West Fraser announces second-quarter results

July 23, 2019

By: The Working Forest Staff

Continuing difficult lumber market conditions and high log costs necessitated additional temporary curtailments in the quarter and the permanent closure of the Chasm, British Columbia lumber facility along with the elimination of the third shift of production at our 100 Mile House lumber mill.  Permanent and temporary curtailments resulted in 250 MMfbm of reduced lumber production during the first half of 2019.   Permanent curtailments are expected to reduce annual production capacity by 614 MMfbm.

Subsequent to quarter-end, we increased the available credit under our syndicated committed revolving credit facilities to $850 million and extended the maturity date of these facilities and our US$200 million syndicated term loan to August 28, 2024.  As a result, we have no significant debt maturities prior to August of 2024 and financial flexibility to navigate the current market conditions and continue to invest in our business. 

As part of our senior leadership transition plan, on July 1, 2019, Ray Ferris replaced Ted Seraphim as our Chief Executive Officer on Mr. Seraphim’s retirement from that role.

Operational Results

Lumber production was up 5% over the first quarter even with the curtailments that were undertaken in both quarters as productivity increased from the first quarter.  Lumber shipments exceeded production by approximately 150 MMfbm resulting in reduced inventories.  Adjusted EBITDA for the lumber segment was $39 million compared to $84 million in the previous quarter as lower lumber prices prevailed in the quarter.

Panel production and shipments were relatively consistent with comparative periods.  Lower plywood pricing reduced Adjusted EBITDA in the panels segment to $10 million from $15 million in the prior quarter. 

We completed the second of our two major maintenance shutdowns at our NBSK mills in the quarter and resumed normal production schedules.  NBSK production was 12% better than the prior quarter as both of our NBSK mills recovered from their shutdowns.  Softer pulp pricing and higher maintenance costs reduced Adjusted EBITDA for the pulp and paper segment to $7 million from $11 million for the quarter.

Outlook

As a result of the temporary and permanent curtailments of production announced to date, we expect our 2019 lumber production to be at least 600 million board feet lower than 2018.  We have completed our two major maintenance shutdowns at our NBSK mills and have resumed normal production schedules.  We expect that industry production reductions will have a more significant impact on lumber supply in the second half of 2019 as permanent closures are implemented and shipments are reduced as mill inventories are eliminated.

Forest fires followed by wet weather has resulted in low log inventories at some of our Alberta mills.  The risk exists that we may need to take more downtime due to a shortage of logs at some of our Alberta mills in addition to the downtime we have already announced at our plywood facility.

 

 

 

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