Western Forest Products Inc. (TSX: WEF) (“Western” or the
“Company”) reported a net loss of $17.4 million in the third
quarter of 2023, as compared to 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 to the same period last year. We
curtailed certain sawmill operations during the third quarter of
2023, to manage inventories and match production to product
demand.
Adjusted EBITDA was negative $11.6 million in
the third quarter of 2023, as compared to 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 to
income of $4.7 million in the third quarter of 2022.
Highlights:
- Announced a
$35.9 million agreement to sell a 34% 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
(millions of Canadian dollars
except per share amounts and where otherwise noted) |
Q32023 |
|
Q32022 |
|
Q22023 |
|
YTD2023 |
|
YTD2022 |
Revenue |
$ |
231.1 |
|
|
$ |
356.0 |
|
|
$ |
276.0 |
|
|
$ |
770.9 |
|
|
$ |
1,153.0 |
|
Export tax expense |
|
5.2 |
|
|
|
8.0 |
|
|
|
6.2 |
|
|
|
16.1 |
|
|
|
34.2 |
|
Export tax recovery |
|
(4.3 |
) |
|
|
(18.0 |
) |
|
|
- |
|
|
|
(4.3 |
) |
|
|
(18.0 |
) |
Stumpage expense |
|
5.9 |
|
|
|
36.4 |
|
|
|
14.3 |
|
|
|
35.7 |
|
|
|
90.1 |
|
Adjusted EBITDA (1) |
|
(11.6 |
) |
|
|
17.3 |
|
|
|
(12.0 |
) |
|
|
(28.7 |
) |
|
|
148.9 |
|
Adjusted EBITDA margin
(1) |
|
(5% |
) |
|
|
5% |
|
|
|
(4% |
) |
|
|
(4% |
) |
|
|
13% |
|
Operating income (loss) prior
to restructuring and other items |
$ |
(25.8 |
) |
|
$ |
4.7 |
|
|
$ |
(25.1 |
) |
|
$ |
(69.0 |
) |
|
$ |
110.3 |
|
Net income (loss) |
|
(17.4 |
) |
|
|
6.6 |
|
|
|
(20.7 |
) |
|
|
(55.8 |
) |
|
|
83.2 |
|
Earnings (loss) per share,
diluted |
|
(0.05 |
) |
|
|
0.02 |
|
|
|
(0.07 |
) |
|
|
(0.17 |
) |
|
|
0.25 |
|
Net debt (cash) (2), end of
period |
|
59.5 |
|
|
|
(35.4 |
) |
|
|
34.6 |
|
|
|
|
|
Liquidity (1), end of
period |
|
170.2 |
|
|
|
269.1 |
|
|
|
195.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commenting on the quarter, Western’s President
and CEO 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’ómoks 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 BC that we need to support reinvestment, and we are excited
to move it forward.”
Summary of Third Quarter 2023
Results
We reported Adjusted EBITDA of negative $11.6
million in the third quarter of 2023, which included $4.3 million
in export tax recovery, as compared to positive $17.3 million in
the same period last year, which included $18.0 million in export
tax recovery. Results in the third quarter of 2023 continue to
reflect more challenging macroeconomic and lumber market
conditions, as compared to the same period last year.
Net loss was $17.4 million in the third quarter
of 2023, as compared to net income of $6.6 million in the same
period last year. Operating loss prior to restructuring and other
items was $25.8 million in the third quarter of 2023, as compared
to income of $4.7 million in the same period last year.
Sales
Lumber revenue was $179.9 million in the third
quarter of 2023 as compared to $267.1 million in the same period
last year. The decrease of 33% was due to lower lumber shipment
volumes and lower average lumber prices, partially offset by a
stronger sales mix and stronger US Dollar (“USD”) to Canadian
Dollar (“CAD”) average exchange rate. Our average realized lumber
price decreased by 7% to $1,388 per thousand board feet in the
third quarter of 2023, as compared to $1,495 per thousand board
feet in the same period last year.
