West Fraser Timber Co. Ltd.

Good morning, ladies and gentlemen, and welcome to the West Fraser Q4 2024 Results Conference Call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star 0 for the operator. This call is being recorded on Thursday, February 13, 2025. 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 and 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 2024 Annual MD&A and Annual Information Form which can be accessed on Wes Fraser's website or through CEDAR Plus for Canadian investors and EDCAR for United States investors. and I would now like to turn the conference over to Mr. Sean McLaren. Thank you. Please go ahead.

Thank you, Alin. Good morning, everyone, and thank you for joining our fourth quarter 2024 earnings call. I am Sean McLaren, President and CEO of West Fraser, and joining me today are Chris Verostek, Senior Vice President and Chief Financial Officer, Matt Tobin, Senior Vice President of Sales and Marketing, and other members of our leadership team. On the earnings call this morning, I will begin with a brief overview of West Fraser's Q4 and fiscal 2024 financial results, and then pass the call to Chris for additional comments before I share some thoughts on our outlook and offer concluding remarks. West Fraser generated $140 million of adjusted EBITDA in the fourth quarter of 2024, representing a 10% margin. Results were varied across our business in Q4 with strength in our North American engineered wood product segment and stronger than expected demand for SPF lumber offset by reduced Southern Yellow Pine lumber volumes. In the fourth quarter, levels of new home construction in the US showed further signs of improved stability on the back of recent U.S. Central Bank rate cuts that appear to be supportive of housing, as well as demand for OSB and SPF lumber. That said, mortgage and interest rates remain relatively elevated, and we believe this continues to shape existing home sales activity and repair and remodeling spending. For full year 2024, we generated $673 million of adjusted EBITDA. representing an 11% margin and a meaningful improvement from the $561 million reported in 2023. This level of 2024 EBITDA, while still below our view of mid-cycle EBITDA, was able to cover our capital expenditures, dividends, and much of our share buyback program. On a pro forma basis, with the inclusion of Norboard, our 2024 EBITDA was approximately $430 million higher than that of the significant down cycle in 2019, reflecting positive synergies from the Norboard acquisition, benefits from our capital investment program, proactive acquisitions, and finally, mill portfolio optimization initiatives to improve performance and lower costs. In terms of our balance sheet, we had nearly $1.7 billion of available liquidity at year-end, which offers us the financial flexibility and strength to support a consistent capital allocation strategy through the cycle. With that overview, I'll now turn the call to Chris for additional detail and comments.

Thank you, Sean, and good morning, everyone. A reminder that we report in U.S. dollars, and all my references are to U.S. dollar amounts unless otherwise indicated. The lumber segment posted adjusted EBITDA of $21 million in the fourth quarter. compared to 62 million adjusted EBITDA in the third quarter. This is a significant sequential improvement, even after excluding the $32 million export duty expense in the third quarter, which had related to the 2022 calendar year. Our North America EWP segment achieved 127 million of adjusted EBITDA in the fourth quarter, up slightly from 121 million in the third quarter. The pulp and paper segment incurred a $10 million adjusted EBITDA loss in the fourth quarter compared to $2 million of positive EBITDA reported in the third quarter. Q4 loss for this segment was largely owing to the previously disclosed major maintenance shutdown at the mill, the first we've undertaken at Caribou since obtaining 100% control of the facility. With this catch-up on investment, we expect the mill to be well positioned moving forward. In our Europe business, adjusted EBITDA was $2 million in the fourth quarter versus $1 million in the third quarter, as that business continues to face relatively tempered demand markets. You will also have seen that we reported a $70 million non-cash impairment of goodwill in this segment in the fourth quarter, which was driven primarily by weaker macroeconomic conditions in the UK and Europe and expectations of an extended recovery to mid-cycle profitability for the business. In terms of our overall results, higher product prices were the largest factor for the sequential EBITDA improvement across our lumber and North American engineered wood products businesses, partially offset by lower North American OSB shipments. As noted in recent quarters, our lumber business continued to benefit from the actions we took earlier in 2024 to curtail production at three of our higher cost mills, essentially replacing that higher cost volume with production from other lower cost mills which is positive for our overall cost structure. Specifically in the US South, our 2024 SYP shipments declined more than 10% from 2023 levels. With regard to softwood lumber duties, late in the fourth quarter, the US Department of Commerce issued a tolling notice extending the deadlines for certain ADD and CVD proceedings, including softwood lumber, of up to 90 days. This extension affects the AR6 preliminary and final determination deadlines for both ADD and CVD cases. As a result of this extension, the preliminary determination decision for AR6 anti-dumping is expected to be published February 20, 2025, and the CVD preliminary determination decision is anticipated to be published May 7, 2025. Cash flow from operations was $173 million in the fourth quarter, with our cash balance net of debt and lease obligations at $412 million, moderately below the $463 million reported last quarter. The sequential decrease in our net cash balance reflects higher operating cash flows being more than offset by $156 million of capital expenditures and approximately $50 million of cash deployed towards share buybacks and dividends. In terms of our outlook for 2025, we are providing initial operational guidance for the year as shown on slide 7 and detailed further in our earnings release where we discuss targeted ranges for key product shipments. We are also providing our forecast for capital expenditures in the range of $400 million to $450 million. This reflects a moderate decrease from 2024 capital spending levels, but is still aligned with our strategy of counter-cyclical investing representing significant investment in our assets above sustaining capital needs of approximately $225 million per year. I would note that as the U.S. administration's tariffs and other policies evolve, we will evaluate the impact of the tariffs on our operations and consider whether any revisions to our 2025 forecasts are warranted. With that overview, I will pass the call back to Sean.