West Fraser Timber Co. Ltd. (NYSE:WFG) Q3 2022 Earnings Conference Call October 27, 2022 11:30 AM ET Company Participants Ray Ferris - President & Chief Executive Officer Chris Virostek - Senior Vice President & Chief Financial Officer Chris McIver - Senior Vice President, Marketing & Corporate Development Conference Call Participants Sean Stewart - TD Securities Hamir Patel - CIBC Capital Markets Mark Wilde - BMO Paul Quinn - RBC Operator Good morning, ladies and gentlemen, and welcome to the West Fraser Q ...

INVESTOR PRESENTATION October 2022 Financial Information: The financial information related to West Fraser contained in this Presentation is derived from our Q3 2022 Interim Financial Statements, which have been prepared in accordance with International Financial Reporting Standards ("IFRS") and is discussed in our Managements' Discussion and Analysis ("MD&A") for the three and nine months ended September 30, 2022 (our "Q3 2022 MD&A"). Additional information is also discussed in our MD&A for year ended Dece ...

INVESTOR PRESENTATION July 2022 West Fraser Financial Information: The financial information related to West Fraser contained in this Presentation is derived from our Q2 2022 Interim Financial Statements, which have been prepared in accordance with International Financial Reporting Standards ("IFRS") and is discussed in our Managements' Discussion and Analysis ("MD&A") for the three and six months ended June 30, 2022 (our "Q2 2022 MD&A"). Additional information is also discussed in our MD&A for year ended D ...

West Fraser Timber Co. Ltd. (NYSE:WFG) Q2 2022 Earnings Conference Call July 28, 2022 11:30 AM ET Company Participants Ray Ferris - President and Chief Executive Officer Chris Virostek - Chief Financial Officer Chris McIver - Senior Vice President, Marketing and Corporate Development Conference Call Participants Sean Steuart - TD Hamir Patel - CIBC Mark Wilde - BMO Paul Quinn - RBC Operator Good morning, ladies and gentlemen, and welcome to the West Fraser Q2 2022 Results Conference Call. At this time, all ...

[Management's Discussion & Analysis Introduction](index=1&type=section&id=MANAGEMENT%27S%20DISCUSSION%20%26%20ANALYSIS%20INTRODUCTION) The MD&A covers financial performance for Q2 and YTD 2022, prepared in accordance with IAS 34 Interim Financial Reporting - The MD&A covers financial performance for Q2 and YTD 2022, prepared in accordance with IAS 34 Interim Financial Reporting[1](index=1&type=chunk)[2](index=2&type=chunk) - The report utilizes various Non-GAAP and other specified financial measures, including **"Adjusted EBITDA"**, **"available liquidity"**, **"total debt to capital ratio"**, **"net debt to capital ratio"**, **"expected capital expenditures"**, and **"expected potential synergies from Norbord acquisition"**, which are explained in a dedicated section[2](index=2&type=chunk) - Dollar amounts are expressed in U.S. currency unless otherwise indicated, and the information is current as of July 27, 2022[4](index=4&type=chunk) [Our Business and Strategy](index=1&type=section&id=OUR%20BUSINESS%20AND%20STRATEGY) West Fraser is a diversified wood products company with facilities across North America and Europe, focusing on cost control, sustainability, and a conservative financial approach - West Fraser is a diversified wood products company with facilities in Canada, the U.S., the U.K., and Europe, manufacturing lumber, engineered wood products (OSB, LVL, MDF, plywood, particleboard), pulp, newsprint, wood chips, and renewable energy[5](index=5&type=chunk) - The company's strategy emphasizes cost control, responsible and sustainable operations, and a financially conservative approach to generate strong financial results through business cycles[6](index=6&type=chunk) - West Fraser joined the Science Based Targets Initiative (SBTi) in Q1 2022, committing to setting specific science-based targets for near-term greenhouse gas reductions across all its operations[9](index=9&type=chunk) - The company aims to maintain a strong balance sheet and liquidity, along with an investment-grade debt rating, to execute a balanced capital allocation strategy, reinvest in operations, capitalize on growth opportunities (including acquisitions), and return capital to shareholders[10](index=10&type=chunk) [Recent Developments](index=3&type=section&id=RECENT%20DEVELOPMENTS) Recent developments include U.S. housing market trends, demand for repair and remodeling products, and details of the 2022 Substantial Issuer Bid - U.S. housing starts averaged **1.56 million units** in June 2022, with permits at **1.69 million units**, facing near-term headwinds from rising interest rates and potential impact on affordability[11](index=11&type=chunk) - Demand for repair and remodeling products showed signs of easing in Q1 2022 but experienced a healthy recovery in Q2 2022 as wood product prices retreated from elevated levels[12](index=12&type=chunk) 2022 Substantial Issuer Bid (SIB) Details | Metric | Value | | :--- | :--- | | Shares Offered to Purchase | Up to $1.25 billion | | Tender Price Range | $80.00 to $95.00 per share | | Shares Purchased | 11,898,205 Common shares | | Purchase Price per Share | $95.00 | | Aggregate Purchase Price | $1.13 billion | | % of Outstanding Shares Repurchased | ~11.7% | - Since the Norbord acquisition (Feb 1, 2021), West Fraser has repurchased **36,745,718 Common shares**, equating to **67%** of shares issued for the acquisition[15](index=15&type=chunk) [Second Quarter Results](index=4&type=section&id=SECOND%20QUARTER%20RESULTS) Second quarter results show decreased earnings primarily due to lower lumber and OSB pricing, despite higher shipment volumes, with increased log and input costs Summary Financial Results (Q2-22 vs. Q1-22, YTD-22, Q2-21, YTD-21) | ($ millions) | Q2-22 | Q1-22 | YTD-22 | Q2-21 | YTD-21 | | :--- | :--- | :--- | :--- | :--- | :--- | | Sales | $2,887 | $3,110 | $5,997 | $3,779 | $6,122 | | Operating earnings | $981 | $1,427 | $2,408 | $1,986 | $2,865 | | Earnings | $762 | $1,090 | $1,852 | $1,488 | $2,153 | | Adjusted EBITDA | $1,124 | $1,592 | $2,716 | $2,160 | $3,168 | Selected Quarterly Financial Amounts (Q2-22 vs. Prior Quarters) | ($ millions, unless otherwise indicated) | Q2-22 | Q1-22 | Q4-21 | Q3-21 | Q2-21 | Q1-21 | Q4-20 | Q3-20 | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Sales | $2,887 | $3,110 | $2,038 | $2,358 | $3,779 | $2,343 | $1,294 | $1,268 | | Earnings | $762 | $1,090 | $334 | $460 | $1,488 | $665 | $282 | $262 | | Basic EPS (dollars) | $7.66 | $10.35 | $3.13 | $4.20 | $12.32 | $6.96 | $4.09 | $3.82 | | Diluted EPS (dollars) | $7.59 | $10.25 | $3.13 | $4.20 | $12.32 | $6.96 | $4.09 | $3.82 | - The decrease in Q2-22 earnings is primarily due to decreases in lumber and OSB pricing, partially offset by higher shipment volumes, while Western Canada log costs and other input costs have significantly increased over the past two years[17](index=17&type=chunk) [Discussion & Analysis by Product Segment](index=5&type=section&id=Discussion%20%26%20Analysis%20by%20Product%20Segment) This section provides a detailed financial and operational analysis of the Lumber, North America EWP, Pulp & Paper, and Europe EWP segments [Lumber Segment](index=5&type=section&id=Lumber%20Segment) The Lumber Segment experienced lower sales and earnings in Q2 2022 compared to prior periods, primarily due to decreased product pricing, despite higher shipment volumes quarter-over-quarter Lumber Segment Earnings (Q2-22 vs. Q1-22, YTD-22, Q2-21, YTD-21) | ($ millions unless otherwise indicated) | Q2-22 | Q1-22 | YTD-22 | Q2-21 | YTD-21 | | :--- | :--- | :--- | :--- | :--- | :--- | | Sales | $1,326 | $1,501 | $2,827 | $1,839 | $3,139 | | Operating earnings | $405 | $750 | $1,155 | $955 | $1,562 | | Earnings before tax | $414 | $738 | $1,152 | $940 | $1,549 | | Adjusted EBITDA | $449 | $796 | $1,245 | $994 | $1,640 | | SPF Production (MMfbm) | 691 | 701 | 1,392 | 867 | 1,705 | | SPF Shipments (MMfbm) | 790 | 619 | 1,409 | 950 | 1,698 | | SYP Production (MMfbm) | 776 | 770 | 1,546 | 688 | 1,373 | | SYP Shipments (MMfbm) | 809 | 750 | 1,559 | 678 | 1,319 | - Lumber sales for Q2-22 and YTD-22 were lower than comparative periods primarily due to lower product pricing, partially offset by higher shipment volumes compared to Q1-22[20](index=20&type=chunk) - SPF shipment volumes increased QoQ due to easing transportation constraints but decreased YoY due to more pronounced railcar shortages[21](index=21&type=chunk) - SYP shipment volumes increased QoQ and YoY, driven by improved truck services, the Angelina lumber mill acquisition (Q4 2021), and ramp-up of the Dudley, Georgia mill[22](index=22&type=chunk) Lumber Segment Adjusted EBITDA Variance ($ millions) | Metric | Q1-22 to Q2-22 | Q2-21 to Q2-22 | YTD-21 to YTD-22 | | :--- | :--- | :--- | :--- | | Adjusted EBITDA - comparative period | $796 | $994 | $1,640 | | Price | $(365) | $(461) | $(239) | | Volume | $86 | $(24) | $(27) | | Changes in export duties | $11 | $56 | $66 | | Changes in costs | $(83) | $(107) | $(153) | | Other | $4 | $(9) | $(42) | | Adjusted EBITDA - current period | $449 | $449 | $1,245 | - SPF log costs in Q2-22 were higher QoQ due to increased costs in Alberta and unabsorbed fixed costs from curtailed logging, and higher YoY due to increased stumpage rates and hauling/fuel costs[31](index=31&type=chunk) - SYP log costs increased across all comparative periods due to increased competition[32](index=32&type=chunk) - Export duty expense was lower than comparative periods due to a lower estimated ADD rate and lower pricing, partially offset by higher softwood lumber volume shipped to the U.S[34](index=34&type=chunk) Softwood Lumber Dispute - CVD and ADD Rates (Selected Periods) | Effective dates for CVD | Cash Deposit Rate | AR POI Final Rate | | :--- | :--- | :--- | | April 28, 2017 - August 24, 2017 | 24.12 % | 6.76 % | | January 1, 2018 - December 31, 2018 | 17.99 % | 7.57 % | | January 1, 2019 - December 31, 2019 | 17.99 % | 5.08 % | | January 1, 2020 - November 30, 2020 | 17.99 % | n/a | | January 1, 2021 - December 1, 2021 | 7.57 % | n/a | | January 10, 2022 – June 30, 2022 | 5.08 % | n/a | | **Effective dates for ADD** | **Cash Deposit Rate** | **AR POI Final Rate** | **West Fraser Estimated Rate** | | June 30, 2017 - December 3, 2017 | 6.76 % | 1.40 % | 1.46 % | | January 1, 2018 - December 31, 2018 | 5.57 % | 1.40 % | 1.46 % | | January 1, 2019 - December 31, 2019 | 5.57 % | 6.06 % | 4.65 % | | January 1, 2020 - November 29, 2020 | 5.57 % | n/a | 3.40 % | | January 1, 2021 - December 1, 2021 | 1.40 % | n/a | 6.80 % | | January 1, 2022 - June 30, 2022 | 6.06 % | n/a | 0.80 | - Preliminary results for AR3 (2020) indicate a potential U.S. dollar recovery of **$43 million**, with a revised combined cash deposit rate of **13.09%** if finalized[42](index=42&type=chunk) - AR4 (2021) commenced in March 2022, with West Fraser selected as a mandatory respondent[43](index=43&type=chunk) [North America Engineered Wood Products Segment](index=9&type=section&id=North%20America%20Engineered%20Wood%20Products%20Segment) The NA EWP segment experienced decreased sales and earnings in Q2 2022 compared to Q1 2022 and Q2 2021, primarily due to lower OSB and plywood pricing, despite increased OSB shipment volumes NA EWP Segment Earnings (Q2-22 vs. Q1-22, YTD-22, Q2-21, YTD-21) | ($ millions unless otherwise indicated) | Q2-22 | Q1-22 | YTD-22 | Q2-21 | YTD-21 | | :--- | :--- | :--- | :--- | :--- | :--- | | Sales | $1,165 | $1,217 | $2,382 | $1,581 | $2,362 | | Operating earnings | $545 | $647 | $1,192 | $1,017 | $1,316 | | Earnings before tax | $548 | $651 | $1,199 | $1,016 | $1,314 | | Adjusted EBITDA | $623 | $730 | $1,353 | $1,106 | $1,459 | | OSB Production (MMsf 3/8" basis) | 1,590 | 1,517 | 3,107 | 1,634 | 2,659 | | OSB Shipments (MMsf 3/8" basis) | 1,568 | 1,429 | 2,997 | 1,585 | 2,595 | | Plywood Production (MMsf 3/8" basis) | 179 | 181 | 360 | 209 | 411 | | Plywood Shipments (MMsf 3/8" basis) | 166 | 167 | 333 | 213 | 404 | - Sales decreased QoQ due to lower OSB pricing, partially offset by increased OSB shipment volumes[52](index=52&type=chunk) - Sales decreased YoY (Q2-21) due to lower OSB and plywood pricing[53](index=53&type=chunk) - YTD-22 sales increased due to an additional month of OSB shipments and the ramp-up of the Chambord OSB mill[53](index=53&type=chunk) - North American OSB prices decreased in Q2-22 due to buyer caution regarding interest rates and inflation[55](index=55&type=chunk) - Plywood and MDF pricing increased due to orders exceeding supply, limited by supply chain constraints[55](index=55&type=chunk) NA EWP Segment Adjusted EBITDA Variance ($ millions) | Metric | Q1-22 to Q2-22 | Q2-21 to Q2-22 | YTD-21 to YTD-22 | | :--- | :--- | :--- | :--- | | Adjusted EBITDA - comparative period | $730 | $1,106 | $1,459 | | Price | $(137) | $(358) | $(150) | | Volume | $56 | $(40) | $110 | | Changes in costs | $(26) | $(85) | $(53) | | Other | $0 | $0 | $(13) | | Adjusted EBITDA - current period | $623 | $623 | $1,353 | - Costs of products sold increased QoQ due to higher OSB shipment volumes and higher fibre/input costs (especially resin)[59](index=59&type=chunk) - Costs increased YoY due to higher fibre/input costs, partially offset by improved productivity[59](index=59&type=chunk) [Pulp & Paper Segment](index=11&type=section&id=Pulp%20%26%20Paper%20Segment) The Pulp & Paper segment reported a loss before tax and negative Adjusted EBITDA in Q2 2022, despite increased sales compared to Q1 2022 due to higher shipment volumes and pulp pricing Pulp & Paper Segment Earnings (Q2-22 vs. Q1-22, YTD-22, Q2-21, YTD-21) | ($ millions unless otherwise indicated) | Q2-22 | Q1-22 | YTD-22 | Q2-21 | YTD-21 | | :--- | :--- | :--- | :--- | :--- | :--- | | Sales | $213 | $171 | $384 | $216 | $393 | | Operating earnings | $(11) | $(37) | $(48) | $17 | $19 | | Earnings (loss) before tax | $(8) | $(38) | $(46) | $18 | $19 | | Adjusted EBITDA | $(3) | $(15) | $(18) | $25 | $36 | | Pulp Production (Mtonnes) | 245 | 219 | 464 | 288 | 564 | | Pulp Shipments (Mtonnes) | 256 | 239 | 495 | 279 | 555 | - Sales increased QoQ due to higher shipment volume and pulp pricing[68](index=68&type=chunk) - Sales were comparable YoY as increased pulp pricing was offset by lower shipment volumes[68](index=68&type=chunk) - Pulp production increased QoQ as transportation issues eased but decreased YoY due to planned annual maintenance shutdowns and reduced operating schedules[70](index=70&type=chunk)[71](index=71&type=chunk) Pulp & Paper Segment Adjusted EBITDA Variance ($ millions) | Metric | Q1-22 to Q2-22 | Q2-21 to Q2-22 | YTD-21 to YTD-22 | | :--- | :--- | :--- | :--- | | Adjusted EBITDA - comparative period | $(15) | $25 | $36 | | Price | $29 | $17 | $35 | | Volume | $2 | $(4) | $(7) | | Changes in costs | $(15) | $(33) | $(64) | | Other | $(4) | $(8) | $(18) | | Adjusted EBITDA - current period | $(3) | $(3) | $(18) | - Costs of products sold increased across all comparative periods due to higher shipments, planned annual maintenance shutdowns, and increased energy and chemical costs[72](index=72&type=chunk) - A **$13 million** impairment charge was recorded in Q1-22 for equipment to be decommissioned as part of the Hinton pulp mill's transition to UKP, which