Specialty lumber shipments represented 55% of
total lumber shipment volumes in the third quarter of 2023, as
compared to 39% in the same period last year, yielding a stronger
sales mix. Industrial lumber shipment volumes remained flat
compared to the same period last year with incremental volume from
the acquisition of our Calvert engineered wood products division
offset by lower volumes in certain other product lines. Cedar
lumber shipment volumes increased 21% compared to the same period
last year due to improved take-away through the home centre
segment. Japan lumber shipment volumes decreased 17% compared to
the same period last year due to increased levels of supply from
domestic manufacturing, Europe and Russia. Commodity lumber
shipment volumes decreased 47% compared to the same period last
year due to weaker market demand.
Log revenue was $38.4 million in the third
quarter of 2023, as compared to $72.5 million in the same period
last year. The decrease of 47% was due to lower log sales volumes
and lower domestic log prices.
By-products and other revenue were $12.8
million, as compared to $16.4 million in the same period last year.
The decrease of 22% was due to lower chip prices and lower volumes
as the result of reduced sawmill production, partially offset by
higher revenue from harvesting services provided to third
parties.
Operations
Lumber production was 126 million board feet in
the third quarter of 2023, as compared to 169 million board feet in
the same period last year. During the third quarter of 2023 we
curtailed certain sawmill operations to match production to market
demand and manage inventory levels. A higher specialty mix of
production led to increased secondary processing volumes and costs
as compared to the third quarter of 2022.
We harvested 678,000 cubic metres of logs from
our BC coastal operations in the third quarter of 2023, as compared
to 800,000 cubic metres in the same period last year, due to an
extended fire-risk season and reduced heli-logging contractor
availability.
Despite lower harvest volumes, Timberlands
operating cash costs per cubic metre declined 26% in the third
quarter of 2023, compared to the same period last year, primarily
as a result of lower stumpage per cubic metre. A reduction in more
costly heli-logging harvest and management of road building
activity also contributed to the lower unit costs.
BC Coastal sawlog purchases were 116,000 cubic
metres in the third quarter of 2023, as compared to 302,000 cubic
metres in the same period last year. We managed sawlog purchases to
match fibre requirements at our BC manufacturing facilities.
Freight expense was $15.7 million in the third
quarter of 2023 as compared to $25.6 million in the same period
last year. The decrease of 39% was due to lower lumber and export
shipments and lower container, rail and trucking rates. In
addition, lack of container availability in the third quarter of
2022 necessitated the use of higher cost breakbulk vessels.
Adjusted EBITDA and operating income included
$5.2 million of countervailing duty (“CV”) and anti-dumping duty
(“AD”) expense in the third quarter of 2023, as compared to $8.0
million in the same period of 2022. Export tax expense declined due
to lower duty rates, lumber prices and US-destined lumber shipment
volumes, partially offset by a stronger USD.
During the third quarter of 2023, we recognized
a recovery of $4.3 million on the finalization of duty rates from
8.99% to 8.05% for shipments made in 2021. The comparative quarter
of 2022 included a recovery of $18.0 million on the finalization of
duty rates from 20.23% to 8.59% or shipments made in 2020.
Corporate and Other
Selling and administration expense was $9.6
million in the third quarter of 2023 as compared to $11.1 million
in the same period last year, primarily as a result of reduced
incentive compensation expense.
Other income was $2.2 million in the third
quarter of 2023 as compared to $4.0 million in the same period last
year, resulting primarily from lower unrealized foreign exchange
gains on export tax receivables.
Finance costs were $0.5 million in the third
quarter of 2023 as compared to finance income of $0.7 million in
the same period last year. Interest expense on higher average
borrowings were partially offset by interest revenue from the
export duty receivable.
