Western Forest Products Inc.

Good morning, ladies and gentlemen. Welcome to Western Forest Products' fourth 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 MDNA, which can be accessed on CDAR and is supplemented by the company's hourly MDNA. 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 of Western Forest Products. Mr. Hofer, please go ahead.

Thank you, Patrick, and good morning, everyone. I'd like to welcome you to Western Forest Products' 2024 fourth quarter conference call. Joining me on the call today is Glenn Nontel, our Chief Financial Officer, and Bruce Alexander, our Senior Vice President of Sales, Marketing, and Manufacturing. We issued our 2024 fourth quarter and full year results yesterday. I will provide you with some introductory comments and then ask Glenn to take you through our financial results. And then I will follow Glenn's review with our outlook section before we open the call to your questions. We delivered significantly improved results in the fourth quarter and the full year of 2024 compared to the same period of 2023. Supporting these improved results was success in executing our strategic priorities, allowing us to reposition our business and balance sheet. Over the last year, this has included continuing to focus on safety with several of our operations achieving zero recordable incidents in 2024, rolling out new company vision and values to enhance our culture and support a shift in mindset, In Timberlands, we continue to focus on improving the stratification of our specialty log sorts, such as pole and peeler logs. In 2024, these efforts delivered incremental gross margin in excess of $6 million. In manufacturing, we improved our operational uptime to 85% in 2024 compared to 83% in 2023 and continue to focus on log and lumber recovery. In sales and marketing, we grew strategic customer accounts and focused on the customer experience. Supporting these initiatives was year-over-year wholesale lumber shipment growth of 58%. From a capital investment perspective, we were successful on executing on our CapEx plans. This included completing and commissioning the first continuous dry kiln on the BC coast at our Salter sawmill in March 2024. Since commissioning, we have operated at 99.2% of full capacity utilization, and we expect an EBITDA payback of less than two years on our $13 million investment. We also commissioned new automated grading equipment, which is assisted by artificial intelligence, at Duke Point in September 2024. We expect an EBITDA payback of less than two years on our $4.6 million investment. We commissioned a new slabber head at Duke Point to support increased production and improvements in ship recovery. We expect an EBITDA payback of approximately three years on our $5.7 million investment. When we continue to advance pre-engineering and permitting related to two additional dry kilns on the BC coast, and in 2025, we plan to explore opportunities in thermally modified hemlock. We were also successful in setting the business up for long-term success, which included ratifying a new six-year collective agreement with the USW, which is one of the longest-term agreements in the history of the BC Coastal Force sector, completing the sale of a 34% interest in a new limited partnership with four Vancouver Island First Nations for $35.9 million in March, and repositioning our balance sheet through significant non-core asset sales. Earlier this week, we completed the sale of our northern private timberlands for gross proceeds of $69.2 million. We plan on using the proceeds to repay debt and support our previously announced kiln investments. We remain focused on working capital reductions throughout the business, which included increasing our overall inventory turnover by 5% year over year. as well as reducing controllable corporate overhead by $2.4 million. I'm very proud of the significant contributions across our entire organization. These efforts have provided for a strong foundation to continue to build on in 2025. I will now turn it over to Glenn to review our key financial results.

Thanks, Stephen. Fourth quarter adjusted EBITDA was $14.4 million as compared to negative $1.2 million in the same period last year. As compared to the prior year, results in the fourth quarter benefited from higher lumber shipments and prices, higher log prices, and a stronger log sales mix. This was partially offset by a weaker lumber sales mix, lower external log sales due to lower harvest levels, and increased softwood lumber duties. We closed the fourth quarter with approximately 63 million board feet of lumber inventory and 838,000 cubic meters of log inventory. Turning to capex and cash flow, our 2025 total capex spending is expected to be between $60 to $65 million, which includes approximately $30 million related to two previously announced continuous kilns. From a balance sheet perspective, we ended the fourth quarter with liquidity of approximately $145 million and a net debt-to-cap ratio of 12%. These metrics do not include the $76 million in gross proceeds from the sale of our northern private Timberlands and pending Albany Pacific Division sale. We expect to record an accounting gain of approximately $23 million in the first quarter of 2025 related to the sale of the private Timberlands. At the end of December, we had approximately $264 million in duties on deposit, which equates to approximately $0.61 per share after tax. 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. We plan to continue to manage our manufacturing operating schedules to match production to market demand and available log supply. Stephen, that concludes my remarks.