West Fraser announces Q3 2017 results
Oct. 30, 2017 - West Fraser Timber Co. Ltd. has reported its third quarter 2017 results. The highlights include: the completed acquisition of six sawmills and a finger-joint mill in Florida and Georgia; adjusted EBITDA of $269 million for the quarter; and quarter ending net debt to capital ratio of 16 per cent.
On August 31, 2017 we completed the acquisition of the Gilman Companies for net cash consideration of $525 million (US$418 million). The Gilman Companies are comprised of six sawmills and a finger-joint mill in Florida and Georgia as well as an administrative office in St. Marys, G. Ted Seraphim, our President and CEO said, “We are delighted to welcome the Gilman leadership and employees to the West Fraser family. This acquisition is a major step in our growth strategy as we expand our lumber business in the United States.”
Forest fires in British Columbia and hurricanes in the U.S. South
A number of wildfires throughout the interior region of British Columbia resulted in a provincial state of emergency being declared from July 7 to September 15, 2017. Our operations in 100 Mile House, Williams Lake and Chasm were briefly suspended due to the wildfires, reducing our production by 55 MMfbm of lumber and 15 Msf of plywood. The 2017 hurricane season was more severe than normal causing significant damage to areas in South East Texas and Florida. We were fortunate that our facilities were undamaged and that disruptions to our operations were minimal.
Our lumber segment generated operating earnings of $126 million (Q2-17 - $171 million) and Adjusted EBITDA of $195 million (Q2-17 - $240 million). This quarter’s results were negatively impacted by lower product pricing and lower SPF production as a result of the British Columbia forest fires. Countervailing and antidumping duties, which commenced in the previous quarter, resulted in an expense of $31 million for the current quarter. Our panels segment generated operating earnings in the quarter of $45 million (Q2-17 - $23 million) and Adjusted EBITDA of $48 million (Q2-17 - $26 million). Improved plywood pricing was the primary driver of improved results. Our pulp & paper segment generated operating earnings of $21 million (Q2-17 - $32 million) and Adjusted EBITDA of $30 million (Q2-17 - $42 million). The major factors contributing to the decrease in operating earnings were lower Canadian dollar pulp prices and increased maintenance costs from our Hinton pulp mill major maintenance shutdown.
Softwood lumber dispute
The U.S. Department of Commerce’s preliminary review resulted in a West Fraser specific countervailing duty rate of 24.12% effective April 28, 2017 and an antidumping duty rate of 6.76% effective June 30, 2017, resulting in an expense of $31 million for the current quarter and $65 million for the first nine months of 2017. The requirement that we pay countervailing duties was suspended on August 24, 2017 until final determination is determined by the U.S. International Trade Commission.
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