Income Taxes
Income tax recovery was $6.5 million on a net
loss before tax of $23.9 million in the third quarter of 2023, as
compared to an expense of $3.0 million on income before tax of $9.6
million in the same period last year. The effective tax rate was
27% as compared to 31% in the same period last year.
Net Income (Loss)
Net loss was $17.4 million in the third quarter
of 2023, as compared to net income of $6.6 million for the same
period last year. More challenging macroeconomic conditions
resulted in lower lumber demand and prices and impacted results
quarter over quarter.
Summary of Year to Date 2023
Results
We reported Adjusted EBITDA of negative $28.7
million for the first nine months of 2023, as compared to $148.9
million for the same period last year. Results in the nine months
of 2023 continue to reflect more challenging macroeconomic and
lumber market conditions, as compared to the same period last
year.
Net loss was $55.8 million for the first nine
months of 2023, as compared to net income of $83.2 million for the
same period last year. Operating loss prior to restructuring and
other items was $69.0 million in the first nine months of 2023, as
compared to income of $110.3 million in the same period last
year.
Sales
Lumber revenue was $603.3 million in the first
nine months of 2023 as compared to $932.8 million in the same
period last year. The decrease of 35% was due to lower lumber
shipment volumes and average lumber prices, partially offset by a
slightly stronger sales mix and stronger USD to CAD average
exchange rate. Our average realized lumber price was $1,334 per
thousand board feet in the first nine months of 2023, as compared
to $1,661 per thousand board feet in the same period last year, a
decrease of 20%.
Speciality lumber shipments represented 49% of
total lumber shipment volumes in the first nine months of 2023, as
compared to 45% in the same period last year, yielding a slightly
stronger sales mix. Industrial lumber shipment volumes increased
22% compared to the same period last year with incremental volume
from the acquisition of our Calvert engineered wood products
division and growth primarily in Douglas fir timbers. Cedar lumber
shipments decreased 13% compared to the same period last year as
buyers managed inventory levels to market conditions. Japan lumber
shipment volumes decreased 35% compared to the same period last
year due to increased levels of supply from domestic manufacturing,
Europe and Russia. Commodity lumber shipments decreased 25%
compared to the same period last year due to weaker market
demand.
Log revenue was $129.8 million in the first nine
months of 2023, as compared to $176.0 million in the same period
last year. The decrease of 26% was due to lower average domestic
log prices, partially offset by higher log sales volume, as we
balanced log inventories to lumber market conditions and fibre
requirements of our manufacturing facilities.
By-product and other revenue were $37.8 million
in the first nine months of 2023 as compared to $44.2 million in
the same period last year. The decrease of 14% was due to lower
chip prices and lower volumes as the result of reduced sawmill
production, partially offset by higher revenue from harvesting
services provided to third parties.
Operations
Lumber production was 436 million board feet in
the first nine months of 2023, as compared to 517 million board
feet in the same period last year. During the first nine months of
2023 we took operating curtailments at certain sawmills to match
production to market demand and manage inventory.
We harvested 2,234,000 cubic metres of logs from
our BC coastal operations in the first nine months of 2023, as
compared to 2,451,000 cubic metres in the same period last year,
due to an extended fire-risk season, reduced heli-logging
contractor availability in the third quarter of 2023 and matching
harvest volumes to market conditions.
Despite lower harvest volumes, Timberlands
operating cash costs per cubic metre declined 22% in the first nine
months of 2023, compared to the same period last year, primarily as
a result of lower stumpage per cubic metre and management of road
building activity.
BC Coastal sawlog purchases were 475,000 cubic
metres in the first nine months of 2023, as compared to 920,000
cubic metres in the same period last year. We managed sawlog
purchases to match fibre requirements at our BC manufacturing
facilities.
Freight expense was $59.3 million in the first
nine months of 2023 as compared to $82.7 million in the same period
last year. The decrease of 28% was due to lower lumber and export
shipments and lower container, rail and trucking rates. In
addition, lack of container availability in the first nine months
of 2022 necessitated the use of higher cost breakbulk vessels.
