West Fraser Timber Co. Ltd.

Good morning ladies and gentlemen and welcome to the West Fraser Q4 2022 results conference call. At this time all lines are in listen only mode. Following the presentation we will conduct a question and answer session. Instructions will be provided at that time for you to queue up for a question. If anyone has any difficulties hearing the conference, please press star zero for operator assistance at any time. During this conference call, West Fraser's representatives will be making certain statements about West Fraser's future financial and operational performance, business outlook, and capital plans. These statements may constitute forward-looking information, or forward-looking statements within the meaning of Canadian and United States securities laws. Such statements involve certain risks, uncertainties, and assumptions which may cause West Fraser's actual or future results and performance to be materially different from those expressed or implied in these statements. Additional information about these risk factors and assumptions is included both in the accompanying webcast presentation and in our 2022 annual MD&A and annual information forum, which can be accessed on Wes Fraser's website or through CDAR for Canadian investors and EDGAR for United States investors. I would like to remind everyone that this call is being recorded today, Wednesday, the 15th of February, 2023. I would now like to turn the conference over to Ray Farris, President and Chief Executive Officer. Please go ahead, Mr. Farris.

Thank you, Michelle. Good morning, and thank you, everyone, for joining our fourth quarter 2022 earnings call. Joining me today are Chris Vrostic, our Senior Vice President, Chief Financial Officer, Chris McKeever, our Senior Vice President, Marketing and Corporate Development, and Matt Tobin, our Vice President of Sales and Marketing, and several other members of our executive team. I'm going to begin with a brief overview of West Fraser's fourth quarter and full year 2022 financial results, and then I'll pass the call over to Chris Vorostek for some additional comments. West Fraser generated $70 million of adjusted EBITDA in the fourth quarter of 2022, as we experienced weakening demand across several key products. particularly in North America, where rising mortgage rates impacted near-term housing affordability. This weakness was particularly evident in our lumber segment and was partially offset by positive EBITDA contributions from our engineered wood products and our pulp business. Overall, however, 2022 is a strong year of performance for West Fraser. as we generated $20.86 of diluted earnings per share and over $3.2 billion of adjusted EBITDA, representing a 33% margin. In the fourth quarter, we invested nearly $150 million back into the business through capital expenditures. We repurchased $117 million of shares and returned $25 million to shareholders through dividends. For the full year, We repurchased nearly 2 billion of shares through our normal course issuer bids, a substantial issuer bid, and now the company has now repurchased approximately 39.7 million common shares since early 2021, representing about 73% of the shares issued with the Norboard acquisition. We have been disciplined in our approach to capital allocation and have preserved capital In the event that we have a down market like the one we are currently experiencing, it is this discipline that has positioned us to be able to execute on our strategy and invest and improve our assets through all market conditions. As we look ahead, our balance sheet remains strong and continues to offer significant financial flexibility, which is a key priority of our capital allocation strategy. Without short or review, I'll turn the call over to Chris. for some additional detail.

Thanks, Ray, and good morning, everyone, and thanks for joining. And a reminder that we report in U.S. dollars, and all my references are to U.S. dollar amounts, unless otherwise indicated. Our North America EWP segment generated $109 million of adjusted EBITDA, down from $215 million in the prior quarter. This result benefited from a $14 million insurance recovery that partially offset repair costs and loss margins charged to earnings in previous quarters, stemming from unscheduled downtime at one of our OSB mills. The lumber segment posted negative $77 million of adjusted EBITDA, declining from $160 million in the third quarter, a period that included an $81 million recovery of export duties associated with AR3. Note that these fourth quarter lumber segment results include a $39 million inventory write-down, which we recognized as lumber prices reached a near-term low at the end of the year. Also of note, in the absence of these Q4 inventory write-downs, our BC business in the aggregate was profitable in the quarter due to our downstream integration in MDF, plywood, and pulp. The pulp and paper segment generated $15 million of adjusted EBITDA in the fourth quarter versus $29 million in the prior quarter. while in Europe adjusted EBITDA rose to $30 million in the fourth quarter from $24 million in the third quarter. Price declines were the largest driver for the sequential EBITDA declines across our North American lumber and engineered wood products businesses. We generated $147 million in cash from operations for the quarter, though our cash balance net of debt, while still at a very healthy level, decreased modestly quarter over quarter from $625 million from $789 million as we allocated $142 million to share repurchases and dividend payments and spent $149 million on capital expenditures in the quarter. In terms of our outlook for 2023, we are providing initial operational guidance for the year as detailed in our earnings release and on slide 6, including ranges for key product shipments and our planned capital expenditures. With that overview, I'll now pass the call back to Ray.