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West Fraser cites pulp segment operating loss in Q4 2019

West Fraser has published the financial results for fourth quarter and full-year 2019, reporting an operating loss of $12 million in its pulp and paper segment.

BCTMP and NBSK shipments improved, partially mitigating the fall in pulp prices.

Overall company sales were $1.129 billion for Q4 2019 and $4.877 billion for full-year 2019.

“This past year has been challenging for West Fraser on multiple fronts. A softer demand environment coupled with high fibre input costs in British Columbia resulted in a significant reduction in earnings,” says Ray Ferris, CEO of West Fraser, in a statement. “We took several difficult decisions to right-size our manufacturing footprint in Western Canada by permanently reducing shifts and closing one facility.

“Despite the difficult conditions, we remained resolute in our commitment to modernize our U.S. South business to achieve its full potential. Several key projects have been completed in 2019 and we are encouraged by the opportunity to fully operationalize them in 2020. The final stage of our Opelika, Alabama modernization will be completed in 2020 with the start up of a new planer mill.

“We are also underway on the construction of a replacement manufacturing complex in Dudley, Georgia and we anticipate commencing operations at the new mill mid 2021. The new facility will be well positioned to benefit from a strong fibre supply basket and well suited to servicing the local markets.”

Operational results

West Fraser’s lumber segment generated an operating loss of $23 million (Q3-19 – $53 million loss) and adjusted EBITDA of $69 million (Q3-19 – $39 million). This quarter’s results were favourably impacted by an increase in lumber prices, cost controls around log procurement, variable operating schedules and the impact of the closure of the company’s Chasm, B.C. lumber facility in the prior quarter.

Realized lumber prices improved slightly from the third quarter which impacted adjusted EBITDA for the segment by $13 million. Lumber shipments declined approximately 10 per cent from the third quarter due to variable operating schedules, shift reductions, mill closures and holidays in the fourth quarter. The decline in shipment volumes negatively impacted adjusted EBITDA by $8 million compared to the third quarter of 2019.

A higher proportion of lumber shipments came from Alberta and the U.S. South in the fourth quarter compared to the third quarter.

West Fraser’s pulp and paper segment generated an operating loss of $12 million (Q3-19 – $8 million loss) and an adjusted EBITDA loss of $1 million (Q3-19 – $3 million income), with BCTMP and NBSK shipments improving and helping to offset the decline in pulp prices.

Read the full Q4 and full-end 2019 financial report from West Fraser.