管理層發言
Good morning, ladies and gentlemen, and welcome to the West Fraser Q2 2026 Results Conference Call. This call is being recorded on Thursday, July 30, 2026. During this conference call, West Fraser's representatives will be making certain statements about West Fraser's future financial and operational performance, business outlook and capital plans. These statements may constitute forward-looking information and forward-looking statements within the meaning of Canadian and United States securities laws. Such statements involve certain risks, uncertainties and assumptions, which may cause West Fraser's actual or future results and performance to be materially different from those expressed or implied in these statements. Additional information about these risk factors and assumptions is included in both the accompanying webcast presentation and in our 2025 annual MD&A and annual information form as updated in our quarterly MD&A, which can be accessed on West Fraser's website or through SEDAR+ for Canadian investors and EDGAR for United States investors. I would now like to turn the conference call over to Mr. Sean McLaren, President and Chief Executive Officer. Please go ahead.
Thank you, Kelsey. Good morning, everyone, and thank you for joining our second quarter 2026 earnings call. I am Sean McLaren, President and CEO of West Fraser. And joining me on the call today are Chris Virostek, Executive Vice President and Chief Financial Officer; Matt Tobin, Senior Vice President of Sales and Marketing; and other members of our leadership team. On the earnings call this morning, I will begin with a brief overview of West Fraser's second quarter and then pass the call to Chris for additional comments before I share some thoughts on our outlook and offer concluding remarks. Our second quarter results reflect continued progress in a market environment where underlying demand remains measured. We generated $50 million of adjusted EBITDA with positive contributions from each of our three core reportable segments. Through the first half of the year, we produced approximately the same amount of Southern Yellow Pine as in the prior year period despite operating fewer mills, reflecting productivity gains and the continued high grading of our U.S. lumber portfolio.
We are pleased with the ramp-up at our new Henderson mill as production has more than doubled in Q2 versus Q1 and is regularly exceeding levels at which the old mill produced. Our team sustained shipping momentum in the U.S. South, navigating significant transportation cost and availability challenges. In Canada, SPF production increased by 13% compared to the previous quarter. In EWP, we completed the safe wind down of our high-level Alberta OSB mill during the quarter on time and under budget. This strategic decision more closely aligns our production footprint with customer demand, enhancing operational efficiency. We are encouraged by our performance in Europe, which has resulted in the strongest first half results since 2023. We continue to strengthen our balance sheet. We ended the quarter with approximately $1 billion of liquidity, maintaining strong financial flexibility. We are closely tracking wildfire conditions in British Columbia and Alberta.
At present, all West Fraser facilities remain safe, and there have been no wildfire-related impacts to our operations. Our focus remains on operating safely, serving our customers, improving the competitiveness of our assets, maintaining a strong balance sheet and allocating capital with discipline. With that high-level overview, I'll now turn the call to Chris for additional detail and comments.
Thank you, Sean. And a reminder that we report in U.S. dollars and all my references are to U.S. dollar amounts, unless otherwise indicated. In the second quarter, we achieved sales of approximately $1.4 billion and delivered adjusted EBITDA of $59 million with a $13 million favorable softwood lumber duty adjustment contributing to an adjusted EBITDA margin of approximately 4%. This compares with sales of approximately $1.3 billion and reported adjusted EBITDA of negative $66 million in the first quarter, which included a $114 million noncash duty adjustment relating to prior year periods. Excluding the duty adjustments, underlying consolidated performance was stable between the quarters. The lumber segment generated $41 million of adjusted EBITDA in Q2 compared with reported adjusted EBITDA of negative $84 million in Q1. Excluding the first quarter duty adjustment, the lumber segment generated modestly higher adjusted EBITDA this quarter.
We were encouraged by both higher mill nets and higher shipment volumes during the quarter. Results were also affected by the seasonal timing of Canadian logging costs during spring breakup and certain costs are expensed during the temporary shutdown of logging operations rather than capitalized into inventory and NRV adjustments around quarter-end pricing trends. The North America EWP segment generated $13 million of adjusted EBITDA in the second quarter, a slight improvement from the $11 million generated in the first quarter. North American OSB economics were primarily influenced by pricing dynamics, while controllable costs remained largely in line with Q1 levels despite ongoing resin inflation. North America OSB was also impacted by an NRV adjustment influenced by quarter-end prices. We have analyzed the impact of the 50% tariff announcements made earlier this month under Section 338 of the Tariff Act of 1930.
