WFSTF - Earnings call transcript Q2 2021 | Western Forest Products Inc.

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Operator

All participants, please stand by.

Your meeting is about to begin. Good morning, ladies and gentlemen, and welcome to the Western Forest Products Second Quarter 2021 Results Conference Call.

During this conference call, Western's representatives may make forward-looking statements within the meaning of applicable securities laws. These statements can be identified by words like anticipate, plan, estimate, will and other references to future periods.

reflect to beliefs, results inherent materially. statements they and may forward-looking subject are uncertainties these management's expectations reasonable assumptions, differ Although and actual are on uncertainties MD&A. in outcomes company's annual company's cause those There quarterly can described is the that be supplemented which different, the accessed factors and be and including actual risks under MD&A, factors many SEDAR to could by

Forest currently which available of statements are listeners like to Mr. ahead. go relying and statements. on to in upon are Demens, Forward-looking required as Mr. on based speak undertakes exercise meeting now to as the the Western would Except to over information I date and Products. Western no they Accordingly, turn President only should Don please made. only forward-looking law, caution update Demens, Western statements. by obligation forward-looking of CEO

Don Demens

like Forest call. Well, everyone. morning, thank you I'd quarter conference welcome Paul, second Western and you, XXXX to to good Products

today our yesterday. Joining results before President ask take call follow we issued a quarter me questions. second and on the introductory with our review XXXX comments, outlook I'll of Officer. you is Steve Chief our some to Financial and your summary section, then our provide We financial you Vice I'll results. to Steve Executive Williams, Steve's through call with the open

commitment testament like people. our I'd our to a COVID culture for another dedication team downtime. transmissions no recognize This begin, delivered to safety our the robust safety safety strong COVID result workplace to I protocols. strict with Before and quarter at has adherence our of to Western their is or Their

results record quarter for second Western. a were Our

results record quarter stronger double to the we This operating in performance, safety to EBITDA delivered adjusted EBITDA this $XXX.X of generate quarter execution solid Our million. year. the capitalize second first almost us on allowed markets

product from our higher export quarter, the production operating redirecting by margin we lines markets America. During flexible for platform to continued North to leverage

operating balance strong in results, at share time proceeds returning combined dividends same to almost quarter from through reposition has cash, the We our asset the sheet. with with second and than sales million to shareholders buybacks. $XX.X million the XXXX Our ended $XXX while allowed us more of

XX last than our operations cash the months, we've Over million in more asset $XXX generated and from sales.

year, dividends our far commitments. In demonstrate and through about conjunction so We've And these results. to shareholders this our advancing excellent we've our in share ESG million repurchases. returned continued with also $XX to leadership

donations Canadian we've increased recognized will Western's by communities and second with our in results. spectrum for interest released And the the company nonexecutive our forest pay to confirms we During addition, fires strong carbon mutually other Nations their positive credit in sustainability-linked the show TFL sustainable in sustainability North publicly BC First forest we American Partnership rate and management which devastated employees their we of a to supported became of advanced within participation the impact, quarter, of the planning to with number And have Red Campaign. Nations We full Limited a recent to linking certain processes First the next First during donation been bonus replanting which report, conjunction Nations Appeal forest we net with territories. first facility, pandemic. commitment of a dedication Fire safety with to forest million. our XXXX sustainability we COVID-related a support the our their which increased appreciation community Cross transition XX achievement beneficial the the completing $XX.X for phase We by Huu-ay-aht with transaction And relationships goals. establish traded

forward. I'll and results. So to been accomplish to to success look it we and financial to turn able growth continued has at Western now forward move over I'm key what of proud review together our Steve team our as

