Mr. Larry Hughes reports
WEST FRASER ANNOUNCES SECOND QUARTER RESULTS
West Fraser Timber Co. Ltd. had earnings of $98-million or $1.22 basic earnings per share on sales of $1,111-million in the second quarter of 2016. These results compare with previous periods as shown in the attached financial highlights table.
Basic earnings per share as described in this news release reflect the adjustments described in the tables referred to in the section titled non-international financial reporting standard measures on page 12 of the company's second quarter 2016 management's discussion and analysis.
FINANCIAL HIGHLIGHTS
($ millions except earnings per share (EPS))
Q2 Q1 YTD Q2 YTD
2016 2016 2016 2015 2015
Sales $1,111 $1,077 $2,188 $1,029 $2,043
Adjusted EBITDA (1) 138 130 268 72 245
Operating earnings 120 79 199 18 143
Earnings 98 42 140 14 63
Basic EPS ($) 1.22 0.51 1.72 0.17 0.76
Adjusted earnings (1) 64 49 113 12 111
Adjusted basic EPS ($) (1) 0.80 0.60 1.40 0.15 1.32
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(1) In this news release, reference is made to adjusted earnings before
interest, taxes, depreciation and amortization, adjusted earnings, and
adjusted EPS. The company believes that, in addition to earnings, these
measures are useful performance indicators. None of these measures are
a generally accepted earnings measure under international financial
reporting standards, and none have a standardized meaning 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, its
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 $78-million (first quarter 2016: $63-million) and adjusted earnings before interest, taxes, depreciation and amortization of $113-million (first quarter 2016: $100-million). 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 the company's operations.
The panel segment, which includes plywood, LVL and MDF, generated operating earnings in the quarter of $18-million (first quarter 2016: $12-million) and adjusted EBITDA of $21-million (first quarter 2016: $15-million). Improving plywood prices and increased shipments were the primary contributors to the improved earnings.
The company's pulp and paper operations generated an operating loss of $5-million (first quarter 2016: earnings of $5-million) and adjusted EBITDA of $4-million (first quarter 2016: $14-million). A stronger Canadian dollar was the main contributor to the reduced earnings.
Outlook
The company's second quarter operating results affirm its expectation that it should exceed its 2015 lumber production by over 400 million feet, board measure. The company expects to see continued gradual improvement in lumber prices as U.S. new home construction returns to average historical levels.
In the event that a softwood lumber agreement is not reached by mid-October, the company is prepared for the potential that the U.S. industry will petition the U.S. government to initiate trade action against Canadian softwood lumber imports to the United States.
Ted Seraphim, the company's president and chief executive officer, said, "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."
Management's discussion and analysis
The company's MD&A is available on the company's website and on the System for Electronic Document Analysis and Retrieval under the company's profile.
Conference call
Investors are invited to listen to the quarterly conference call on July 22, 2016, at 8:30 a.m. Pacific Time (11:30 a.m. Eastern Time) 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)
April 1 to June 30, Jan. 1 to June 30,
2016 2015 2016 2015
Sales $ 1,111 $ 1,029 $ 2,188 $ 2,043
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Costs and expenses
Cost of products sold 775 749 1,524 1,406
Freight and other distribution
costs 156 159 315 303
Export taxes - 12 - 12
Amortization 48 45 97 92
Selling, general and
administration 42 37 81 77
Equity-based compensation (30) 9 (28) 10
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991 1,011 1,989 1,900
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Operating earnings 120 18 199 143
Finance expense (7) (7) (15) (15)
Other 7 21 (9) (26)
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Earnings before tax 120 32 175 102
Tax provision (22) (18) (35) (39)
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Earnings $ 98 $ 14 $ 140 $ 63
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Earnings per share (dollars)
Basic $ 1.22 $ 0.17 $ 1.72 $ 0.76
Diluted $ 0.86 $ 0.17 $ 1.36 $ 0.76
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Comprehensive earnings
Earnings $ 98 $ 14 $ 140 $ 63
Other comprehensive earnings
Translation gain (loss) on
foreign operations (3) (8) (35) 43
Actuarial gain (loss) on post-
retirement benefits (1) (45) 54 (105) 9
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Comprehensive earnings $ 50 $ 60 $ - $ 115
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(1) Net of tax recovery of $17-million for the three months ended June 30,
2016 (three months ended June 30, 2015: $19-million tax provision), and
$38-million for the six months ended June 30, 2016 (six months ended
June 30, 2015: $2-million tax provision).
We seek Safe Harbor.
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