West Fraser Timber Co. Ltd.

Good afternoon, ladies and gentlemen, and welcome to the West Fraser Q3 2023 results conference call. Please note that all lines have been placed on mute to prevent any background noise. 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 one on your telephone keypad. If you would like to withdraw your question, please press the star followed by the 2. During this conference call, Wes Fraser's representative will be making certain statements about Wes 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 2023 Annual MD&A and Annual Information Form, which can be accessed on West Fraser's website or through CEDAR Plus for Canadian investors and EDGAR for United States investors. Thank you. Mr. Ferris, you may begin your conference.

Well, thank you, operator. And good morning and thank you for everyone joining our third quarter earnings call. My name is Ray Ferris, President and Chief Executive Officer of West Fraser. And joining me today is Sean McLaren, our Chief Operating Officer, who we previously announced will be assuming the role of President and CEO effective January the 1st, 2024. and Christopher Rostick, our Chief Financial Officer, as well as Matt Tobin, our VP of Sales and Marketing, and several other members of our leadership team. This quarter, I am very pleased to inform you that Sean McLaren and I and Matt are joining the call from our OSB mill in Chambord, Quebec. As I am sure you are aware, our West Fraser team has been particularly busy this past period. with the recently announced divestitures of three of our pulp mills and the acquisition of a sawmill and wood treatment operation and associated forest management agreements in Alberta. All of these moves are aligned with our long-term strategy to be a premier, low-cost, sustainable and renewable wood building products producer and key supplier to our customers. Our team has been successfully processing and executing on these announced changes all the while, navigating uncertain, sometimes conflicting, difficult-to-predict demand fluctuations within the very product and geographic regions we serve. Before I hand the call to Christopher Austick to discuss our third quarter financials further, I'd like to reinforce how thankful and grateful we are for the team at West Fraser for continually adapting to meet the needs of our growing company. in particular to our employees within our pulp team, of which no organization could ask for more. The dedication and hard work of this is shared and appreciated by all of our nearly 11,000 employees. As we will discuss on this call, despite persistently varied and mixed demand markets, we've posted strong improvement EBITDA over the prior quarter. And as we'll talk further, we'll also have Sean available to answer questions later in your call as well. But for now, let me hand it back to Chris, who will walk us through our Q3 financial results.

Thank you, Ray, and good morning, everyone. And just as a reminder, we report in U.S. dollars, and all the references today in our comments will be the U.S. dollars, unless specified otherwise. Wes Fraser generated $325 million of consolidated adjusted EBITDA in the third quarter, improving from the $80 million of adjusted EBITDA reported in the second quarter. Our North American EWP segment generated $289 million of adjusted EBITDA, up from $126 million in the prior quarter. The price strength carried over from the prior quarter. The lumber segment posted $44 million of adjusted EBITDA this quarter, up from $10 million in the prior quarter, with this quarter negatively impacted by production curtailments for capital projects, as well as extreme weather in parts of Florida and Georgia. The majority of the sequential improvement this quarter was driven by a $62 million export duty recovery. In the prior quarter, we benefited from favorable changes related to inventory valuation adjustments, although these adjustments were not a significant part of the Q3 results in lumber. The net result was a $35 million negative impact relative to the second quarter on a sequential basis. The pulp and paper segment improved, but profitability remains challenging in the third quarter, posting negative 12 million of adjusted EBITDA versus negative 74 million in the prior quarter. As a reminder, last quarter was marked by considerable disruption within the pulp segment, with all four of our pulp mills taking downtime. In Europe, adjusted EBITDA was $4 million in the third quarter, as the demand weakness that had begun to unfold late in the second quarter persisted. These three Q3 results were down from $19 million of adjusted EBITDA in the second quarter. In summary, price strength across our North American EWP business was the largest positive driver of the company's sequential EBITDA improvements. which more than offset demand challenges in our lumber, pulp and EU segments. Cash flow from operations was $355 million this quarter, and cash net of debt increased to $663 million from $449 million last quarter. This quarter's cash flow more than covered $25 million of dividends paid and $115 million for capital expenditures. We also repurchased $25 million of shares in the third quarter, and a further $53 million between quarter end and October 24th. In terms of our operational outlook for 2023, we are reiterating guidance for North American OSB and SPF lumber shipments, but reducing guidance for SYP shipments as market demand for lumber in the U.S. South has begun to cool. We therefore now expect our SYP shipments to be at the bottom end of the guidance range of 2.9 to 3.1 billion board feet. Also, given the weakening trend in European OSB demand, we now expect OSB shipments there to be near the low end of the guidance range of 1 to 1.2 billion board feet on a three-eighths inch basis. In terms of capital spending for 2023, based on equipment delivery schedules and spending levels to date, we now anticipate capital investment will be approximately $450 million. down from last quarter's expectation that we would spend near the bottom end of our $500 million to $600 million guidance range. Looking back over the last four quarters, which have undoubtedly been challenging for the wood products industry, our diversified portfolio of assets has generated consolidated EBITDA of $472 million, excluding the $62 million export duty recovery this quarter. And this trailing 12-month EBITDA would have been markedly higher on a pro forma basis after giving effect to the pending sale of the three pulp mills and the pending acquisition of spray-like sawmills. For comparison, this latest level of trough-like EBITDA is significantly higher than the financial results generated in similarly weak markets experienced in 2019, which reflects the success of the Norboard acquisition and integration, as well as the other mill additions and capital improvements we have made to the West Fraser portfolio in recent years. With that overview, I'll now pass the call back to Ray.