Western Forest Products : Q2 2022 RESULTS RELEASE

FOR IMMEDIATE RELEASE

TSX: WEF

Western Announces Second Quarter 2022 Results

August 3, 2022 - Vancouver, British Columbia - Western Forest Products Inc. (TSX: WEF) ("Western" or the "Company") reported net income of $38.6 million and adjusted EBITDA of $66.2 million in the second quarter of 2022. Strong Japan lumber demand and record specialty product pricing drove revenue growth, but earnings were reduced by increased stumpage expense, logistics constrained shipments, higher export tax, freight rates and operating costs. In addition, a significant decline in commodity lumber pricing through the quarter and weaker cedar markets led to increased inventory provisions.

Net income in the second quarter of 2022 was $38.6 million ($0.12 per diluted share) as compared to net income of $38.0 million ($0.11 per diluted share) for the first quarter of 2022, and net income of $78.3 million ($0.21 per diluted share) in the second quarter of 2021.

Highlights:

• Delivered second quarter adjusted EBITDA of $66.2 million
• Confirmed approximately $29 million in capital projects in coastal BC manufacturing operations
• Announced the pending US$12.0 million glulam business asset acquisition from Calvert Company, Inc.
• Announced the renewal of a 10% normal course issuer bid
• Maintained liquidity of $319.1 million to support growth strategy and balanced capital allocation

Western's second quarter adjusted EBITDA was $66.2 million, as compared to adjusted EBITDA of $65.4 million in the first quarter of 2022, and adjusted EBITDA of $120.4 million in the second quarter of 2021. Operating income prior to restructuring and other items was $53.4 million, compared to income of $52.2 million in the first quarter of 2022, and $105.7 million of income reported in the second quarter of 2021.

(millions of Canadian dollars except per share amounts		Q2			Q2			Q1			YTD			YTD
and where otherwise noted)		2022			2021			2022			2022			2021
Revenue	$	437.4	$	414.4	$	359.6	$	797.0	$	736.9
Export tax expense		14.7			10.8			11.5			26.2			19.0
Stumpage expense		34.9			15.0			18.8			53.7			24.2
Adjusted EBITDA		66.2			120.4			65.4			131.6			183.4
Adjusted EBITDA margin(1)		15%			29%			18%			17%			25%
Operating income prior to restructuring and other items	$	53.4	$	105.7	$	52.2	$	105.6	$	154.5
Net income		38.6			78.3			38.0			76.6			132.1
Earnings per share, diluted		0.12			0.21			0.11			0.23			0.35
Net cash (debt)(2), end of period		84.3			97.7			74.9
Liquidity (1), end of period		319.1			341.1			310.1

"We continue to deliver strong results overcoming significant cost pressures and logistics challenges," said Don Demens, President and Chief Executive Officer. "Recent capital announcements for our coastal manufacturing business and the addition of glulam to our specialty lumber portfolio are important steps forward in Western's strategy to move up the product value chain and to improve shareholder returns."

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.

Summary of Second Quarter 2022 Results

Adjusted EBITDA for the second quarter of 2022 was $66.2 million, as compared to $120.4 million in the same period last year. Results in the comparative period were driven by record North American lumber pricing and margins. Net income in the second quarter of 2022 was $38.6 million as compared to net income of $78.3 million in the same quarter of 2021.

We grew revenues in the second quarter of 2022 by leveraging record specialty product pricing. Adjusted EBITDA in the second quarter of 2022 was impacted by incremental costs including $19.9 million in additional stumpage expenses, $13.5 million in inventory and silviculture provisions, rising log purchase pricing, and higher operating costs. In addition, we incurred an incremental $4.3 million in freight expense and an incremental $3.9 million in export taxes despite lower lumber shipments. Second quarter operating income prior to restructuring and other items was $53.4 million in 2022, as compared to $105.7 million in the same period last year.

Sales

Revenue grew by 6% in the second quarter of 2022 as compared to the same period last year, as we increased log shipments to capitalize on record log pricing and maintained lumber revenue despite lower sales volumes.

We delivered a stronger specialty lumber mix, which more than offset logistics-constrained lumber shipments and declining commodity lumber pricing through the quarter.

Lumber shipments decreased by 11% as compared to the same period last year, despite increased shipments to Japan. Logistics constraints and weaker demand limited lumber shipments. Lower activity in the repair and renovation market reduced demand for certain Cedar and Niche products. Shipments of Japan specialty products increased by 17% as compared to the second quarter last year, as we took advantage of strong demand and pricing.

Our average realized lumber price was a record $1,786 per thousand board feet, an increase of 12% from the second quarter of 2021. Strong pricing across our specialty lumber products was offset by weaker pricing for commodity lumber, which had peaked in the comparative quarter of 2021. Lumber revenue also benefited from the 4% appreciation of the US to Canadian dollar exchange rate from the comparative period.