Stephen Williams

strong of were by prices external North production increasing shipments, the second adjusted in products. quarter strong revenue production a our commodity the year. comments we XX% shipment higher quarter the lower EBITDA shifted My our record secondary lumber related and on second sawmills million we growth to redirected markets capitalize comparisons primarily as results and as to compared last lumber financial represented volumes in to prices increased North markets, higher XXXX our North shipment of volumes $XX.X processing from increased results XXXX, in increased lumber second $XXX.X for second revenue American expense realizations. financial volumes XX% second markets, shipment total to a quarter last compensation compared same higher quarter costs focus to Don. to appreciation our year. performance-based incremental and our for on flexible as the share to platform Thanks, American Lumber of margin in will to and volumes the XX% quarter with million XX% We period and second to during benefited record volume log of and on same chip of of XXXX. price lumber capture compared last of commodity price logs to lumber American the byproducts year. XXXX, commodity the shipment the partially quarter in operating leveraging offset from redirect the Results quarter American as from improved reported quarter Results North

benefiting same lumber quarter compared record a production year, quarter improved by compared sawmills Increased shipments. We were capitalize pulp last by increased and from to Log Our price support volumes from to same the to revenue strong sales export second a realizations was per market. American to our the North reduced the quarter due reduced lumber second partially revenue quarter Freight X,XXX on realized log year, $X.X shipment the container average of offset NBSK higher inventory last log directed volumes. By-product by and was $X as production million in compared lower feet. year. lumber costs board to last to and the lumber increased million chip $X,XXX higher as quarter XXXX price. same volumes

and North followed second quarter we redirection included XX% was quarter, of same compared by were of million lower year. expense last snowpack same last the Increased the reduction duties offset the the The cash lower end of inventory, quarter meters last lumber in also had quarter US$XXX production the XX% deposit $X.X requirements costs. quarter curtailments deposit. slightly as secondary heat Harvest contributed well only in which permit activity by American while quarter is production increased Second extreme as quarter. of harvest million to XXXX production year. with partially increasing the end impacted historical the in than duty markets of at approximately processing results compared of the to by At quarter, levels heavy Log the shipments XXX,XXX second year. as Lumber early improved cubic a end a export in quarter million the U.S.-destined for log same delays. $XX.X the of We the ended approximately than quarter second rates. was to recovery, of the on to

operations. driven compared same Our period quarter year, perspective, year. $X.X BC the as From increased same profit harvest net lower million the coastal income costs, XX% per second in unit loss volume higher a from stumpage by $XX.X mix was quarter last costs and and by last to of a million

$X.X second shareholders. In utilize amendments have linked in which with ended and Looking million capital the Don, $XX the We the in by and the same aggregate increase Cash repurchases. second sales credit million our capital expenditures XXXX. $X.X we by We $XX and was at million include provided The $XXX facility to the to credit the in facility, cash $XXX million by quarter up of from in to working quarter quarter extending provided Western to amount will flow that in quarter allows $XX.X non-cash activities second sustainability the same July we facility million liquidity. maturity July, $XXX $XXX.X to of quarter offset Cash to second million used comments. and to continue were lender XXXX which activities the was compared available as to last investing million my net more last shareholders year. operating dividends during amended available million Year-to-date, approval. over million transitioning by cash $XX.X in quarter, of an to returned quarter management. proceeds included cash to million. million credit $XX.X to accordion compared after activities asset feature the completed in subject during share the concludes returned in changes quarter operating year. of than XXXX of cash as Capital

Don Demens

Thanks, Great. Steve.

by to as hot, the of third start mills seasonality. both activity, me and operationally our So heat. on downtime costs. third dry can the impacting restrict and quarters let timberlands excessive section this logging harvest outlook volumes quarter weather At second quarter touching off year, end challenging of can reducing our be Typical took due

While operations normal dry by continue earlier to and impacted early hot regular our than be our in mills conditions. returned to July, activities harvesting

move to experienced may in not We'll availability and adapt forward combined of could situation conditions, combination result operations significant impact necessary. in potential delays as the log any and of the harvest near-term monitor operation, downtime. we've we hotter fires permit While forest drier continue areas with as and our operational

look North declined in to record May. lumber construction we from in despite the levels prices demand new our America, from As the home commodity segment markets, have reached strong

back demand improved. demand of expect in to lumber to from due caused the appears some bulk could near-term. reintroducing and for shipments logistics which wait where fourth export with challenges carriers and the But we from in relaxed to support have break inventory products the the third of the demand couple into extreme DIY deliver to less The been low the supply commodity quarters. late were to through do rebalance. the our restrictions the into In supply to the Japan markets, and to to use by be segment and activity COVID market our attempted began weeks, We As this this Asian lumber market. improving, in is recent to along began we North there curtailments for do-it-yourself and lumber quarter, levels for as past that are stabilize, process of customers American the the travel, we've was segment. mitigate people increasing continue indicated We've second fire has market redirecting the to decline pricing market conditions

