Mr. Ted Seraphim reports
WEST FRASER ANNOUNCES FOURTH QUARTER RESULTS
West Fraser Timber Co. Ltd. had a loss of $15-million or 18 cents per share (basic) on sales of $1,013-million in the fourth quarter of 2015, and earnings of $104-million or $1.25 per share (basic) on sales of $4.1-billion for 2015. These results compare with previous periods as shown in the accompanying table.
Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization), adjusted earnings and adjusted basic EPS (earnings per share) as described in this news release are non-IFRS (international financial reporting standards) measures.
(in millions of dollars, except EPS) Q4 2015 Q3 2015 YTD 2015 Q4 2014 YTD 2014
Sales $ 1,013 $ 1,044 $ 4,100 $ 964 $ 3,856
Adjusted EBITDA(1) 90 82 417 157 621
Operating earnings 18 88 249 83 406
Earnings (15) 56 104 43 259
Basic EPS ($) (0.18) 0.67 1.25 0.51 3.06
Adjusted earnings(1) 30 36 176 84 327
Adjusted basic EPS ($)(1) 0.38 0.42 2.12 1.00 3.86
1. In this news release, reference is made to adjusted EBITDA, adjusted earnings and adjusted
basic EPS. The company believes that, in addition to earnings, these measures are useful
performance indicators. These measures are not generally accepted earnings measures under IFRS
and do not have standardized meanings prescribed by IFRS. Investors are cautioned that none of
these measures should be considered as an alternative to earnings, EPS or cash flow, as
determined in accordance with IFRS. As there is no standardized method of calculating any of
these measures, the company's method of calculating each of them may differ from the methods
used by other entities and, accordingly, the company's use of any of these measures may not be
directly comparable with similarly titled measures used by other entities.
Operational results
In the quarter, the company's lumber operations generated operating earnings of $17-million (third quarter 2015 -- operating loss of $9-million) and adjusted EBITDA of $55-million (third quarter 2015 -- $26-million). An increase in U.S. SYP (southern yellow pine) and low-grade SPF (spruce/pine/fir) lumber prices and a slightly weaker Canadian dollar were major factors in the improvement on a quarter-to-quarter basis. The benefit of increased shipments from the company's Canadian mills was offset by a decrease in production and shipments from its U.S. sawmills.
The company's panels segment, which includes plywood, LVL (laminated veneer lumber) and MDF (medium-density fibreboard), generated operating earnings in the quarter of $16-million (Q3-15 -- $26-million) and adjusted EBITDA of $19-million (Q3-15 -- $29-million). Plywood and MDF markets experienced a seasonal decline and prices decreased accordingly.
The company's pulp and paper segment generated operating earnings of $8-million (Q3-15 -- $14-million) and adjusted EBITDA of $17-million (Q3-15 -- $25-million). Production and shipments from the company's pulp mills were similar to the previous quarter, but key prices declined. Newsprint shipments improved, but prices continued their secular decline.
Outlook
"We weathered a sharp deterioration in lumber prices in 2015, which was the result of a number of external factors, such as a delayed building season due to poor weather in the first quarter of 2015 and a significant slowdown in demand from China during the third quarter. We expect U.S. housing to continue to improve in 2016 and currently are experiencing strong demand for lumber from our customers in China. We are continuing to focus on those factors that are within our control: all the elements of operational excellence. On that front, I am encouraged that we are improving many aspects of our performance and that throughout our company, our people are focused on taking advantage of all the opportunities that are presented to us," said Ted Seraphim, president and chief executive officer.
The company also announces that on April 19, 2016, Hank Ketcham will relinquish the title of executive chairman and will become the non-executive chairman of the board. This step completes the transition of the company's senior executive position to Mr. Seraphim. Mr. Ketcham has been the senior member of the company's executive team since his appointment as president and CEO in 1985. Mr. Seraphim commented, "I know that Hank will continue to play a key role at West Fraser and I look forward to receiving his counsel and advice in the future."
Annual financial statements and management's discussion and analysis (MD&A)
The company's consolidated financial statements for the year ended Dec. 31, 2015, and related MD&A are available on the company's website and on SEDAR.
Dividend declared
The board of directors of the company has declared a dividend of seven cents per share on the common shares and the Class B common shares in the capital of the company, payable on April 4, 2016, to shareholders of record on March 21, 2016.
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.
Conference call
Investors are invited to listen to the quarterly conference call on Friday, Feb. 12, 2016, at 8:30 a.m. PT (11:30 a.m. ET) by dialling 1-866-225-0198 (toll-free North America). The call may also be accessed through West Fraser's website.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE EARNINGS
(in millions of dollars, except where indicated)
Oct. 1 to Dec. 31, Jan. 1 to Dec. 31,
2015 2014 2015 2014
Sales $ 1,013 $ 964 $ 4,100 $ 3,856
Costs and expenses
Cost of products sold 712 631 2,874 2,538
Freight and other distribution
costs 160 137 627 548
Export taxes 3 - 29 -
Amortization 50 43 191 170
Selling, general and
administration 48 39 153 149
Equity-based compensation 22 31 (23) 45
995 881 3,851 3,450
Operating earnings 18 83 249 406
Finance expense (6) (6) (29) (26)
Other (16) (7) (64) (5)
Earnings before tax (4) 70 156 375
Tax provision (11) (27) (52) (116)
Earnings $ (15) $ 43 $ 104 $ 259
Earnings per share ($)
Basic $ (0.18) $ 0.51 $ 1.25 $ 3.06
Diluted $ (0.18) $ 0.51 $ 0.89 $ 3.06
Comprehensive earnings
Earnings $ (15) $ 43 $ 104 $ 259
Other comprehensive earnings
Translation gain on foreign
operations 25 19 109 45
Actuarial gain (loss) on
postretirement benefits(1) 19 (38) (12) (87)
Comprehensive earnings $ 29 $ 24 $ 201 $ 217
1. Net of tax provision of $7-million for the three months ended Dec. 31,
2015 (three months ended Dec. 31, 2014 -- $14-million recovery) and
$5-million tax recovery for the year ended Dec. 31, 2015 (year ended
Dec. 31, 2014 -- $31-million recovery).
We seek Safe Harbor.
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