Financial Reports & Markets
West Fraser reports 61% increase in sales for Q2 2021
July 29, 2021 By P&PC Staff/West Fraser Timber Co.
West Fraser Timber Co. has released its Q2 2021 results, with a 61 per cent increase in sales to $3.779 billion.
Operational results include those of Norbord from Feb. 1, 2021 when West Fraser acquired the company.
Earnings increased to $1.488 billion, or 39 per cent of sales, from $665 million in the prior quarter. Adjusted EBITDA increased to $2.160 billion from $1.008 billion in the prior quarter.
Pulp & paper segment
West Fraser’s pulp and paper segment generated operating earnings in the quarter of $17 million (Q1-21 – $2 million) and adjusted EBITDA of $25 million (Q1-21 – $11 million).
The lumber segment generated operating earnings in the second quarter of $955 million (Q1-21 – $607 million) and adjusted EBITDA of $994 million (Q1-21 – $646 million).
Adjusted EBITDA increased due to higher lumber prices and higher shipment volumes that recovered from the seasonal railcar shortages in Canada and a period of extreme winter conditions in the U.S. South in the previous quarter.
Adjusted EBITDA was negatively affected by higher manufacturing costs due in part to increased SPF log costs, and to a lesser degree, increased SYP log costs, higher expenditures related to increased employee costs in the U.S. South associated with managing through COVID-19 impacts and other input cost inflation.
Engineered wood products (EWP) segment
The company’s NA EWP segment generated operating earnings in the quarter of $1.017 billion (Q1-21 – $299 million) and adjusted EBITDA of $1.106 billion (Q1-21 – $353 million).
Segment operating earnings and adjusted EBITDA in the prior quarter were decreased by a one-time charge of $86 million related to inventory fair value adjustments from purchase price accounting.
The contribution of a full three months from our OSB operations from the Norbord acquisition, higher plywood pricing and recovery of plywood shipment volumes from the weather-related railcar shortages experienced in the previous quarter positively impacted adjusted EBITDA for the quarter. Higher log costs from increased B.C., Alberta and Ontario stumpage rates and higher resin costs negatively impacted adjusted EBITDA.
The Europe EWP segment generated operating earnings in the quarter of $15 million (Q1-21 – negative $6 million) and adjusted EBITDA of $39 million (Q1-21 – $11 million).
Europe EWP segment operating earnings and adjusted EBITDA were decreased by a one-time charge of $7 million in the prior quarter related to inventory fair value adjustments from purchase price accounting.
“In order to address the wildfire situation in Western Canada (including evacuation alerts and orders, and a provincial state of emergency declaration), transportation challenges, log cost and availability, variability in short term demand and overall inventory levels, we may from time to time adjust activity levels at our operations,” says the company in a statement.
“Starting in the second half of June, we have been making such adjustments to activity levels at our operations to address the current situation and will continue to do so as required. As a result, we expect that our production and shipments in the second half of 2021 will be impacted.
“The extent of this impact will be dependent on the severity of the wildfire situation, any state of emergency or evacuation orders issued by governments and resulting impacts to operations, log cost and availability, fluidity of transportation and overall demand for our products.”
To read the full outlook and the rest of the West Fraser Timber Co. Q2 2021 financial results, click here.
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