Mr. Steven Hofer reports

WESTERN ANNOUNCES THIRD QUARTER 2023 RESULTS

Western Forest Products Inc. had a net loss of $17.4-million in the third quarter of 2023, as compared with a net loss of $20.7-million in the second quarter of 2023 and net income of $6.6-million in the third quarter of 2022. Results in the third quarter of 2023 reflect more challenging macroeconomic conditions, resulting in lower product prices and reduced demand compared with the same period last year. It curtailed certain sawmill operations during the third quarter of 2023 to manage inventories and match production to product demand.

Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) was negative $11.6-million in the third quarter of 2023, as compared with adjusted EBITDA of negative $12.0-million in the second quarter of 2023 and adjusted EBITDA of $17.3-million in the third quarter of 2022.

Operating loss prior to restructuring and other items was $25.8-million in third quarter of 2023, as compared with income of $4.7-million in the third quarter of 2022.

Highlights:

• Announced a $35.9-million agreement to sell a 34-per-cent interest in a newly formed forestry limited partnership to four Vancouver Island first nations;
• Celebrated one-year anniversary of glulam business asset acquisition from Calvert Company Inc. with operations accretive to EBITDA in that year;
• Completed installation of machine-stress-rated lumber grader to support increased product value and mass timber market growth;
• Recognized an export tax recovery of $4.3-million on finalization of the softwood lumber duty rate.

Commenting on the quarter, Western Forest's president and chief executive officer, Steven Hofer, said: "While our results in the quarter reflect the continued challenging operating environment and cost structure in our British Columbia operations, we are encouraged by the progress we've made in repositioning our business for the future. The agreement announced with the Tlowitsis, We Wai Kai, Wei Wai Kum and K'omoks first nations is a significant step forward. This partnership will provide a collaborative forest stewardship and business model that is key to the operational stability in coastal B.C. that we need to support reinvestment, and we are excited to move it forward."

Dividend and capital allocation

The company remains committed to a balanced approach to capital allocation. It will continue to evaluate opportunities to invest strategic and discretionary capital in jurisdictions that create the opportunity to increase long-term shareholder value.

Quarterly dividend

In response to the weaker lumber market conditions and corresponding financial results, Western Forest is suspending its quarterly dividend until further notice, effective Nov. 7, 2023. The board of directors will continue to review the company's dividend on a quarterly basis. Any decision to declare and pay dividends in the future will be made at the discretion of the board after considering its operating results, financial condition, cash requirements, financing agreement restrictions and other factors the board may deem relevant.

Dividends of $4.0-million and $11.9-million were paid in the three and nine months ended Sept. 30, 2023, respectively, as compared with $4.1-million and $11.4-million in the same period last year.

Strategy and outlook

Western Forest's long-term business objective is to create and increase shareholder value by building a sustainable, margin-focused specialty product business of scale to compete well in global markets. For more detail on its strategic initiatives and actions, refer to strategy and outlook in its management's discussion and analysis for the year ended Dec. 31, 2022.

Market outlook

Near term, it expects lumber markets to remain volatile as it heads into the typically slower fall and winter seasons. Consumers continue to adjust to higher interest rates and macroeconomic conditions, which are driving a rebalancing of lumber supply and demand.

Demand and prices for cedar timber and premium appearance products are expected to remain stable, while cedar decking, trim and fencing products are expected to remain weaker. In Japan, it sees near-term opportunities to increase volumes as domestic production has been impacted by a fire at a large Japanese sawmill. It anticipates prices to modestly improve in the near term. Demand for its industrial lumber products will be product line specific but are expected to remain stable over the near term. North American demand and prices for its commodity products are expected to remain volatile while lumber demand and prices in China are expected to remain weak.

It expects sawlog markets to follow conditions in the lumber markets while residual chip pricing is expected to modestly improve in the fourth quarter of 2023 due to stronger northern bleached softwood kraft prices to China.

It remains excited about the long-term growth opportunity for wood products and the positive impacts they have in a low carbon world.

Western Forest is an integrated forest product company building a margin-focused log and lumber business to compete well in global softwood markets. With operations and employees located primarily on the coast of British Columbia and Washington State, Western Forest is a premier supplier of high-value, specialty forest products to worldwide markets. Western Forest has a lumber capacity in excess of 1.0 billion board feet from seven sawmills, as well as operates four remanufacturing facilities and two glulam manufacturing facilities. The company sources timber from its private lands, long-term licences, first nations arrangements and market purchases. Western Forest supplements its production through a wholesale program, providing customers with a comprehensive range of specialty products.

Teleconference call notification

Wednesday, Nov. 8, 2023, at 9 a.m. PST (12 p.m. EST)

To participate in the teleconference, please dial 416-340-2217 or 1-800-952-5114 (passcode: 9879996 followed by the number sign). This call will be taped, available one hour after the teleconference, and on replay until Dec. 9, 2023, at 8:59 p.m. PST (11:59 p.m. EST). To hear a complete replay, please call 905-694-9451/1-800-408-3053 (passcode: 7251741 followed by the number sign).

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