West Fraser reports a slow quarter
Oct. 29, 2013, Vancouver - West Fraser Timber reports earnings of $55 million or $1.29 per share on sales of $878 million in the third quarter of 2013.
In the quarter, West Fraser lumber operations generated operating earnings of $57 million (Q2 - $103 million) and EBITDA of $83 million (Q2- $125 million). The weaker results compared to the previous quarter reflect lower lumber prices during the current quarter.
The company's panel segment generated operating earnings of $6 million (Q2 - $6 million) and EBITDA of $9 million (Q2 - $10 million) in the quarter. Higher plywood and MDF prices were offset by higher log costs and reduced MDF production.
In the quarter, West Fraser pulp and paper operations generated operating earnings of $29 million (Q2 - $20 million) and EBITDA of $40 million (Q2 - $31 million). Higher prices, a slightly weaker Canadian dollar and improved NBSK production contributed to the improved results.
The mountain pine beetle plan
On October 24, 2013 West Fraser announced a MPB Plan to address some of the effects of the mountain pine beetle infestation in the interior of British Columbia. The MPB Plan consists of the exchange of certain timber rights, the closure of the company's Houston, B.C. sawmill and significant mill upgrades for each of the Smithers and 100 Mile House, B.C. sawmills.
Both SPF and SYP lumber prices began the quarter at low levels but improved by the end of the period. U.S. housing starts remained relatively flat, a reflection of the slow recovery, but the longer-term trend continues to appear positive. Lumber prices could continue to be volatile as U.S. housing continues to recover. We expect to achieve lumber productivity improvements and cost reductions over the next several quarters as we complete various capital projects. Pulp prices are improving in the fourth quarter as several producers have announced price increases.
"Our third quarter results reflect lower lumber prices offset somewhat by improved pulp prices compared to the previous quarter." said Ted Seraphim, President and CEO. "Given our strong balance sheet and strong cash generation from our operations we remain focused on our aggressive capital spending program over the next few years as we fully modernize our operations." Mr. Seraphim also reiterated the Company's support for the company's employees and families affected by the Houston mill closure. "We made a very difficult decision last week and our full attention is on working closely with affected employees to ensure that they have every reasonable opportunity to find new employment."
Management's discussion & analysis ("MD&A")
The Company's MD&A is available on the Company's website: www.westfraser.com and on the System for Electronic Document Analysis and Retrieval at www.sedar.com under the company's profile.