For context, year-to-date, approximately 3% of our Canadian plywood shipments and 20% of our LVL shipments have been exported to the U.S. Our MDF shipments to the U.S., which represent approximately half our MDF shipments, are not directly subject to tariffs. We continue to assess the potential indirect effects on downstream customers and end markets. In Europe, we generated $13 million of adjusted EBITDA in the second quarter, improving on the $10 million earned in the first quarter. The Europe market continues to benefit from an improved environment of higher demand — although resin and freight costs increased, we were able to effectively manage these increases through our pricing strategy. Our other operating segment showed an $8 million adjusted EBITDA loss, which was principally due to a maintenance shutdown at Caribou during the quarter. Bridging our results from Q1 to Q2, higher realized prices in both lumber and Europe generated an incremental $51 million of adjusted EBITDA.
Duties and tariffs were lower, which includes the $13 million adjustment we discussed earlier. Higher resin and freight costs and changes in inventory valuation reserves contributed most of the offsets to higher realized prices. Majority of the increase in freight costs was recovered through adjustments to freight adders included in our invoicing. Canadian SPF shipments were up 18% from Q1, mainly due to the restart of our Blue Ridge, Alberta facility mid-March. Additionally, SYP shipments were up 5% despite the transportation shortages facing the U.S. South. We generated $192 million of cash from operations as the seasonal working capital investment began to reverse, enabling us to repay $148 million of operating borrowings during the quarter. This cash flow helped us reduce our net debt in the quarter by $140 million. We exited the quarter with only $55 million drawn on our $1 billion revolver, resulting in a 5% net debt-to-capital ratio and giving us ample financial flexibility to continue to execute on our business plan.
We chose not to repurchase any shares in the second quarter to maintain financial flexibility and strengthen our balance sheet during this phase of the cycle. Compared with the first half of 2025, unit costs across our U.S. lumber portfolio were approximately 4% lower in the first half of 2026 driven by lower production and Henderson start-up costs. We are targeting continued improvement in these numbers as Henderson ramps up during the remainder of 2026. We have made no changes to our shipment guidance across our main products as well as our capital expenditure range of $300 million to $350 million. Transportation and resin costs have risen in the first half of the year. Outbound transportation costs are largely passed on to the end customer in all of our markets. Resin and wax costs are influenced by oil prices. We estimate that a $10 change in crude oil prices impacts annual resin and wax costs by approximately $15 million.
Compared to Q1, we estimate there was a $13 million overall increase to our wax and resin costs. This is across both our North American and European EWP business. Encouragingly, against that backdrop, we have seen a decline in fiber costs, especially in the U.S. South that has offset much of this increase. There remains a lot of uncertainty on oil prices, but we have been successful at managing and mitigating these impacts to our business. With that overview, I'll pass the call back to Sean.
Thank you, Chris. I'll now shift to our general outlook and add some concluding remarks. Looking ahead, our priorities are focused on improving the competitiveness of our assets and positioning the business to perform through a range of market conditions. In U.S. lumber, our multiyear portfolio optimization continues to translate into improved performance. As Henderson continues to ramp, we expect further production gains and lower unit costs. We also expect to maintain shipping momentum while effectively managing ongoing transportation constraints and finished goods inventory levels. In North American OSB, we believe the market will reward efficient operators. Our portfolio has been enhanced by the closure of High Level, the progress at Allendale, a continued focus on reliability improvements and strong inventory and cost management. These actions lowered our unit costs in Q2, and we remain focused on further improvement.
Pulp industry closures remain a headwind for lumber residual realizations in the U.S. South, but they are also increasing regional pulpwood availability and lowering OSB fiber costs, an example of these offsets within our diversified portfolio. In Canada, our lumber mills increased production and shipments materially from Q1. We expect limited pressure on fiber inputs as the overall Canadian lumber supply has been shrinking. Duty rates will also drop coming out of the AR7 review when they take effect later this year. Our Canadian panels business continues to deliver reliable results. Our focus for the second half will be on managing potential tariff exposure, mainly in our LVL and MDF businesses and continuing to focus on unit cost performance across all mills. In Europe, our OSB operations delivered strong year-over-year growth in both pricing and volumes, with teams successfully navigating energy-related cost pressures through strategic pricing, procurement and disciplined operational execution.
Over the longer term, we continue to see support for wood-based construction in Europe, including increased adoption of timber frame in the U.K. The demand environment remains challenging. Mortgage rates are elevated and consumers are focused on affordability. Notwithstanding these pressures, lumber pricing has improved given the tightening supply-demand balance, reduced European imports and transportation constraints. OSB prices remain near levels that are challenging for higher cost capacity. Our priorities continue to lower our cost base, managing production and working capital. Summarizing our discussion today, our second quarter performance demonstrates that the investments and portfolio actions we have taken are delivering results. The breadth of our portfolio is an important advantage. We reported positive EBITDA in all three of our operating segments and supporting our operations is a strong balance sheet that provides us full financial flexibility with $1 billion of liquidity and low net debt levels. Thank you again for your time and continued interest, and we look forward to updating you next quarter. With that, we'll turn the call back to the operator for questions.
