Canfor Corporation

Good morning. My name is Jenny, and I will be your conference operator today. Welcome to Canfor and CanforPulse's first quarter analyst call. Call lines have been placed on mute to prevent any background noise. During this call, Canfor and CanforPulse'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 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, operator, and good morning, everyone. Thank you for joining the Canfor and Canfor Club Q1 2024 results conference call. I'm going to make a few comments before I turn things over to Kevin Edson, CanForce Pulp President and Chief Executive Officer, 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, Senior Vice President of Sales and Marketing. Before talking about our financial results, I'll share a few Q1 business updates. As you know, over the past decade, we have been focused on building a globally diversified operating platform by increasing our footprint in the US South and Europe, while working towards a smaller but stronger presence in British Columbia. Although global lumber markets remained under pressure in Q1, thanks to this strategy, we have a more resilient organization that has been better able to mitigate market-related pressures and the persistent constraints we continue to face accessing economically viable fiber in British Columbia. Through a targeted and expansive capital investment program, we have been growing and transforming our manufacturing facilities in fiber-rich regions to be low-cost leaders that are globally competitive over the long term. As part of this effort and our plans to optimize our operational footprint in Alabama, this quarter we announced that we will permanently close our Jackson facility in June and expand production at our nearby Fulton facility with a second shift. These steps, together with our new state-of-the-art Greenfield sawmill being built in Axis, Alabama, and pending closure of our Mobile sawmill, will improve our cost structure, optimize the fiber supply in Alabama, and add 100 million more feet of southern yellow pine production capacity in the region. By consolidating and expanding our Alabama operations, we will be better positioned to serve our global customers from a modern, competitive operating platform while providing more sustainable jobs and improved working conditions for our valued employees. Similarly, as part of our continued growth strategy in the US South, yesterday we announced an agreement with Resolute Forest Products to acquire their El Dorado Lumber Manufacturing Facility in Union County, Arkansas. Bringing this facility to Canfor create synergies and vertical integration opportunities given its complementary geographic fit with our existing operations in the region. These include our El Dorado laminating plant as well as our Urbana plant, which is progressing in its $130 million U.S. dollar modernization that will increase production by 115 million board feet to a total 285 million board feet next year. The El Dorado acquisition will capitalize on our regional manufacturing footprint to optimize our product We anticipate investing a further $50 million to upgrade the sawmill, which will increase its production capacity to 175 million per feet per year. As we look forward to ongoing growth, we remain deeply committed to sustainability, which is embedded throughout our entire operations, from the forest to the customer. This quarter, we released our 2023 sustainability report, highlighting the activities and our performance to advance our sustainability strategy. We have an ambitious plan to be a leader in sustainable business, focused on three key areas, people, planet, and products. Our report tracks our progress across 13 material topics, each with discrete goals to significantly shift the way we do business. Naturally, this includes a focus on climate change through our targets on scope one, two, and three emissions, but it also includes improving safety, expanding relationships with indigenous nations, increasing support for our operating communities and further enhancing the diversity of our workforce. Through these actions and our carbon-friendly products, Canfor is well positioned to be part of the solution to climate change. Turning to our financial results, our lumber business benefited from solid lumber pricing and earnings in Europe, with strong contribution from VDOT highlighting the value of our diversification strategy. In North America, weak lumber markets continue to reflect ongoing affordability issues related to inflation and the current interest rate environment, in addition to a significant decline in multifamily construction activity. While our Western Canadian operations benefited from improved pricing in the first quarter, our financial results continue to reflect the impact of weak North American lumber pricing. challenges accessing economically viable fiber supply in British Columbia. While lumber prices are anticipated to remain under pressure in the short term, Canfor has seen steady underlying demand in the repair and remodel sector, and we continue to believe the medium to long-term market fundamentals remain strong. Notwithstanding current market conditions, our balance sheet remains strong, supporting continued reinvestment in our operations over the next several years. I will now turn it over to Kevin to provide an overview of Canfor Pulp.

Thank you, Don, and good morning, everyone. Canfor pulp generated improved financial results in the first quarter, supported by a 7% quarter-over-quarter increase in pulp production and steady global pulp markets. Notwithstanding the impacts of extreme winter weather in January, we continue to see improvements in our operating performance. Given projected weakness in North American lumber markets in the short term, combined with ongoing uncertainty with regards to the availability of economically available fiber in B.C., We continue to evaluate our operating conditions and remain focused on improving our operating performance and cost structure while optimizing the available fiber supply. I would like to thank our employees for the resilience and continued efforts to enhance our operational performance as we respond to the external pressures facing our business. Turning to pulp markets, while softwood pulp markets were steady in the first quarter, pricing has increased considerably to start the second quarter, driven by global supply disruptions and pulp producer downtimes. Looking ahead, we continue to believe strong global pulp market fundamentals will remain over the medium to long term, supporting our capital reinvestment plan. The magnitude of spend will be modest in 2024, with future spending completed as market and financial circumstances allow. I will now turn it over to Pat to provide an overview of our financial results.