Western Forest Products Inc.

All participants, thank you for standing by. The conference is ready to begin. Good morning, ladies and gentlemen. Welcome to Western Forest Products' second quarter 2024 results conference call. During this conference call, Western's 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 Hofer, President and CEO of Western Forest Products. Mr. Hofer, please go ahead.

Thank you, Patrick, and good morning, everyone. I would like to welcome you to Western Forest Products' 2024 second quarter conference call. Joining me on the call today, Glenn Montel, our new Chief Financial Officer, Steve Williams, our Executive Vice President, and Bruce Alexander, our Senior Vice President, Sales, Marketing, and Manufacturing. We issued our 2024 second quarter results yesterday, which included the announcement that Glenn Montel will be our next CFO. In deciding who should fill the role of CFO, we looked both internally and externally. We wanted someone with the right mix of leadership, industry experience, and technical skills to help navigate through near-term macroeconomic conditions and advance our strategic priorities. Glenn's financial acumen, forward thinking, and laser focus on execution made him a clear choice from a number of strong candidates and speaks to the strength of the internal talent at Western. Steve Williams will remain in the role of Executive Vice President until his previously communicated retirement date of December 31st, 2024. We look forward to benefiting from Steve's advice and judgment as he moves to an advisory role thereafter. Turning to our second quarter financial results. We successfully navigated through more challenging market conditions to return our business to positive EBITDA in the second quarter, generating $9.4 million. This was This was the result of a huge effort across all of our operating divisions and driven by a focused effort on execution and safety. In Timberlands, despite facing ongoing harvesting permadean delays, we continue to improve the stratification of our specialty log sorts, such as pole and pier logs, to support incremental margins. In manufacturing, our continued focus on operational uptime and reliability supported improved results despite tight log supply at certain facilities. In sales and marketing, we continue to make progress growing key strategic accounts while developing value-added products and programs targeted with the end user in mind. In engineered wood products, we delivered another quarter of positive EBITDA despite labor and lamb stock availability challenges. In addition, we remain focused on accelerating our transition to higher-value products. Our new salt air kiln dried 14.5 million board feet of lumber in the second quarter and is achieving our uptime, production, and value performance targets. We also continue to advance pre-engineering and permitting related to our two previously announced continuous kilns Each kiln will have a capacity of approximately 70 million board feet and are expected to be completed in 2025. A continued focus on safety and maintaining a strong balance sheet while advancing our key strategic priorities remains our key focus in the near term. I will now turn it over to Glenn to review our key financial results.

Thanks, Stephen. Second quarter adjusted EBITDA was $9.4 million. as compared to negative $12 million in the same period last year. As compared to the prior year, results in the second quarter benefited from higher lumber shipments, higher domestic log prices and a stronger log sales mix, and lower scumbage and freight expenses. This was partially offset by a slightly weaker lumber specialty sales mix and higher timberlands and secondary processing costs. We closed the second quarter with approximately 75 million board feet of lumber inventory and 777,000 cubic meters of log inventory. Turning to CapEx and cash flow, our revised 2024 total CapEx spending is now expected to be approximately $40 million. This reflects the expectation that the majority of the $35 million related to two new continuous kilns will be incurred in 2025. After the end of the second quarter, we received our income tax refund of approximately $23 million, which was utilized to reduce debt. From a balance sheet perspective, we ended the second quarter with liquidity of approximately $142 million and a net debt-to-cap ratio of 13%. Last week, we amended and extended our credit facility to July 2026. At the end of June, we had approximately $236 million in duties on deposits. which equates to approximately $0.54 per share after tax. Turning to third quarter seasonality, typical third quarters can be challenging operationally, as hot, dry weather can restrict logging activity, reduce harvest volumes, and impact cost. While we have yet to experience any significant forest fires in our area of operation, hotter and drier conditions combined with harvest permit delays may impact harvest volumes through the summer. We will continue to manage our manufacturing operating schedules to match production to market demand and available log supply. Stephen, that concludes my remarks. Thanks, Glenn.