Adjusted EBITDA and operating income included
$16.1 million of CV and AD expense in the first nine months of
2023, as compared to $34.2 million in the same period of 2022. In
the first nine months of 2023, we recognized a recovery of $4.3
million on the finalization of duty rates from 8.99% to 8.05% for
shipments made in 2021. The comparative period of 2022 included a
recovery of $18.0 million on the finalization of duty rates from
20.23% to 8.59% for shipments made in 2020.
Export tax expense declined due to lower average
duty rates, lumber prices and US-destined lumber shipment
volumes.
Corporate and Other
Selling and administration expense was $32.0
million for the first nine months of 2023 as compared to $34.0
million in the same period last year, primarily as a result of
reduced incentive compensation expense.
Restructuring costs were $6.6 million in the
first nine months of 2023 as compared to $0.6 million in the same
period last year. The increase was primarily due to retirement and
other benefits related to our Alberni Pacific Division (“APD”)
facility and rightsizing of various operational functions within
our business.
Other income was $1.3 million in the first nine
months of 2023 as compared to income of $4.1 million in the same
period last year, resulting primarily from lower unrealized foreign
exchange gains on export tax receivables partially offset by gains
on the sale of equipment and other assets.
Finance costs were $1.2 million in the first
nine months of 2023 as compared to a negligible amount in the same
period last year. Interest expense on higher average borrowings
were partly offset by revenue from the export duty receivable.
Income Taxes
Income tax recovery was $19.7 million on a net
loss before tax of $75.5 million in the first nine months of 2023,
as compared to an expense of $30.6 million on income before tax of
$113.8 million in the same period last year. The effective tax rate
was 26% as compared to 27% in the same period last year.
Net Income (Loss)
Net loss was $55.8 million in the first nine
months of 2023 as compared to net income of $83.2 million for the
same period of last year. More challenging macroeconomic conditions
during the first nine months of 2023 resulted in lower lumber
demand and prices and impacted results year over year.
Alberni Pacific Division
The Company previously announced we would not
restart our APD facility in its current configuration and had
established a multi-party working group to explore viable
industrial manufacturing solutions for the site over a 90-day
period. On April 27, 2023, we announced we had commenced
negotiations and due diligence processes related to the proposals
we received, which are ongoing. Operations at the APD facility have
been curtailed since fall 2022 and will remain curtailed through
the negotiations.
Indigenous Relationships
We respect the treaty and Aboriginal rights of
Indigenous groups, and we are committed to open dialogue and
meaningful actions in support of reconciliation. We are actively
investing time and resources in capacity building and fostering
positive working relationships with Indigenous groups with
traditional territories within which Western operates. For details
of our progress in 2022, please see “Indigenous Relationships” in
our Management’s Discussion and Analysis for the year ended
December 31, 2022. Work continues on several
Nation-led, integrated resource management
planning initiatives across five of the Tree Farm Licence (“TFL”)
areas where Western operates.
TFL 39 Block 2 Transaction
On October 23, 2023, Western and four Vancouver
Island First Nations (Tlowitsis, We Wai Kai, Wei Wai Kum, and
K’ómoks) (collectively, “Nations”) announced an agreement for the
Nations to acquire a 34% interest from Western in a newly formed
Limited Partnership (“Partnership”) for $35.9 million. The
Partnership will consist of certain assts and liabilities of
Western’s Mid Island Forest Operation, including Block 2 of TFL 39.
The operations of the new Partnership will cover approximately
157,000 hectares of forest land in the traditional territories of
the Nations near the communities of Campbell River and Sayward on
eastern Vancouver Island. The Partnership will manage an allowable
annual cut (“AAC”) of 904,540 cubic metres of timber, and includes
a long-term fibre agreement to support Western’s BC coastal
manufacturing operations. The formation of the Partnership and
acquisition by the Nations is subject to various closing
conditions, including subdivision and tenure transfer approvals
from the BC Ministry of Forests. Western and the Nations are
working towards closing the acquisition in the first quarter of
2024.
