West Fraser reported Adjusted EBITDA that was above consensus and our estimate – Adjusted EBITDA of $200MM was above our estimate of $156MM and Bloomberg consensus of $156MM. The stronger results compared to our expectations were primarily driven by stronger SPF shipments and overall margins in the Lumber segment, and stronger realized pricing and margins in the North American Engineered Wood Products segment.
Guidance ranges on shipment volumes and capex for 2024 were unchanged – Management reiterated 2024 guidance for SPF shipments of 2.6–2.8 Bbf (RBCe: 2.63 Bbf), SYP shipments of 2.7–2.9 Bbf (RBCe: 2.79 Bbf), North American OSB shipments of 6.3–6.6 bsf (3/8" basis; RBCe: 6.5 Bsf), and European OSB shipments of 0.9-1.1 Bsf (RBCe: 1.025 Bsf), as well as capex in the $450-550MM range (RBCe: $500MM). However, management called out "downside risk to its current shipments guidance" for lumber, particularly for SYP, given "persistently weak market conditions." Management also noted that it expects near-term weakness to persist for its panel products in Europe, although it expects shipments of MDF, particleboard and OSB to be similar or slightly better than 2023 levels. Please see Exhibit 2 for more information.
Segment results
Lumber Adjusted EBITDA of $10MM was above our -$9MM forecast – Segment sales of $685MM were above our $661MM forecast. SPF shipments of 705 mmfbm were ~10% above our 640 mmfbm estimate, while SYP shipments of 665 mmfbm were in line with our 665 mmfbm estimate, leaving total shipments ~5% ahead of our estimate. Realized lumber pricing was roughly in-line with our estimate, while duty expenses were $3.7MM below our estimate. Management noted that warm weather in Western Canada has hampered logging activities through the winter (in line with its comments as of Q423 results), which required it to take downtime at select SPF mills in Q124 and could constrain its ability to manufacture and ship SPF lumber in the coming quarters. Management also highlighted a positive impact to costs from curtailing higher-cost SYP mills and replacing that production at other mills in its portfolio.
North America Engineered Wood Products Adjusted EBITDA of $188MM was above our $159MM forecast – Segment sales of $697MM were ahead of our $675MM forecast, driven by OSB sales of $550MM vs. our $520MM forecast. OSB shipments of 1,609 mmsf were ~0.6% above our 1,600 mmsf forecast, while realized OSB pricing was 5.2% above our forecast. Plywood shipments were 2% below our forecast.
Pulp & Paper Adjusted EBITDA of $3MM was roughly in line with our $4MM forecast – The company announced on February 5 that the sale of its Hinton Pulp mill to Mondi had closed, and earlier this week, the company announced the close of its sale of the Quesnel River and Slave Lake pulp mills to a fund managed by Atlas Holdings. Additionally, West Fraser announced during Q124 that the company dissolved its JV with Mercer around Cariboo Pulp & Paper in Quesnel, B.C, with West Fraser now the sole owner/operator.
Europe Engineered Wood Products Adjusted EBITDA of -$1MM was slightly below our $1MM forecast – Segment sales of $108MM were roughly in line with our $111MM forecast, although OSB shipments of 277 mmsf were 10.8% ahead of our 250 mmsf forecast. Management noted lower product pricing q/q and y/y. The company is seeing slightly better demand for its OSB products early in 2024, although it continues to experience near-term softness in MDF and particleboard panel products.