West Fraser Timber Co. Ltd.

Good morning, ladies and gentlemen, and welcome to the West Fraser Q2 2021 results conference call. During this conference, West Fraser's representatives will be making certain statements about potential future developments. These forward-looking statements include certain statements about West Fraser's future financial and operational performance, including the impact of foreign exchange rates credit ratings, and mill maintenance shutdowns. West Fraser's business outlook, including forecasted U.S. housing starts, market conditions, demand for products, and available supply and expectations concerning costs. West Fraser's capital plans, including the completion and ramp-up of capital projects and the benefits of such projects. the softwood lumber dispute, including adjustments to duty rates and related proceedings, the integration of Norboard into the West Fraser business and expected synergies, and recent developments, including the impact of wildfires on production and shipments and the completion of our substantial issuer bid. These statements include forward-looking statements within the meaning of Canadian and United States securities laws and are intended to provide reasonable guidance to investors. The accuracy of these statements depends on a number of assumptions and is subject to various risks and uncertainties that may cause future events to differ materially from the events implied by these statements. Actual outcomes will depend on a number of factors that could affect the ability of the company to execute its business plans, including those matters described under risks and uncertainties in the company's annual management discussion and analysis as supplemented by other risks and uncertainties as set out in the company's quarterly MD&As. These filings can be assessed on Wes Fraser's website or through CDAR for Canadian investors and EDGAR for United States investors. Accordingly, Listeners should exercise caution in relying upon forward-looking statements. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, then the number 1 on your telephone keypad. If you would like to withdraw your question, please press the star followed by 2. Mr. Ferris, you may begin your conference.

Thank you, Michelle, and thank you for that disclaimer. Well, listen, good morning, everyone, and welcome to our Q2 2021 conference call. I'm joined today by Chris Verostik, our Chief Financial Officer, and Chris McIver, Senior Vice President, Marketing and Corporate Development, and several members of our executive team. This morning, I'll make a few opening remarks. And then I'll pass the call to Chris Sporostic for a review of West Fraser's second quarter results before I make my concluding comments, and then we'll take your questions. I'd like to start with a couple of important housekeeping items. Today, we will limit the scope of our comments to those already provided in our Q2 disclosures, and we'll refrain from addressing any questions related to our company or market outlook beyond what has already been provided. in those disclosures. Further, after this morning's earnings call and in the absence of any material developments that would require a news release, we do not intend to make any additional comments to investors or analysts until after our substantial issuer bid expires, which currently is intended to expire on August the 17th, 2021. Finally, you will have noticed in our earnings release that we have announced a virtual investor and analyst event to be held on September 16th at 2 p.m. Eastern Time, 11 Pacific. We are planning for the event to be approximately two hours in duration, and we'll have further details at a later date. With that out of the way, let's move on to our comments for this quarter. It has been a captivating time for Forest Products. Being a meaningful part of an industry that provides sustainable and renewable building products, required for a low carbon economy, simply by participating in the life cycle of the forest that we live and operate in. Manufacturing building materials from a sustainable and renewable forest is but one very important part of the required solution for society to meet its climate change objectives. On the topic of sustainability, I am pleased to share that this summer, West Fraser will plant its two billionth tree as part of our reforestation program. This is a proud and long-standing commitment to the sustainability and environment in the communities in which we operate. We've been sustainably managing forests in BC, British Columbia and Alberta for more than 65 years. For every tree we harvest in the woodlands that we manage, we plant two trees, two seedlings in its place. This is a significant milestone for the company and we couldn't have achieved it without the support of our employees, contractors, community stakeholders, and many others. It's all part of our renewable resource management that contributes to the goals of supporting global climate change and carbon sequestration. Now onto our Q2 results overview. I'm pleased to report that another strong quarter for West Fraser as we remained agile and continued to work diligently. diligently at minimizing COVID-related business disruptions, thanks to our focus on the health and safety of our employees and communities. We remain proud of what we've accomplished so far. In North America, we experience continued strength and recovery in U.S. home construction activity, spurring demand for wood building products. In fact, homes construction is measured by new home starts recently reached levels not since not seen since 2006. Despite what appears to be a short-term pullback in repair and remodeling activity, we expect this segment to remain relatively strong in the longer term, supported by new home sales activity and an aging housing stock. The slowing of the repair and remodeling market was more evident for lumber and plywood, which has a greater exposure than our balance of engineered wood products to repair and remodeling. On the lumber side, the new manufacturing complex in Dudley, Georgia became fully operational in the second quarter and the mill continues to make progress ramping up. On the OSB side, supply continued to struggle to keep up with the stronger than expected recovery in OSB demand experienced in recent quarters. As you are aware, in response to this increased customer demand and in the midst of a pandemic, we announced the safe restart of our Chambord Quebec mill, which began to produce and ship panels in late March. Chambord remains on track to ramp up towards its annual rated capacity of 550 million square feet on a three-eighths-inch basis, and we're very pleased with the progress to date. With that introduction, I'll now pass the call over to Chris Verostek.

