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 Oct 24, 2022 9:10am

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Post# 35043226

TD Notes

Trees Weekly

Equities Keep Drifting Lower, Even as Commodity Prices Settle Lumber Prices Bounce in Some Regions as Downtime Kicks-in

Forest product equities continued to decline last week. The average share- price decline for our coverage universe was 2.6%, which contrasted against gains of 2.9% for the S&P/TSX Composite and 4.7% for the S&P 500. Sector weakness was led by lumber-weighted names (average w/w share-price decline of 5.5%). The lone positive performer in our coverage universe was LPX (+5.0%). The average decline from 52-week highs for our coverage universe is 31.6% versus peak-to-current declines averaging 18.6% for broader equity indices.
After a seven-month collapse (composite price down 63%), lumber markets have started to stabilize. The Western SPF 2x4 (#2 & better) cash price of US $470/Mfbm improved 7% from last week and the nearest futures contract price of US$540/Mfbm has improved 34% since the end of September. Price trends in the U.S. South are relatively muted (regional composite price declines continued last week). We attribute some recent resilience to downtime across the industry and unexpected curtailments in the Pacific Northwest related to a labour dispute.
OSB prices are treading water; still above cash costs. The benchmark North Central OSB price has held at US$360/Msf for seven straight weeks. Prices in other key regions are in a similar holding pattern. At current prices, we estimate average industry EBITDA margins are ~12% — down from the unsustainable North American 2021 average estimate of 61%, but still impressive, given new home affordability pressure amid soaring mortgage rates. Market commentary referenced firming activity last week, with order files extending into November.

North American containerboard markets are starting to weaken. RISI Fastmarkets reference 42-lb. unbleached kraft containerboard price for October was flat at US$930/ton (low end of the reported range), but there are reports of price discounts, especially for recycled grades. Shifting momentum is a function of capacity growth, slowing corrugated box demand, and rising inventories. U.S. corrugated box shipments declined 2.3% y/y in Q2/22.