West Fraser announces second quarter results
By West Fraser
July 20, 2018 - West Fraser Timber Co. Ltd. has reported its second quarter 2018 results.
By West Fraser
Second quarter highlights include:
- Record sales and operating earnings for the quarter
- Earnings up 76 per cent from previous quarter and 137 per cent from the second quarter of 2017
- Strong product pricing across all operating segments
- Repurchased 2.878 million shares for $256 million at an average price of $88.94
- Quarter ending net debt to capital ratio of 11 per cent and available liquidity of $864 million
We were able to partially overcome the transportation challenges from the previous quarter and begin the process of normalizing our inventory levels. Specifically related to lumber, we shipped 82 million board feet more than our production during the quarter, partially reducing the accumulation of 226 million board feet from the first quarter of 2018. There remains a backlog of lumber inventory to be reduced over the balance of the year.
Commissioning of our newly rebuilt sawmill in High Prairie, Alta., is proceeding according to schedule and is on track to realize the expected cost reductions from the upgrades. We expect to start production at our new sawmill in Opelika, Ala., in the third quarter which when fully ramped up in early 2019 will increase site capacity by 110 million board feet.
In the quarter, we received approximately $7 million of insurance proceeds as final settlement of business interruption claims stemming from the fires last summer that resulted in curtailed production at a number of our mills in the B.C., Interior.
Our lumber segment generated operating earnings of $358 million (Q1-18 – $189 million) and Adjusted EBITDA of $467 million (Q1-18 – $282 million). Improved product pricing and increased shipments of 416 million board feet were largely responsible for the improved results. Countervailing and antidumping duties charged in the quarter were $81 million, of which $68 million was recorded as export duties expense in the earnings statement and $13 was recorded as a long-term duty receivable on the balance sheet.
Our panels segment generated operating earnings in the quarter of $52 million (Q1-18 — $25 million) and Adjusted EBITDA of $56 million (Q1-18 – $28 million). Improved plywood pricing and higher shipments boosted results.
Our pulp & paper segment generated operating earnings of $56 million (Q1-18 — $57 million) and Adjusted EBITDA of $68 million (Q1-18 – $70 million). Higher pulp prices were offset by lost production from a planned maintenance shutdown at our Cariboo NBSK mill, transportation related production curtailments at our Quesnel BCTMP mill, and a series of operational challenges at our Hinton NBSK mill.