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 16, 2022 8:15am

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Post# 34432927

TD

Currently have a US$125.00 target. GLTA

West Fraser Timber Co. Ltd.

(WFG-N, WFG-T) US$97.04 | C$123.38

Q4 Below Estimates; Capex Guidance Near Expectations Event

West Fraser reported Q4/21 results yesterday after market close. Aggregate adjusted EBITDA of $615 million was below our estimate of $644 million and the consensus forecast of $620 million. The adjusted EBITDA figure included a $55 million benefit related to a retroactive lumber duty assessment that was not included in our forecast. Q4/21 adjusted EPS of $3.13 was similarly below our forecast of $3.38 and the consensus forecast of $3.37.

Conference call at 11:30 a.m. ET today: 1-888-390-0605 or link to webcast.

Impact: SLIGHTLY NEGATIVE

West Fraser's Q4/21 earnings moderated on a sequential basis, but were still well above our estimate of mid-cycle (trend) potential. Compared to our segmented estimates, North American panel margins were below expectations (price realizations). Excluding the duty reassessment benefit, lumber segment trends were consistent with peers' Q4/21 results: pronounced realized price timing lags versus published benchmarks.

Lumber margins improved q/q driven by price gains. Average Q4/21 lumber price realizations improved 16% q/q - better than the 10% average gain for peers that have reported results so for this earnings season, but trailing the average 40% increase for the US$-denominated lumber composite. Price gains were heavily weighted to the tail end of the quarter, which enhances the lag effect. Lumber shipments decreased 13% q/q, reflecting B.C. storms and transportation bottlenecks.
West Fraser retains balance sheet flexibility. Year-ending net cash was $1.04 billion and available liquidity was $2.59 billion (down from $3.13 billion at the end of Q3 after Q4 acquisitions). Buyback activity continued during Q4 (1.2 million shares repurchased for $100 million). The company is raising the quarterly dividend by 25% to $0.25/share (1.0% annual yield). Capex guidance for 2022 of $500-$600 million is near our forecast.
In our view, early-2022 cost inflation and volume constraints will be more than offset by resurgent lumber, structural panel, and pulp prices. Current reference prices for lumber and OSB are 81% and 115% above respective Q4/21 averages. The Western SPF lumber benchmark price closed last night at $1,290/ Mfbm - up 1% from last Thursday and 235% above the most recent trough last August.