remains on track[74](index=74&type=chunk) [Europe Engineered Wood Products Segment](index=13&type=section&id=Europe%20Engineered%20Wood%20Products%20Segment) The Europe EWP segment reported decreased sales and Adjusted EBITDA in Q2 2022 compared to Q1 2022, primarily due to the strengthening USD against GBP and lower shipment volumes Europe EWP Segment Earnings (Q2-22 vs. Q1-22, YTD-22, Q2-21, YTD-21) | ($ millions unless otherwise indicated) | Q2-22 | Q1-22 | YTD-22 | Q2-21 | YTD-21 | | :--- | :--- | :--- | :--- | :--- | :--- | | Sales | $207 | $241 | $448 | $178 | $290 | | Operating earnings | $42 | $61 | $103 | $15 | $9 | | Earnings before tax | $45 | $59 | $104 | $14 | $8 | | Adjusted EBITDA | $54 | $78 | $132 | $39 | $50 | | OSB Production (MMsf 3/8" basis) | 281 | 281 | 562 | 318 | 522 | | OSB Shipments (MMsf 3/8" basis) | 278 | 296 | 574 | 307 | 533 | | USD - GBP Average Exchange Rate | 0.7961 | 0.7451 | 0.7698 | 0.7151 | 0.7202 | - Sales decreased QoQ due to the strengthening USD against GBP and lower shipment volumes, despite increased local currency product pricing[79](index=79&type=chunk) - Sales increased YoY due to higher product pricing[79](index=79&type=chunk) - Shipment volumes decreased QoQ and YoY due to reductions in operating schedules to balance inventory as sales demand in Europe softened[80](index=80&type=chunk) Europe EWP Segment Adjusted EBITDA Variance ($ millions) | Metric | Q1-22 to Q2-22 | Q2-21 to Q2-22 | YTD-21 to YTD-22 | | :--- | :--- | :--- | :--- | | Adjusted EBITDA - comparative period | $78 | $39 | $50 | | Price | $13 | $74 | $145 | | Volume | $(21) | $(14) | $14 | | Changes in costs | $(11) | $(41) | $(73) | | Other | $(5) | $(4) | $(4) | | Adjusted EBITDA - current period | $54 | $54 | $132 | - Costs of products sold increased YoY due to increases in input costs, with energy and resin being the most significant components, driven by availability constraints and rising natural gas costs[83](index=83&type=chunk) [Discussion & Analysis of Specific Items](index=15&type=section&id=Discussion%20%26%20Analysis%20of%20Specific%20Items) This section analyzes specific financial items including selling, general and administration costs, equity-based compensation, finance expense, other income, income tax, and comprehensive earnings [Selling, general and administration](index=15&type=section&id=Selling%2C%20general%20and%20administration) Selling, general and administration costs for Q2-22 decreased QoQ but increased YoY and YTD, primarily due to higher salaries, professional fees, and additional operating expenses Selling, General and Administration Costs ($ millions) | Period | Amount | | :--- | :--- | | Q2-22 | $87 | | Q1-22 | $94 | | Q2-21 | $73 | | YTD-22 | $181 | | YTD-21 | $151 | - SG&A costs increased compared to Q2-21 and YTD-21 due to higher salaries and wages, increased professional fees for integration activities, and the inclusion of an additional month of OSB team operating expenses[90](index=90&type=chunk) [Equity-based compensation](index=15&type=section&id=Equity-based%20compensation) The company recorded a recovery in Q2-22 and YTD-22 for equity-based compensation, reflecting a decrease in share price, contrasting with expenses in prior periods Equity-based Compensation (Recovery/Expense) ($ millions) | Period | Amount | | :--- | :--- | | Q2-22 | $1 (recovery) | | Q1-22 | $5 (recovery) | | Q2-21 | $(12) (expense) | | YTD-22 | $6 (recovery) | | YTD-21 | $(19) (expense) | - The recoveries in Q2-22 and YTD-22 reflect a decrease in the company's share price during those periods[94](index=94&type=chunk) [Finance expense, net](index=15&type=section&id=Finance%20expense%2C%20net) Net finance expense decreased QoQ due to higher interest income and was lower YoY due to the redemption of Norbord senior notes in Q2-21 - Finance expense, net decreased compared to Q1-22 due to higher interest income on short-term investments[96](index=96&type=chunk) - Finance expense, net was higher in Q2-21 and YTD-21 due to additional interest on Norbord senior notes, which were redeemed in Q2-21[96](index=96&type=chunk) [Other Income/Expense](index=15&type=section&id=Other) Other income for the Corporate & Other segment in Q2-22 and YTD-22 was primarily driven by mark-to-market gains on interest rate swap contracts and foreign exchange gains Other Income (Corporate & Other Segment) ($ millions) | Period | Amount | | :--- | :--- | | Q2-22 | $6 | | Q1-22 | $1 | | Q2-21 | $8 | | YTD-22 | $7 | | YTD-21 | $4 | - Other income in the current period primarily relates to mark-to-market gains on interest rate swap contracts and foreign exchange gains on CAD-denominated monetary assets and liabilities[97](index=97&type=chunk) [Income Tax](index=15&type=section&id=Income%20tax) Income tax expense for Q2-22 was $240 million with an effective tax rate of 24%, consistent with Q1-22 and prior year periods Income Tax Expense and Effective Tax Rate ($ millions) | Period | Income Tax Expense | Effective Tax Rate | | :--- | :--- | :--- | | Q2-22 | $240 | 24% | | Q1-22 | $330 | 23% | | Q2-21 | $478 | 24% | | YTD-22 | $570 | 24% | | YTD-21 | $683 | 24% | [Other Comprehensive Earnings – Translation of Foreign Operations](index=17&type=section&id=Other%20comprehensive%20earnings%20%E2%80%93%20translation%20of%20foreign%20operations) The company recorded a translation loss in Q2-22 and YTD-22, reflecting a strengthening of the USD against the British pound sterling and Euro, impacting European EWP operations Translation Gain/Loss ($ millions) | Period | Amount | | :--- | :--- | | Q2-22 | $(51) (loss) | | Q1-22 | $(20) (loss) | | Q2-21 | $0 | | YTD-22 | $(71) (loss) | | YTD-21 | $1 (gain) | - The translation loss in Q2-22 and YTD-22 reflects a strengthening of the USD against both the British pound sterling and Euro[102](index=102&type=chunk) [Other Comprehensive Earnings – Actuarial Gains/Losses on Retirement Benefits](index=17&type=section&id=Other%20comprehensive%20earnings%20%E2%80%93%20actuarial%20gains%2Flosses%20on%20retirement%20benefits) The company recorded an after-tax actuarial gain in Q2-22 and YTD-22, primarily due to an increase in the discount rate for plan liabilities, partially offset by lower asset returns After-tax Actuarial Gain/Loss ($ millions) | Period | Amount | | :--- | :--- | | Q2-22 | $69 (gain) | | Q1-22 | $94 (gain) | | Q2-21 | $(4) (loss) | | YTD-22 | $163 (gain) | | YTD-21 | $85 (gain) | - The gains in Q2-22 and YTD-22 reflect an increase in the discount rate used to calculate plan liabilities, offset in part by lower returns on plan assets[104](index=104&type=chunk) [Outlook and Operations](index=17&type=section&id=OUTLOOK%20AND%20OPERATIONS) This section outlines the business outlook, operational challenges, Norbord integration progress, and cash flow expectations, including revised shipment guidance and capital expenditure forecasts [Business Outlook](index=17&type=section&id=Business%20Outlook) The company anticipates sustained medium- to longer-term demand for wood products in North America and Europe, alongside growing pulp demand, despite near-term economic headwinds and ongoing trade disputes - Medium- and longer-term demand for North American lumber, OSB, and wood panel products is expected to be supported by aging housing stock, lagging new home construction completions, work-from-home trends, and growing market penetration of mass timber[106](index=106&type=chunk) - Near-term demand for new home construction and wood products may be reduced if interest rates continue to rise and housing affordability is impacted[107](index=107&type=chunk) - European EWP demand is expected to remain