Mr. Stephen Williams reports

WESTERN ANNOUNCES FIRST QUARTER 2024 RESULTS

Western Forest Products Inc. had a net loss of $8.0-million in the first quarter of 2024, as compared with a net loss of $17.7-million in the first quarter of 2023 and a net loss of $14.3-million in the fourth quarter of 2023.

Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) was negative $4.2-million in the first quarter of 2024, as compared with negative $5.0-million in the first quarter of 2023 and negative $1.2-million in the fourth quarter of 2023.

First quarter 2024 financial and operational summary:

• Lumber shipments of 131 million board feet (versus 170 million board feet in Q1 2023);
• Japan lumber shipments of 29 million board feet (versus 15 million board feet in Q1 2023);
• Specialty lumber mix of 61 per cent (versus 40 per cent in Q1 2023);
• Average lumber selling price of $1,351 per thousand board feet (versus $1,241 per thousand board feet in Q1 2023), benefiting from a stronger sales mix, but offset by lower lumber prices.

Indigenous relationships:

• Completed the sale of a 34-per-cent ownership interest in the newly formed La-kwa sa muqw Forestry Limited Partnership for gross proceeds of $35.9-million to the Tlowitsis, We Wai Kai, Wei Wai Kum and K'omoks first nations. The LFLP is composed of certain assets and liabilities of Western Forest's former Mid-Island forest operation, including the newly established tree farm licence 64, created through the subdivision of block 2 from TFL 39. The current allowable annual cut of TFL 64 represents approximately 16 per cent of Western Forest's total AAC.
• In collaboration with the Namgis First Nation, we released a draft of the first forest landscape plan in British Columbia for public comment. The FLP covers approximately 89 per cent of the area of TFL 37 and offers the opportunity for greater certainty for a stable long-term fibre supply within TFL 37. Western Forest's current AAC in TFL 37 represents approximately 14 per cent of its total AAC.

Accelerating the transition to higher-value products:

• Completed and commissioned the first continuous dry kiln on the B.C. coast at its Saltair sawmill; the new continuous kiln, which has a capacity of approximately 70 million board feet, will support increased production of higher-valued products and also contributes to its environmental objectives by reducing energy consumption;
• Advanced permitting related to two previously announced continuous dry kilns: one at its Duke Point sawmill in Nanaimo, B.C., and one at its value-added division in Chemainus, B.C.; each kiln will have a capacity of approximately 70 million board feet, and the company expects to complete these two additional kilns by the end of 2025.

Balance sheet and cash flow:

• Near-term priority is maintaining a strong balance sheet and financial flexibility;
• Ended the quarter with liquidity of $142.1-million and a net debt to capitalization ratio of 13 per cent;
• Expect an income tax refund of approximately $23-million in the second or third quarter of 2024;
• Reducing capital expenditure spending to approximately $50-million in 2024; this includes approximately $13-million of spending related to two new continuous dry kilns, which are expected to be completed over 2024 and 2025 at an estimated total cost of approximately $35-million;
• Cumulative duties of $168.8-million (U.S.) ($228.5-million) held in trust by U.S. Customs and Border Protection as at March 31, 2024, or approximately 53 cents per share on an after-tax basis.

Other updates:

• Announced the indefinite curtailment of its Alberni Pacific division facility.

Market outlook

The company is seeing some positive signs of improving demand and prices in certain lumber products relative to the first quarter of 2024. However, lumber demand and prices in the second half of 2024 will vary based on product lines and be dependent on global macroeconomic conditions.

Demand and prices for cedar timber and premium appearance products are expected to remain stable. Demand and price for cedar decking products are firming up as the company heads into the spring while demand for cedar trim and fencing products is expected to remain soft until market inventory rebalances.

In Japan, it anticipates quarterly lumber volumes to remain near those achieved in the first quarter of 2024. Lumber prices are expected to remain stable but may be impacted by further weakness in the Japanese yen to U.S. dollar exchange rate.

Demand for its industrial lumber products is generally expected to remain stable over the near term. North American demand and prices for its commodity products should marginally improve in the second quarter of 2024 but are expected to remain volatile through the second half of 2024. In China, lumber demand and prices may slightly weaken as the company progresses through 2024.

It expects sawlog markets to follow conditions in the lumber markets while residual chip pricing is expected to slightly improve in the near term and will continue to follow the northern bleached softwood kraft price to China.

Management's discussion and analysis

Readers are encouraged to read its first quarter 2024 MD&A, interim consolidated financial statements and accompanying notes, which are available on its website and SEDAR+.

Conference call

Wednesday, May 8, 2024, at 12 p.m. PDT (3 p.m. EDT)

To participate in the teleconference, please dial 416-340-2217 or 1-800-952-5114 (passcode: 7950035 followed by the number sign). This call will be taped, available one hour after the teleconference, and on replay until June 8, 2024, at 8:59 p.m. PDT (11:59 p.m. EDT). To hear a complete replay, please call 905-694-9451/1-800-408-3053 (passcode: 1087490 followed by the number sign).

About Western Forest Products Inc.

Western Forest is an integrated forest product company building a margin-focused log and lumber business to compete 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 of 885 million board feet from six 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.

We seek Safe Harbor.