West Fraser(US:WFG)2025-10-22 21:02Financial Performance - Q3-25 sales decreased to $1,307 million from $1,437 million in Q3-24, representing a decline of 9% year-over-year[25] - Adjusted EBITDA for Q3-25 was $(144) million, compared to $62 million in Q3-24, indicating a significant decrease[25] - Operating earnings for Q3-25 were $(275) million, a decline from $72 million in Q3-24[25] - Q3-25 sales decreased to $1,307 million from $1,532 million in Q2-25, primarily due to lower OSB and lumber pricing[26] - Q3-25 earnings reported a loss of $204 million, a significant decline from a loss of $24 million in Q2-25[26] - Lumber segment sales in Q3-25 were $551 million, down from $639 million in Q2-25, with operating loss increasing to $169 million from $31 million[27] - Adjusted EBITDA for the Lumber segment was $(123) million in Q3-25, a decrease of $138 million compared to Q2-25[27] - Adjusted EBITDA for the NA EWP Segment decreased by $83 million compared to Q2-25, decreased by $137 million compared to Q3-24, and decreased by $440 million from YTD-24[69] - Sales in the Pulp & Paper Segment decreased to $82 million in Q3-25 from $92 million in Q2-25 and from $86 million in Q3-24[71] - Operating earnings for the Pulp & Paper Segment decreased by $5 million compared to Q2-25, $8 million compared to Q3-24, and $13 million from YTD-24[81] - Q3-25 Adjusted EBITDA was $(144) million, a decrease from $84 million in Q2-25 and $62 million in Q3-24[180] - Year-to-date (YTD) Adjusted EBITDA for 2025 stands at $135 million, compared to $533 million in YTD 2024[180] Market Conditions - The U.S. housing starts averaged 1.31 million units in August 2025, showing a decrease from 1.37 million units in 2024[11] - The company anticipates that aging housing stock will stimulate renovation and repair spending in the medium to long term[12] - The North American wood products industry is experiencing a protracted period of oversupply, impacting future supply capabilities[13] - The company expects medium to long-term demand for new home construction in North America to be supported by improved housing affordability and an aging housing stock[113] - In Europe and the U.K., the company anticipates industry demand to improve but remain challenging in the near term, with long-term growth expected as OSB use increases[115] Production and Operations - The Henderson, Texas lumber manufacturing facility is expected to reach a capacity of 275 MMfbm, doubling the existing mill's capacity[23] - A fire at the Cowie production facility during Q3-25 caused a five-week shutdown of particleboard production[24] - SPF production in Q3-25 was 650 MMfbm, comparable to Q2-25, while shipments were 684 MMfbm, slightly down from 696 MMfbm in Q2-25[29] - OSB production volumes decreased due to incremental reductions in operating schedules and higher downtime related to capital projects and weather impacts[65] - OSB shipment volumes decreased to 1,619 MMsf in Q3-25 from 1,710 MMsf in Q2-25, reflecting weaker demand[64] - The ramp-up of the new Henderson mill is expected to contribute to incremental production levels in the near term[195] Costs and Expenses - The final ADD rate of 9.65% and CVD rate of 16.82% resulted in an incremental duty expense of $67 million[16] - Export duty expense increased to $87 million in Q3-25, up from $21 million in Q2-25, primarily due to the finalization of AR6 duty rates[43] - Cost of products sold decreased from Q2-25 by $13 million, attributed to lower shipment volumes and a favorable inventory valuation adjustment[35] - Cost of products sold increased in Q3-25 due to higher NBSK shipment volumes, higher repairs and maintenance costs, and higher labor costs, partially offset by a $4 million favorable impact from inventory valuation adjustments and CAD weakening against USD[77] - The cost of products sold in the Pulp & Paper Segment decreased to $73 million in Q3-25 from $76 million in Q2-25[71] Shareholder Returns and Liquidity - As of September 26, 2025, available liquidity was $1,566 million, down from $1,685 million at the end of 2024[138] - The company has repurchased 1,240,030 common shares under the 2025 NCIB program as of October 21, 2025[150] - The total anticipated cash payment of dividends in 2025 is $101 million based on the latest declared quarterly dividend rate of $0.32 per share[130] - The company has paid a dividend in every quarter since becoming public in 1986 and expects to continue this practice[130] - The company returned $40 million and $121 million to shareholders through common share repurchases in Q3-25 and year-to-date 2025, respectively, compared to $39 million and $117 million in the same periods of 2024[165] Debt and Financing - Total debt increased to $367 million in September 2025 from $265 million in December 2024, resulting in a total debt to capital ratio of 5%[186] - The company’s credit facilities include a $1 billion committed revolving credit facility, which was renewed and extended to May 2030[141] - The company received $100 million from the amendment of its term loan facility, increasing the total to $300 million, maturing in May 2028[164] Strategic Outlook and Risks - The company aims to maintain a strong balance sheet and return capital to shareholders while pursuing opportunistic acquisitions and larger-scale growth initiatives[195] - The company is facing uncertainties related to housing affordability and demand for its products due to potential increases in interest rates and inflation[196] - Risks associated with international trade, including tariff actions and government policies, could significantly impact the company's profitability and operational results[197] - The company is monitoring geopolitical conflicts and their potential impact on demand and pricing for its products[195] - The anticipated capital expenditures for 2025 remain in the range of $400 million to $450 million, focusing on optimization and automation projects[126] - The company plans to focus on optimization and automation projects, as well as greenhouse gas emissions reduction in its capital expenditures[191]