robust longer-term, driven by OSB's growth as a plywood alternative and repair/renovation spending, despite near-term challenges from rising interest rates, geopolitical developments, and inflation[108](index=108&type=chunk) - Pulp demand is anticipated to grow longer-term due to increasing boxboard and tissue production in Asia and greater substitution of single-use plastics[109](index=109&type=chunk) - The Hinton mill is transitioning to UKP by end of 2022, offering environmental benefits and benefiting from increased demand for UKP in packaging[109](index=109&type=chunk) - The Softwood Lumber Dispute continues, with CVD and ADD duties in place since April 2017[110](index=110&type=chunk) - Preliminary AR3 duty rates were issued in Q1-22 and are expected to be finalized in August 2022, while AR4 commenced in March 2022 with final rates expected in August 2023[110](index=110&type=chunk) [Operations](index=18&type=section&id=Operations) Operations face challenges from rising interest rates, transportation issues, softening demand, labor shortages, and inflation, leading to revised shipment guidance and increased costs for the Allendale OSB facility restart - Operations are negatively affected by increases in interest rates, transportation availability, softening demand, labor availability, the Ukraine conflict, inflationary pressures (energy prices), adverse weather, intense competition for logs, elevated stumpage fees, and production disruptions[111](index=111&type=chunk) 2022 Shipment Guidance Updates | Product | Original Guidance | Revised Guidance | Reason for Change | | :--- | :--- | :--- | :--- | | SPF Lumber | 2.8 to 3.0 billion board feet | Closer to bottom end of range | Acute and longer-duration transportation challenges in Western Canada | | SYP Lumber | 3.0 to 3.2 billion board feet | Reiterated at 3.0 to 3.2 billion board feet | No change | | NA EWP OSB | 6.1 to 6.4 billion square feet | 5.9 to 6.2 billion square feet | Transportation and logistics constraints, slowing demand | | Europe EWP OSB | 1.1 to 1.3 billion square feet | 1.0 to 1.2 billion square feet | Reduced expectations | - The Allendale OSB facility restart project's capital investment is expected to increase by approximately **10%** from the original **$70 million** estimate, and project completion is shifted to the end of Q1 2023, due to inflationary cost pressures and supply chain challenges[113](index=113&type=chunk) - Elevated inflationary cost pressures and availability constraints for labor, transportation, raw materials (resins, chemicals), and energy are expected to persist through 2022[115](index=115&type=chunk) [Norbord Integration](index=19&type=section&id=Norbord%20Integration) The Norbord business integration is progressing well, with the company on track to achieve targeted annual synergies of $61 million by the end of 2022 - The integration of the Norbord business is progressing well, with targeted annual synergies of **$61 million** expected to be achieved by the end of 2022[117](index=117&type=chunk) [Cash Flows (Outlook)](index=19&type=section&id=Cash%20Flows%20(Outlook)) Operating cash flows and available liquidity are expected to support capital spending, with 2022 capital expenditures anticipated at the lower end of the $500-$600 million range, alongside significant share repurchases and increased dividends - Operating cash flows and available liquidity are expected to support capital spending, with 2022 capital expenditures anticipated to be nearer the bottom end of the **$500-$600 million** guidance range[117](index=117&type=chunk) - The company aims to maintain its investment-grade debt rating and preserve sufficient liquidity to capitalize on strategic growth opportunities[117](index=117&type=chunk) - During Q2-22, the company purchased **$1.13 billion** of Common shares under the 2022 SIB and increased its quarterly dividend to **$0.30 per share** from **$0.25 per share**[118](index=118&type=chunk)[120](index=120&type=chunk) [Liquidity and Capital Resources](index=20&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) This section details West Fraser's liquidity, capital resources, credit facilities, long-term debt, debt ratings, and shareholder equity, including share repurchases and options [Liquidity and Capital Resource Measures](index=20&type=section&id=Liquidity%20and%20Capital%20Resource%20Measures) As of June 30, 2022, West Fraser's available liquidity decreased to $2,334 million, while its total debt to total capital ratio remained at 7% and net debt to total capital improved to (10%) Summary of Liquidity and Debt Ratios ($ millions, except as otherwise indicated) | Metric | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Cash and short-term investments | $1,281 | $1,568 | | Operating lines available | $1,053 | $1,025 | | **Available liquidity** | **$2,334** | **$2,593** | | Total debt to total capital | 7% | 7% | | Net debt to total capital | (10%) | (16%) | [Credit Facilities](index=20&type=section&id=Credit%20Facilities) As of June 30, 2022, West Fraser maintained $1 billion in committed revolving credit, $35 million in uncommitted U.S. facilities, and an $18 million European facility, all undrawn, with $135 million supporting letters of credit - As of June 30, 2022, the company had a **$1 billion** committed revolving credit facility (maturing July 2026), **$35 million** in uncommitted U.S. facilities, and an **$18 million** European facility, all of which were undrawn[124](index=124&type=chunk)[125](index=125&type=chunk) - Credit facilities totaling **$135 million** supported **$61 million** in letters of credit as of June 30, 2022[126](index=126&type=chunk) [Long-Term Debt](index=20&type=section&id=Long-Term%20Debt) West Fraser's long-term debt includes $300 million of 4.35% senior unsecured notes due October 2024 and a $200 million 5-year term loan maturing August 2024, with interest rates fixed via swap agreements - Long-term debt includes **$300 million** of **4.35%** fixed-rate senior unsecured notes due October 2024[127](index=127&type=chunk) - A **$200 million** 5-year term loan matures on August 25, 2024, with interest payable at floating rates[128](index=128&type=chunk) - The company uses interest rate swap agreements with a total notional amount of **$200 million** to fix the interest rate on the term loan through August 2024, at rates of **1.78%** and **0.51%**[129](index=129&type=chunk) [Debt Ratings](index=21&type=section&id=Debt%20Ratings) West Fraser holds investment-grade debt ratings from DBRS (BBB Stable), Moody's (Baa3 Stable), and Standard & Poor's (BBB- Stable) as of July 27, 2022 Debt Ratings (as at July 27, 2022) | Agency | Rating | Outlook | | :--- | :--- | :--- | | DBRS | BBB | Stable | | Moody's | Baa3 | Stable | | Standard & Poor's | BBB- | Stable | [Shareholder's Equity](index=21&type=section&id=Shareholder%27s%20Equity) As of July 26, 2022, West Fraser had 86,551,490 shares outstanding, comprising Common and Class B Common shares, with Class B shares being exchangeable one-for-one for Common shares - As of July 26, 2022, total issued and outstanding shares were **86,551,490**, consisting of **84,270,012 Common shares** and **2,281,478 Class B Common shares**[132](index=132&type=chunk) - Class B Common shares are equal to Common shares in all respects, including dividends and voting rights, and are exchangeable on a one-for-one basis for Common shares[133](index=133&type=chunk) [Share Repurchases](index=21&type=section&id=Share%20Repurchases) West Fraser renewed its NCIB in February 2022, authorizing repurchases of up to 10,194,000 Common shares, and completed a 2022 SIB purchasing 