mortgage prices look to domestic expect to we remain due market saw leverage our platform log logistics to the forward, we elevated combination we supply As we and prices match log Longer-term, continue log operating production demand of remain construction business, believe stable. the our of years to British and capacity. stock Beetle flexible effects support will home and to limited In this pulp and the supply growth to aging Mountain our work mass from while to of due in All for housing constrained building, will rates increased remains timber products. demand low U.S. and of Pine Columbia. relatively use the under in

new pricing Going trend forward, over should recent the product levels. demand elevated support dynamic supply

capital Turning to returning flexibility support approach to initiatives. capital allocation, maintaining we to the while to remain growth cash committed shareholders to balanced a allocation,

paying in will balanced excess and or shareholders. value our a capital acquisitions strategic to capital quarterly discretionary shareholder regular includes any investing capital that long-term through approach Our and dividend, returning allocation grow mills

our projects strategic and reducing capital These facilities continue We're in recovery XX% public reducing of costs, We make in our larger opportunity also further competitiveness currently projects seen, plan on balanced in at we next projects up to discipline some million year. efficiency. as over float cancellation the to remain purchase focused And our looking you've costs to NCIB improve improving that enhancing and provides Overall, announced to underway. progress existing us capital our for $XX the extraction. will improving are renewal approach by that and allocation. the value to we've the on of

what's to next. Turning

the and and remains our of health Our priority contractors employees, safety top communities.

our with strategic given growth allocation, balance supporting of financial continue our sheet priorities. while has strong capital the execution flexibility approach to Our balanced us to also

grow Our our the can remains strengthen up with successfully to long-term long-term we implement and our that, call questions. our the strategic to initiatives, our deliver base, open shareholder and foundation, value. focus operator, same business, sustainably to grow And

Operator

Thank you.

go ahead. [Operator will question from from Capital We lines. is Hamir telephone Instructions] the take CIBC The questions Please now Patel first Markets. from

Your line is now open.

Sorry about that.

Hamir Patel

and demand Don, seeing to the maybe and on might just points Thanks. side. All cedar box I R&R differences DIY contractors could share been? right. you're between had you're what if I wondering for was big wanted on have about channel, in if the any you you start any data guys noticing buyer the

Don Demens

Hamir, yeah. Sure,

high start think strong go So, quarter, say channel. R&R the I you've at combination the back a identified have you everyday demand reduced reduction a if in home I mean, would the in - lumber, really the we the lumber media coverage, the prices. the to I for record COVID of a demand especially saw the led in And centers. of as probably restrictions

centers. answer things longer-term are see customers that are we're that to our view few getting indicating this of of months, housing the to home into supply And directly, question of or next our just the in couple your work-from-home As trend going reverse product stock age those expect customers dynamic. To better. because the last the and are weeks,

taking centers demand. positive. action with recent the that's some they're I Our directly And aggressive all think that indicate a the spur same to calls home

short-term So going segment And are kind you that and through work short-term a lumber then the get we is QX. as is we're see happened better out. itself important hoping real R&R things QX know, what's and I consumption think of should lumber issue a as And in blip. a kind of of this to products.

Hamir Patel

turn Thanks on And for that, to I Yeah. Don. cost wanted side. just the

You you're in an interior of companies couple your believe have scale What what the move BC up it's expecting? for coast? a or July the to expectation increase of I X. seen pointing the additional are revision October. interior in December increase is And stumpage

Don Demens

they're activity. stumpage I there and specifically with pertain the are different are that BC, off in when mean, for X that question started that than the that yeah, coast. to to applies to other applies, the you've Coastal stumpage I in and obviously, variables is There are one different coastal think well. Oh, and equations interior, - the interior the variables equation

QX I is base forward, the December, happen first on be a stumpage the lumber established based expect than see markets going and kind as the lag strong what's would increase stumpage. full - front the to us, see of foremost, I we look in think, in beginning from likely to when in last to expecting And, the right we we're the and to of to of higher do update a stumpage QX year.

market. an As update on you based know, there I quarter, stumpage mean, is every on

as in come going to a environment markets may get think more down, December, that and I change of So lot we stable a we're to here. see adjusted be the

the So, a that QX to changing just market changing the somewhat to going to and summarize, December, offset reset by I things likely think stumpage reset is in bring up level and to prices. QX. the higher will We'd expect be to

Hamir Patel

the all in Okay, thanks. That's That's helpful. had. on queue. that. I Thanks get back I'll

Don Demens

Great. Thanks, Hamir.

