Western Forest Products Inc.

Good morning, ladies and gentlemen. Welcome to the Western Forest Products fourth quarter 2022 results conference call. During this conference call, Western representatives may make forward-looking statements within the meaning of applicable securities laws. These statements can be identified by words like anticipate, plan, estimate, will, and other references to future periods. Although these forward-looking statements reflect management's reasonable beliefs, expectations, and assumptions, they are subject to inherent uncertainties and actual results may differ materially. There are many factors that could cause actual outcomes to be different, including those factors described under risks and uncertainties in the company's annual MD&A, which can be accessed on CDAR and is supplemented by the company's quarterly MD&A. Forward-looking statements are based only on information currently available to Western and speak only as of the date on which they are made. Except as required by law, Western undertakes no obligation to update forward-looking statements. Accordingly, listeners should exercise caution in relying upon forward-looking statements. I would now like to turn the meeting over to Mr. Stephen Hoffer, President and CEO of Western Forest Products. Mr. Hoffer, please go ahead.

Thank you, Chris, and good morning, everyone. I'd like to welcome you to Western Forest Products' 2022 fourth quarter conference call. Joining me on the call today is Stephen Williams, our Executive Vice President and Chief Financial Officer, and Glenn Montel, our Vice President of Corporate Development. We issued our 2022 fourth quarter results yesterday. I will provide you with some introductory comments and then ask Steve to take you through a summary of our financial results. I will follow Steve's review with a discussion of our strategic priorities and outlook before we open the call to your questions. 2022 was a year of two halves. In the first half of 2022, lumber demand and pricing remained strong. However, in the second half of 2022, as the impacts from interest rate increases, and slowing growth started to be felt through the economy, lumber demand and prices significantly weakened. In response, temporary and permanent lumber curtailments were taken by companies across North America. Despite the more challenging operating environment in the second half of 2022, we made progress advancing our strategic priorities, including delivering improved health and safety metrics compared to 2021, acquiring Calvert in the U.S. to capitalize on the growing mass timber building sector, advancing collaborative forest planning activities and partnership opportunities with First Nations, advancing strategic investments in our business to support value-added manufacturing in British Columbia, further enhancing our board with the recent addition of two new board members, including members with prior forest sector experience, releasing our latest sustainability report, which included further refinement of admissions data and third-party limited assurance engagement of our carbon accounting. And finally, continuing with our balanced approach to capital allocation, which included increasing our dividend per share 25% and returning over $35 million to shareholders. I will now turn it over to Steve to review our key financial results.

Thanks, Stephen. Fourth quarter adjusted EBITDA was negative $11.9 million. Results in the quarter included $11.8 million of inventory provisions. Compared to the same period last year, results in the fourth quarter of 2022 were also impacted by lower lumber demand, lower prices, and a weaker mix. Higher costs, including stumpage and sawmill operating curtailments as we balanced production to market conditions. These were partially offset by an increase in log, by-product, and other revenue. In our engineered products division, we were very pleased with the first full quarter of results post our Calvert acquisition. Since closing the acquisition, the business has generated EBITDA margins in excess of 20% and performed to our expectations. The ability of our sawmills to stratify the lumber products we produced enabled incremental lamb stock production and supported our ability to move further up the value chain. While the relative size of the business is currently small, we are excited about the potential growth opportunities for the business over the long term. Moving on to our BC strategic investments, we continue to make progress on our previously announced strategic investments at our BC manufacturing operations. We remain committed to these investments as we believe they will position the company for future success in value-added manufacturing and moving our products further up the value chain. For 2023, We currently expect total CapEx to be between $60 and $70 million, which includes a mix of maintenance of business, roads, and strategic CapEx. Should market and financial conditions materially deteriorate during 2023, we would look to reduce our CapEx spend to match those conditions. Turning to first quarter seasonality, in typical first quarters, our timber harvesting activity can be periodically interrupted by winter weather. Harvest volumes are typically skewed to the end of the quarter when the weather and light conditions support greater activity. From a market perspective, sales typically accelerate through the quarter. Our log inventories remain well positioned as we head into the first quarter. We ended the fourth quarter with approximately 895,000 cubic meters of log inventory. We will continue to match production to market demand, and our available liquidity remains strong to manage through any near-term market volatility. Stephen, that concludes my comments.