11,898,205 Common shares for $1.13 billion - The NCIB was renewed on February 23, 2022, authorizing the repurchase of up to **10,194,000 Common shares** until February 22, 2023[135](index=135&type=chunk) Share Repurchases (2021-2022) | Program | Period | Common Shares | Average Price (USD) | | :--- | :--- | :--- | :--- | | NCIB | Feb 17, 2021 - Dec 31, 2021 | 7,059,196 | $74.60 | | 2021 SIB | Aug 20, 2021 | 10,309,278 | $76.84 | | NCIB | Jan 1, 2022 - Jun 30, 2022 | 6,694,346 | $83.76 | | 2022 SIB | Jun 7, 2022 | 11,898,205 | $95.00 | - The 2022 SIB resulted in the purchase of **11,898,205 Common shares** at **$95.00 per share** for an aggregate of **$1.13 billion**, representing approximately **11.7%** of total outstanding shares[138](index=138&type=chunk) [Share Options](index=22&type=section&id=Share%20Options) As of July 26, 2022, 917,745 share purchase options were outstanding, with exercise prices ranging from CAD$31.77 to CAD$123.63 per Common share - As of July 26, 2022, **917,745 share purchase options** were outstanding, with exercise prices ranging from **CAD$31.77** to **CAD$123.63 per Common share**[140](index=140&type=chunk) [Cash Flow](index=23&type=section&id=Cash%20Flow) This section analyzes cash flows from operating, financing, and investing activities, highlighting changes in earnings, tax payments, share repurchases, and capital expenditures [Operating Activities](index=24&type=section&id=Operating%20Activities) Cash provided by operating activities decreased in Q2-22 and YTD-22 due to lower earnings and higher income tax payments, with working capital decreasing from lower receivables and inventory Cash Provided by Operating Activities ($ millions) | Period | 2022 | 2021 | | :--- | :--- | :--- | | Three Months Ended June 30 | $1,064 | $1,886 | | Six Months Ended June 30 | $1,627 | $2,348 | - Cash provided by operating activities was lower in Q2-22 and YTD-22 versus comparative periods due primarily to lower earnings and higher income tax payments[144](index=144&type=chunk) - Income tax payments were higher in YTD-22 (**$844 million**) primarily due to payments for 2021 results and increased 2022 tax installments[145](index=145&type=chunk) - Working capital decreased in Q2-22 due to decreases in accounts receivable (lower product pricing) and inventory (reduced logging, clearing backlogs)[146](index=146&type=chunk)[147](index=147&type=chunk) [Financing Activities](index=24&type=section&id=Financing%20Activities) Cash used in financing activities significantly increased in Q2-22 and YTD-22, primarily driven by substantial common share repurchases under the 2022 SIB and higher dividend payments Cash Used for Financing Activities ($ millions) | Period | 2022 | 2021 | | :--- | :--- | :--- | | Three Months Ended June 30 | $(1,515) | $(1,000) | | Six Months Ended June 30 | $(1,732) | $(1,109) | - Cash used in financing activities increased in Q2-22 compared to Q2-21 primarily due to additional common share repurchases and higher dividends paid, offset by lower repayments of long-term debt[149](index=149&type=chunk) - The company returned **$1,475 million** (Q2-22) and **$1,664 million** (YTD-22) to shareholders through common share repurchases under NCIB and SIB programs, significantly higher than prior year[150](index=150&type=chunk) - Dividends paid increased to **$26 million** (Q2-22) and **$47 million** (YTD-22) due to an increase in the dividend amount per share[151](index=151&type=chunk) [Investing Activities](index=24&type=section&id=Investing%20Activities) Cash used for investing activities increased in Q2-22 and YTD-22 due to higher capital expenditures for mill reinvestment, contrasting with the prior year's Norbord acquisition which included acquired cash Cash Provided by (Used for) Investing Activities ($ millions) | Period | 2022 | 2021 | | :--- | :--- | :--- | | Three Months Ended June 30 | $(86) | $(64) | | Six Months Ended June 30 | $(178) | $518 | Capital Expenditures by Segment ($ millions) | Segment | Q2-22 | Q2-21 | YTD-22 | YTD-21 | | :--- | :--- | :--- | :--- | :--- | | Lumber | $25 | $26 | $58 | $60 | | North America EWP | $44 | $29 | $102 | $49 | | Pulp & Paper | $13 | $6 | $14 | $10 | | Europe EWP | $5 | $4 | $6 | $8 | | Corporate | $1 | $1 | $1 | $1 | | **Total** | **$88** | **$66** | **$181** | **$128** | - Capital expenditures increased to **$88 million** in Q2-22 and **$181 million** YTD-22, reflecting continued reinvestment in mills[153](index=153&type=chunk) [Risks and Uncertainties](index=25&type=section&id=RISKS%20AND%20UNCERTAINTIES) The company's business is subject to various risks and uncertainties, as detailed in its Annual MD&A and updated in quarterly disclosures and public filings - The company's business is subject to a number of risks and uncertainties, which are included in its Annual MD&A and updated in quarterly MD&A disclosures and public filings[155](index=155&type=chunk) [Controls and Procedures](index=25&type=section&id=CONTROLS%20AND%20PROCEDURES) This section addresses the company's disclosure controls and procedures, and internal controls over financial reporting, confirming their design for reasonable assurance and no material changes [Disclosure Controls and Procedures](index=25&type=section&id=Disclosure%20Controls%20and%20Procedures) The company's disclosure controls and procedures are designed to ensure timely and accurate recording, processing, summarizing, and reporting of required information to management - Disclosure controls and procedures are designed to provide reasonable assurance that required information is recorded, processed, summarized, and reported within specified time periods[157](index=157&type=chunk) [Internal Controls and Procedures](index=25&type=section&id=Internal%20Controls%20and%20Procedures) Management is responsible for maintaining adequate internal control over financial reporting to ensure reliable financial reporting and IFRS-compliant consolidated financial statements, with no material changes in Q2 2022 - Management is responsible for establishing and maintaining adequate internal control over financial reporting to provide reasonable assurance regarding the reliability of financial reporting and IFRS-compliant consolidated financial statements[158](index=158&type=chunk) - No material change in internal controls over financial reporting occurred during the three months ended June 30, 2022[159](index=159&type=chunk) [Definitions, Reconciliations, and Other Information](index=26&type=section&id=DEFINITIONS%2C%20RECONCILIATIONS%2C%20AND%20OTHER%20INFORMATION) This section provides definitions, reconciliations, and other important information, including Non-GAAP financial measures, a glossary of terms, forward-looking statements, and additional information sources [Non-GAAP and Other Specified Financial Measures](index=26&type=section&id=Non-GAAP%20and%20Other%20Specified%20Financial%20Measures) This section defines and explains Non-GAAP Financial Measures, Capital Management Measures, and Supplementary Financial Measures, emphasizing they are not IFRS standardized alternatives [Adjusted EBITDA and Adjusted EBITDA by Segment](index=26&type=section&id=Adjusted%20EBITDA%20and%20Adjusted%20EBITDA%20by%20Segment) Adjusted EBITDA is defined as IFRS earnings adjusted for finance expense, tax, amortization, equity-based compensation, restructuring, impairment, and other items, with a similar definition for segment-level reporting - Adjusted EBITDA is defined as earnings determined in accordance with IFRS, adding back finance expense, tax provision, amortization, equity-based compensation, restructuring and impairment charges, and