分析師問答
The first question comes from Ben Isaacson from Scotiabank.
I just have three quick questions, if that's okay. First one is, can you provide some color on these transportation constraints? Are there more — is there more than one issue? Is it getting worse? Is there a solution that could improve over time? How do you frame these transportation issues?
Okay. What I might do is ask Matt Tobin here just to give a bit of an update on transportation.
I would say that it's been a multilayered challenge. I think if we go back to quarter four, we saw a lot of bankruptcies and trucking companies taking out supply. And then on top of that, we layered a spike in fuel. And then usually end of Q1, early Q2 is a seasonally tight period for trucks in the South since we see produce pick up and just increased demand. So we've seen that easing as of late. We've seen also railways responding — more product moving by rail, a little bit easing as the seasonality of that tightness slows down. But I think with the geopolitical pressures and the fuel, it will remain tight, but we do see that easing somewhat here.
Great. My second question, Sean, you mentioned that duty rates will drop later this year. Would you expect pricing to fall on a dollar-for-dollar basis? Or is there an opportunity for margin capture? What is your experience watching these duties change over the years and through different cycles?
Yes. I'll make a couple of comments, and then I'm going to ask Matt to add to that. Duties impact the cost floor. Price is really determined by supply-demand dynamics. So it really depends on the supply-demand dynamics for that product in that moment. It's difficult to predict: if there's an imbalance there, pricing will be based on demand. If there isn't, then the cost floor adjusts, and it depends on actions from everyone supplying that market. So it's really difficult to predict. Matt, would you add anything to that?
No, I agree. I think it's really a question of supply and demand and what demand is as those things change. We've been navigating this environment for the last nine or ten years. And I would say we historically have had a long-term advantage on rates. Supply and demand will tell us what happens when the rates drop off from there.
Thanks, Matt. I would add that we continue to lean into our integrated model in Western Canada and work on our cost structure and competitive position regardless of what border measures are in place.
That's perfect. And then just a final one for Chris. Chris, you mentioned that you have not done buybacks this year. You do have an open NCIB, I believe. But I found that the tone in your Q2 MD&A has improved somewhat. Leverage is now moving in the right direction. Liquidity is ample. What should we — what do we need to see in order for you to want to restart buybacks? Are there certain metrics that you're looking for?
Thanks, Ben, and great question. As you probably heard in our remarks and noted in the MD&A, we're quite pleased with the progress that we're making across the company, and it really spans all the segments — seeing improvements in Europe, the Henderson ramp-up proceeding, the successful wind down of High Level, managing through impacts on oil and resins, and so on. That being said, maintaining financial flexibility to preserve full optionality of a range of outcomes for us remains a priority, whether that be organic growth and continued investment in the business, inorganic opportunities that may present themselves at this time in the cycle, or share buybacks. It'd be hard to nail it down to a single factor or a couple of factors that are going to influence that decision. It's really looking at all those variables and where we think we can deploy capital in the way that creates the most value for shareholders over the long term. And that's really going to guide our thinking here. I do think that this far in on the lumber side, we are starting to see potentially an inflection point on lumber. We've worked very hard over the last three years to do the right things for the business in as much of a cycle-agnostic way as we can.
And your next question comes from Hamir Patel from CIBC Capital Markets.
Sean, with your European OSB business finally rebounding, how do you think about your positioning in Europe and potential to expand that platform into other wood products, just thinking as perhaps some more distressed assets might come to market?
Of course, we're pleased with our progress in Europe. As I mentioned on prior calls, we have a strong management team and efficient assets. Even though macro conditions in Europe are not great, our cost position and the location of our assets mean we're well positioned to compete as there is cost pressure in other regions. In terms of growth, Europe brought to West Fraser another region to consider opportunities. Any growth opportunity would compete in Europe like it would anywhere else on our platform and would have to stand on its own two feet. If an opportunity is compelling, we'd consider it.
Fair enough. And just thinking about some of the perhaps organic opportunities, it looks like the Henderson ramp-up is progressing quite well. What's the next sort of Henderson-type project that you're considering? And would that be — are there also opportunities perhaps on the OSB side for something similar?
We've done a lot of work on our portfolio over the last four or five years. I think we are very much in the mode of operationalizing those investments and making good progress in each of our segments on the investments we've made. Our Bemidji project is the only major project that is currently under construction and will be ramping up early next year; it's really a relife of a very solid asset. We do have a basket of other opportunities, but our focus today is getting the value from the investments we've made and operationalizing them.
