Wood Business

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West Fraser sees bright 2016, higher profits

West Fraser Timber Co. Ltd. has reported Q2 results substantially improved versus Q1 2016 or the same quarter last year. Sales of $1.111 billion compare to $1.077 billion in Q1 and $1.029 billion last year. Adjusted EBITDA of $138 million compares to $130 million in Q1 and $72 million in Q2 2015. The company has earnings of $140 million YTD versus $63 million last year, an improvement of 122%.

While the possible lumber dispute with the US is a grey cloud on the horizon, West Fraser feels its geographic diversification (US sawmills, Asian market) and operational efficiency will carry the company through. "We expect that our geographic diversification and investment of capital to modernize and improve the efficiency of our mills should substantially mitigate any negative effect of any trade action," said Ted Seraphim, president and CEO in a release.

Operational Results
In the quarter lumber operations generated operating earnings of $78 million (Q1-16 - $63 million) and Adjusted EBITDA of $113 million (Q1-16 - $100 million). West Fraser reports that increased U.S. lumber prices and strong sales partially offset by a stronger Canadian dollar contributed to the improvement in earnings. Greater sawmill efficiency after the completion of a number of capital improvements contributed to increased production at several of its operations, the company adds.

The panel segment, which includes plywood, LVL and MDF, generated operating earnings in the quarter of $18 million (Q1-16 - $12 million) and Adjusted EBITDA of $21 million (Q1-16 - $15 million). Improving plywood prices and increased shipments were the primary contributors to the improved earnings according to West Fraser.

The company's pulp & paper operations generated an operating loss of $5 million (Q1-16 - earnings of $5 million) and Adjusted EBITDA of $4 million (Q1-16 - $14 million). A stronger Canadian dollar was the main contributor to the reduced earnings.

Outlook
According to West Fraser, the outlook remains positive for the rest of 2016. "The second quarter operating results affirm our expectation that we should exceed our 2015 lumber production by over 400 MMfbm. We expect to see continued gradual improvement in lumber prices as U.S. new home construction returns to average historical levels."

Full details can be found at the West Fraser website.