Bullboard - Stock Discussion Forum 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... see more

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TSX:WFG - Post Discussion

West Fraser Timber Co Ltd > TD

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Post by retiredcf on Feb 16, 2022 8:15am

TD

Currently have a US$125.00 target. GLTA

West Fraser Timber Co. Ltd.

(WFG-N, WFG-T) US$97.04 | C$123.38

Q4 Below Estimates; Capex Guidance Near Expectations Event

West Fraser reported Q4/21 results yesterday after market close. Aggregate adjusted EBITDA of $615 million was below our estimate of $644 million and the consensus forecast of $620 million. The adjusted EBITDA figure included a $55 million benefit related to a retroactive lumber duty assessment that was not included in our forecast. Q4/21 adjusted EPS of $3.13 was similarly below our forecast of $3.38 and the consensus forecast of $3.37.

Conference call at 11:30 a.m. ET today: 1-888-390-0605 or link to webcast.

Impact: SLIGHTLY NEGATIVE

West Fraser's Q4/21 earnings moderated on a sequential basis, but were still well above our estimate of mid-cycle (trend) potential. Compared to our segmented estimates, North American panel margins were below expectations (price realizations). Excluding the duty reassessment benefit, lumber segment trends were consistent with peers' Q4/21 results: pronounced realized price timing lags versus published benchmarks.

Lumber margins improved q/q driven by price gains. Average Q4/21 lumber price realizations improved 16% q/q - better than the 10% average gain for peers that have reported results so for this earnings season, but trailing the average 40% increase for the US$-denominated lumber composite. Price gains were heavily weighted to the tail end of the quarter, which enhances the lag effect. Lumber shipments decreased 13% q/q, reflecting B.C. storms and transportation bottlenecks.
West Fraser retains balance sheet flexibility. Year-ending net cash was $1.04 billion and available liquidity was $2.59 billion (down from $3.13 billion at the end of Q3 after Q4 acquisitions). Buyback activity continued during Q4 (1.2 million shares repurchased for $100 million). The company is raising the quarterly dividend by 25% to $0.25/share (1.0% annual yield). Capex guidance for 2022 of $500-$600 million is near our forecast.
In our view, early-2022 cost inflation and volume constraints will be more than offset by resurgent lumber, structural panel, and pulp prices. Current reference prices for lumber and OSB are 81% and 115% above respective Q4/21 averages. The Western SPF lumber benchmark price closed last night at $1,290/ Mfbm - up 1% from last Thursday and 235% above the most recent trough last August.