West Fraser Results
October 27, 2022
WEST FRASER ANNOUNCES THIRD QUARTER 2022 RESULTS
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October 26, 2022 – 5:01 pm
VANCOUVER, BC, Oct. 26, 2022 – West Fraser Timber Co. Ltd. (“West Fraser” or the “Company”) (TSX and NYSE: WFG) reported today the third quarter results of 2022 (“Q3-22”). All dollar amounts in this news release are expressed in U.S. dollars unless noted otherwise.
Third Quarter Highlights
- Sales of $2.088 billion and earnings of $216 million, or $2.50 per diluted share
- Adjusted EBITDA1 of $426 million, representing 20% of sales
- Lumber segment Adjusted EBITDA1 of $160 million, including $81 million of export duty recovery
- North America Engineered Wood Products (“NA EWP”) segment Adjusted EBITDA1 of $215 million
- Pulp & Paper segment Adjusted EBITDA1 of $29 million
- Europe Engineered Wood Products (“Europe EWP”) segment Adjusted EBITDA1 of $24 million
- Repurchased 2.224 million shares for aggregate consideration of $182 million
|1. Adjusted EBITDA is a non-GAAP financial measure. Refer to the “Non-GAAP and Other Specified Financial Measures” section of this document for more information on this measure.|
“West Fraser generated solid financial results in the third quarter of 2022 and returned more than $200 million of capital to shareholders through share repurchases and a quarterly dividend. Overall, West Fraser continues to benefit from product and geographic diversity and a track record of disciplined capital allocation,” said Ray Ferris, West Fraser’s President & CEO. “We saw considerable improvement in the transportation challenges that had impacted our business earlier this year. However, ongoing inflationary cost pressures and slowing demand for many of our key products impacted our financial results this quarter. Our team continues to prioritize financial discipline as we navigate near-term market uncertainties to ensure we are best positioned to take advantage of the more favourable demand markets we envision over the medium and longer term.”
“To that end, with the support of the local community, we are pleased to announce the planned addition of a new state-of-the-art lumber manufacturing complex with the brownfield development at our Henderson, Texas facility. This project is another important step in our strategy of optimizing our lumber portfolio by continuously driving cost efficiency through deployment of advanced technologies utilized by our skilled and engaged teams.”
Third quarter sales were $2.088 billion, compared to $2.887 billion in the second quarter of 2022. Third quarter earnings were $216 million, or $2.50 per diluted share, compared to $762 million, or $7.59 per diluted share in the second quarter of 2022. Third quarter Adjusted EBITDA1 was $426 million compared to $1,124 million in the second quarter of 2022.
Several key trends that have served as positive drivers in recent years are expected to continue to support medium and longer-term demand for new home construction in North America.
The most significant uses for our North America lumber, OSB and wood panel products are residential construction, repair and remodelling and industrial applications. Over the medium-term, we expect that an aging housing stock, lagging completions of previously started new home construction and greater acceptance of work-from-home practices may help to offset near-term headwinds and spur repair and renovation spending that supports lumber, plywood and OSB demand. Over the longer-term, growing market penetration of mass timber in industrial and commercial applications is also expected to become a more significant demand growth driver for wood building products in North America.
The seasonally adjusted annualized rate of U.S. housing starts averaged 1.44 million units in September 2022, with permits issued averaging 1.56 million units, according to the U.S. Census Bureau. However, demand for new home construction and our wood building products may decline in the near-term should interest rates continue to rise and consumer sentiment and housing affordability continue to be impacted.
The demand for our European products is also expected to remain robust over the longer-term as use of OSB as an alternative to plywood continues to grow, and an aging housing stock supports long-term repair and renovation spending and additional demand for our wood building products. Near-term challenges, including rising interest rates, ongoing geopolitical developments and inflationary pressures, are expected to cause a temporary slowing of demand for our products in Europe, however, we are confident that we will be able to navigate through these periods and capitalize on opportunities for long-term growth ahead.