Log revenue was $70.8 million in the second quarter of 2022, a 53% increase from the comparative period last year. Recent strong lumber market conditions and limited British Columbia ("BC") coastal log production combined to drive coastal log prices to record highs. We capitalized on market conditions by selling certain domestic log inventories which were in excess to our sawmill requirements, achieving a 31% average realized log price improvement and an 11% increase in sales volumes as compared to the second quarter last year.

By-product revenue was $14.8 million, comparable to the second quarter last year. Increased chip price realizations resulting from a higher Northern Bleached Softwood Kraft ("NBSK") pulp price to China, were offset by reduced by-product shipments due to lower lumber production.

Lumber market weakness and significant declines in commodity lumber pricing in the second quarter of 2022 led to incremental inventory provisions of $10.5 million as compared to the same period last year. We recognized $11.5 million in inventory provisions in the second quarter of 2022, as compared to $1.0 million expense in the same period last year.

Operations

Lumber production was 16% lower in the second quarter of 2022 as compared the same period last year, due to log supply related operating curtailments at certain large-log sawmills and the mix of production. We modified certain production plans to reduce the impacts of logistics constraints which limited access to North American markets.

2

We harvested 904,000 cubic metres of logs from our coastal operations in BC, as compared to 1,012,000 cubic metres in the second quarter last year. Harvest results were impacted by late spring snow conditions that extended into the second quarter of 2022, and harvest permitting delays. The comparative period included an incremental 96,000 cubic metres of accelerated private timberlands log harvest associated with the sale of our former Orca Quarry assets.

Stumpage expense increased by $19.9 million as compared to the same period last year, despite reduced harvest volume. Recent record product pricing led to record coastal stumpage rates in the second quarter of 2022 on applicable BC crown land harvest.

Excluding stumpage, timberlands operating costs increased over the comparative period due to weather- related impacts early in the quarter, incremental road building, higher fuel costs and increased heli-logging. We increased road expenditures to address timber development deferred in past quarters due to weather. In addition, we recognized an incremental $3.0 million in silviculture expense from same period last year, which was primarily the result of inflation on our reforestation provision.

To support sawmill production, we increased our BC coastal saw log purchases by 45% as compared to the second quarter of last year. Average purchased log price increased 23%, consistent with the increase in our log sales pricing over the same period.

Second quarter freight expense increased by $4.3 million over the same period last year, despite a 11% decline in lumber shipments and the absence of log exports. Higher freight expenses were led by a 42% increase in container freight rates, increased use of breakbulk vessel shipments, and higher fuel costs. We continued to partly mitigate ongoing export logistics issues and limited container availability by converting a component of our lumber shipments to higher-cost breakbulk. Vessel and rail capacity improved towards the end of the quarter.

Adjusted EBITDA and operating income included $14.7 million of countervailing duty ("CV") and anti-dumping duty ("AD") expense in the second quarter of 2022, as compared to $10.8 million in the same period of 2021. The applicable export tax cash deposit rates increased from 8.99% to 17.91% over those periods. Higher export taxes were also influenced by the US to Canadian dollar exchange rate, offset by a 32% reduction in US-destined lumber shipments and lower lumber prices.

At June 30, 2022, we had $182.0 million of cash on deposit with the US Department of Treasury in respect of softwood lumber duties, of which $38.4 million was recognized as a long-term duty receivable.

Selling and Administration Expense

Second quarter selling and administration expense was $9.7 million in 2022 as compared to $16.7 million in the second quarter last year, attributable to lower incentive compensation expense resulting from reduced share price and earnings.

Other Income

We recognized other income of $0.2 million as compared to income of $1.4 million in the second quarter last year, resulting primarily from sales of equipment and other assets.

Finance Costs

Finance costs were $0.3 million as compared to $0.4 million in the second quarter last year. Interest expense was offset by slightly higher interest earned on our cash balances.

Income Taxes

Western recognized current income tax expense of $14.9 million partially offset by a deferred income tax recovery of $0.4 million in net income in the second quarter of 2022, a decrease of $13.4 million over the second quarter of 2021. Lower tax expense was the result of reduced operating income.

3

Net Income

Net income for the second quarter of 2022 was $38.6 million, as compared to net income of $78.3 million for the same period last year. Compressed margins on lower shipment volumes, higher stumpage expense, freight rates, export taxes, and the impact of inventory provisions reduced second quarter net income as compared to the same period of 2021.

Summary of Year to Date 2022 Results

Adjusted EBITDA for the first six months of 2022 was $131.6 million, as compared to $183.4 million for the same period last year. Net income was $76.6 million for the first six months of 2022, as compared to $132.1 million for the same period last year. Improved specialty product price realizations in the first half of 2022 have been more than offset by lower commodity lumber pricing, logistics constrained shipments, and cost pressures including an incremental $29.5 million stumpage expense, $7.5 million from freight rate increases, and $7.2 million for higher export taxes, as compared to the same period last year. Weaker lumber pricing at the end of the second quarter of 2022 led to increased inventory provisions of $12.7 million net as compared to the same period last year.

Operating income prior to restructuring and other items was $105.6 million, as compared to $154.5 million in the same period last year.

