More RBC April 9, 2021
Forest Products
Share Repurchase Monitor - Activity from WFG, IFP, WEF, and CFF
Our view: As expected, Canadian forest product companies were actively repurchasing shares during the month of March, with West Fraser and Interfor standing out as the most aggressive. On the small cap side, both Conifex and Western Forest Products have started to return capital to shareholders through share repurchases. At current spot lumber & OSB prices, we expect that wood product producers will continue to utilize share repurchases as an avenue to return capital to shareholders. Notably absent is Canfor, which we expect will look to grow outside of BC.
West Fraser Timber Co. Ltd (TSX: WFG; NYSE: WFG) repurchased ~1.2% of its outstanding shares during Q1 – According to SEDI, West Fraser repurchased ~1.358 million shares during the month of March at an average price of ~$65.25 or ~C$82.08. During Q1, West Fraser repurchased ~1.448 million shares (or ~1.18% of the outstanding balance) at an average price of $65.48 or ~C$82.33. We estimate that West Fraser spent about $88.65 million on share repurchases during the month of March and ~$94.8 million during Q1. As compared to the current price of ~$81.08 (C$102.13), we believe that West Fraser has added significant value through its capital deployment given that the shares were repurchased at a ~19% discount (on average) to the current trading price. Shares were repurchased between $62.31 and $70.04.
Interfor Corporation (TSX: IFP) repurchased ~1.2% of its outstanding shares during Q1 – According to SEDI, Interfor repurchased ~774,420 shares during the month of March at an average price of ~C $26.21. Interfor did not repurchase shares in either January or February. We estimate that Interfor spent about $20.3 million on share repurchases during Q1. As compared to the current price of ~C$32.29, we believe that Interfor has added significant value through its capital deployment given that the shares were repurchased at a ~19% discount (on average) to the current trading price. Shares were repurchased between C$23.98 and C$27.85.
Western Forest Products Inc. (TSX: WEF) repurchased about 0.3% of its outstanding shares during Q1 –
According to SEDI, Western repurchased ~1.295 million shares during the month of March at an average price of ~C$1.79. Western did not repurchase shares in either January or February. We estimate that Western spent about $2.3 million on share repurchases during Q1. As compared to the current price of ~C$1.99, we believe that Western has added some value through its capital deployment given that the shares were repurchased at a ~10% discount (on average) to the current trading price. Shares were repurchased between C$1.73 and C$1.87.
Conifex Timber Inc. (TSX: CFF) repurchased about 0.7% of its outstanding shares during Q1 – According to SEDI, Conifex repurchased ~338,400 shares during the month of March at an average price of ~C$1.79. Conifex did not repurchase shares in January or February. We estimate that Conifex spent ~$607,248 on share repurchases during Q1. As compared to the current price of ~C$2.40, we believe that Conifex has added some value through its capital deployment given that the shares were repurchased at a ~24% discount to the current trading price. Shares were repurchased between C$1.70 and C$1.90.
We expect that Domtar and Louisiana-Pacific will be active on the buyback program during the quarter – Following the sale of its Personal Care business, Domtar announced that it had entered into an accelerated share repurchase ("ASR") agreement to repurchase $200 million of its common stock with available cash on hand. Louisiana-Pacific has historically been an active repurchaser of shares, the company has committed to return at least 50% of cash flow from operations in excess of capex. We estimate that LP will generate ~$300 million in FCF during Q1, which would imply ~$133 million for share repurchases after dividends