June 13, 2021
Paper, Packaging & Forest Products
The Continuous Digester – What we learned this week
Lumber prices are in free fall (expected given their altitude) while OSB prices are holding – According to Random Lengths, the Framing Lumber Composite fell by $122 w/w (8.4%) to $1,324, the largest w/w decline on record. Traders have noted that fading retail sales and less activity from builders contributed to the decline. In OSB markets, the Composite was up $12 w/w, with strong demand keeping prices relatively flat, though buyer inquires have slowed.
Resolute announced a $1/share special dividend and additional lumber investments – The special dividend will be payable on July 7 to shareholders of record as of June 28. The company also announced $50MM of additional wood products investments, including: 1) $22MM to modernize equipment at the Senneterre sawmill; 2) $13MM to increase capacity at the Thunder Bay sawmill by 40 mmfbm; and 3) $15MM at the Glenwood and Cross City sawmills to support fiber optimization and efficiency. The investment will increase capacity at Cross City by 20 mmfbm. These capital projects are expected to be completed by Q3/22.
West Fraser increased its dividend and share buyback authorization – The board of directors declared a dividend of C$0.25 per share (up from C$0.20/share previously), payable on July 6 to shareholders of record on June 21. West Fraser also filed with the TSX to increase its share repurchase authorization by ~3.5 million shares to ~9.6 million shares. Under the current authorization, West Fraser has purchased 3.9 million shares at an average price of $88.08/share (or ~$340 million).
Western Forest Products has also been active on the NCIB – Not to be outdone, the company has repurchased nearly 2% of its outstanding shares QTD (or ~6.2 million shares). QTD, the company has spent $13.4 million on share repurchases at an average price of $2.15/share.