Operator

ahead. Thank Capital you. from Paul next The RBC Quinn question go from Please Markets. is

Your line is open.

Paul Quinn

thanks, Yeah, guys, morning. good

Don Demens

Paul. morning, Good

Stephen Williams

Good morning, Paul.

Paul Quinn

but specialty Just much niche. you lumber a been prices have volatile, pretty guys of operate

so to average. XQ drop price QX the seeing of you're in what wondering Just far a in from terms date

Don Demens

markets. different in operate we indicated, you've as So

we back QX I commodities. going pretty were So, to America North and into just into think heavily skewed

to you're to see think between norms specialty mix, going us historic on return I more commodity. our forward, and Going

markets, they market When good than some else the seen stability didn't seeing export On look the buyers commodity right not side, with North much North to as America, the the levels. seeing different in significant once And, did. price lots see once as strength or challenges returns we're market. of we've to anyone as American of we repositioning established is in are a to the the bottom's wait now Japan. sales getting really rise But anything

we've demand looking a lumber. into hard worked to Japan. lot really higher customers stronger And a has And, China to in a pretty for production environment price customer try who've our been adjusted our meet and schedules of with have We been stable.

been as we've So well. moving volume there

and the I relatively now. to markets, of think commodity been and we're redirecting China Japan volume we're maintain North that Paul, seeing in the to we summarize, America, export specialty way, And not in items look have some So, different of space pricing. still right anything strong, when

Paul Quinn

early side, Okay. the With And of here cubic you at conditions log then, and dry end fiery coast QX. this the on the inventory side. meters sort of on XXX,XXX mentioned season

fact, logging been periodically. suspended has In

slightly Is it average. Just currently. sits than same? said it where lower still wondering And the you

Don Demens

XXX,XXX to the Well, end on at the you're interrupted We're logging have less get yeah, harvesting, the of right. and logs operations just market. at up to so been load quarter, coast and haul to

significant we So really haven't a on of as yet. inventories seen impact

third think permit would in entered quarter, downtime. the we all meters to coast piece of of for say with the logs tight traditionally or would pretty Couple market XXX,XXX think, the there's I think, some amount that going that right kind the However, lower kind operators. been challenges of. And, here. the the we I entered than would And I quarter going across significant - of be forward through are the

Paul Quinn

Okay.

your some do that? that anything Is there to looks ability there Given balance sheet, you've out M&A. in promising? got What's

Don Demens

Yeah.

we So focused remain on growth. to continue

the I of some or all growth to been we're cognizant continue the And to valuations pretty are going valuations acquisitions. darn have are currently. And, on of value opportunities. We think higher recently

strong Our along mostly you working hard focus, Japan. we're developing X-way specialty in in a on really manufacturing, as recall, Northwest Pacific the relationship and with is

lines Cedar. product As Cedar lines, Japanese to expand and our we expand including start our product

elevated and manufacturing, U.S. invest remains and activity. Japan we So Current things hard we're our from be specialty really are, really on about would valuations working these Northwest Focus business. time. M&A take an going I Pacific suggest, prudent where and to

Paul Quinn

subject you percentage doing? growth are logging. old operations the newspaper every logging old any areas lastly, under Okay. to blockades? what are always that your of growth you're - there day article the of in about is an And currently that goes And by, How there's

Don Demens

Yeah.

it front. to old think, government growth So, on expand BC I'll the policy I front, the maybe

You're right.

the every Southern there's in Huu-ay-aht feels on. deferrals have First and to Nation Current are around it with like XX. to close limited growth our related - joint to not close the as there's venture Bank every think, second day, TFL our although, something I impacted old partnership day, business, going operations, our issues

the and of real work regular consistent and support government. maintain forest and issues, sustainable we're we based dialogue long think, levels well their I our growth to pretty all history with around tenures think, initiatives to positioned area-based of I upon And, management. old

and working story great So we've we've got developed And in got great XX. we've success Nations there. TFL a story ownership success First with template a the

a our positioning but to there's story relative day, certainly I kind I think, - can environment. think we to and in a challenging successful like I this of relative others, So, even be

Paul Quinn

Okay. That's Best luck. all I had. of

Don Demens

Great. Thanks, Paul.

