West Fraser Timber Co Ltd T.WFG

Alternate Symbol(s): WFG

Forest Products Lumber & Wood Production

West Fraser Timber Co. Ltd. is a diversified wood products company. The Company is engaged in manufacturing, selling, marketing and distributing lumber, engineered wood products, including oriented strand board (OSB), laminated veneer lumber (LVL), medium-density fiberboard (MDF), plywood, particleboard, pulp, newsprint, wood chips and other residuals and renewable energy. Its products are used in home construction, repair and remodeling, industrial applications, paper, tissues, and box materials. Its segments include Lumber, North America engineered wood products (NA EWP), Pulp & Paper and Europe EWP. Its business comprises lumber mills, OSB facilities, renewable energy facilities, pulp and paper mills, plywood facilities, MDF facilities, particleboard facilities, LVL facility, treated wood facility, and veneer facility. The Company operates approximately 58 facilities in Canada, the United States, the United Kingdom and Europe. It also offers wood preservation services.

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West Fraser Timber Co Ltd

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Post by retiredcfon Sep 17, 2021 10:16am

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West Fraser Timber Co. Ltd.

(WFG-N, WFG-T) US$77.73 | C$98.52

Management Presentations Outline Capital Deployment Priorities Event

Yesterday, West Fraser hosted investors and analysts for its inaugural Investor Day. Presentations outlined management's views on a series of topics: wood product commodity markets; the Norbord integration; capital allocation priorities; and the company's compelling ESG attributes.

Impact: NEUTRAL

Presentations covered a lot of ground and provided high-level context on discretionary capex priorities and lumber/OSB markets, but give us no cause to adjust our estimates at this time. There was minimal guidance provided regarding mid-term capital structure targets and broader strategic objectives beyond consistent reinvestment to sustain the company's leading cost position. The Norbord integration has seemingly progressed smoothly, with the synergy objective ($61 million annual run-rate by the end of 2022) on schedule.
Management expects that North American lumber and OSB industry supply additions will roll out slowly, contributing to relatively tight markets. The company noted rising capital costs and long lead times to build/ramp-up new supply, which contributes to lengthening paybacks for greenfield projects. North American capacity addition announcements for both lumber and OSB are accumulating, but we expect that closures of B.C. sawmills and LP conversions of commodity OSB mills to siding will provide buffers.
After a busy year, we expect that West Fraser will take a balanced approach to mid-term capital deployment. Management reiterated three priorities: 1) consistent reinvestment in existing assets through the commodity cycle; 2) retaining balance-sheet flexibility/investment-grade credit rating as dry powder for potential large-scale growth initiatives; and 3) ongoing returns of capital to shareholders via the modest regular dividend and buybacks. West Fraser has remained active on its NCIB following the C$1.0 billion August substantial issuer bid.

TD Investment Conclusion

Between the Q1/21 acquisition of Norbord and subsequent aggressive balance- sheet deployment — including returns of capital to shareholders — 2021 was transformative for West Fraser. We expect that the company will remain aggressive in asset base investment, while returning surplus capital to shareholders. In our view, West Fraser is attractively valued.