Results in the fourth quarter of 2023 reflect lower realized pricing and shipment volumes on a stronger lumber sales mix, offset by lower stumpage rates as compared to the same period last year.
Adjusted EBITDA was negative
Operating loss prior to restructuring and other items was
Despite the more challenging operating environment, highlights in 2023 included:
- Celebrated the one-year anniversary of the acquisition of the glulam business from
Calvert Company, Inc. , that continues to perform to expectations and generated EBITDA margins in excess of 20%. - Advanced strategic investments to support value-added manufacturing on the
British Columbia (“BC”) Coast and grow our value-added wood products, all while continuing to improve Western’s long-term competitiveness. We completed the installation of a machine stress rated lumber grader at theDuke Point sawmill location to support increased production of higher value lumber. The continuous kiln at the Saltair sawmill is anticipated to commence commissioning in the first quarter of 2024. - Announced a
$35.9 million agreement to sell a 34% interest in a new forestry limited partnership to four Vancouver Island First Nations, further demonstrating Western’s commitment to First Nation partnerships and meaningful reconciliation. - Advanced joint and collaborative planning of forestry activities with First Nations in whose traditional territories we operate in BC, building upon Western’s well-established forestry practices and in support of greater long-term clarity for the stewardship and management of the land base.
(millions of Canadian dollars except per share amounts and where otherwise noted) | Q4 2023 | Q4 2022 | Q3 2023 | Annual 2023 | Annual 2022 | ||||||||||||||
Revenue | $ | 246.6 | $ | 291.0 | $ | 231.1 | $ | 1,017.5 | $ | 1,444.0 | |||||||||
Export tax expense | 4.1 | 4.7 | 5.2 | 20.2 | 38.9 | ||||||||||||||
Export tax recovery | - | - | (4.3 | ) | (4.3 | ) | (18.0 | ) | |||||||||||
Stumpage expense | 8.7 | 27.9 | 5.9 | 44.4 | 118.0 | ||||||||||||||
Adjusted EBITDA (1) | (1.2 | ) | (11.9 | ) | (11.6 | ) | (29.9 | ) | 136.9 | ||||||||||
Adjusted EBITDA margin (1) | (0% | ) | (4% | ) | (5% | ) | (3% | ) | 9% | ||||||||||
Operating income (loss) prior to restructuring and other items | $ | (14.4 | ) | $ | (23.6 | ) | $ | (25.8 | ) | $ | (83.4 | ) | $ | 86.7 | |||||
Net income (loss) | (14.3 | ) | (21.4 | ) | (17.4 | ) | (70.1 | ) | 61.8 | ||||||||||
Earnings (loss) per share, diluted | (0.04 | ) | (0.07 | ) | (0.05 | ) | (0.22 | ) | 0.19 | ||||||||||
Net debt (cash) (2), end of period | 82.4 | (15.8 | ) | 59.5 | |||||||||||||||
Liquidity (1), end of period | 147.8 | 249.8 | 170.2 |
(1) | Refer to Adjusted EBITDA, Liquidity, Adjusted EBITDA margin in the Non-GAAP Financial Measures section. |
(2) | Net cash (debt), a supplemental measure, is defined as cash and cash equivalents less long-term debt and bank indebtedness. |
Senior Leadership Change
The Company announced today that
“Since joining Western in 2014, Steve has made significant contributions to our Company’s financial governance and overall success in an ever-changing and dynamic forest sector landscape,” said
Western has commenced an executive search for a new Chief Financial Officer.
Summary of Fourth Quarter 2023 Results
We reported Adjusted EBITDA of negative
Net loss was
Sales
Lumber revenue was
Specialty lumber shipments represented 60% of total lumber shipment volumes in the fourth quarter of 2023, as compared to 40% in the same period last year, yielding a stronger sales mix.
