VANCOUVER, BC, Feb. 15, 2022 /CNW/ - West Fraser Timber Co. Ltd.
("West Fraser" or the "Company") (TSX and NYSE: WFG) reported today
the fourth quarter and annual results of 2021. All dollar
amounts in this news release are expressed in U.S. dollars unless
noted otherwise.
The results of operations presented and discussed below include
those of Norbord from February 1,
2021 and those of Angelina Forest Products from December 1, 2021.
Fourth Quarter Highlights
- Sales of $2.038 billion and
earnings of $334 million, or
$3.13 per diluted share
- Adjusted EBITDA1 of $615
million, representing 30% of sales
- Lumber segment Adjusted EBITDA1 of $240 million
- North America Engineered Wood Products ("NA EWP") segment
Adjusted EBITDA1 of $343
million
- Pulp & Paper segment Adjusted EBITDA1 of
negative $14 million
- Europe Engineered Wood Products ("Europe EWP") segment Adjusted
EBITDA1 of $61
million
Annual Highlights
- Sales of $10.518 billion and
earnings of $2.947 billion, or
$27.03 per diluted share
- Adjusted EBITDA1 of $4.569
billion, representing 43% of sales
- Lumber segment Adjusted EBITDA1 of $1.973 billion
- NA EWP segment Adjusted EBITDA1 of $2.414 billion
- Pulp & Paper segment Adjusted EBITDA1 of
$15 million
- Europe EWP segment Adjusted EBITDA1 of $201 million
1. Adjusted EBITDA is a
non-GAAP financial measure. Refer to the "Non-GAAP and Other
Specified Financial Measures" section of this document for more
information on this measure.
|
"I am proud of the efforts of the West Fraser team, highlighted
by the integration of two leading wood building products companies
during the global COVID-19 pandemic," said Ray Ferris, West Fraser's President & CEO.
"Despite a number of challenges, we posted record earnings in 2021
and another strong result in the fourth quarter. In particular, we
managed the complexities of significant transportation and mill
disruptions in the face of unprecedented flooding in the B.C.
Interior and Vancouver Lower Mainland, which severely disrupted
transportation and logistics and the flow to markets of our
finished products from Western
Canada. The benefits of our product and geographic
diversification were evident in the fourth quarter as
quarter-over-quarter Adjusted EBITDA1 improvement from
our Lumber business helped to offset declines in our North America and Europe Engineered Wood
Products segments."
"Fundamentals for housing are favourable entering 2022 and we
continue to see signs of resilience in repair and remodelling
demand in both our North American and European markets. I expect
our team to remain agile and creative to navigate the evolving
needs of our customers."
Results Summary
Fourth quarter sales were $2.038
billion, compared to $2.358
billion in the third quarter of 2021. Fourth quarter
earnings were $334 million, or
$3.13 per diluted share, compared to
$460 million, or $4.20 per diluted share in the third quarter of
2021. Fourth quarter Adjusted EBITDA1 was $615 million compared to $786 million in the third quarter of
2021.
Full year sales were $10.518
billion, compared to $4.373
billion in 2020. Full year earnings were $2.947 billion, or $27.03 per diluted share, compared to
$588 million, or $8.56 per diluted share in 2020. 2021 Adjusted
EBITDA1 was $4.569 billion
compared to $1.043 billion in
2020.
Liquidity and Capital Allocation
Cash and short-term investments decreased to $1.568 billion at the end of the fourth quarter
from $2.105 billion at the end of the
third quarter.
Capital expenditures in the fourth quarter were $401 million, including $276 million for the asset acquisition of the
idled oriented strand board ("OSB") mill near Allendale, South Carolina. Full year capital
expenditures were $635 million in
2021 and $180 million in
2020. In addition, we acquired a sawmill from Angelina
Forest Products for $302 million, net
of the acquired cash, during the fourth quarter.
We paid $21 million of dividends
in the fourth quarter and $75 million
of dividends in 2021.
In the fourth quarter of 2021, we repurchased approximately 1.2
million shares under our Normal Course Issuer Bid ("NCIB") for
aggregate consideration of $100
million. For the full year, we repurchased approximately 7.1
million shares under the NCIB for aggregate consideration of
$527 million and an additional 10.3
million shares for consideration of CAD$1.0
billion under a substantial issuer bid. There were no shares
repurchased in 2020.