I would add that through this cycle, we've done a considerable amount of countercyclical investing. If or when we reach an inflection point, we're not entering it with a backlog of deferred capital expenditure or deferred maintenance that we need to catch up on. We feel we've done a good job through the bottom of this cycle of maintaining and high-grading our asset portfolio.
Your next question comes from Ketan Mamtora from BMO Capital Markets. So our next question comes from Sean Steuart from TD Cowen.
A couple of questions. For Sean or Matt, trying to get a sense of what you're seeing from North American customers in terms of wood products demand. We've seen a great lift in lumber prices year-to-date for a lot of the reasons you laid out on the supply side, but we have 30-year mortgage rates up 70 to 80 basis points since February. Affordability would still seem to be compromised. Can you give us a sense for OSB and lumber, what you're seeing in terms of order file activity, demand pull across both new home construction and repair and remodeling?
I might ask Matt to provide some commentary on that.
On the lumber side, we're seeing a somewhat better supply-demand mix, which has supported prices over the quarter. I'd say we see consistent ordering and no significant shifts over the recent period other than a somewhat better balance. On the repair and remodel side, visibility is limited, but treaters offer a useful lens into R&R. We're seeing seasonally in-line order patterns from our treaters and customers. I wouldn't say we've seen a meaningful shift in demand that would change our view from the last few quarters in either R&R or new home construction.
Okay. That's encouraging. For Sean or Chris, a lot of the wording in previous calls with respect to North American M&A ambitions was that you want to keep your powder dry and preserve financial flexibility, but you did anticipate more opportunities coming to market in the initial stages of a cyclical upturn. I don't know if what we've had year-to-date qualifies as a cyclical upturn yet, but has the M&A opportunity set in North America evolved at all year-to-date? Are you seeing more opportunities?
I wouldn't say it's changed much. People are likely waiting to see if there's durability to this. We're only a couple of quarters into improved conditions for SYP, so it's hard to say when others will make choices about what they might do. We've been consistent that we're looking for quality — high-quality assets — and we'll be selective if those opportunities arise.
Okay. Just one last quick one. North American engineered wood unit costs were held in check nicely this quarter, which was a surprise to us. I know there's a lot of moving pieces, some of which you highlighted. Between lower pulpwood costs and margin benefits associated with High Level being out of the mix, can you give us a sense of if either one of those two items weighed or was a more important determinant of that cost progression this quarter?
Across the company, and particularly for North American OSB, we've leaned into cost reduction. It's a combination of things. We've become adept at flexing our portfolio of assets to meet customer demand as it fluctuates. When demand drifted lower, we took action early at High Level. It took months to unwind the log inventory there, and we have yet to see the full benefit, but redeploying those products to other mills will improve our efficiency and help manage cost. Operationalizing capital investments has also helped: Allendale and Chambord are meeting or exceeding expectations and operating at a high level, reducing our unit cost. Additionally, southern wood costs have become more competitive as pulp mill closures have restructured regional pulp markets, increasing available fiber.
And our last question comes from Ketan Mamtora from BMO Capital Markets. So we do have one last question from Matthew McKellar from RBC Capital Markets.
Appreciate all the help so far. Just a couple of cleanups on costs. First, how would you expect diesel prices to affect your Canadian log prices in Q3? I think you've been consuming quite a bit of the log that built through Q1 during Q2. What's the impact of rolling on to more current costs as we progress into Q3?
Most of our agreements with contractors include fuel riders, so there will be some impact depending on diesel pricing at the time. That said, we have a number of other cost initiatives underway in Western Canada that should allow us to manage any inflationary pressure and manage those costs in the coming quarters.
Okay. Great. And then shifting over, I appreciate the help with the sensitivity provided, but maybe just to a finer point given recent volatility, any nuances around timing: do you have a sense of how much of a sequential headwind resin and wax costs would be for North American EWP in Q3 versus Q2?
We've provided some sensitivity. The way I'd describe that sensitivity in our disclosure is all things being equal. We had that headwind in Q2, but through a number of other initiatives, we were able to more than offset it. We'll continue navigating changes in the resin market. Our agreements around resin pricing and other chemical inputs are robust, and while resin volatility will affect the industry, we believe we're well positioned to manage through it.
And there are no further questions at this time. You may continue your conference, Mr. McLaren.
Thank you, Kelsey. As always, Chris and I are available to respond to further questions as is Anil Agrawala, our Director of Treasury and Investor Relations. Thank you again for your participation today. Stay well, and we look forward to reporting on our progress next quarter.
Ladies and gentlemen, this concludes your conference call for today. We thank you very much for your participation, and you may now disconnect. Have a great day.