Thanks, Ray, and good morning, everyone, and thank you for joining us. As a reminder, our consolidated second quarter results include now a full three months of financial results from Norbord, and as of January 1 of this year, and for all comparative periods, we no longer exclude export duties in our calculation of adjusted EBITDA. When we last reported earnings in early May, the recovery in lumber and OSB demand was strong, and that demand strength continued through most of the second quarter. Demand for new housing construction in particular was elevated versus historic norms. In terms of financial performance, West Fraser generated consolidated adjusted EBITDA of $2.16 billion in the second quarter, up from $1 billion last quarter, largely due to the addition of Norbord's financial results for a full three months, as well as higher lumber and panel prices. Recall that in the prior quarter results, there was a $93 million EBITDA reduction, which was an acquisition-related non-cash purchase price accounting impact for the one-time inventory adjustment that raised our cost of goods sold to their fair value upon closing of the Norboard acquisition. Moving on to segmented results, our lumber segment reported adjusted EBITDA of $994 million versus $646 million in the first quarter of 2021, driven by higher pricing and higher shipments, partially offset by higher fiber costs. In our North American EWP segment, Adjusted EBITDA increased to $1.106 billion from $353 million in the prior quarter, with gains primarily due to the addition of Norboard results for a full three months, as well as higher OSB and plywood pricing, which more than offset fiber and raw material cost inflation. Adjusted EBITDA in the pulp and paper segment increased to $25 million in the second quarter from $11 million in the first quarter, owing to higher pulp pricing. And finally, adjusted EBITDA in the European EWP segment was $39 million in the second quarter, up from $11 million in the prior quarter. We continue to see recent market strength in Europe as demand for OSB continues to grow. Shifting to capital allocation in the balance sheet, capital expenditures were $66 million in the second quarter, slightly higher than capital spending in the prior quarter. Note that due to some lengthening lead times on projects currently underway, We are now expecting our 2021 capital expenditures target to be in the range of approximately $400 to $450 million versus our prior guidance of approximately $450 million. We continue to view share buybacks as an appropriate use of excess cash when we believe our shares are trading below intrinsic value. In the second quarter, we bought back $233 million worth of West Fraser shares under our normal course issuer bid at an average price of Canadian $90.85. We also amended our NCIB in the second quarter, allowing us to acquire an additional 3.54 million shares for an aggregate authorization of 9.58 million shares. We also remain pleased with the level of U.S. trading liquidity we've seen for West Fraser shares with the addition of the New York Stock Exchange listing. Our U.S. trading volume, which accounted for less than 10% of our total trading volume on U.S. and Canadian exchanges in February, now regularly reaches 35% of our daily total trading volume. Given the strong Q2 results, our financial liquidity increased materially, exiting the quarter with $3.39 billion of available liquidity, up from $2.55 billion last quarter. Leverage was modest, exiting the quarter with total debt of $500 million and net cash of $1.7 billion. In combination with the early redemption of the Norbord 2023 and 2027 notes, we have now retired an aggregate $665 million of high yield Norbord debt, which will ultimately reduce annual interest costs by approximately $40 million and help rationalize our capital structure. With that, I'll turn the call back over to Ray for an update on our outlook on 2021 recent developments in capital allocation, and on the northward integration.