Log revenue was
By-products and other revenue were
Operations
Lumber production was 125 million board feet in the fourth quarter of 2023, as compared to 139 million board feet in the same period last year. Contributing to this reduction, quarter over quarter, was a shift in production from North American markets measured on a gross (“nominal”) volume basis to export markets measured on a net volume basis. In the fourth quarter of 2023 we curtailed certain sawmill operations to match production to market demand and manage inventory levels. A higher specialty mix of production led to increased value-added processing volumes and costs as compared to the fourth quarter of 2022.
We harvested 718,000 cubic metres of logs from our BC coastal operations in the fourth quarter of 2023, as compared to 658,000 cubic metres in the same period last year. Log harvest was reduced in the fourth quarter of 2022 to more closely match log volumes to our sawmill requirements.
Timberlands operating costs per cubic metre decreased 20% compared to the same period last year primarily due to lower stumpage rates.
BC Coastal sawlog purchases were 200,000 cubic metres in the fourth quarter of 2023, as compared to 173,000 cubic metres in the same period last year. We managed sawlog purchases to match mill fibre requirements.
Freight expense was
Adjusted EBITDA and operating loss included
Corporate and Other
Selling and administration expense was
Restructuring costs were
Other expense was
Finance costs were
Income Taxes
Income tax recovery was
Net Loss
Net loss was
Summary of Annual 2023 Results
We reported Adjusted EBITDA of negative
Net loss was
Sales
Lumber revenue was
Speciality lumber shipments represented 51% of total lumber shipment volumes in 2023, as compared to 44% in the same period last year, yielding a stronger sales mix. Cedar lumber shipments decreased 9% compared to the same period last year as buyers managed inventory levels to market conditions.
Log revenue was
By-product and other revenue were
Operations
Lumber production was 561 million board feet in 2023, as compared to 655 million board feet in the same period last year. Contributing to this reduction, year over year, was a shift in production from North American markets measured on a gross (“nominal”) volume basis to export markets measured on a net volume basis. During 2023 we took operating curtailments at certain sawmills to match production to market demand and manage inventory. We also did not operate our Alberni Pacific Division (“APD”) facility in 2023, which had lumber production of 27 million board feet in 2022.
We harvested 3.0 million cubic metres of logs from our BC coastal operations in 2023, comparable to 3.1 million cubic metres harvested in the same period last year. Harvest volumes were managed to market conditions to match log supply to mill requirements.
Timberlands operating costs per cubic metre decreased by 18% compared to the same period last year due to lower stumpage rates.
BC Coastal sawlog purchases were 0.7 million cubic metres in 2023, as compared to 1.1 million cubic metres in the same period last year. We managed sawlog purchases to match fibre requirements at our BC manufacturing facilities.
Freight expense was
Adjusted EBITDA and operating loss included
Corporate and Other
Selling and administration expense was
Restructuring costs were
Other expense was
Finance costs were
Income Taxes
Income tax recovery was
Net Income (Loss)
Net loss was
Accelerating the Transition to Higher Value Products
In support of the Company’s key strategic priorities, including optimizing our business platform and growing our value-added, specialty and engineered wood products business, the Company is moving forward with two new continuous kilns, one at its
These investments are part of a broader comprehensive strategy that the Company is pursuing in relation to its BC Coastal manufacturing operations to identify opportunities to modernize our primary manufacturing facilities, increase our kiln drying and planing capacity, reduce our cost structure and expand our engineered wood products and remanufacturing capacity.
The Company will continue to evaluate any potential future investment opportunities with a long-term view of supporting our overall business. Any potential future investments will consider the operating environment, our business and labour partnerships, and our financial condition, cash requirements and other financial metrics that we may deem relevant.
BC Operations Strategic Investments Update
Western continues to make progress on our previously announced strategic investments. All projects remain on budget and are expected to be completed by mid-2024.