Outlook
Markets
The most significant uses for our lumber and OSB products are
residential construction, repair and remodelling, and industrial
applications. Historically low mortgage rates, low volumes of
homes available for resale and increased acceptance and practice of
remote working appear to be positively influencing the demand for
new home construction in North
America. However, interest rates have been trending higher
in early 2022 and should they continue to do so, housing
affordability may be impacted, which could reduce demand for our
wood building products. An aging housing stock and repair and
renovation spending should also continue to support lumber, plywood
and OSB demand. Over the medium to long term, growing market
penetration of mass timber in industrial and commercial
applications is also expected to support demand growth for wood
building products.
The demand for our European products is expected to remain
robust as demand for OSB as an alternative to plywood in
Europe continues to grow. An aging
European housing stock is also expected to drive repair and
renovation spending, supporting growing demand for our wood
building products.
While infrastructure repairs to rail and truck routes resulting
from the severe weather and flooding in late 2021 in B.C. are
progressing, our ability to ship products in a timely manner
remains challenged. Availability of rail service, adverse
weather conditions, operator shortages and the backlog from
disruptions in the fourth quarter have all negatively impacted our
ability to ship our products. For the month of January 2022 our western Canadian spruce-pine-fir
("SPF) lumber and plywood shipments declined by approximately
20% compared to the prior year, and while our overall OSB shipments
are trending in line with the prior year, we have been forced to
take unscheduled downtime due to transportation constraints. In
addition, our pulp shipments for the same period declined by
approximately 30% compared to the prior year. Though we
continue to seek out and utilize alternative transportation routes
and methods to the extent they are available to continue servicing
customers, the magnitude and duration of the impact from these
multiple disruptions remains uncertain. The situation has also
resulted in significant delays in shipments of orders. In light of
these challenges, further reduction of operating schedules across
our manufacturing network in order to manage inventory levels, raw
material supplies and our integrated fibre supply chain may be
required. At the current time, it is not possible to estimate
when full transportation services will be available or when the
backlogs resulting from the interruptions will be cleared and we
will be able to return to operating a full schedule or clearing the
backlog of delayed shipments.
Operations
The Company is providing the following operational guidance for
2022:
- SPF shipments are expected to be approximately 3.0 to 3.2
billion board feet
- Southern yellow pine ("SYP") shipments are expected to be
approximately 3.0 to 3.2 billion board feet
- NA OSB shipments are expected to
be approximately 6.1 to 6.4 billion square feet (3/8-inch
basis)
- Pulp & Paper segment shipments are not expected to increase
from 2021 levels
- Europe OSB shipments are expected to be approximately 1.1 to
1.3 billion square feet (3/8-inch basis)
- Inflationary cost pressures and availability constraints for
labour, transportation, raw materials such as resins and chemicals,
and energy are expected to remain elevated
- Capital expenditures2 are expected to be
approximately $500 to $600 million
2. Expected capital expenditure is a
supplementary financial measure. Refer to the "Non-GAAP and Other
Specified Financial Measures" section of this document for more
information on this measure.
|
Dividend Declared
The Board of Directors of the Company has declared a dividend of
$0.25 per share on the Common shares
and the Class B Common shares in the capital of the Company,
payable on April 5, 2022 to
shareholders of record on March 18,
2022. Dividends are designated to be eligible dividends
pursuant to subsection 89(14) of the Income Tax Act (Canada) and any applicable provincial
legislation pertaining to eligible dividends. Dividends are
declared and payable in U.S. dollars. Shareholders may elect to
receive their dividends in Canadian dollars. Details regarding the
election procedure are available on our website
at www.westfraser.com in the "Investors/Stock
Information/Dividends section.
MD&A
Our 2021 MD&A and annual audited consolidated financial
statements and the related notes are available on our website at
www.westfraser.com and the System for Electronic Document Analysis
and Retrieval ("SEDAR") at www.sedar.com and the Electronic Data
Gathering, Analysis and Retrieval System ("EDGAR") website at
www.sec.gov/edgar.shtml under the Company's profile.
Financial Information Related to the Norbord and Angelina
Acquisitions
We have accounted for the Norbord and Angelina Forest Products
acquisitions as business combinations and attributed $1,339 million and $78
million to goodwill, respectively. Note 3 to
our annual audited consolidated financial statements provides
details on these purchase price allocations. For additional
information, refer to the section titled "Norbord Acquisition" and
"Angelina Acquisition" in our 2021 MD&A.
