Interfor Investment Highlights - Interfor is a top three softwood lumber producer in North America with 28 strategically located facilities[6] - The company has high exposure to the US South and Eastern Canada with attractive log costs[6] - Interfor has top quartile EBITDA margins and returns on capital employed through the cycle[6] - As of October 1, 2025, Interfor had approximately $386 million of liquidity[6] Market and Operations - Softwood lumber accounted for 81% of Interfor's $3 billion in 2024 revenues[18] - Approximately 75% of Interfor's sales volumes are not exposed to lumber duties or tariffs[19] - Interfor has 47 billion board feet of lumber production capacity, with 50% in the US South, 23% in Eastern Canada, 16% in BC Interior and 12% in US Northwest[26] Lumber Market Fundamentals - Repair & Remodel accounts for 38%, New Home Construction 32%, and Industrial/Commercial/Other 30% of North American lumber demand[35] - Since 2016, nearly 54% of BC industry capacity has been curtailed due to declining log supply[45] - Approximately 25% of Interfor's shipments are exposed to duties[48]

Financial Data and Key Metrics Changes - West Fraser reported an adjusted EBITDA of -$144 million for Q3 2025, indicating continued operation within an extended cycle trough [3] - The company exited the quarter with nearly $1.6 billion in available liquidity and a positive net cash position after debt [4] - Cash flow from operations was $58 million, with a net cash balance of $212 million, down from $310 million in the prior quarter [9] Business Line Data and Key Metrics Changes - The lumber segment posted an adjusted EBITDA of -$123 million in Q3 2025, a significant decline from $15 million in Q2 2025, primarily due to lower pricing and a $67 million duty expense [6] - The North America EWP segment reported an adjusted EBITDA of -$15 million, down from $68 million in the previous quarter, driven by lower OSB pricing [7] - The pulp and paper segment's adjusted EBITDA was -$6 million, compared to -$1 million in Q2, largely due to an annual maintenance shutdown [8] - The Europe business generated $1 million of adjusted EBITDA, similar to the $2 million reported in the second quarter [8] Market Data and Key Metrics Changes - U.S. housing starts averaged 1.31 million units through August, indicating stable but uninspiring levels of new home construction [4] - The company noted subdued demand in repair and remodeling, continuing a trend observed in previous quarters [4] Company Strategy and Development Direction - The company is focused on a defensive capital allocation strategy, leveraging a strong balance sheet to invest countercyclically and pursue investment opportunities [5] - West Fraser has permanently removed 820 million board feet of lumber capacity, representing approximately 12% of its total capacity, to optimize its asset portfolio [11] - The company plans to maintain flexibility in its operating strategy to meet customer needs while driving down costs [12] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about navigating the current challenging macroeconomic conditions, supported by a strong financial position [11] - The company is preparing for a potential recovery in demand while remaining cautious about the timing and nature of such recovery [14] - Management highlighted the importance of quality in potential M&A opportunities, emphasizing a focus on enhancing strength at the bottom of the cycle [24] Other Important Information - The U.S. Department of Commerce announced final softwood lumber duty rates of 26.5%, with West Fraser having the lowest duty rate in the Canadian industry [10] - A 10% Section 232 tariff on imported softwood timber and lumber into the U.S. was imposed, effective October 14, 2025 [10] Q&A Session Summary Question: Approach to managing production in lumber and North America OSB - Management discussed maintaining a variable operating strategy that aligns with economics and customer demand needs, adjusting production as necessary [19] Question: Implied Q4 operating rate for OSB - The implied operating rate for OSB in Q4 is expected to be around 80%, influenced by seasonal maintenance shutdowns [22] Question: M&A opportunities in the current down cycle - Management emphasized a quality-first approach to M&A, focusing on opportunities that enhance the company's strength [23][24] Question: Federal support for the lumber industry - Management noted ongoing discussions with the government regarding support measures for the lumber industry, but specifics were limited [29] Question: Inventory levels in the U.S. channel - Management indicated that their inventory levels are intentionally lean, with customers buying as needed [31][34] Question: Conditions in the Canadian markets - The Canadian market remains competitive, but it does not drive demand as significantly as the U.S. market [46] Question: Capital expenditures outlook - Management indicated that capital expenditures would be discussed in more detail in February 2026, with a focus on operationalizing recent major projects [49] Question: State of the Cowie facility post-fire - The Cowie facility has been repaired and is back up and running, with positive signs in the European segment [50] Question: European lumber imports and OSB demand - Management noted limited visibility on European lumber imports but observed some price improvement and demand growth in OSB [55]

