Western Forest Products Inc.

All participants, thank you for standing by. The conference is ready to begin. Good afternoon, ladies and gentlemen. Welcome to Western Forest Products 2021-2025 Results 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 four 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 complemented by the company's quarterly 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 forelooking statements. I'm going 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 afternoon, everyone. I'd like to welcome you to Western Forest Products' 2025 First Quarter Conference Call. Joining me on the call today is Gwen Montel, our Chief Financial Officer, and Bruce Alexander, our Senior Vice President of Sales, Marketing, and Manufacturing. We issued our 2025 first quarter results yesterday. I will provide you with some introductory comments and then ask Gwen to take you through our financial results. I will then follow Gwen's review of our outlook section before we open the call to your questions. We delivered significantly improved results in the first quarter of 2025 compared to the same period last year. Supporting these improved results was success in executing on our strategic priorities, allowing us to significantly reduce our debt and position Western for future growth. During the quarter, this included gratifying a new six-year collective agreement with the USW, completing significant non-core asset sales for gross proceeds of $76.5 million, and extending the maturity of our $250 million credit facility for three years to July 2028. We were also successful on executing our strategic CapEx clients, which included advancing site preparation for two continuous ride signals that are valued at a division, These kilns are planned to be completed and commissioned in early 2026. We also entered into an agreement with the BC government through the BC Manufacturing Jobs Fund to reimburse up to $7.5 million of eligible expenses related to our kiln investments. From an operational perspective, we continue to focus on improving our efficiency and recovery to drive increased profitability. In our manufacturing group, this includes a continued focus on operational uptime and reliability. Despite the mechanical downtime at the dew point sawmill, we are very impressed with the Slabberhead Capital Project. We are now experiencing 90% operational uptime with improved lumber and grade recovery. We continue to be very impressed with our first continuous film at our saltwater sawmill. It has been achieving above target uptime of 99%, and we look forward to the commissioning of the two new CDKs in early 2026. In our timber landscape, we continue to focus on improving our specialty log source stratification and reducing our harvesting costs. However, harvest permitting delays in some tenures are leading to lean log inventories for certain BC psalms. We continue to work with all parties involved in the permitting process to ensure economic viable laws are available to support our value-added manufacturing facilities. In our sales and marketing group, we continue to focus on growing key strategic customer accounts and diversifying our customer base. Supporting these initiatives was year-over-year wholesale lumber shipment growth of 28%. I am proud of the significant contributions across our entire organization. While the direction of U.S. trade policy remains uncertain, our significant efforts have provided for a strong balance sheet to navigate through near-term volatility and uncertainty. I will now turn it over to Glenn to review our key financial results.

Thanks, Stephen. First quarter adjusted EBITDA was $3.5 million. as compared to negative $4.2 million in the same period last year. As compared to the prior year, results in the first quarter benefited from higher lumber shipments and prices, a stronger U.S. dollar exchange rate, and improved log prices and sales mix. This was partially offset by increased cost for lumber duty, lower external log sales volume, and a weaker lumber sales mix. We closed the first quarter with approximately 66 million board feet of lumber inventory and 753,000 cubic meters of log inventory. We've been taking proactive steps to improve our inventory turnover, with log and lumber turnover ratios improving 6% and 12% respectively compared to the same period last year. Turning to CapEx, our 2025 total CapEx spending is expected to be between $60 to $65 million dollars, approximately $30 million related to two continuous kilns. We may reduce our 2025 planned traffic spending depending on how market and financial conditions evolve through 2025, with the near-term priority of maintaining a strong balance sheet. From a balance sheet perspective, we ended the first quarter with a significantly delevered balance sheet compared to the end of the last quarter, ending the quarter with a net debt-to-cap ratio of 4%. We were also successful in extending our $250 million credit facility for three years to 2028. With respect to soft and lumber duties, preliminary rates for the sixth administrative review have been released. The preliminary combined rates applicable to Western of approximately 34% will be finalized in the second half of 2025. Should the final rates be unchanged from the preliminary rate, Western will record an incremental non-cash duty expense of approximately $43 million U.S. dollars plus accrued interest of approximately $7 million U.S. dollars in the second half of 2025. These amounts will reduce the current long-term duty receivable of $58.2 million U.S. dollars on our balance sheet. Turn to second quarter seasonality. Typically in second quarter, our harvest volumes increase as snow recedes and we stand our As our harvest activities move further up the hillside, our costs tend to rise as deeper, more difficult terrain increases harvesting complexity. From a market perspective, North American lumber consumption typically increases as we move into the spring season. We plan to continue to match production to market demand. Even that concludes my remarks.