West Fraser(US:WFG)2024-10-23 21:02Financial Performance - For Q3 2024, West Fraser reported sales of $1,437 million, a decrease from $1,705 million in Q2 2024 and $1,705 million in Q3 2023[20]. - The company recorded an operating loss of $108 million in Q3 2024, compared to an operating profit of $132 million in Q2 2024 and $184 million in Q3 2023[20]. - Adjusted EBITDA for Q3 2024 was $62 million, down from $272 million in Q2 2024 and $325 million in Q3 2023[20]. - Lumber sales decreased to $518 million in Q3-24 from $616 million in Q2-24, and from $613 million in Q3-23, with year-to-date sales at $1.733 billion compared to $1.906 billion in YTD-23[23]. - Adjusted EBITDA for Q3-24 was a loss of $62 million, down from a loss of $51 million in Q2-24 and a profit of $44 million in Q3-23, reflecting a decrease of $149 million compared to YTD-23[26]. - Operating earnings for the Lumber segment in Q3 2024 were reported at a loss of $126 million, while the NA EWP segment generated earnings of $50 million[196]. - Adjusted EBITDA for Q3 2024 was $62 million, a decrease from $159 million in Q3 2023, reflecting a year-over-year decline of 61%[195]. - Year-to-date Adjusted EBITDA for 2024 reached $533 million, compared to $464 million for the same period in 2023, indicating a 15% increase[198]. Production and Sales Volumes - SPF production volumes decreased by 11% from Q2-24 and 6% from Q3-23 due to the closure of the Fraser Lake lumber mill, impacting annual capacity by 160 million board feet[32]. - SYP production volumes decreased by 15% from Q2-24, 18% from Q3-23, and 10% from YTD-23 due to operational curtailments and mill closures[34]. - SPF shipment volumes were 689 million board feet in Q3-24, down from 799 million board feet in Q2-24, but comparable to 678 million board feet in Q3-23[30]. - OSB production volumes decreased from Q2-24 due to higher unscheduled downtime, but increased from Q3-23 and YTD-23 due to ramp-up of the Allendale mill[64]. Costs and Expenses - Cost of products sold decreased to $494 million in Q3-24 from $590 million in Q2-24, and from $551 million in Q3-23, influenced by lower shipment volumes and log costs[35]. - Selling, general and administration costs decreased to $34 million in Q3-24 from $37 million in Q2-24, and from $41 million in Q3-23, due to reduced corporate overhead allocation[48]. - The unfavorable impact from inventory valuation adjustments in Q3-24 was $3 million compared to Q2-24 and Q3-23[69]. - Freight and other distribution costs decreased in Q3-24 due to lower fuel costs and favorable changes in customer geographic mix[70]. - Cost of products sold increased from Q2-24 due to higher fibre costs and maintenance costs, but decreased compared to Q3-23 and YTD-23 primarily due to pulp mill disposals[80]. Market Conditions - The U.S. housing starts averaged 1.35 million units in September 2024, with permits issued averaging 1.43 million units, indicating a stabilization in new housing construction[9]. - The pricing environment for SYP lumber has weakened compared to SPF and OSB products, influenced by subdued demand in repair and remodeling applications[10]. - The company anticipates that an aging housing stock and stabilization of inflation and interest rates will stimulate renovation and repair spending in the medium to long term[10]. - The overall price variance resulted in a decrease in operating earnings of $22 million compared to Q2-24 and $70 million compared to Q3-23[26]. Debt and Liquidity - The company repaid $300 million in senior notes on October 15, 2024, using cash on hand[18]. - Available liquidity as of September 27, 2024, was $2,042 million, an increase from $1,954 million as of December 31, 2023[145]. - The company has a $200 million term loan maturing in July 2025, with interest payable at floating rates based on Base Rate Advances or SOFR Advances[152]. - Interest rate swaps were amended in January 2024, extending their maturity to July 2025, with a new weighted average fixed interest rate of 2.61%, up from 0.91%[153]. Shareholder Actions - The company has repurchased 1,414,985 Common shares under the 2024 NCIB, leaving 2,556,395 available for purchase until February 28, 2025[134]. - The company repurchased 1,907,510 common shares for cancellation under its 2023 NCIB program and 446,460 shares under its 2024 NCIB program[160][161]. - Cash used in financing activities increased to $39 million for Q3-24 due to common share repurchases, compared to no cash used for repurchases in the same period of 2023[175]. Tax and Financial Reporting - Income tax recovery of $26 million was recorded in Q3-24, compared to an expense of $34 million in Q2-24 and $56 million in Q3-23[112]. - The tax provision for Q3 2024 was a recovery of $26 million, contrasting with a provision of $34 million in Q2 2024[195]. - The company maintained no changes in internal control over financial reporting during the three months ended September 27, 2024[186]. Strategic Initiatives - The indefinite curtailment of the Lake Butler Lumber Mill will reduce U.S. lumber capacity by approximately 110 million board feet annually, with restructuring and impairment charges of $18 million recorded in Q3 2024[15]. - Anticipated capital expenditures for 2024 are narrowed to approximately $475 million to $525 million, focusing on optimization and automation projects[132]. - The modernization of the Henderson, Texas lumber manufacturing facility is expected to be ready for ramp-up in the first half of 2025, with a ramp-up period of 18 to 24 months[132]. - The company continues to expect long-term demand growth for its European products as the use of OSB as an alternative to plywood increases[122].