February 11, 2021
West Fraser Timber Co. Ltd.
Q420 results: Well above expectations
Impact: Positive
First impression
West Fraser and Norbord both reported Adjusted EBITDA well above our forecasts and consensus estimates – West Fraser reported Adjusted EBITDA of $544MM. After normalizing for -$47MM of export duties, Adjusted EBITDA of $591MM was well above both our $439MM estimate and consensus at $477MM. Norbord reported Adjusted EBITDA of US $384MM, which was above RBC/Consensus at US$373/377MM.
The company is proceeding with a normal course issuer bid ("NCIB") to repurchase up to 5% of the outstanding shares – West Fraser has received approval to commence share repurchases beginning February 17, 2020.
2021 will be a heavier capex year – Management guided to ~$550MM of capex during 2021, which is slightly above our current pro-forma estimate of ~$500MM ($300MM at West Fraser and $200MM at Norbord, respectively). The focus is expected to be on integrating the OSB and panel operations and realizing previous investments.
West Fraser Lumber Segment Adjusted EBITDA (adjusted for duties) of $555MM was above our $380MM forecast – Segment net sales of $1,320MM were above our $1,209MM forecast. West Fraser expects to increase lumber production by ~340 mmfbm y/y in 2021.
Norbord North America OSB Adjusted EBITDA of US$370MM was slightly above our US$361MM forecast – Relative to our forecasts, segment revenue of US$662MM was well below our US$760MM forecast, as slightly lower-than-expected shipments of 1,405 mmsf (vs. RBCe at 1,450 mmsf) and lower-than-expected prices were realized.
West Fraser Panels Segment Adjusted EBITDA of $62MM was in line with our $64MM forecast – Segment net sales of $194MM were slightly below our $199MM forecast, as a better-than-expected price/mix impact was more than offset by lower-than-expected volumes.
Norbord Europe OSB Adjusted EBITDA of US$20MM was in line with our US$19MM forecast – Segment revenue of US$132MM was above our US $118MM forecast due to higher-than-expected shipments of 485 mmsf (vs. RBCe at 450 mmsf) and slightly better-than-expected pricing.
West Fraser Pulp & Paper Segment Adjusted EBITDA of -$26MM was well below our -$2MM forecast – Segment net sales of $206MM were slightly below our $211MM forecast, with a better-than-expected price/ mix largely offset by lower-than-expected shipments. The annual major maintenance shutdown at Hinton had a larger than expected impact.
Conference call tomorrow at 11:30 a.m. ET – Dial-in: 1-888-390-0605.