Regulatory Environment
Since 2020, the Province of BC (“the Province”)
has introduced various policy initiatives and regulatory changes
that impact the BC forest sector, including: fibre recovery, lumber
remanufacturing, old growth forest management, forest stewardship
and the exportation of logs.
Tripartite Framework Agreement on Nature
Conservation (“Nature Agreement”)
On November 3, 2023, the Government of Canada,
the Province and the First Nations Leadership Council announced the
signing of the Nature Agreement, extending through March 2030, and
intended to further conserve and protect land and water, species
and biodiversity in BC. The Nature Agreement includes up to $1
billion in government funding in support of the Government of
Canada’s goal to protect 30% of Canada’s terrestrial and aquatic
ecosystems by 2030. The Company is unable to assess the potential
impact of the Nature Agreement on the Company’s business at this
time.
TFL 44
In June 2023, the Province set a new AAC for TFL
44, reducing the allowable annual log harvest from 793,600 cubic
metres to 642,800 cubic metres. The new AAC was effective
immediately and reflects harvest reductions associated with forest
resources and socio-economic objectives of the Province, including
the reallocation of previously unharvested volume to new forest
licences.
The TFL 44 licence is held by the Tsawak-qin
Forestry Limited Partnership, a partnership between Western and
Huumiis Ventures Limited Partnership, a limited partnership
beneficially owned by the Huu-ay-aht First Nations. The Company
strongly opposes the AAC determination and the allocation of
unharvested volume to new forest licences in light of their serious
concerns that the allocation significantly affected the AAC
determination and are continuing to pursue this matter with the
Province. Given the foregoing, the Company is unable to assess the
potential impact of this AAC determination on the Company’s
business at this time.
TFL 19
We expect the Provincial Chief Forester to
determine a new AAC for TFL 19 before the end of 2023. While
we cannot predict the outcome of the determination, the Management
Plan that we submitted in 2020, recommended an 18% lower AAC
(approximately 130,000 cubic metres), consistent with the timber
supply forecasts from previous Management Plans.
Dividend and Capital
Allocation
We remain committed to a balanced approach to
capital allocation. We will continue to evaluate opportunities to
invest strategic and discretionary capital in jurisdictions that
create the opportunity to grow long-term shareholder value.
Quarterly Dividend
In response to the weaker lumber market
conditions and corresponding financial results, Western is
suspending its quarterly dividend until further notice, effective
November 7, 2023. The Board of Directors (“Board”) 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 our Board, after considering our operating results,
financial condition, cash requirements, financing agreement
restrictions and other factors our Board may deem relevant.
Dividends of $4.0 million and $11.9 million were
paid in the three and nine months ending September 30, 2023,
respectively, as compared to $4.1 million and $11.4 million in the
same period last year.
Normal Course Issuer Bid (“NCIB”)
On August 3, 2023, the Company renewed its NCIB
permitting the purchase and cancellation of up to 15,837,277 common
shares, representing 5% of the Company’s common shares outstanding
as of August 2, 2023. The renewed NCIB commenced on August 11, 2023
and will end no later than August 10, 2024. The Company also
entered into an automatic share purchase plan with a designated
broker to facilitate purchases of its common shares under the
renewed NCIB at times when the Company would ordinarily not be
permitted to purchase its common shares due to regulatory
restrictions or self-imposed blackout periods.
During the first nine months ended September 30,
2023, no common shares were repurchased under our current NCIB.
Strategy and Outlook
Western’s long-term business objective is to
create and grow shareholder value by building a sustainable,
margin-focused specialty products business of scale to compete
successfully in global markets. For more detail on our strategic
initiatives and actions, refer to “Strategy and Outlook” in our
Management’s Discussion and Analysis for the year ended December
31, 2022.
