West Fraser Timber Co. Ltd.

Good morning, ladies and gentlemen, and welcome to the West Fraser Q1 2025 results conference call. At this time, all lines are in a 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 zero for the operator. This call is being recorded on Wednesday, April 23, 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 the 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 Frazier's website or through Cedar Plus for Canadian investors and EDGAR for United States investors. I would now like to turn the conference over to Sean McLaren, President and Chief Executive Officer. Please go ahead.

Thank you, Joelle. Good morning, everyone, and thank you for joining our first quarter 2025 earnings call. I am Sean McLaren, President and CEO of West Fraser, and joining me today in our Quesnel office on the day of our annual general meeting are Chris Vrostek, 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 Q1 2025 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 $195 million of adjusted EBITDA in the first quarter of 2025, representing a 13% margin and a meaningful improvement over last quarter. Of particular note, Our lumber segment had its best result in more than two years on the back of better SPF demand and pricing. New home construction continued to show signs of stabilization with annualized U.S. housing starts averaging nearly 1.4 million units in the first quarter as elevated mortgage and interest rates continue to challenge housing demand. Similarly, repair and remodeling demand is also relatively stable though remains somewhat subdued. In complicating matters, we are now dealing with the uncertainty of tariffs and their potential inflationary effects that have the potential to affect future demand for our wooden building products. We'll continue to watch these developments closely. Over the trailing 12 months, we generated $668 million of adjusted EBITDA, representing an 11% margin a meaningful improvement from the $561 million reported during the most recent trough year of 2023. This level of trailing EBITDA, while still well below our view of mid-cycle economics, is largely sufficient to cover our capital allocation priorities, including key capital expenditures, our quarterly dividend and opportunistic share repurchases. In terms of our balance sheet we had nearly $1.5 billion of available liquidity exiting Q1 in a healthy cash position, even net of debt. Strong balance sheet and liquidity profile, along with our investment grade rating, remain key elements of our capital allocation strategy that allows us to invest in our business counter-cyclically and take advantage of growth opportunities if and when they arise. With that overview, I'll now turn the call to Chris for additional detail and comments.

Thank you, Sean. And 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 $66 million in the first quarter compared to $21 million adjusted EBITDA in the fourth quarter. This improvement is mainly explained by higher product pricing and higher SPF shipment volumes offset in part by lower SYP shipment volumes that were impacted by weather-related transportation disruptions in the U.S. South. Our North America EWP segment continued to lead the business in EBITDA generation, with 125 million adjusted EBITDA in the first quarter, similar to the 127 million adjusted EBITDA reported in the fourth quarter. The pulp and paper segment generated 7 million adjusted EBITDA in the first quarter, compared to a $10 million adjusted EBITDA loss in the fourth quarter. This had been impacted by a major maintenance downtime event at Caravan Pult. Our European business realized negative $2 million adjusted EBITDA in the first quarter versus positive $2 million in the fourth quarter, with a slight decrease driven mainly by pricing. In terms of our overall results, higher product prices for our lumber business and lower costs for lumber and North American OSB were the largest contributing factors to the sequential EBITDA improvement in Q1 versus Q4. We continue to see the financial benefits of the portfolio optimization initiatives that we've undertaken and that allows us to shift select production to our lower cost operations. Cash flow from operations was negative $75 million for the first quarter, with our cash balance at $390 million, down from $641 million last quarter. The relative decrease in our cash balance reflects increased earnings in Q1, being more than offset by the seasonal build of working capital from winter logging operations, $104 million of capital expenditures, and approximately $72 million of cash deployed towards share buybacks and dividends. In terms of our guidance for 2025, both our lumber and North American OSB segments have experienced a slower than expected start to the year, owing primarily to transportation and weather-related challenges that temporarily disrupted shipments. While we expect to catch up on these delayed shipments, we are conservatively reducing the top end of our 2025 Shipments Guidance Ranges for SPF, SYP, and OSB. As the U.S. Administration's tariffs and other trade policies evolve, including the Section 232 investigation into U.S. lumber imports, we will revisit the impact of the tariffs on our operations and consider whether any further revisions to our 2025 guidance forecasts are required. Regarding softwood lumber duties, on April 4th, 2025, the U.S. Department of Commerce released preliminary CVD results for AR6 based on the year 2023. Our preliminary CVD rate for AR6 is 16.57%. Combined with our preliminary ADD rate for AR6 of 9.48%, our preliminary combined rate for AR6 is 26.05%, which is in fact the lowest preliminary rate in the Canadian industry. Final rates are expected to be released in the second half of this year. With that financial overview, I'll pass the call back to Sean.