Mr. Sean McLaren reports

WEST FRASER ANNOUNCES FIRST QUARTER 2024 RESULTS

West Fraser Timber Co. Ltd. has released its first quarter results of 2024 (Q1 2024). All dollar amounts in this news release are expressed in United States dollars unless noted otherwise.

First quarter highlights

• Sales of $1,627-million and earnings of $35-million, or 42 cents per diluted share;
• Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of $200-million, representing 12 per cent of sales;
• Lumber segment adjusted EBITDA of $10-million;
• North America Engineered Wood Products (NA EWP) segment adjusted EBITDA of $188-million;
• Pulp and paper segment adjusted EBITDA of $3-million;
• Europe Engineered Wood Products (Europe EWP) segment adjusted EBITDA of $(1)-million;
• Repurchased 105,666 shares for aggregate consideration of $8-million;
• Completed sale of Hinton pulp mill to Mondi Group PLC:
• Subsequent to quarter-end, completed sale of Quesnel River Pulp mill and Slave Lake Pulp mill to Atlas Holdings.

Subsequent to quarter-end, announced dissolution of Cariboo Pulp & Paper (CPP) 50/50 JV (joint venture) with Mercer, and West Fraser's continuation as sole owner/operator of CPP

"Our North American OSB, plywood and other engineered products had another strong quarter in Q1 2024, with robust demand driven by strength in new home construction, which carried over from the fourth quarter. This was in contrast to ongoing demand softness in our European EWP business and North American lumber business, particularly for SYP lumber with its greater relative exposure to repair and remodelling applications," said Sean McLaren, West Fraser's president and chief executive officer.

"While some of our wood building products still face near-term demand uncertainties, we remain optimistic in our ability to continue managing through current markets, executing on our strategy with the strong balance sheet, people and expertise to handle whatever comes our way. We continue to make progress optimizing our portfolio of assets and investing capital to modernize mills and lower costs across our platform, creating a more resilient organization. Of note, we are already seeing early financial benefits from the recent closures of some of our higher-cost lumber mills. Finally, we completed the disposition of three of our pulp and paper mills and are now the sole owner and operator of CPP following the dissolution of our joint venture. These developments took considerable effort and perseverance across the organization and are a key part of our ongoing optimization strategy, making the company stronger and benefiting all our stakeholders."

Results summary

First quarter sales were $1,627-million, compared with $1,514-million in the fourth quarter of 2023. First quarter earnings were $35-million, or 42 cents per diluted share, compared with $(153)-million, or $(1.87) per diluted share in the fourth quarter of 2023. First quarter adjusted EBITDA was $200-million compared with $97-million in the fourth quarter of 2023.

Liquidity and capital allocation

Cash and short-term investments decreased to $711-million at March 29, 2024, from $900-million at Dec. 31, 2023.

Capital expenditures in the first quarter were $122-million.

The company paid $24-million of dividends in the first quarter, or 30 cents per share, and declared a 30-cent-per-share dividend payable in the second quarter of 2024.

On Feb. 27, 2024, the company renewed its normal course issuer bid (2024 NCIB), which allows the company to acquire up to 3,971,380 common shares for cancellation from March 1, 2024, until the expiry of the bid on Feb. 28, 2025. From Jan. 1, 2024, to April 22, 2024, 296,307 total shares have been repurchased under both the prior NCIB and the 2024 NCIB.

As of April 22, 2024, the company has repurchased for cancellation 41,872,902 of the company's shares since the closing of the acquisition of Norbord on Feb. 1, 2021, through the completion of a substantial issuer bid (SIB) in 2021, completion of a SIB in 2022 and normal course issuer bids, equalling 77 per cent of the shares issued in respect of the Norbord acquisition.

Outlook

Markets

Several key trends that have served as positive drivers in recent years are expected to continue to support medium and longer-term demand for new home construction in North America.

The most significant uses for the company's North American lumber, OSB and engineered wood panel products are residential construction, repair and remodelling, and industrial applications. Over the medium term, improved housing affordability from stabilization of inflation and interest rates, a large cohort of the population entering the typical home buying stage, and an aging U.S. housing stock are expected to drive new home construction and repair and renovation spending that supports lumber, plywood and OSB demand. Over the longer term, growing market penetration of mass timber in industrial and commercial applications is also expected to become a more significant source of demand growth for wood building products in North America.

The seasonally adjusted annualized rate of U.S. housing starts was 1.32 million units in March, 2024, with permits issued of 1.46 million units, according to the U.S. Census Bureau. While there are near-term uncertainties for new home construction, owing in large part to interest rates and the direction of changes to mortgage rates and the resulting impact on housing affordability, unemployment remains relatively low in the U.S. And although central bankers across North America have indicated that rates may be higher for longer, the latest rate hiking cycle appears to be over with U.S. rate futures indicating potential for one or more rate cuts later in the year. However, demand for new home construction and the company's wood building products may decline in the near term should the broader economy and employment slow or the trend in interest rates negatively impact consumer sentiment and housing affordability.

