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West Fraser shares results for the third quarter of 2022

October 26, 2022  By P&PC Staff/West Fraser

West Fraser Timber’s third-quarter results for 2022 are strong despite a dip from the previous quarter. All dollar amounts noted below are expressed in U.S. dollars unless noted otherwise.

Highlights from Q3 2022

  • Sales value is at $2.088 billion and earnings are at $216 million, or $2.50 per diluted share
  • Adjusted EBITDA is $426 million, representing 20 percent of sales
  • The lumber segment Adjusted EBITDA is $160 million, including $81 million of export duty recovery
  • North America Engineered Wood Products segment Adjusted EBITDA is $215 million
  • The pulp and paper segment Adjusted EBITDA is $29 million
  • Europe Engineered Wood Products segment Adjusted EBITDA is $24 million
  • Repurchased 2.224 million shares for aggregate consideration of $182 million

“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 and CEO, in a press statement. “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.”

Summary of results

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 EBITDA was $426 million compared to $1,124 million in the second quarter of 2022.

Market outlook

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 the company’s North American lumber, OSB and wood panel products are residential construction, repair and remodelling and industrial applications. Over the medium term, West Fraser expects that 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 West Fraser’s 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.

Operations outlook

West Fraser does not expect to increase its pulp and paper segment shipments in 2022.

The extent of transportation challenges experienced in Western Canada earlier in 2022 was more acute and of longer duration than originally anticipated. West Fraser, therefore, had reduced production at a number of its lumber facilities in Western Canada to account for these constraints. More recently these transportation challenges have eased. However, the company experienced continued slowing of demand, in part owing to the transition into the seasonally slower fall construction period.

Given this combination of factors, West Fraser now expects our SPF lumber shipments for 2022 to be modestly below the bottom end of the prior guidance range of approximately 2.8 to three billion board feet while the company reiterates expectations for its 2022 SYP shipments to be approximately three to 3.2 billion board feet.

On October 1, 2022, stumpage rates decreased in B.C. due to the market-based adjustments related to lumber prices. In the current commodity price environment, B.C. stumpage rates are expected to decrease again early in 2023. Despite falling lumber prices the company expects U.S. log costs to remain elevated in a number of our operating regions over the next several quarters.

In the company’s NA EWP segment, transportation and logistics constraints across North America showed signs of improvement in the third quarter, though it continues to see signs of slowing demand for its products. Therefore, West Fraser reaffirms expectations for OSB shipments in 2022 to be approximately 5.9 to 6.2 billion square feet (3/8-inch basis). The company also continues to expect that input costs for the NA EWP business will remain elevated in the near-term, due primarily to high energy and resin costs. Work at the Allendale OSB facility is ongoing to prepare the mill for an eventual restart when warranted by customer demand. The company continues to expect the capital investment for the project to be approximately 10 percent above the original estimate of $70 million and project completion to be by the end of the first quarter of 2023.

Given ongoing inflationary and macroeconomic challenges in Europe, including the Russia-Ukraine conflict, the company expects OSB shipments for its Europe EWP segment in 2022 to be at the bottom end of the range of our guidance of approximately one to 1.2 billion square feet (3/8-inch basis). Input costs for the Europe EWP business are expected to remain elevated in the near-term, due primarily to higher electricity, energy and resin costs.

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