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 Feb 12, 2021 7:58am

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Post# 32549950

TD

Maintain their Buy rating and US$86.00 target. GLTA

West Fraser Timber Co. Ltd.

(WFG-N, WFG-T) US$71.75 | C$91.04

Combined WFG/OSB Q4/20 Results Near Our Forecast Event

West Fraser and Norbord reported Q4/20 results, separately, yesterday evening.

Aggregate adjusted EBITDA of US$743 million was a little below our estimate of US$757 million. Our estimate was net of recurring duty expenses, but did not include the non-recurring recovery during Q4/20 (retroactive duty adjustment following administrative review). Adjusted Q4/20 pro forma EPS of US$3.93 (net of duty expense) was near our forecast of US$3.86.

Conference call at 11:30 a.m. ET today: 1-888-390-0605 or westfraser.com.

Impact: NEUTRAL

There were lots of moving parts in the results, but aggregate earnings were relatively close to our forecast. Overall wood product margins were stellar and the combined company's balance sheet improved rapidly during the quarter.

Sawmill contributions were impressive. Relative to our forecasts, better- than-expected lumber margins offset lower-than-expected North American panel results (OSB price realizations/shipments lagged expectations) and negative EBITDA for the pulp & paper segment (delayed maintenance affected unit costs to a greater than expected extent). Combined Q4/20 FCF was US$4.79/share (a 7% yield for the quarter).

Management provided some guidance for 2020 capital allocation. West Fraser announced a 5% NCIB (taking effect February 17) and is guiding to 2021 aggregate capex of ~US$430 million (up 50% y/y and near our forecast). The company will also commence a mandatory repurchase offer for US$665 million of Norbord senior notes at 101% of principal. On a pro forma basis, West Fraser exited 2020 with negligible net debt and available liquidity of US$2.3 billion.
We expect much improved results in the near-term as West Fraser benefits from synchronized commodity price momentum in early 2021. We believe that current lumber and OSB price momentum is unsustainable, but a disciplined supply response this cycle has extended an exceptional free cash flow window for the sector. The Random Lengths Framing Lumber Composite (RLFLC) price closed last night at US$966/Mfbm - a new record and 42% higher than the Q4/20 average. OSB prices have similar positive momentum to lumber. While a smaller piece of West Fraser's mix going forward, pulp prices are in the early stages of a cyclical recovery.