other[162](index=162&type=chunk) - Adjusted EBITDA by segment is defined as segment earnings before tax, adding back finance expense, amortization, equity-based compensation, restructuring and impairment charges, and other for that segment[163](index=163&type=chunk) Reconciliation of Quarterly Adjusted EBITDA to Earnings ($ millions) | ($ millions) | Q2-22 | Q1-22 | YTD-22 | Q2-21 | YTD-21 | | :--- | :--- | :--- | :--- | :--- | :--- | | Earnings | $762 | $1,090 | $1,852 | $1,488 | $2,153 | | Finance expense, net | $3 | $7 | $10 | $20 | $33 | | Tax provision | $240 | $330 | $570 | $478 | $683 | | Amortization | $144 | $157 | $301 | $162 | $284 | | Equity-based compensation | $(1) | $(5) | $(6) | $12 | $19 | | Impairment charges | $0 | $13 | $13 | $0 | $0 | | Other | $(24) | $0 | $(24) | $0 | $(4) | | **Adjusted EBITDA** | **$1,124** | **$1,592** | **$2,716** | **$2,160** | **$3,168** | [Available Liquidity](index=28&type=section&id=Available%20liquidity) Available liquidity is defined as the sum of cash, short-term investments, and funds available under committed and uncommitted bank credit facilities - Available liquidity is the sum of cash and short-term investments and funds available under committed and uncommitted bank credit facilities[170](index=170&type=chunk) Available Liquidity ($ millions) | Metric | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Cash and short-term investments | $1,281 | $1,568 | | Operating lines available | $1,053 | $1,025 | | **Available liquidity** | **$2,334** | **$2,593** | [Total Debt to Total Capital Ratio](index=28&type=section&id=Total%20debt%20to%20total%20capital%20ratio) The total debt to total capital ratio is calculated as total debt divided by total capital, expressed as a percentage - Total debt to total capital ratio is total debt divided by total capital (sum of total debt plus total equity), expressed as a percentage[172](index=172&type=chunk) Total Debt to Capital ($ millions) | Metric | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Total debt | $596 | $595 | | Shareholders' equity | $7,856 | $7,656 | | **Total Capital** | **$8,452** | **$8,251** | | **Total debt to capital** | **7%** | **7%** | [Net Debt to Capital Ratio](index=29&type=section&id=Net%20debt%20to%20capital%20ratio) The net debt to capital ratio is calculated as net debt (total debt less cash, equivalents, letters of credit, and swap liabilities) divided by total capital (net debt plus total equity) - Net debt to capital ratio is net debt (total debt less cash and cash equivalents, open letters of credit, and fair value of interest rate swap liabilities) divided by total capital (net debt plus total equity)[176](index=176&type=chunk) Net Debt to Capital ($ millions) | Metric | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Net Debt | $(746) | $(1,039) | | Shareholders' equity | $7,856 | $7,656 | | **Total Capital** | **$7,110** | **$6,617** | | **Net debt to capital** | **(10%)** | **(16%)** | [Expected Capital Expenditures](index=29&type=section&id=Expected%20capital%20expenditures) Expected capital expenditures represent the best estimate of cash outflows for capital asset additions in the upcoming year, primarily for improvement, maintenance, optimization, automation, and greenhouse gas reduction projects - Expected capital expenditures represent the best estimate of cash outflows for capital asset additions for the upcoming year, primarily for improvement projects, maintenance, optimization, automation, and greenhouse gas reduction[179](index=179&type=chunk) [Expected Synergies from the Norbord Acquisition](index=30&type=section&id=Expected%20synergies%20from%20the%20Norbord%20Acquisition) Expected synergies from the Norbord Acquisition represent the best estimate of revenue and cost synergies realized through integration, including reduced overhead, optimized operations, and procurement savings - Expected synergies from the Norbord Acquisition represent the best estimate of revenue and cost synergies from integration, realized through reduced corporate overhead, optimized sales/transportation, procurement savings, and shared operational best practices[181](index=181&type=chunk) [Glossary of Key Terms](index=30&type=section&id=Glossary%20of%20Key%20Terms) This glossary defines various capitalized terms, abbreviations, and acronyms used throughout the MD&A to ensure clarity and consistent understanding - The glossary defines key terms, abbreviations, and acronyms used in the MD&A, such as ADD (Antidumping duty), CVD (Countervailing duty), EWP (Engineered wood products), IFRS (International Financial Reporting Standards), OSB (Oriented strand board), SPF (Spruce/pine/balsam fir lumber), and SYP (Southern yellow pine lumber)[182](index=182&type=chunk)[183](index=183&type=chunk) [Forward-Looking Statements](index=31&type=section&id=Forward-Looking%20Statements) This section provides a cautionary note on forward-looking statements, outlining management's expectations and the inherent risks and uncertainties that could cause actual results to differ materially - Forward-looking statements are predictive in nature, reflecting management's expectations regarding operations, business, financial condition, results, and outlook, identified by words like "expects," "anticipates," "plans," and "will"[184](index=184&type=chunk) - Key forward-looking statements cover corporate strategy, market outlook, administrative review of export duty rates, projected lumber and OSB shipments, operating costs, Norbord integration synergies, and expected cash flows and capital expenditures[185](index=185&type=chunk)[186](index=186&type=chunk) - These statements involve numerous assumptions, inherent risks, and uncertainties, including economic and financial conditions, interest rate increases, inflation, global supply chain issues, competition, input costs, transportation availability, and regulatory changes[186](index=186&type=chunk)[187](index=187&type=chunk) [Additional Information](index=33&type=section&id=Additional%20Information) This section directs readers to the company's website, SEDAR, and EDGAR for additional information, noting that third-party data has not been independently verified - Additional information on West Fraser, including Annual Information Forms and other public filings, is available on the company's website (www.westfraser.com), SEDAR (www.sedar.com), and EDGAR (www.sec.gov/edgar.shtml)[189](index=189&type=chunk) - Third-party information in the MD&A is believed to be reliable but has not been independently verified for accuracy or completeness[190](index=190&type=chunk)

INVESTOR PRESENTATION April 2022 West Fraser Financial Information: The financial information related to West Fraser contained in this Presentation is derived from our Q1 2022 Interim Financial Statements, which have been prepared in accordance with International Financial Reporting Standards ("IFRS") and is discussed in our Managements' Discussion and Analysis ("MD&A") for the three months ended March 31, 2022 (our "Q1 2022 MD&A"). Additional information is also discussed in our MD&A for year ended Decembe ...

West Fraser Timber Co. Ltd. (NYSE:WFG) Q1 2022 Earnings Conference Call April 29, 2022 11:30 AM ET Company Participants Ray Ferris - President and Chief Executive Officer Chris Virostek - Chief Financial Officer Chris McIver - Senior Vice President, Marketing and Corporate Development Conference Call Participants Sean Steuart - TD Securities Hamir Patel - CIBC Capital Markets Mark Wilde - BMO Paul Quinn - RBC Capital Markets Operator Good morning, ladies and gentlemen and welcome to West FraserÂ's Q1 2022 R ...