Core Viewpoint - The ongoing "tariff war" is expected to be a significant variable in the fourth quarter of this year, with potential impacts on global trade dynamics and consumer behavior [1]. Group 1: U.S. Tariff Actions - Starting from October 14, the U.S. will impose tariffs ranging from 10% to 25% on imported softwood lumber, upholstered wooden furniture, and finished cabinets/vanities [2]. - Specific tariff rates include 10% on softwood lumber and 10%-25% on upholstered wooden furniture and cabinets, with some rates set to increase in 2026 [2]. - President Trump announced plans to impose an additional 100% tariff on Chinese goods starting November 1, citing China's export controls on rare earths as the reason [2]. Group 2: China’s Response - China has expressed its willingness to engage in dialogue while also indicating readiness to respond to U.S. tariff threats, emphasizing that negotiations should not occur alongside new restrictions [3]. Group 3: EU Tariff Actions - The European Union will impose anti-dumping duties of nearly 90% on hardwood plywood from China starting December 7, 2025, with specific rates for different suppliers [5]. Group 4: Market Reactions and Economic Impact - U.S. stock markets reacted negatively to the tariff news, raising concerns about the impact on global supply chains [7]. - In contrast, the A-share market showed resilience despite initial declines, with China's total trade value reaching 33.61 trillion yuan, a 4% year-on-year increase [7]. - According to Goldman Sachs, U.S. consumers will bear over 55% of the costs associated with the tariffs, while U.S. businesses will absorb 22% [7]. Group 5: Industry-Specific Impacts - The furniture industry is expected to face similar challenges as retailers prepare for the holiday season, with reports indicating a 40% reduction in orders for Halloween costumes due to tariffs [8]. - The shipping market is experiencing price fluctuations, with container shipping rates from Shanghai to the U.S. West Coast showing slight increases, and plans for further rate hikes are in place [9][10].

Group 1: Tariff Announcement and Impact - The announcement of a 25% tariff on all imported medium and heavy trucks to the U.S. starting November 1, 2025, has created significant turmoil in the U.S. automotive industry [1] - In 2022, the U.S. imported nearly 245,000 medium and heavy trucks, with a trade value exceeding $20 billion, indicating substantial revenue potential for the U.S. Treasury but also significant disruption for the industry [1] - The implementation of the tariff was initially set for October 1 but was postponed due to lobbying from automotive manufacturers, highlighting the influence of interest groups in U.S. politics [1] Group 2: Differentiated Impact on Companies - The impact of the new tariff will vary significantly among companies; for instance, International Automotive and Daimler have a high percentage of trucks produced in Mexico, making them particularly vulnerable [2] - In contrast, companies like PACCAR and Volvo, which produce nearly all their trucks domestically, are less affected and may benefit from the tariff situation [2] - Stellantis is actively lobbying for exemptions for its Mexican-produced Ram trucks, while competitors General Motors and Ford oppose this, indicating competitive tensions within the industry [2] Group 3: Broader Trade Policy Context - Trump's tariff policies reflect a broader "America First" ideology aimed at protecting U.S. industries and promoting manufacturing return [3] - The ongoing tariff measures are part of a larger trend of increasing protectionism, with potential implications for global trade dynamics and the risk of retaliatory actions from trade partners [3][4] - The evolving trade landscape poses challenges for companies, particularly Chinese firms, which must navigate the complexities of U.S. protectionism and seek diversified markets [4]

Group 1 - The European Union plans to double the steel import tariff rate to 50%, aligning it with the United States' tariff rate [1][3][4] - Following the announcement, European steel stocks surged, with SSAB rising over 9%, Outokumpu over 8%, and ArcelorMittal over 5% [1][3] - The EU's current temporary mechanism imposes a 25% tariff on most imports once quotas are exhausted, set to expire in June [3][4] Group 2 - The European Automobile Manufacturers Association (ACEA) has warned that the increased tariffs could raise commodity prices and exacerbate inflation, urging for a temporary measure with a re-evaluation [1][5][6] - Recent statistics show that the Eurozone inflation rate rose to 2.2% in September, surpassing the European Central Bank's target of 2% [6] - Concerns have been raised by some EU member states about the potential negative impact on downstream manufacturers due to increased steel prices [6] Group 3 - EU industry officials have indicated that the new regulations will not have a time limit, differing from the current system that is set to expire [4][6] - The proposal requires approval from the European Parliament and a majority of EU member states, with some countries expressing concerns about inflation and competitiveness [6] - The EU's actions are seen as a response to similar measures taken by the United States and Canada regarding steel imports [4][6]

Trade Policy Changes - US to adjust import tariffs on wood, lumber, and processed wood products [1] - 10% ad valorem duty on softwood lumber and boards [1] - 25% ad valorem duty on certain upholstered wood products [1] - Intention to cap tariffs on wood products originating from the EU and Japan at 15% [1] - Wood national security tariff measures to take effect on October 14 [1]

