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:
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Record sales and operating earnings for the quarter;
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Earnings up 19 per cent from previous quarter and 49 per cent from the second quarter of 2016;
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Strong product pricing across operating segments;
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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.
We seek Safe Harbor.
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