Market Outlook
Near-term we expect lumber markets to remain
volatile as we head into the typically slower fall and winter
seasons. Consumers continue to adjust to higher interest rates and
macroeconomic conditions which is 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, we see near-term opportunities to increase volumes as
domestic production has been impacted by a fire at a large Japanese
sawmill. We anticipate prices to modestly improve in the near-term.
Demand for our Industrial lumber products will be product line
specific but are expected to remain stable over the near-term.
North American demand and prices for our commodity products are
expected to remain volatile, while lumber demand and prices in
China are expected to remain weak.
We expect 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.
We remain excited about the long-term growth
opportunity for wood products and the positive impacts they have in
a low carbon world.
Non-GAAP Financial Measures
Reference is made in this news release to the
following non-GAAP measures: Adjusted EBITDA, Adjusted EBITDA
margin, Net debt to capitalization and total Liquidity are used as
benchmark measurements of our operating results and as benchmarks
relative to our competitors. These non-GAAP measures are commonly
used by securities analysts, investors and other interested parties
to evaluate our financial performance. These non-GAAP measures do
not have any standardized meaning prescribed by IFRS and may not be
comparable to similar measures presented by other issuers. The
following table provides a reconciliation of these non-GAAP
measures to figures as reported in our unaudited condensed
consolidated financial statements:
(millions of Canadian dollars except where otherwise noted)
Adjusted EBITDA |
Q32023 |
Q32022 |
Q22023 |
YTD2023 |
YTD2022 |
Net income (loss) |
$ |
(17.4 |
) |
$ |
6.6 |
|
$ |
(20.7 |
) |
$ |
(55.8 |
) |
$ |
83.2 |
|
Add: |
|
|
|
|
|
Amortization |
|
14.1 |
|
|
12.7 |
|
|
13.2 |
|
|
40.4 |
|
|
38.2 |
|
Changes in fair value of biological assets |
|
- |
|
|
(0.2 |
) |
|
(0.1 |
) |
|
(0.2 |
) |
|
0.3 |
|
Operating restructuring items |
|
(0.2 |
) |
|
(0.2 |
) |
|
1.6 |
|
|
6.6 |
|
|
0.6 |
|
Other expense (income) |
|
(2.2 |
) |
|
(4.0 |
) |
|
0.8 |
|
|
(1.3 |
) |
|
(4.1 |
) |
Finance costs |
|
0.5 |
|
|
(0.7 |
) |
|
0.5 |
|
|
1.2 |
|
|
- |
|
Income tax expense (recovery) |
|
(6.5 |
) |
|
3.0 |
|
|
(7.3 |
) |
|
(19.7 |
) |
|
30.6 |
|
Adjusted EBITDA |
$ |
(11.6 |
) |
$ |
17.3 |
|
$ |
(12.0 |
) |
$ |
(28.7 |
) |
$ |
148.9 |
|
Adjusted EBITDA margin |
|
|
|
|
|
Total revenue |
$ |
231.1 |
|
$ |
356.0 |
|
$ |
276.0 |
|
$ |
770.9 |
|
$ |
1,153.0 |
|
Adjusted EBITDA |
|
(11.6 |
) |
|
17.3 |
|
|
(12.0 |
) |
|
(28.7 |
) |
|
148.9 |
|
Adjusted EBITDA margin |
|
(5% |
) |
|
5% |
|
|
(4% |
) |
|
(4% |
) |
|
13% |
|
Net debt to capitalization |
Sept. 302023 |
Sept. 302022 |
Jun. 302023 |
|
|
Net debt (cash) |
|
|
|
|
|
Total debt |
$ |
62.0 |
|
$ |
- |
|
$ |
36.8 |
|
|
|
Bank indebtedness |
|
0.5 |
|
|
- |
|
|
1.0 |
|
|
|
Cash and cash equivalents |
|
(3.0 |
) |
|
(35.4 |
) |
|
(3.2 |
) |
|
|
|
$ |
59.5 |
|
$ |
(35.4 |
) |
$ |
34.6 |
|
|
|
Capitalization |
|
|
|
|
|
