More RBCExtract from their 128 page Q221 Global report.
WFG is rated Outperform with a US$125.00 target. GLTA
West Fraser Timber Co. Ltd. (“West Fraser”) is a diversified North American wood products company, with operations in lumber, panels, pulp, newsprint, wood chips, and energy. The company was founded in 1955 after the Ketcham brothers acquired a lumber planing mill in Quesnel, BC. Today, the company operates in BC, Alberta, and the southern United States.
Management expects that repair & remodel will recover: “In North America we experienced continued strength and recovery in US home construction activity spurring demand for wood building products. In fact, homes construction as measured by new home starts recently reached levels not seen since 2006. Despite what appears to be a short-term pullback in repair and remodeling activity, we expect this segment to remain relatively strong in the longer term, supported by new home sales activity and an aging housing stock.”
West Fraser is ramping up OSB capacity at Chambord: “As you are aware, in response to this increased customer demand and in the midst of a pandemic, we announced that the safe restart of our Chambord Quebec mill which began producing ship panels in late March. Chambord remains on track to ramp up towards its annual rate of capacity at 550 million square feet on three-eighths inch basis, and we're very pleased with the progress to-date.”
BC wildfires resulted in temporary suspensions of production: “The province of British Columbia has recently declared a provincial state of emergency and the wildfires are affecting access to logging areas and some of our operating areas and are impacting transportation networks that we rely on to move our products. This has resulted in temporary suspensions of production due to raw material shortages, evacuation orders and difficulties, as I discussed, about moving our finished products by truck and rail.”
The company is increasing export volumes: “And with regards to exports, it was very difficult to participate in export markets during this run-up over the last year. They just couldn't keep up. But seeing that Japan actually got to levels very similar to North America and the prices there are still holding up. We expect to see a bit of weakness there over the next while. So that market looks pretty good. China we have – we've reentered, not in a significant way but we're putting some more product over there quite frankly because some of the pricing is quite favorable. So we never exited any of the export markets. We did reduce our volumes. And we're picking those up a little bit now...”
BC stumpage rates increase again on October 1: “... it's publicly available that stumpage will rise on October 1. The stumpage impacts can be different depending on the region that you're operating in. But there – so everyone may see it somewhat differently but it's going to be a significant increase, and somewhere in that $30 range, but it could be more or less than that.”