Core Viewpoint - The Canadian government has announced a substantial aid plan of approximately CAD 1.25 billion (around RMB 6.5 billion) to support the lumber industry in response to trade tariff threats from the United States [1][4]. Group 1: Aid Plan Details - The aid plan includes CAD 700 million (approximately USD 508 million) in loan guarantees to ensure softwood lumber companies can secure necessary financing and credit support [2]. - The government aims to reform procurement policies, prioritizing Canadian lumber in government contracts for major infrastructure projects over the next decade [2]. - An investment of CAD 500 million is planned to promote product diversification and market expansion for the lumber industry [2]. - CAD 50 million will be allocated for income support, training, and skill development for over 6,000 workers in the lumber sector [2]. Group 2: Industry Context - The lumber industry in British Columbia is crucial to Canada's economy, housing some of the largest forest product companies [3]. - Approximately two-thirds of Canada's lumber production and nearly 90% of its lumber exports are directed towards the U.S. market, creating a high dependency that poses risks [4]. - The Canadian government opposes the U.S. Department of Commerce's decision to increase anti-dumping duties on Canadian softwood lumber to over 20%, arguing it contradicts the spirit of the North American Free Trade Agreement (NAFTA) [4].

Core Viewpoint - The Canadian government has announced a substantial aid plan of approximately CAD 1.25 billion (around RMB 6.5 billion) to support the lumber industry in response to trade tariff threats from the United States [1][4]. Group 1: Financial Support and Measures - The aid plan includes CAD 700 million (approximately USD 508 million) in loan guarantees to ensure softwood lumber companies can secure necessary financing and credit support [2]. - An additional CAD 500 million will be invested to promote product diversification and market expansion for lumber products [2]. - The government will allocate CAD 50 million for income support, training, and skills development to enhance the workforce in the lumber industry, benefiting over 6,000 workers [2]. Group 2: Policy Changes and Industry Impact - The Canadian government plans to reform procurement processes, requiring companies contracting with the government to prioritize Canadian lumber in construction projects, aiming to accelerate infrastructure and housing development over the next decade [2]. - Approximately two-thirds of Canada's lumber production and nearly 90% of its lumber exports are directed towards the U.S., creating a high dependency that poses risks to the industry [4]. - The aid measures are seen as crucial for the survival and development of the lumber industry, particularly in British Columbia, which is home to many of Canada's largest forest product companies [3]. Group 3: Trade Relations and Challenges - The aid plan is a necessary response to the U.S. Department of Commerce's decision to increase anti-dumping duties on Canadian softwood lumber to over 20%, continuing the "America First" strategy [4]. - The Canadian government firmly opposes the current tariff policies, arguing they contradict the spirit of the North American Free Trade Agreement (NAFTA) [4]. - The government emphasizes its commitment to free trade and will continue to defend its lumber industry against claims of dumping [4].

Core Viewpoint - The Trump administration is preparing to impose anti-dumping duties on Canadian lumber, casting a shadow over Canada's attempts to negotiate a reduction in tariff threats [1][4]. Group 1: Trade Dispute Background - The softwood lumber tariff dispute between Canada and the U.S. has become one of the longest-standing trade disputes between the two countries [4]. - For the past 25 years, the U.S. lumber industry has frequently sought to limit Canadian softwood imports through anti-subsidy and anti-dumping laws [4]. Group 2: Recent Developments - On July 25, the U.S. government announced the results of an anti-dumping investigation, determining that Canada was dumping softwood lumber and will impose anti-dumping duties on such imports [1]. - The U.S. Department of Commerce proposed significantly increasing the anti-dumping duties on Canadian softwood lumber earlier this year, which has raised concerns in the U.S. construction industry that relies on Canadian imports for about one-third of its lumber needs [4]. Group 3: Duty Rates and Economic Impact - The current anti-subsidy and anti-dumping duty rates on Canadian lumber are 14.5%, which may be increased to over 34.5% following a review by the U.S. Department of Commerce [4][5]. - As of April, the U.S. government had threatened to impose "reciprocal tariffs" on lumber, although lumber was ultimately exempted from new tariffs [4].

Core Viewpoint - The Canadian Prime Minister Carney described the latest U.S. tariffs on Canadian softwood lumber as "unreasonable and misleading" [1] Group 1 - The U.S. has imposed new tariffs on Canadian softwood lumber, which has raised concerns in Canada regarding trade relations [1] - The Canadian government is likely to challenge these tariffs through legal means, emphasizing the importance of fair trade practices [1] - The softwood lumber industry is a significant sector for Canada, contributing billions to the economy and providing thousands of jobs [1]