Mr. Ted Seraphim reports
WEST FRASER ANNOUNCES THIRD QUARTER RESULTS
West Fraser Timber Co. Ltd. has provided its third-quarter 2017 results.
Highlights:
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Completed acquisition of six sawmills and a finger joint mill in Florida and Georgia;
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Adjusted earnings before interest, taxes, depreciation and amortization of $269-million for the quarter;
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Quarter ending net-debt-to-capital ratio of 16 per cent.
RESULTS COMPARED WITH PREVIOUS PERIODS
($-millions except earnings per share (EPS))
Q3 2017 Q2 2017 YTD 2017 Q3 2016 YTD 2016
Sales $ 1,247 $ 1,322 $ 3,758 $ 1,155 $ 3,343
Adjusted EBITDA (1) 269 305 819 213 481
Operating earnings 177 217 577 156 355
Earnings 120 146 389 107 247
Basic EPS ($) 1.53 1.86 4.97 1.35 3.06
Adjusted earnings (1) 150 174 458 115 229
Adjusted basic EPS ($)(1) 1.93 2.23 5.87 1.45 2.84
(1) In this news release, reference is made to adjusted EBITDA, 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 third-quarter 2017 management's discussion and analysis for details
of these adjustments.
Gilman acquisition
On Aug. 31, 2017, the company completed the acquisition of the Gilman Companies for net cash consideration of $525-million ($418-million (U.S.)). The Gilman Companies comprised six sawmills and a finger joint mill in Florida and Georgia, as well as an administrative office in St. Marys, Ga. Ted Seraphim, the president and chief executive officer, said: "We are delighted to welcome the Gilman leadership and employees to the West Fraser family. This acquisition is a major step in our growth strategy as we expand our lumber business in the United States."
Forest fires in British Columbia and hurricanes in the U.S. South
A number of wildfires throughout the interior region of British Columbia resulted in a provincial state of emergency being declared from July 7 to Sept. 15, 2017. Operations in 100 Mile House, Williams Lake and Chasm were briefly suspended due to the wildfires, reducing the company's production by 55-million board feet of lumber and 15,000 square feet of plywood.
The 2017 hurricane season was more severe than normal, causing significant damage to areas in southeast Texas and Florida. The company was fortunate that its facilities were undamaged and that disruptions to its operations were minimal.
Operational results
The lumber segment generated operating earnings of $126-million (Q2 2017: $171-million), and adjusted earnings before interest, taxes, depreciation and amortization of $195-million (Q2 2017: $240-million). This quarter's results were negatively impacted by lower product pricing and lower SPF production as a result of the British Columbia forest fires. Countervailing and antidumping duties, which commenced in the previous quarter, resulted in an expense of $31-million for the current quarter.
The panels segment generated operating earnings in the quarter of $45-million (Q2 2017: $23-million) and adjusted EBITDA of $48-million (Q2 2017: $26-million). Improved plywood pricing was the primary driver of improved results.
The pulp and paper segment generated operating earnings of $21-million (Q2 2017: $32-million) and adjusted EBITDA of $30-million (Q2 2017: $42-million). The major factors contributing to the decrease in operating earnings were lower Canadian dollar pulp prices and increased maintenance costs from the Hinton pulp mill major maintenance shutdown.
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 $31-million for the current quarter and $65-million for the first nine months of 2017. The requirement that the company pay countervailing duties was suspended on Aug. 24, 2017, until final determination is determined by the U.S. International Trade Commission.
Management's discussion & analysis (MD&A)
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 Tuesday, Oct. 24, 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)
July 1 to Sept. 30, Jan. 1 to Sept. 30,
2017 2016 2017 2016
Sales $ 1,247 $ 1,155 $ 3,758 $ 3,343
Costs and expenses
Cost of products sold 775 739 2,313 2,263
Freight and other distribution costs 153 158 484 473
Export duties 31 - 65 -
Amortization 51 50 151 147
Selling, general and administration 50 45 142 126
Equity-based compensation 10 7 26 (21)
1,070 999 3,181 2,988
Operating earnings 177 156 577 355
Finance expense (8) (7) (23) (22)
Other (2) 1 (3) (8)
Earnings before tax 167 150 551 325
Tax provision (47) (43) (162) (78)
Earnings $ 120 $ 107 $ 389 $ 247
Earnings per share (dollars)
Basic $ 1.53 $ 1.35 $ 4.97 $ 3.06
Diluted $ 1.53 $ 1.35 $ 4.97 $ 2.73
Comprehensive earnings
Earnings $ 120 $ 107 $ 389 $ 247
Other comprehensive earnings
Translation gain (loss) on foreign operations (24) 8 (45) (27)
Actuarial gain (loss) on
postretirement benefits 39 26 6 (79)
Comprehensive earnings $ 135 $ 141 $ 350 $ 141
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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