Management's Discussion & Analysis [Introduction, Business, and Strategy](index=1&type=section&id=INTRODUCTION) West Fraser, a diversified wood products company, pursues strong financial results through cost control and a strong balance sheet, acknowledging industry cyclicality and currency volatility - West Fraser is a diversified wood products company with manufacturing facilities in **Canada, the U.S., the U.K., and Europe**[5](index=5&type=chunk) - The company's core strategy emphasizes **cost control**, operating responsibly and sustainably, and maintaining a **strong, investment-grade balance sheet** to navigate market cycles and fund growth[6](index=6&type=chunk)[10](index=10&type=chunk) - Earnings are **highly sensitive** to cyclical world economic conditions, particularly the **U.S. housing market**, and are subject to volatility from **foreign exchange rate fluctuations**[7](index=7&type=chunk) [Recent Developments](index=3&type=section&id=RECENT%20DEVELOPMENTS) Q1 2022 saw North American housing fundamentals tempered by rising rates, significant Canadian transportation challenges leading to production curtailments, a **$13 million** Hinton mill impairment, and a **$1.25 billion** share repurchase bid - The U.S. housing market remained supportive with starts at **1.79 million units** in March 2022, but rising interest rates and inflation pose risks to demand for new construction and remodeling[11](index=11&type=chunk)[12](index=12&type=chunk) - Logistics and transportation challenges in Canada, including rail service availability and weather issues, negatively impacted the ability to ship products, forcing production reductions at several facilities[13](index=13&type=chunk) - The Hinton pulp mill will permanently reduce capacity by shutting one of its two production lines and transitioning to Unbleached Kraft Pulp, leading to a **$13 million** impairment charge[15](index=15&type=chunk) - On April 26, 2022, the company launched a substantial issuer bid (SIB) to purchase up to **$1.25 billion** of its Common shares via a "modified Dutch auction"[17](index=17&type=chunk)[18](index=18&type=chunk) [First Quarter 2022 Results](index=5&type=section&id=FIRST%20QUARTER%20RESULTS) West Fraser reported strong Q1 2022 financial results with sales of **$3.11 billion** and earnings of **$1.09 billion**, driven by higher pricing despite transportation issues, resulting in **$1.59 billion** Adjusted EBITDA Q1 2022 Financial Summary | ($ millions) | Q1-22 | Q4-21 | Q1-21 | | :--- | :--- | :--- | :--- | | **Sales** | $3,110 | $2,038 | $2,343 | | **Operating earnings** | $1,427 | $450 | $879 | | **Earnings** | $1,090 | $334 | $665 | | **Adjusted EBITDA** | $1,592 | $615 | $1,008 | - The earnings trend improved through Q4-21 and Q1-22 due to **strong product pricing**, although gains were partially offset by transportation disruptions, particularly impacting rail service in Western Canada[20](index=20&type=chunk) [Segment Performance Analysis](index=6&type=section&id=Discussion%20%26%20Analysis%20by%20Product%20Segment) The Lumber and North America EWP segments drove Q1 earnings with higher pricing, while Europe EWP performed strongly, and Pulp & Paper reported a loss due to transportation and cost challenges [Lumber Segment](index=6&type=section&id=Lumber%20Segment) The Lumber segment's Adjusted EBITDA surged to **$796 million** in Q1 2022, driven by higher pricing despite transportation disruptions impacting SPF shipments, with log costs rising and a potential **$43 million** duty recovery from the Softwood Lumber Dispute Lumber Segment Financials (Q1-22) | ($ millions) | Q1-22 | Q4-21 | Q1-21 | | :--- | :--- | :--- | :--- | | **Sales** | $1,501 | $888 | $1,300 | | **Operating earnings** | $750 | $195 | $607 | | **Adjusted EBITDA** | $796 | $240 | $646 | - Higher lumber pricing was the main driver of increased earnings, contributing a **$541 million** increase to **Adjusted EBITDA** compared to Q4-21 and **$222 million** compared to Q1-21[26](index=26&type=chunk) - SPF production and shipments decreased due to transportation disruptions in Western Canada, while SYP production and shipments increased, partly due to the acquisition of the Angelina lumber mill[23](index=23&type=chunk)[24](index=24&type=chunk)[29](index=29&type=chunk)[30](index=30&type=chunk) - Preliminary results from the AR3 review of softwood lumber duties for the 2020 calendar year indicate a potential future recovery of **$43 million** for West Fraser[45](index=45&type=chunk) [North America Engineered Wood Products (NA EWP) Segment](index=11&type=section&id=North%20America%20Engineered%20Wood%20Products%20Segment) The NA EWP segment achieved **$730 million** Adjusted EBITDA, driven by higher OSB and plywood pricing despite sequential volume decreases from railcar shortages, with overall costs increasing due to higher input prices NA EWP Segment Financials (Q1-22) | ($ millions) | Q1-22 | Q4-21 | Q1-21 | | :--- | :--- | :--- | :--- | | **Sales** | $1,217 | $834 | $781 | | **Operating earnings** | $647 | $270 | $299 | | **Adjusted EBITDA** | $730 | $343 | $353 | - Higher OSB and plywood pricing drove the segment's performance, contributing a **$434 million** increase to **Adjusted EBITDA** compared to Q4-21[56](index=56&type=chunk) - OSB shipment volumes decreased from Q4-21 due to limited railcar availability in Western Canada and Ontario but increased from Q1-21 due to the inclusion of an additional month of shipments post-**Norbord acquisition**[54](index=54&type=chunk) - Cost of products sold increased compared to Q1-21 due to higher costs for wood and other inputs like resins, wax, and energy[59](index=59&type=chunk) [Pulp & Paper Segment](index=13&type=section&id=Pulp%20%26%20Paper%20Segment) The Pulp & Paper segment reported a **$38 million** loss and negative **$15 million** Adjusted EBITDA in Q1 2022, impacted by a **$13 million** Hinton mill impairment, lower shipments due to railcar shortages, and increased fibre and freight costs Pulp & Paper Segment Financials (Q1-22) | ($ millions) | Q1-22 | Q4-21 | Q1-21 | | :--- | :--- | :--- | :--- | | **Sales** | $171 | $159 | $177 | | **Earnings (loss) before tax** | $(38) | $(25) | $1 | | **Adjusted EBITDA** | $(15) | $(14) | $11 | - A **$13 million** impairment charge was recorded for equipment at the Hinton, Alberta pulp mill as part of its transition to Unbleached Kraft Pulp (UKP)[73](index=73&type=chunk) - Pulp shipments were adversely impacted by railcar shortages and port backlogs, leading to production curtailments to manage inventory levels[67](index=67&type=chunk)[69](index=69&type=chunk) - Costs increased due to higher fibre, supplies, and energy costs, as well as higher freight costs from substituting trucking for rail services[70](index=70&type=chunk)[71](index=71&type=chunk) [Europe Engineered Wood Products (Europe EWP) Segment](index=14&type=section&id=Europe%20Engineered%20Wood%20Products%20Segment) The Europe EWP segment achieved strong **$78 million** Adjusted EBITDA, driven by increased shipment volumes from seasonal demand recovery and normalized production, alongside higher product pricing and an additional month of operations post-**Norbord acquisition** Europe EWP Segment Financials (Q1-22) | ($ millions) | Q1-22 | Q4-21 | Q1-21 | | :--- | :--- | :--- | :--- | | **Sales** | $241 | $184 | $112 | | **Earnings before tax** | $59 | $36 | $(6) | | **Adjusted EBITDA** | $78 | $61 | $11 | - Shipment and production volumes increased significantly compared to Q4-21, which was impacted by a seasonal slowdown and a major maintenance shutdown at the Genk, Belgium facility[79](index=79&type=chunk)[81](index=81&type=chunk) - Compared to Q1-21, higher product pricing was the primary driver of improved results, contributing a **$90 million** increase to **Adjusted EBITDA**[80](index=80&type=chunk) - Input costs, particularly for resins, increased year-over-year, driven by availability constraints and rising natural gas costs[83](index=83&type=chunk) [Non-Operational Items Analysis](index=16&type=section&id=Discussion%20%26%20Analysis%20of%20Non-Operational%20Items) Non-operational items include an equity-based compensation recovery due to share price decrease, a **23%** effective tax rate, and a **$94 million** actuarial gain on retirement plans from increased discount rates - A recovery was recognized in equity-based compensation in Q1-22 due to a decrease in the company's share price during the quarter[89](index=89&type=chunk) - The effective tax rate was **23%** in Q1-22, compared to **24%** in both Q4-21 and Q1-21[93](index=93&type=chunk) - An after-tax actuarial gain of **$94 million** was recorded on retirement benefit plans, reflecting an increase in the discount rate used to calculate liabilities, partially offset by lower returns on plan assets[98](index=98&type=chunk) [Outlook and Operations](index=18&type=section&id=OUTLOOK%20AND%20OPERATIONS) The company anticipates robust wood product demand but faces risks from rising rates and transportation challenges, leading to a reduced SPF lumber shipment forecast, while Norbord integration is on track for **$61 million** synergies and **$500-$600 million** capital spending - The 2022 SPF lumber shipment forecast has been reduced from **3.0-3.2 billion board feet** to **2.8-3.0 billion board feet** due to acute and prolonged transportation challenges in Western Canada[106](index=106&type=chunk) - The 2022 OSB shipment outlook is maintained at **6.1-6.4 billion square feet**, but input costs for both NA and Europe EWP segments are expected to increase more significantly than anticipated, primarily due to higher energy costs[107](index=107&type=chunk)[108](index=108&type=chunk) - The **Norbord