Sales

We grew lumber revenue to $665.7 million in the first half of 2022, 6% higher than last year, despite a 10% decline in lumber shipments. Revenue growth was led by our specialty products, the benefit of which was partly offset by global logistics constraints, limited production and sale of certain Niche products, and slowing demand for Cedar decking, trim and fencing products.

We leveraged our flexible operating platform to increase specialty products to 48% of shipments, from 45% in the first six months of last year, to capitalize on improved specialty product price realizations. Commodity lumber pricing declined year over year but remained above historic trend levels. Lumber revenue benefited from the 2% appreciation of the US to Canadian dollar exchange rate from the comparative period.

Log revenue was $103.5 million in the first half of 2022, an increase of 30% from the same period last year as the result significantly improved domestic log pricing on lower sales volumes. Strong lumber markets and limited BC log production have driven coastal log prices higher, resulting in a 39% increase in average realized BC log prices.

Timberlands permitting delays and weather-related curtailments in the latter half of 2021 and early 2022 continued to limit coastal log harvest, and as a result we continue to direct all export-grade logs to our sawmills in support of lumber production.

By-product and other revenue remained flat in the first half of 2022 versus the first half of 2021. Higher price realizations were offset by reduced shipments due to lower lumber production compared to the same period last year.

Declining commodity lumber prices in the second quarter of 2022 was the primary driver for net incremental inventory provisions of $12.7 million over the first half of 2022 as compared to the same period last year.

Operations

Lumber production in the first half of 2022 was 348 million board feet, 14% lower than the same period last year due to log supply related operating curtailments at certain sawmills and the mix of production.

Log production for the first half of 2022 was 1,651,000 cubic metres, a decrease of 3% from the same period last year. Logging operations in the first half of 2022 were partly impacted by late snow and permitting approval delays. The comparative period included an incremental 134,000 cubic metres of log harvest from private timberlands associated with the sale of the Orca Quarry assets.

4

Stumpage rates have increased by 110% as compared to the same period last year, with an incremental $29.5 million in stumpage expensed in the first six months of 2022. Third quarter stumpage is expected to increase further before stumpage rates moderate as the result of the decline in most lumber product prices.

Timberlands operating costs were higher in the first half of 2022 versus the same period last year due to cost impacts of an extended snowpack in 2022, more road building activity, higher contractor and fuel costs, and increased heli-logging. Road building costs increased as we replenished developed timber inventories depleted from weather-related deferrals in prior periods and implemented alternative harvest plans to mitigate certain harvest permitting delays. We have experienced delays in obtaining certain timberlands harvest permits owing in part to First Nation capacity constraints. In addition, silviculture expense increased by $3.9 million over the prior period on lower harvest volume, primarily due to higher silviculture costs.

We increased our BC coastal saw log purchases by 46% to 618,000 cubic metres, as compared to the same period last year to maximize fibre available for sawmill operations. The mix of purchases and higher log pricing drove a 23% increase in average log purchase price as compared to the same period last year.

Freight expense for the first half of 2022 was $57.1 million, an increase of 15% as compared to same period last year despite a 10% decline in lumber shipments and the absence of log exports. Freight expense increased due to a 46% increase in realized container freight rates over the same period last year, the increased use of higher cost breakbulk shipments intended to partly mitigate limited container availability, and higher fuel costs.

Adjusted EBITDA and operating income in the first six months of 2022 included $26.2 million of CV and AD expense, as compared to $19.0 million in the same period of 2021. Export tax expense rose due to increases in the cash deposit rates from 8.99% to 17.91%, higher lumber prices and a 2% appreciation of the US to Canadian dollar exchange rate, partly mitigated by a 31% reduction in US-destined lumber shipment volumes compared to the first half of 2021.

Selling and Administration Expense

Selling and administration expense for the first half of 2022 was $22.9 million as compared to $31.0 million in the same period last year. Share price declines in the first half of 2022 resulted in a net recovery of $7.7 million compared to the same period last year, in which the share price had increased by 65%.

Other Income

We recognized other income of $0.1 million in the first half of 2022, as compared to $18.1 million in the same period of 2021 attributable primarily to gains from non-core asset sales, including the Orca Quarry assets.

Finance Costs

Finance costs were $0.7 million, compared to $1.3 million in the first half of 2021, due to a reduction in our average outstanding debt balance and interest earned on our cash balance.

Income Taxes

Western's current income tax expense in the first half of 2022 was $30.3 million, partly offset by a recovery on deferred income taxes of $2.7 million. Tax expense decreased by $10.6 million over the same period last year resulting primarily from the decrease in operating income. The first half of 2021 also benefitted from utilization of capital losses carried forward to offset other income earned on the sale of assets.

Net Income

Net income for the first half of 2022 was $76.6 million, as compared to a net income of $132.1 million for the same period last year. Lower net income was due to reduced margins on lower shipment volumes, significant inventory provisions, and higher stumpage, export tax and freight rates as compared to the same period of 2021.

5