Sustainability Report
West Fraser's full Sustainability Report is available on the
Company's website at www.westfraser.com. This report reviews
the Company's key Environmental, Social, and Governance (ESG)
topics, opportunities and performance and includes information
aligned with the Sustainable Accounting Standards Board (SASB),
Global Reporting Initiative (GRI), and the recommendations of the
Task Force on Climate-Related Disclosures (TFCD).
Risks and Uncertainties
Risk and uncertainty disclosures are included in our 2021 annual
MD&A as well as in our public filings with securities
regulatory authorities. See also the discussion of
"Forward-Looking Statements" below.
Conference Call
West Fraser will hold an analysts' conference call to discuss
the Company's fourth quarter 2021 financial and operating results
on Wednesday, February 16, 2022, at
8:30 a.m. Pacific Time (11:30 a.m. Eastern Time). To participate in
the call, please dial: 1-888-390-0605 (toll-free North America) or 416-764-8609 (toll) or
connect on the webcast. The call and an earnings presentation
may also be accessed through West Fraser's website at
www.westfraser.com. Please let the operator know you wish to
participate in the West Fraser conference call chaired by Mr.
Ray Ferris, President and Chief
Executive Officer.
Following management's discussion of the quarterly results,
investors and the analyst community will be invited to ask
questions. The call will be recorded for webcasting purposes
and will be available on the West Fraser website at
www.westfraser.com.
About West Fraser
West Fraser is a diversified wood products company with more
than 60 facilities in Canada,
the United States, the
United Kingdom, and Europe. From responsibly sourced and
sustainably managed forest resources, the Company produces lumber,
engineered wood products (OSB, LVL, MDF, plywood, and
particleboard), pulp, newsprint, wood chips, other residuals, and
renewable energy. West Fraser's products are used in home
construction, repair and remodelling, industrial applications,
papers, tissue, and box materials.
Forward-Looking Statements
This press release includes statements and information that
constitutes "forward-looking information" within the meaning of
Canadian securities laws and "forward-looking statements" within
the meaning of United States
securities laws (collectively, "forward-looking statements").
Forward-looking statements include statements that are
forward-looking or predictive in nature and are dependent upon or
refer to future events or conditions. We use words such as
"expects," "anticipates," "plans," "believes," "estimates,"
"seeks," "intends," "targets," "projects," "forecasts" or negative
versions thereof and other similar expressions, or future or
conditional verbs such as "may," "will," "should," "would" and
"could" to identify these forward-looking statements. These
forward-looking statements generally include statements which
reflect management's expectations regarding the operations,
business, financial condition, expected financial results,
performance, prospects, opportunities, priorities, targets, goals,
ongoing objectives, strategies and outlook of West Fraser and its
subsidiaries, as well as the outlook for North American and
international markets and economies for the current fiscal year and
subsequent periods.
Forward-looking statements included in this press release
include references to the following and their impact on our
business:
- Demand in North American and European markets for our products,
including demand from new home construction and repairs and
renovations, the potential for rising interest rates and the
growing penetration of mass timber
- Disruptions in transportation services, and the timelines for
resumptions of full transportation services
- Operation guidance, including projected shipments, inflationary
cost pressure and projected capital expenditures
By their nature, these forward-looking statements involve
numerous assumptions, inherent risks and uncertainties, both
general and specific, which contribute to the possibility that the
predictions, forecasts, and other forward-looking statements will
not occur. Factors that could cause actual results to differ
materially from those contemplated or implied by forward-looking
statements include, but are not limited to:
- assumptions in connection with the economic and financial
conditions in the U.S., Canada,
Europe and globally and
consequential demand for our products;
- risks inherent to product concentration and cyclicality;
- effects of competition and product pricing pressures, including
continued access to log supply and fibre resources at competitive
prices and the impact of third-party certification standards;
- effects of variations in the price and availability of
manufacturing inputs, including continued access to fibre resources
at competitive prices and the impact of third-party certification
standards;
- availability of transportation services, including truck and
rail services, and port facilities, and impacts on transportation
services from wildfires and severe weather events;
- various events that could disrupt operations, including
natural, man-made or catastrophic events including wildfires and
any state of emergency and/or evacuation orders issued by
governments and ongoing relations with employees;
- risks inherent to customer dependence;
- impact of future cross border trade rulings or agreements;
- implementation of important strategic initiatives and
identification, completion and integration of acquisitions;
- impact of changes to, or non-compliance with, environmental or
other regulations;
- the impact of the COVID-19 pandemic on our operations and on
customer demand, supply and distribution and other factors
- government restrictions, standards or regulations intended to
reduce greenhouse gas emissions;
- changes in government policy and regulation, including against
taken by the Government of British
Columbia pursuant to recent amendments to forestry
legislation and initiatives to defer logging of forests deemed "old
growth" and the impact of these actions on our timber supply;
- impact of weather and climate change on our operations or the
operations or demand of its suppliers and customers;
- ability to implement new or upgraded information technology
infrastructure;
- impact of information technology service disruptions or
failures;
- impact of any product liability claims in excess of insurance
coverage;
- risks inherent to a capital-intensive industry;
- impact of future outcomes of tax exposures;
- potential future changes in tax laws, including tax rates;
- effects of currency exposures and exchange rate
fluctuations;
- future operating costs;
- availability of financing, bank lines, securitization programs
and/or other means of liquidity;
- continued integration of the Norbord business;
- continued access to timber supply in the traditional
territories of Indigenous Nations;
- the risks and uncertainties described above in our 2021
MD&A; and
- other risks detailed from time-to-time in our annual
information forms, annual reports, MD&A, quarterly reports and
material change reports filed with and furnished to securities
regulators.
