On the Rise
West Fraser Timber Co. Ltd. gained 1.2 per cent with the release of third-quarter results that largely fell in line with the Street’s expectations.
The Vancouver-based company reported adjusted EBITDA of $286-million, adjusting for $39-million in duties, meeting the consensus forecast of $287-million. EBITDA from its lumber segment fell $5-million from the previous quarter to $35-million due to higher costs and lower sequential pricing.
President and CEO Ray Ferris says the third quarter saw a continuation of challenging demand, especially in lumber.
As a result, Mr. Ferris says the company executed curtailments at several locations.
He says the company continues to focus on what it can control, such as improving flexibility and lowering costs.
“Despite recent share buyback action on the ongoing 5-per-cent NCIB and capex-driven operational improvements, net cash levels came in at $663-million (up $214-million quarter-over-quarter) as strong North American OSB earnings supported FCF,” said Raymond James’ Daryl Swetlishoff. “We highlight this backdrop has offset temporary wildfire-related cost headwinds, with consolidated EBITDA rising 172 per cent quarter-over-quarter and a full 300-per-cent relative to 1Q23; our bullish earnings inflection hypothesis remains intact.
“Though lumber price momentum remains muted, we note this is in line with typical seasonal trends with the historic seasonal buy point fast approaching. In fact, our seasonality analysis underscores that from October to November, WFG shares have traded higher in 8 out of the last 10 years – recording an average 5-per-cent gain month-over-month. With earnings equally levered to structural panels, we highlight OSB markets stabilized 2 weeks ago with the bulk of producers spending time off market after extending order files until mid-November. At the same time, recent September U.S. housing stats backstop our constructive view on building materials demand fundamentals -with starts, home sales and forward-looking permits recording month-over-month improvements despite higher mortgage rates. B.C. interior harvest data running 50 per cent below the 5-year average over the summer is also bullish.”