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West Fraser earns $146-million in Q2 2017

2017-07-20 17:14 ET - News Release

Mr. Ted Seraphim reports

WEST FRASER ANNOUNCES SECOND QUARTER RESULTS

West Fraser Timber Co. Ltd. has released its second-quarter 2017 results.

Second-quarter highlights:

  • Record sales and operating earnings for the quarter;
  • Earnings up 19 per cent from previous quarter and 49 per cent from the second quarter of 2016;
  • Strong product pricing across operating segments;
  • Quarter ending net-debt-to-capital ratio of 6 per cent.

                     RESULTS COMPARED WITH PREVIOUS PERIODS
                  ($ millions except earnings per share (EPS)) 

                                   Q2 2017  Q1 2017  YTD 2017  Q2 2016  YTD 2016

Sales                               $1,322   $1,189    $2,511   $1,111    $2,188 
Adjusted EBITDA                        305      245       550      138       268   
Operating earnings                     217      183       400      120       199   
Earnings                               146      123       269       98       140   
Basic EPS ($)                         1.86     1.58      3.44     1.22      1.72  
Adjusted earnings                      174      134       308       64       113   
Adjusted basic EPS ($)                2.23     1.71      3.94     0.80      1.40  

(1) In this news release, reference is made to adjusted earnings before interest,
    taxes, depreciation and amortization; adjusted earnings; and adjusted basic
    earnings per share. The company believes that, in addition to earnings, these
    measures are useful performance indicators. None of these measures is a
    generally accepted earnings measure under international financial reporting
    standards (IFRS), and none has a standardized meaning prescribed by IFRS.
    Investors are cautioned that these measures should not 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. Refer to the tables in the section titled non-IFRS
    measures in the second-quarter 2017 management's discussion and analysis for
    details of these adjustments.

Forest fires in British Columbia

The Province of British Columbia has declared a provincial state of emergency due to a number of wildfires throughout the interior region of British Columbia. The company has temporarily suspended operations in 100 Mile House, Williams Lake and Chasm, and these facilities will remain suspended until it is safe to resume operations. Ted Seraphim, president and chief executive officer, said: "Our foremost concern is for people's safety and the safeguarding of our communities. I would like to personally thank our employees who are making extraordinary contributions, including fighting fires, helping displaced employees and safeguarding our assets."

Operational results

The lumber segment generated operating earnings of $171-million (Q1 2017: $152-million), and adjusted earnings before interest, taxes, depreciation and amortization of $240-million (Q1 2017: $191-million). Improved product pricing was the primary driver of improved results. Countervailing and antidumping duties commenced this quarter resulting in an expense of $34-million.

The panels segment generated operating earnings in the quarter of $23-million (Q1 2017: $12-million) and adjusted EBITDA of $26-million (Q1 2017: $15-million). Improved plywood pricing was offset by costs associated with the WestPine MDF plant restart.

The pulp and paper segment generated operating earnings of $32-million (Q1 2017: $31-million) and adjusted EBITDA of $42-million (Q1 2017: $40-million). Higher pulp prices were offset by higher maintenance costs as the Cariboo pulp mill had a planned maintenance shutdown followed by non-related operational issues. The Hinton pulp mill struggled in the first part of the quarter; however performance improved to targeted levels over the balance of the quarter.

Softwood lumber dispute

The U.S. Department of Commerce's preliminary review resulted in a West Fraser specific countervailing duty rate of 24.12 per cent effective April 28, 2017, and an anti-dumping duty rate of 6.76 per cent effective June 30, 2017, resulting in an expense of $34-million for the quarter.

The company continues to believe that the allegations of subsidy and dumping are groundless. Mr. Seraphim said: "I want to thank all of our employees for their tremendous effort and dedication to operational excellence. We are going into the softwood lumber dispute with a strong balance sheet which will enable us to sustain another round of this long-standing disagreement."

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 Friday, July 21, 2017, at 8:30 a.m. PT (11:30 a.m. ET) by dialling 1-888-390-0546 (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
                                                2017     2016      2017      2016   
                                                                                 
Sales                                        $ 1,322  $ 1,111  $  2,511  $  2,188  
Costs and expenses                                                               
Cost of products sold                            798      775     1,538     1,524  
Freight and other distribution costs             171      156       331       315    
Export duties                                     34        -        34         -      
Amortization                                      49       48       100        97     
Selling, general and administration               48       42        92        81     
Equity-based compensation                          5      (30)       16       (28)   
                                               1,105      991     2,111     1,989  
Operating earnings                               217      120       400       199    
Finance expense                                   (8)      (7)      (15)      (15)   
Other                                             (1)       7        (1)       (9)    
Earnings before tax                              208      120       384       175    
Tax provision                                    (62)     (22)     (115)      (35)   
Earnings                                     $   146  $    98  $    269  $    140    
Earnings per share (dollars)                                             
Basic                                        $  1.86  $  1.22  $   3.44  $   1.72   
Diluted                                      $  1.86  $  0.86  $   3.44  $   1.36   
Comprehensive earnings                                                           
Earnings                                     $  146   $    98  $    269  $    140    
Other comprehensive earnings                                                     
Translation (loss) on foreign operations        (16)       (3)      (21)      (35)   
Actuarial (loss) on postretirement benefits     (44)      (45)      (33)     (105)  
Comprehensive earnings                       $   86   $    50  $    215  $      -      

About West Fraser Timber Co. Ltd.

West Fraser is a diversified wood products company producing lumber, LVL, MDF, plywood, pulp, newsprint, wood chips and energy with facilities in Western Canada and the southern United States.

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