Net debt (cash) |
$ |
59.5 |
|
$ |
(35.4 |
) |
$ |
34.6 |
|
|
|
Total equity attributable to equity shareholders of the
Company |
|
580.3 |
|
|
676.0 |
|
|
599.5 |
|
|
|
|
$ |
639.8 |
|
$ |
640.6 |
|
$ |
634.1 |
|
|
|
Net debt to capitalization |
|
9% |
|
|
0% |
|
|
5% |
|
|
|
Total liquidity |
Sept. 302023 |
Sept. 302022 |
Jun. 302023 |
|
|
Cash and cash equivalents |
$ |
3.0 |
|
$ |
35.4 |
|
$ |
3.2 |
|
|
|
Available credit facility |
|
250.0 |
|
|
250.0 |
|
|
250.0 |
|
|
|
Bank indebtedness |
|
(0.5 |
) |
|
- |
|
|
(1.0 |
) |
|
|
Credit facility drawings |
|
(62.2 |
) |
|
- |
|
|
(37.0 |
) |
|
|
Outstanding letters of credit |
|
(20.1 |
) |
|
(16.3 |
) |
|
(19.7 |
) |
|
|
|
$ |
170.2 |
|
$ |
269.1 |
|
$ |
195.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Figures in the table above may not equal or sum to figures
presented elsewhere due to rounding.
Forward Looking Statements and Information
This press release contains statements that may
constitute forward-looking statements under the applicable
securities laws. Readers are cautioned against placing undue
reliance on forward-looking statements. All statements herein,
other than statements of historical fact, may be forward-looking
statements and can be identified by the use of words such as
“will”, “commit”, “project”, “estimate”, “expect”, “anticipate”,
“plan”, “target”, “forecast”, “intend”, “believe”, “seek”, “could”,
“should”, “may”, “likely”, “continue”, “pursue” and similar
references to future periods. Forward-looking statements in this
press release include, but are not limited to, statements relating
to our current intent, belief or expectations with respect to:
domestic and international market conditions, demands and growth;
economic conditions; our growth, marketing, production, wholesale,
operational and capital allocation plans, investments and
strategies, including but not limited to payment of a dividend or
repurchase of shares; fibre availability and regulatory
developments; changes to stumpage rates and the expected timing
thereof; the impact of COVID-19; the execution of our sales and
marketing strategy; the development and completion of integrated
resource management plans or forest landscape plan pilots by First
Nations; the impact of the Nature Agreement on the Company’s
operations; the impact of the determination of a new AAC for TFL
19; the Company’s pursuit of the TFL 44 AAC determination with
government; the potential for viable industrial manufacturing
solutions for the APD facility; the timing and outcome of the
negotiation processes for the APD facility; the completion of and
expected timing of the acquisition by the Nations; and the expected
timing and cost of completion of the Company’s announced strategic
investments. Although such statements reflect management’s current
reasonable beliefs, expectations and assumptions as to, amongst
other things, the future supply and demand of forest products,
global and regional economic activity and the consistency of the
regulatory framework within which the Company currently operates,
there can be no assurance that forward-looking statements are
accurate, and actual results and performance may materially
vary.
