Post by
retiredcf on Feb 16, 2022 8:36am
CIBC
Currently have a $150 target. GLTA
EQUITY RESEARCH
February 15, 2022 Flash Research
WEST FRASER TIMBER CO. LTD.
Q4/21 Results Lower Than Street Expectations - First Glance
Impact: Slightly negative. While WFG posted EBITDA 9% lower than
consensus, we expect the market to look past the miss, given ongoing
pricing momentum in wood products. Although early Q1 volume indicators
are likely worse than most forecasters have been assuming (given
transportation challenges), we note that product pricing is tracking ahead of expectations. W. SPF lumber prices have averaged $1,215/mfbm YTD (vs. 2022E consensus of $685), while OSB North Central has averaged $955/msf (vs. full-year consensus of $550).
Q4/21 Results Lower Than Street Expectations: West Fraser reported
adjusted EBITDA of $565MM (after paying lumber duties of $20MM), in line with our Street-low forecast of $561MM but below consensus of $620MM (range of $561MM to $676MM). The company deployed $100MM on share buybacks in the quarter.
Segment Performance: NA EWP (OSB/Plywood) EBITDA was down
$269MM Q/Q to $343MM (CIBCe $314MM), largely due to lower pricing
(OSB North Central -20%), while shipments were steady. Lumber EBITDA
increased $58MM Q/Q to $190MM (CIBCe $247MM) due to higher lumber
prices (RL Composite +37%), partially offset by higher costs for fiber (all
regions) and raw materials, as well as reduced operating schedules. SPF
shipments decreased by 16% Q/Q, given transportation disruptions in B.C.
following severe flooding, while SYP shipments declined 9%. SPF production fell by 5% Q/Q, while SYP output improved by 2%. The segment benefited from one-month contribution from the Angelina FP acquisition. Within the other segments, the European OSB business added $61MM to EBITDA (CIBCe $28MM) and pulp came in at ($14MM) [CIBCe ($17MM)].
Management Outlook: West Fraser is pointing to lumber shipments in 2022 of 6.0-6.4 Bbf (split evenly between SPF and SYP), consistent with our forecast of 6.2 Bbf. On the OSB side, NA shipments are expected to be 6.1- 6.4 Bsf (CIBCe 6.3 Bsf), while European OSB volumes are expected to total 1.1-1.3 Bsf. The company is pointing to 2022 capex of $500MM-$600MM (CIBCe ~$525MM), up from ~$400MM last year. Further out, WFG’s preliminary estimate of the impact of B.C. Old-Growth Deferrals on the province’s AAC suggest a B.C. industry timber supply reduction of up to 15%. Similar to most companies, WFG is also pointing to inflationary cost pressures and labor/transportation/chemical input constraints through 2022.
West Fraser Running At Reduced Op. Rates Across The Business In Q1
Given Transportation Challenges: The company pointed to transportation
disruptions continuing into the first quarter, given limited railcar availability,
adverse weather and operator shortages. In January, West Fraser’s SPF
lumber and plywood shipments were down ~20% Y/Y, while pulp shipments were off ~30%.