- A
$12.3 million continuous kiln at the Saltair sawmill is in the construction phase with$11.2 million in spending completed throughDecember 31, 2023 . Commissioning is anticipated in first quarter of 2024. Once the kiln is operational, the Company will qualify for a$1.5 million energy rebate resulting from installation of more energy efficient equipment; - Capital expenditures for optimization of a centralized planer and installation of a machine stress rate (“MSR”) grader at the
Duke Point facility total$9.2 million throughDecember 31, 2023 , including installation of the MSR grader, which is complete; and - Other strategic investments with expenditures to date totalling
$7.5 million , with most projects complete.
Alberni Pacific Division
Operations at the APD facility have been curtailed since fall 2022. The Company previously announced we would not restart our APD facility in its current configuration and had established a multi-party working group to explore viable industrial manufacturing solutions for the site over a 90-day period. On
Market Outlook
Near-term lumber markets are expected to remain variable, but we remain cautiously optimistic as we head into the typically more active spring building season in
Demand and prices for Cedar timber and premium appearance products are expected to remain stable. Demand and price for Cedar decking products should firm up as we head into the spring, while demand for Cedar trim and fencing products is expected to remain soft until market inventory rebalances.
In
Demand for our Industrial lumber products will be product line specific but are expected to remain stable over the near-term. North American demand and prices for our commodity products should marginally improve in the first quarter of 2024, but are expected to remain volatile through 2024. In
We expect sawlog markets to follow conditions in the lumber markets, while residual chip pricing is expected to remain stable and will follow the northern bleached softwood kraft price to
Non-GAAP Financial Measures
Reference is made in this press release to the following non-GAAP measures: Adjusted EBITDA, Adjusted EBITDA margin, net debt to capitalization, total liquidity and ROCE which are used as benchmark measurements of our operating results and as benchmarks relative to our competitors. These non-GAAP measures are commonly used by securities analysts, investors and other interested parties to evaluate our financial performance. These non-GAAP measures do not have any standardized meaning prescribed by IFRS and may not be comparable to similar measures presented by other issuers. The following table provides a reconciliation of these non-GAAP measures to figures as reported in our audited annual consolidated financial statements:
(millions of Canadian dollars except where otherwise noted)
Adjusted EBITDA | Q4 2023 | Q4 2022 | Q3 2023 | Annual 2023 | Annual 2022 | Annual 2021 | |||||||||||||||||
Net income (loss) | $ | (14.3 | ) | $ | (21.4 | ) | $ | (17.4 | ) | $ | (70.1 | ) | $ | 61.8 | $ | 202.8 | |||||||
Add: | |||||||||||||||||||||||
Amortization | 13.3 | 12.0 | 14.1 | 53.7 | 50.2 | 50.9 | |||||||||||||||||
Changes in fair value of biological assets | - | (0.2 | ) | - | (0.2 | ) | 0.1 | 3.7 | |||||||||||||||
Operating restructuring items | 0.9 | 3.9 | (0.2 | ) | 7.5 | 4.5 | 2.7 | ||||||||||||||||