In addition, actual outcomes and results of these statements
will depend on a number of factors including those matters
described under "Risks and Uncertainties" in our 2021 MD&A and
may differ materially from those anticipated or projected.
This list of important factors affecting forward–looking statements
is not exhaustive and reference should be made to the other factors
discussed in public filings with securities regulatory
authorities. Accordingly, readers should exercise caution in
relying upon forward–looking statements and we undertake no
obligation to publicly update or revise any forward–looking
statements, whether written or oral, to reflect subsequent events
or circumstances except as required by applicable securities
laws.
Non-GAAP and Other Specified Financial Measures
Throughout this news release, we make reference to (1) certain
non-GAAP financial measures, including Adjusted EBITDA and Adjusted
EBITDA by segment (our "Non-GAAP Financial Measures"), and (ii)
certain supplementary financial measures, including our expected
capital expenditures (our "Supplementary Financial Measures"). We
believe that these Non-GAAP Financial Measures and Supplementary
Financial Measures (collectively, our "Non-GAAP and other specified
financial measures") are useful performance indicators for
investors with regard to operating and financial performance and
our financial condition. These Non-GAAP and other specified
financial measures are not generally accepted financial measures
under IFRS and do not have standardized meanings prescribed by
IFRS. Investors are cautioned that none of our Non-GAAP Financial
Measures should be considered as an alternative to earnings or cash
flow, as determined in accordance with IFRS. As there is no
standardized method of calculating any of these Non-GAAP and other
specified financial measures, our method of calculating each of
them may differ from the methods used by other entities and,
accordingly, our use of any of these Non-GAAP and other specified
financial measures may not be directly comparable to similarly
titled measures used by other entities. Accordingly, these
Non-GAAP and other specified financial measures are intended to
provide additional information and should not be considered in
isolation or as a substitute for measures of performance prepared
in accordance with IFRS. The reconciliation of the Non-GAAP
measures used and presented by the Company to the most directly
comparable IFRS measures is provided in the tables set forth
below.
Adjusted EBITDA and Adjusted EBITDA by
segment
Adjusted EBITDA is defined as earnings determined in accordance
with IFRS adding back the following line items from the
consolidated statements of earnings and comprehensive
earnings: finance expense, tax provision or recovery,
amortization, equity-based compensation, restructuring and
impairment charges, and other.
Adjusted EBITDA by segment is defined as earnings before tax
determined for each reportable segment in accordance with IFRS
adding back the following line items from the consolidated
statements of earnings and comprehensive earnings for that
reportable segment: finance expense, amortization,
equity-based compensation, restructuring and impairment charges,
and other.
EBITDA is commonly reported and widely used by investors and
lending institutions as an indicator of a company's operating
performance, ability to incur and service debt, and as a valuation
metric. We calculate Adjusted EBITDA and Adjusted EBITDA by segment
to exclude items of an unusual nature that do not reflect our
ongoing operations and should not, in our opinion, be considered in
a long-term valuation metric or should not be included in an
assessment of our ability to service or incur debt.
We believe that disclosing these measures assists readers in
measuring performance relative to other entities that operate in
similar industries and understanding the ongoing cash generating
potential of our business to provide liquidity to fund working
capital needs, service outstanding debt, fund future capital
expenditures and investment opportunities, and pay dividends.
Adjusted EBITDA is used as an additional measure to evaluate the
operating and financial performance of our reportable segments.
