In addition, we believe there is significant opportunity to improve our operational efficiency and reliability, which will support the sustainability of the company for the foreseeable future and allow us to capitalize on the strong global pulp market fundamentals we believe will remain over the medium to long term. To achieve this goal, we have identified a significant capital reinvestment plan with approximately $500 million of capital spend identified over the foreseeable future. This includes a major rebuild of the recovery boiler number one at Northwood, which will significantly extend the useful life of this critical asset. We currently anticipate the work on the boiler to commence in 2025, although this timeline may be accelerated or deferred depending on the condition of the boiler, which will be inspected during our planned maintenance outage in the third quarter. We currently anticipate spending of more than $120 million on RB1, subject to final engineering and labor costs at the time of installation. The balance of the recapitalization consists of smaller projects aimed at improving reliability and asset performance. While timing and magnitude of spend will take into account market conditions and available cash flow, we currently anticipate our annual capital spend to trend in the neighborhood of $100 million for each of the next several years. I will now turn it over to Pat to provide an overview of our financial results.