Other expense (income) | 2.5 | 2.0 | (2.2 | ) | 1.2 | (2.1 | ) | (22.4 | ) | ||||||||||||||
Finance costs (income) | 1.8 | (0.1 | ) | 0.5 | 3.0 | (0.1 | ) | 1.9 | |||||||||||||||
Income tax expense (recovery) | (5.3 | ) | (8.0 | ) | (6.5 | ) | (25.0 | ) | 22.6 | 62.4 | |||||||||||||
Adjusted EBITDA | $ | (1.2 | ) | $ | (11.9 | ) | $ | (11.6 | ) | $ | (29.9 | ) | $ | 136.9 | $ | 302.1 | |||||||
Adjusted EBITDA margin | |||||||||||||||||||||||
Total revenue | $ | 246.6 | $ | 291.0 | $ | 231.1 | $ | 1,017.5 | $ | 1,444.0 | $ | 1,417.7 | |||||||||||
Adjusted EBITDA | (1.2 | ) | (11.9 | ) | (11.6 | ) | (29.9 | ) | 136.9 | 302.1 | |||||||||||||
Adjusted EBITDA margin | (0% | ) | (4% | ) | (5% | ) | (3% | ) | 9% | 21% | |||||||||||||
Net debt to capitalization | 2023 | 2022 | 2021 | ||||||||||||||||||||
Net debt | |||||||||||||||||||||||
Total debt | $ | 83.8 | $ | - | $ | - | |||||||||||||||||
Bank indebtedness | 0.9 | - | - | ||||||||||||||||||||
Cash and cash equivalents | (2.3 | ) | (15.8 | ) | (130.0 | ) | |||||||||||||||||
$ | 82.4 | $ | (15.8 | ) | $ | (130.0 | ) | ||||||||||||||||
Capitalization | |||||||||||||||||||||||
Net debt (cash) | $ | 82.4 | $ | (15.8 | ) | $ | (130.0 | ) | |||||||||||||||
Total equity attributable to equity shareholders of the Company | 565.0 | 647.2 | 612.1 | ||||||||||||||||||||
$ | 647.4 | $ | 631.4 | $ | 482.1 | ||||||||||||||||||
Net debt to capitalization | 13% | - | - | ||||||||||||||||||||
Total liquidity | 2023 | 2022 | 2021 | ||||||||||||||||||||
Cash and cash equivalents | $ | 2.3 | $ | 15.8 | $ | 130.0 | |||||||||||||||||
Available credit facility | 250.0 | 250.0 | 250.0 | ||||||||||||||||||||
Bank indebtedness | (0.9 | ) | - | - | |||||||||||||||||||
Credit facility drawings | (84.0 | ) | - | - | |||||||||||||||||||
Outstanding letters of credit | (19.6 | ) | (16.0 | ) | (8.6 | ) | |||||||||||||||||
$ | 147.8 | $ | 249.8 | $ | 371.4 |
Figures in the table above may not equal or sum to figures presented in the table and elsewhere due to rounding.
(millions of Canadian dollars except where otherwise noted)
Return on capital employed | 2023 | 2022 | 2021 | ||||||||
Trade and other receivables | $ | 50.9 | $ | 60.5 | $ | 57.4 | |||||
Inventory | 213.5 | 224.8 | 207.2 | ||||||||
Prepaid expenses and other assets | 33.9 | 21.3 | 16.4 | ||||||||
Property, plant and equipment | 354.4 | 364.7 | 343.2 | ||||||||
Timber licences | 92.3 | 96.3 | 100.3 | ||||||||
Biological assets | 49.3 | 49.1 | 49.1 | ||||||||
Other assets | 77.4 | 75.7 | 55.2 | ||||||||
6.9 | 7.0 | - | |||||||||
878.6 | 899.4 | 828.8 | |||||||||
Less: | |||||||||||
Duty receivable and related interest | 70.8 | 63.7 | 40.4 | ||||||||
Accounts payable and accrued liabilities | 102.8 | 108.5 | 112.8 | ||||||||
Current portion of lease liabilities | 6.9 | 6.8 | 5.5 | ||||||||
Current portion of reforestation obligation | 7.9 | 8.3 | 9.9 | ||||||||
Current portion of deferred revenue | 2.0 | 2.0 | 2.0 | ||||||||
190.4 | 189.3 | 170.6 | |||||||||
Net capital employed as at | 688.2 | 710.1 | 658.2 | ||||||||
Net capital employed as at | 710.1 | 658.2 | 687.3 | ||||||||
Average capital employed | $ | 699.2 | $ | 684.2 | $ | 672.8 | |||||
Adjusted EBITDA divided by average capital employed | (4% | ) | 20% | 45% | |||||||
Figures in the table above may not equal or sum to figures presented in the table and elsewhere due to rounding.