integration** is progressing well and is on track to achieve targeted annual synergies of **$61 million** by the end of 2022[112](index=112&type=chunk) - The company anticipates investing approximately **$500 to $600 million** in capital spending in 2022 and increased its quarterly dividend to **$0.25 per share**[112](index=112&type=chunk)[114](index=114&type=chunk) [Liquidity and Capital Resources](index=21&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) West Fraser maintained strong liquidity of **$2.85 billion** and a negative **-18%** net debt to total capital ratio, with Q1 operating cash flow of **$563 million** impacted by tax payments and working capital increases, and **$210 million** returned to shareholders Liquidity and Debt Ratios (as of March 31, 2022) | ($ millions, except as otherwise indicated) | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Cash and short-term investments | $1,816 | $1,568 | | **Available liquidity** | **$2,851** | **$2,593** | | Total debt to total capital | 6% | 7% | | Net debt to total capital | (18%) | (16%) | Q1 2022 Cash Flow Summary | ($ millions) | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Cash provided by operating activities | $563 | $462 | | Cash used for financing activities | $(217) | $(109) | | Cash used for investing activities | $(92) | $582 | - Cash from operations was impacted by a **$456 million** income tax payment (largely a top-up for 2021 earnings) and a combined **$587 million** increase in receivables and inventories[135](index=135&type=chunk)[137](index=137&type=chunk)[138](index=138&type=chunk)[139](index=139&type=chunk) - During Q1 2022, the company returned **$210 million** to shareholders through **$189 million** in share repurchases and **$21 million** in dividends[140](index=140&type=chunk)[141](index=141&type=chunk) [Risks and Uncertainties](index=26&type=section&id=RISKS%20AND%20UNCERTAINTIES) The company's business is subject to various risks and uncertainties detailed in the Annual MD&A and supplemented by new risks identified in this report - The company's business is subject to a number of risks and uncertainties, which are included in the Annual MD&A and this report[144](index=144&type=chunk) [Controls and Procedures](index=26&type=section&id=CONTROLS%20AND%20PROCEDURES) Management confirms responsibility for disclosure controls and internal control over financial reporting, excluding Angelina Forest Products LLC from Q1 2022 scope, with no material changes to ICFR reported - Management has limited the scope of its design of disclosure controls and internal control over financial reporting to exclude Angelina Forest Products LLC, which was acquired on December 1, 2021[146](index=146&type=chunk) - Angelina's contribution to consolidated sales was **2.2%** and to consolidated earnings was **3.5%** for the three months ended March 31, 2022[147](index=147&type=chunk) - No changes in internal controls over financial reporting occurred during Q1 2022 that have materially affected, or are reasonably likely to materially affect, the company's internal controls[150](index=150&type=chunk) [Non-GAAP and Other Specified Financial Measures](index=27&type=section&id=Non-GAAP%20and%20Other%20Specified%20Financial%20Measures) This section defines and reconciles non-GAAP measures like **Adjusted EBITDA** and liquidity ratios, used to evaluate performance and provide investors with additional insight into financial condition - The report uses non-GAAP measures including **Adjusted EBITDA**, **available liquidity**, **total debt to total capital ratio**, and **net debt to total capital ratio** to provide additional performance indicators[152](index=152&type=chunk) - **Adjusted EBITDA** is defined as earnings adding back finance expense, taxes, amortization, equity-based compensation, impairment charges, and other non-recurring items[153](index=153&type=chunk) Reconciliation of Earnings to Adjusted EBITDA | ($ millions) | Q1-22 | Q4-21 | Q1-21 | | :--- | :--- | :--- | :--- | | **Earnings** | **$1,090** | $334 | $665 | | Finance expense, net | 7 | 1 | 13 | | Tax provision | 330 | 104 | 205 | | Amortization | 157 | 153 | 122 | | Equity-based compensation | (5) | 12 | 7 | | Impairment charges | 13 | — | — | | Other | — | 11 | (4) | | **Adjusted EBITDA** | **$1,592** | $615 | $1,008 | [Forward-Looking Statements](index=32&type=section&id=Forward-Looking%20Statements) This section provides a cautionary note on forward-looking statements within the MD&A, identifying future expectations and listing numerous assumptions, risks, and uncertainties that could cause actual results to differ materially - The MD&A contains forward-looking statements regarding operations, financial condition, performance, and outlook[177](index=177&type=chunk) - Key forward-looking statements relate to the impact of interest rates, transportation service timing, completion of share repurchases, demand for products, projected shipments, operating costs, and expected synergies from the **Norbord integration**[178](index=178&type=chunk)[179](index=179&type=chunk) - A comprehensive list of risk factors that could cause actual results to differ is provided, including economic conditions, product pricing, input costs, transportation disruptions, and government policy changes[180](index=180&type=chunk)

INVESTOR PRESENTATION February 2022 West Fraser Financial Information: The financial information related to West Fraser contained in this Presentation is derived from our 2021 Annual Financial Statements, which have been prepared in accordance with International Financial Reporting Standards ("IFRS") and is discussed in our Managements' Discussion and Analysis for the year ended December 31, 2021 (our "2021 Annual MD&A"). This Presentation uses various Non-GAAP and other specified financial measures, includ ...

Financial Data and Key Metrics Changes - In Q4 2021, West Fraser achieved $615 million of adjusted EBITDA, representing a margin of 30% of sales, contributing to a full-year adjusted EBITDA of $4.57 billion, or 43% of sales [5][20] - Cash flow from operations in Q4 was $290 million, with net cash declining to approximately $1 billion after completing two acquisitions for a combined consideration of approximately $580 million [7][20] - The company repurchased $100 million of shares in Q4, totaling $1.3 billion for the full year [7][20] Business Line Data and Key Metrics Changes - The Lumber business saw adjusted EBITDA nearly triple to $240 million in Q4 from the previous quarter, while the North American EWP business generated $343 million of adjusted EBITDA [5][6] - In Europe, adjusted EBITDA was $61 million, marking the second-best result for that business [6] Market Data and Key Metrics Changes - Western Canadian lumber and plywood shipments were down approximately 20% year-over-year in January 2022 due to ongoing logistics and transportation constraints [10][11] - The cash deposit rate for Canadian softwood lumber shipments to the U.S. increased from 8.97% to 11.14% effective January 10, 2022 [9] Company Strategy and Development Direction - The company is focused on capital deployment for shareholder returns and growth opportunities, including the acquisition of Angelina sawmill in Texas and an idled OSB mill in South Carolina [8][20] - West Fraser is committed to sustainability, aiming to reduce scope one and two greenhouse gas emissions by 46% and scope three emissions by 25% by 2030, with an investment of approximately $400 million in greenhouse gas reduction projects [19][20] Management's Comments on Operating Environment and Future Outlook - Management acknowledged unprecedented transportation challenges in Western Canada due to severe flooding, impacting operations and logistics [13][14] - Despite near-term challenges, management remains optimistic about the medium to long-term fundamentals of the Wood Products business, emphasizing the importance of geographic and product diversity [21][22] Other Important Information - The company is actively seeking alternative transportation routes to mitigate shipping constraints and is prepared for potential further reductions in operating schedules [11][12] - Management highlighted the importance of operational excellence and strategic capital projects to enhance productivity and margins [22] Q&A Session Summary Question: Current price surge and inventory levels in North American wood product markets - Management noted a seasonal slowdown in lumber demand in Q4, but a significant uptick was observed moving into Q1 2022, with strong housing and R&R demand expected to continue [26][27] Question: Fiber cost inflation in the U.S. South - Management indicated that fiber costs have seen flat to modest increases, primarily driven by weather events and contractor capacity issues [29][30] Question: Acquisition potential and market value - Management expressed continued interest in the U.S. South for lumber strategy and European markets for potential acquisitions, emphasizing a balanced approach to capital allocation [36][38] Question: Impact of transportation issues on export sales - Management confirmed that transportation issues have disproportionately affected export sales, particularly for products trying to reach ports like Vancouver [41][42] Question: Greenhouse gas reduction targets and capital investment - Management detailed that many projects already incorporate sustainability and GHG considerations, with a focus on energy efficiency and existing capital strategies [81][83] Question: Realization of price increases in January - Management stated that delays in shipping affect the realization of price benefits, making it difficult to comment on current realizations [88][89]