Many factors could cause our actual results or
performance to be materially different including: economic and
financial conditions including inflation, international demand for
forest products, the Company’s ability to export its products, cost
and availability of shipping carrier capacity, competition and
selling prices, international trade disputes and sanctions, changes
in foreign currency exchange rates, labour disputes and
disruptions, ability to recruit workers, natural disasters, the
impact of climate change, relations with First Nations groups,
First Nations’ claims and settlements, the availability of fibre
and allowable annual cut, the ability to obtain operational
permits, development and changes in laws and regulations affecting
the forest industry including as related to old growth timber
management and the Manufactured Forest Products Regulation, changes
in the price of key materials for our products, changes in
opportunities, information systems security, future developments
relating to COVID-19 and other factors referenced under the “Risks
and Uncertainties” section of our MD&A in our 2022 Annual
Report dated February 16, 2023. The foregoing list is not
exhaustive, as other factors could adversely affect our actual
results and performance. Forward-looking statements are based only
on information currently available to us and refer only as of the
date hereof. Except as required by law, we undertake no obligation
to update forward-looking statements.
Reference is made in this press release to
Adjusted Earnings Before Interest, Tax, Depreciation and
Amortization (“Adjusted EBITDA”). Adjusted EBITDA is defined as
operating income prior to operating restructuring items and other
income (expense) plus amortization of plant, equipment, right of
use and timber licence assets, impairment adjustments, and changes
in fair value of biological assets. Adjusted EBITDA margin is
Adjusted EBITDA as a proportion of revenue. Western uses Adjusted
EBITDA and Adjusted EBITDA margin as benchmark measurements of our
own operating results and as benchmarks relative to our
competitors. We consider Adjusted EBITDA to be a meaningful
supplement to operating income as a performance measure primarily
because amortization expense, impairment adjustments and changes in
the fair value of biological assets are non-cash costs and vary
widely from company to company in a manner that we consider largely
independent of the underlying cost efficiency of their operating
facilities. Further, the inclusion of operating restructuring items
which are unpredictable in nature and timing may make comparisons
of our operating results between periods more difficult. We also
believe Adjusted EBITDA and Adjusted EBITDA margin are commonly
used by securities analysts, investors and other interested parties
to evaluate our financial performance.
Adjusted EBITDA does not represent cash
generated from operations as defined by IFRS and it is not
necessarily indicative of cash available to fund cash needs.
Furthermore, Adjusted EBITDA does not reflect the impact of certain
items that affect our net income. Adjusted EBITDA and Adjusted
EBITDA margin are not measures of financial performance under IFRS,
and should not be considered as alternatives to measures of
performance under IFRS. Moreover, because all companies do not
calculate Adjusted EBITDA in the same manner, Adjusted EBITDA and
Adjusted EBITDA margin calculated by Western may differ from
similar measures calculated by other companies. A reconciliation
between the Company’s net income as reported in accordance with
IFRS and Adjusted EBITDA is included in this press release.
Also in this press release management may use
key performance indicators such as net debt, and net debt to
capitalization. Net debt is defined as long-term debt and bank
indebtedness less cash and cash equivalents. Net debt to
capitalization is a ratio defined as net debt divided by
capitalization, with capitalization being the sum of net debt and
equity. These key performance indicators are non-GAAP financial
measures that do not have a standardized meaning and may not be
comparable to similar measures used by other issuers. They are not
recognized by IFRS, but are meaningful in that they indicate the
Company’s ability to meet its obligations on an ongoing basis, and
indicate whether the Company is more or less leveraged than in the
past.
Western is an integrated forest products company
building a margin-focused log and lumber business to compete
successfully in global softwood markets. With operations and
employees located primarily on the coast of British Columbia and
Washington State, Western is a premier supplier of high-value,
specialty forest products to worldwide markets. Western 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 licenses, First Nations
arrangements, and market purchases. Western supplements its
production through a wholesale program providing customers with a
comprehensive range of specialty products.
TELECONFERENCE CALL
NOTIFICATION:
Wednesday, November 8, 2023 at 9:00 a.m. PST (12:00 p.m.
EST)
To participate in the teleconference please dial
416-340-2217 or 1-800-952-5114 (passcode: 9879996#). This call will
be taped, available one hour after the teleconference, and on
replay until December 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#).
For further information, please contact:Stephen
WilliamsExecutive Vice President & Chief Financial Officer(604)
648-4500
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