Forward Looking Statements and Information
This press release contains statements that may constitute forward-looking statements under the applicable securities laws. Readers are cautioned against placing undue reliance on forward-looking statements. All statements herein, other than statements of historical fact, may be forward-looking statements and can be identified by the use of words such as “will”, “commit”, “project”, “estimate”, “expect”, “anticipate”, “plan”, “forecast”, “intend”, “believe”, “seek”, “could”, “should”, “may”, “likely”, “continue”, “pursue” and similar references to future periods. Forward-looking statements in this press release include, but are not limited to, statements relating to our current intent, belief or expectations with respect to: domestic and international market conditions, demands and growth; economic conditions; our growth, marketing, product, wholesale, operational and capital allocation plans and strategies, including but not limited to payment of a dividend; fibre availability and regulatory developments; the impact of COVID-19; the potential for viable industrial manufacturing solutions for the APD facility; and the selling of additional incremental ownership interests in
Many factors could cause our actual results or performance to be materially different including: economic and financial conditions including inflation, international demand for forest products, the Company’s ability to export its products, cost and availability of shipping carrier capacity, competition and selling prices, international trade disputes and sanctions, changes in foreign currency exchange rates, labour disputes and disruptions, natural disasters, the impact of climate change, relations with First Nations groups, First Nations’ claims and settlements, the availability of fibre and allowable annual cut, the ability to obtain operational permits, development and changes in laws and regulations affecting the forest industry including as related to old growth timber management and the Manufactured Forest Products Regulation, changes in the price of key materials for our products, changes in opportunities, information systems security, future developments in COVID-19 and other factors referenced under the “Risks and Uncertainties” section of our MD&A in our 2023 Annual Report dated
Reference is made in this press release to adjusted EBITDA which is defined as operating income prior to operating restructuring items and other income (expense) plus amortization of plant, equipment and intangible assets, impairment adjustments, and changes in fair value of biological assets. Adjusted EBITDA margin is adjusted EBITDA as a proportion of revenue. Western uses adjusted EBITDA and adjusted EBITDA margin as benchmark measurements of our own operating results and as benchmarks relative to our competitors. We consider adjusted EBITDA to be a meaningful supplement to operating income as a performance measure primarily because amortization expense, impairment adjustments and changes in the fair value of biological assets are non-cash costs, and vary widely from company to company in a manner that we consider largely independent of the underlying cost efficiency of their operating facilities. Further, the inclusion of operating restructuring items which are unpredictable in nature and timing may make comparisons of our operating results between periods more difficult. We also believe adjusted EBITDA and adjusted EBITDA margin are commonly used by securities analysts, investors and other interested parties to evaluate our financial performance.
Adjusted EBITDA does not represent cash generated from operations as defined by IFRS and it is not necessarily indicative of cash available to fund cash needs. Furthermore, adjusted EBITDA does not reflect the impact of certain items that affect our net income. Adjusted EBITDA and adjusted EBITDA margin are not measures of financial performance under IFRS, and should not be considered as alternatives to measures of performance under IFRS. Moreover, because all companies do not calculate adjusted EBITDA and adjusted EBITDA margin in the same manner, these measures as calculated by Western may differ from similar measures calculated by other companies. A reconciliation between the Company’s net income as reported in accordance with IFRS and adjusted EBITDA is included in this press release.
Also in this press release management may use key performance indicators such as net debt, net debt to capitalization, and current assets to current liabilities. Net debt is defined as long-term debt less cash and cash equivalents. Net debt to capitalization is a ratio defined as net debt divided by capitalization, with capitalization being the sum of net debt and equity. Current assets to current liabilities is defined as total current assets divided by total current liabilities. These key performance indicators are non-GAAP financial measures that do not have a standardized meaning and may not be comparable to similar measures used by other issuers. They are not recognized by IFRS, however, they are meaningful in that they indicate the Company’s ability to meet their obligations on an ongoing basis, and indicate whether the Company is more or less leveraged than the prior year.
Western is an integrated forest products company building a margin-focused log and lumber business to compete successfully in global softwood markets. With operations and employees located primarily on the coast of
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For further information, please contact:
Executive Vice President & Chief Financial Officer
(604) 648-4500
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