Operator

Instructions] Thank [Operator Securities. is The next TD from Please Steuart question sir. go ahead, from Sean you.

line Your is open.

Sean Steuart

Thanks. morning, guys. Good

Don Demens

Hey, Sean.

Sean Steuart

you of thinking XX% back the mix I on gauge, more quarters? little from year. move And the quarter? be this on previous from down sales a morning. And I the range the mix to, ago, should can do mid-XX% that away Is Good back the grades. gradual the questions. the sales you a that Don, shipments can over a think that of a we you in trying of progression as one I'm I X towards was wanted was range? half have X, back about X, the repositioning think follow-up suggestion, bit to Do year over going you touched commodity And it that to percentage commodity flexibility much quickly

Don Demens

think you was Sean, that on back out think, Well, cutting strike production. I going and about coming and talk I the or value of our XX%, when focus Yeah. XX% think, custom high I to

were - to what So and we I do. think restricted

try high will in where, consider there's shipments Japan, mix And the going drop probably should we'll products. you back into XX-XX XX-XX, think a as more it - for range, so, increase know, to premium I quality be we're you our to to the and right?

order delivered with for plan looking building And think so, them. We're were the that that's who I we've I work going support, really and for file Japan, really customers, think, through forward. and focused by on supply our encouraged our

you'll So for sure. getting into see back Japan, us

Sean Steuart

shipments suggested I to volatile, wanted in, I we know grades dial on a hanging able And Cedar. market sometimes to hang the that. much that your the now? move, in not able more not to track ability Red you are those move as of in prices Can the into in for prices. is really volume when prices with but specifically, And into All but strong price that not resilience are right on markets well. Western you industry you're bit Thanks sustain comment strength and North to America the strong

Don Demens

And Yeah, you're there is exactly a few things happening cedar. right. in

entering a where typically see part, slower the can weather, has it's cedar. and most the quarter, back then little at third demand in the break especially the as a we get does pick We're the resilient. quarter pricing Historically, up take cooler the where For the here States, quarter the to part market been middle decline gets in of of and right hot end United into projects. a people

expand cedar in of of new be Japanese far. expect coast increasing think So it's seeing the this Cedar, the Maybe of to for date more less developing our Overall, to is I in than for impact Demand year mitigating be just product Cedar the you, year, volumes nothing years. hung a seasonal been thing. Yellow than to Japanese but so Cedar. less bringing focus different we're normal. lines cedar by Sean, past our and Pricing it, has there production is - and customers we to our probably weaker, on there. harvest on And of volumes

there no real longer-term substitute So Cedar. And I high cedar in cedar applications. we're know, and is think outdoor for positioned quality in you as natural well

a longer-term, So, segment. seasonal. hung little outdoor think short-term, I got, seeing And we've demand, less Pricing there. well positioned we're living that's in yeah, in the is we're

Sean Steuart

have. Thanks, all That's That's great detail. Don. I

Don Demens

Sean. Thanks, Great.

Operator

registered further Demens. the like Mr. over to would to now back time. no I are meeting turn There questions at you. this Thank

Don Demens

to any results November. third Have your and we a quarter with in I you day. your Great. Thanks in today. on and a Steve great support. your company for the interest our our you call questions continued lot. have Thanks, follow-up if time forward Paul. And are look both sharing thanks, Appreciate and everyone, available

Operator

disconnect lines Thank has now conference you Please ended. thank for The this time. And we participation. you. at your your

Don Demens

Operator?

Operator

to Yes, want the you the you do back to pre-conference? Demens, Mr. pre-conference, me transfer to

Don Demens

no, Thank your much you great a afternoon. No, we're good. Have very time. for

Operator

Oh, very much. thank you

well great again. a have and as day. all Yourself your Thanks, team,

Don Demens

Bye-bye. Great.

Operator

Goodbye. Bye, Mr. Williams.

Western Forest Products (WFSTF) 8 Aug 212021 Q2 Earnings call transcript