Q421 results below our forecasts on transportation challenges
West Fraser reported Adjusted EBITDA below both our forecast and consensus expectations – Adjusted EBITDA of $560MM was below both our estimate of $676MM and consensus of $620MM. We adjusted reported results lower by $55MM to reverse the impact of an export duty recovery related to the finalization of AR2 duty rates. The lower-than- expected results were largely attributable to transportation issues.
First impression
Lumber Adjusted EBITDA of $185MM below our $242MM forecast –
Segment sales of $888MM were below our $1,024MM forecast, as lower- than-expected Western SPF and SYP shipments were only partially offset by slightly higher-than-expected realized pricing. West Fraser noted that SPF shipments were lower due to severe flooding in BC and reduced demand in the earlier part of the quarter, and that it is not clear when full transportation services will resume.
North America Engineered Wood Product Adjusted EBITDA of $343MM sightly below our $353MM forecast – Segment sales of $834MM were above our $794MM forecast, as OSB and Other EWP (i.e., plywood, LVL, and MDF) sales were both higher than our estimate. OSB sales of $666MM were above our $654MM forecast, as higher-than-expected shipments more than offset slightly lower-than-expected realized pricing. Other EWP sales of $162MM were well above our $131MM forecast due to a much more favorable price/mix and higher-than-expected plywood shipments, which were partially offset by lower-than-expected MDF/LVL shipments.
Pulp & Paper Adjusted EBITDA of -$14.0MM well below our $2.7MM forecast – Segment sales of $159MM were below our $166MM forecast due to much lower-than-expected shipments, partially offset by a higher-than-expected price/mix. Management noted that shipments were adversely impacted by disruptions to rail and truck services following flooding in the BC Interior.
Europe Engineered Wood Products Adjusted EBITDA of $61MM below our $80MM forecast – Segment sales of $184MM were well below our $240MM forecast, as shipment volumes declined significantly q/q, which management attributed to a more pronounced seasonal slowdown and a major maintenance shutdown at the Genk mill to install a new dryer.
2022 Guidance – 1) Lumber: Management expects SPF shipments of 3.0– 3.2 bbf (vs. our 3.2 bbf forecast) and SYP shipments of 3.0–3.2 bbf (vs. our 2.8 bbf forecast). 2) North American OSB: Shipments are expected to be in the 6.1–6.4 bsf range (vs. our 5.6 bsf forecast). 3) Pulp & Paper: Shipments are not expected to increase y/y (we had BCTMP shipments up y/y). 4) European OSB: Shipments are expected to be in the 1.1–1.3 bsf range (vs. our 1.2 bsf forecast). 5) Capex is expected to be $500–600MM, vs. our $400MM forecast.
Conference call on February 16 at 11:30AM ET – Dial-in: 1-888-390-0605