The following tables reconcile Adjusted EBITDA to the most
directly comparable IFRS measure, earnings:
Annual Adjusted EBITDA
($ millions)
|
2021
|
2020
|
Earnings
|
2,947
|
588
|
Finance expense,
net
|
45
|
27
|
Tax
provision
|
951
|
202
|
Amortization
|
584
|
203
|
Equity-based
compensation
|
40
|
9
|
Other
|
2
|
14
|
Adjusted
EBITDA
|
4,569
|
1,043
|
Quarterly Adjusted EBITDA
($ millions)
|
|
|
|
Q4-21
|
Q3-21
|
Earnings
|
334
|
460
|
Finance expense,
net
|
1
|
11
|
Tax
provision
|
104
|
164
|
Amortization
|
153
|
147
|
Equity-based
compensation
|
12
|
9
|
Other
|
11
|
(5)
|
Adjusted
EBITDA
|
615
|
786
|
Annual Adjusted EBITDA by segment
($ millions)
2021
|
Lumber
|
North America
EWP
|
Pulp
&
Paper
|
Europe
EWP
|
Corporate &
Other
|
Total
|
Earnings before
tax
|
1,794
|
2,121
|
(22)
|
112
|
(107)
|
3,898
|
Finance expense,
net
|
17
|
3
|
5
|
1
|
19
|
45
|
Amortization
|
164
|
289
|
34
|
88
|
9
|
584
|
Equity-based
compensation
|
-
|
-
|
-
|
-
|
40
|
40
|
Other
|
(2)
|
1
|
(2)
|
|
5
|
2
|
Adjusted EBITDA by
segment
|
1,973
|
2,414
|
15
|
201
|
(34)
|
4,569
|
2020
|
Lumber
|
North America
EWP
|
Pulp
&
Paper
|
Europe
EWP
|
Corporate &
Other
|
Total
|
Earnings before
tax
|
769
|
95
|
(46)
|
-
|
(28)
|
790
|
Finance expense,
net
|
17
|
4
|
6
|
-
|
-
|
27
|
Amortization
|
151
|
13
|
31
|
-
|
8
|
203
|
Equity-based
compensation
|
-
|
-
|
-
|
-
|
9
|
9
|
Other
|
2
|
(5)
|
8
|
-
|
9
|
14
|
Adjusted EBITDA by
segment
|
939
|
107
|
(1)
|
-
|
(2)
|
1,043
|
Quarterly Adjusted EBITDA by segment
($
millions)
Q4-21
|
Lumber
|
North America
EWP
|
Pulp
&
Paper
|
Europe
EWP
|
Corporate &
Other
|
Total
|
Earnings before
tax
|
194
|
265
|
(25)
|
36
|
(32)
|
438
|
Finance expense,
net
|
(1)
|
-
|
-
|
1
|
1
|
1
|
Amortization
|
45
|
73
|
9
|
24
|
2
|
153
|
Equity-based
compensation
|
-
|
-
|
-
|
-
|
12
|
12
|
Other
|
2
|
5
|
2
|
-
|
2
|
11
|
Adjusted EBITDA by
segment
|
240
|
343
|
(14)
|
61
|
(15)
|
615
|
Q3-21
|
Lumber
|
North America
EWP
|
Pulp
&
Paper
|
Europe
EWP
|
Corporate &
Other
|
Total
|
Earnings before
tax
|
51
|
542
|
(16)
|
68
|
(21)
|
624
|
Finance expense,
net
|
8
|
1
|
2
|
(1)
|
1
|
11
|
Amortization
|
41
|
73
|
8
|
23
|
2
|
147
|
Equity-based
compensation
|
-
|
-
|
-
|
-
|
9
|
9
|
Other
|
(7)
|
(4)
|
(1)
|
-
|
7
|
(5)
|
Adjusted EBITDA by
segment
|
93
|
612
|
(7)
|
90
|
(2)
|
786
|
Expected capital expenditures
This measure represents our best estimate of the amount of cash
outflows relating to additions to capital assets for the upcoming
year based on our current outlook. This amount is comprised
primarily of various improvement projects and
maintenance-of-business expenditures, projects focused on
optimization and automation of the manufacturing process, and
projects targeted to reduce greenhouse gas emissions. This measure
assumes no deterioration in market conditions during the year and
that we are able to proceed with our plans on time and on budget.
This estimate is subject to the risks and uncertainties identified
in the Company's 2021 MD&A.
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SOURCE West Fraser Timber Co. Ltd.