Although the company continues to experience near-term softness for MDF and particleboard panel products in Europe and the United Kingdom, the company is experiencing slightly better demand for its OSB products early in 2024. The company continues to expect demand for its European products will grow over the longer term as use of OSB as an alternative to plywood grows. Further, an aging housing stock supports long-term repair and renovation spending and additional demand for the company's wood building products. Near-term risks, including relatively high interest rates, continuing geopolitical developments and the lagged impact of recent inflationary pressures, may cause further temporary slowing of demand for our panel products in the U.K. and Europe. Despite these risks, the company is confident that it will be able to navigate through this period and capitalize on the long-term growth opportunities ahead.

With the recent developments in its pulp and paper segment, namely the disposition of one UKP mill and two BCTMP mills, the company expects the financial impact of the pulp and paper segment to be less significant and to contribute much less variability to the company's consolidated results going forward.

Operations

The company continues to expect total lumber shipments in 2024 will be largely similar to 2023 levels. The acquisition of Spray Lake lumber mill and reliability and capital improvement gains across the company's lumber mill portfolio will be largely offset by capacity reductions from the recently announced permanent closures and indefinite curtailments. However, persistently weak market conditions have increased the downside risk to West Fraser's current shipments guidance, particularly for SYP. That notwithstanding, for now the company reiterates 2024 SPF shipments guidance of 2.6 billion to 2.8 billion board feet and SYP shipments of 2.7 billion to 2.9 billion board feet.

In the company's NA EWP segment, it continues to expect 2024 OSB shipments to be consistent with 2023 levels and reiterate shipments guidance of 6.3 billion to 6.6 billion square feet (three-eighths-inch basis) this year. Start-up of the Allendale mill continues to progress and the company still anticipates a ramp-up period for the mill of up to three years to meet targeted production levels. The company expects its overall OSB platform to be better and lower cost with a modern Allendale facility operating, and as with all the company's wood products operations, demand is a key input in determining its operating schedules across its manufacturing footprint. Input costs for the NA EWP business are expected to be relatively stable through 2024.

In the company's Europe EWP segment, the company expects near-term demand weakness to persist for our panel products, although 2024 shipments of MDF, particleboard and OSB are now expected to be similar or slightly better than 2023 levels. For OSB, the company reiterates shipments guidance in the range of 900 million to 1.1 billion square feet (three-eighths-inch basis). Input costs for the Europe EWP business, including energy and resin costs, are expected to stabilize in 2024 but remain elevated.

In Q1 2024, the company continued to experience moderation of costs and improved availability for inputs across its supply chain, including resins and chemicals, although labour availability and some capital equipment lead times remained challenging. The company expects these trends to largely continue over the near term.

Based on its current outlook, assuming no deterioration from current market demand conditions during the year and no additional lengthening of lead times for projects under way or planned, the company continues to anticipate that it will invest approximately $450-million to $550-million in 2024.

Management discussion and analysis (MD&A)

The company's Q1 2024 MD&A and interim consolidated financial statements and accompanying notes are available on its website and SEDAR+ and the EDGAR website under the company's profile.

Sustainability report

West Fraser's 2023 sustainability report is available on the company's website. This report summarizes its environmental, social and governance (ESG) performance with a focus on the company's people, communities and role of its products in the carbon cycle. It is aligned with the Sustainable Accounting Standards Board (SASB), Global Reporting Initiative (GRI), the Task Force on Climate-Related Financial Disclosures (TCFD) and CDP (formerly the Carbon Disclosure Project).

Risks and uncertainties

Risk and uncertainty disclosures are included in the company's 2023 annual MD&A, as updated in the disclosures in the company's Q1 2024 MD&A, as well as in its public filings with securities regulatory authorities.

Conference call

West Fraser will hold an analyst conference call to discuss the company's Q1 2024 financial and operating results on Wednesday, April 24, 2024, at 7 a.m. Pacific Time (10 a.m. Eastern Time). To participate in the call, please dial: 1-888-390-0605 (toll-free North America) or 416-764-8609 (toll) or connect on the webcast. The call and an earnings presentation may also be accessed through West Fraser's website. Please let the operator know you wish to participate in the West Fraser conference call chaired by Sean McLaren, president and chief executive officer.

Following management's discussion of the quarterly results, investors and the analyst community will be invited to ask questions. The call will be recorded for webcasting purposes and will be available on the West Fraser website.

About West Fraser Timber Co. Ltd.

West Fraser is a diversified wood products company with more than 60 facilities in Canada, the United States (U.S.), the United Kingdom (U.K.) and Europe. From responsibly sourced and sustainably managed forest resources, the company produces lumber, engineered wood products (OSB, LVL, MDF, plywood and particleboard), pulp, newsprint, wood chips, other residuals and renewable energy. The company's products are used in home construction, repair and remodelling, industrial applications, papers, tissue, and box materials.

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