West Fraser Timber Co. Ltd. has reported its sales in the third quarter of 2024 have dropped by more than US $250 million.
All dollar amounts are expressed in U.S. dollars unless noted otherwise.
West Fraser reports results of $1.437 billion in sales, compared to $1.705 billion in the second quarter of 2024 – a drop of $268 million.
Third quarter Adjusted EBITDA was $62 million compared to $272 million in the second quarter of 2024.
"The benefits of our product diversification strategy were apparent once again in the third quarter of 2024, a period marked by uneven demand across our key products. North American OSB, plywood and other engineered wood products continued to experience healthy demand and the Lumber segment saw unexpected improvement in SPF demand, while SYP markets remained challenging, in part reflecting ongoing softness in repair and remodelling markets," said Sean McLaren, West Fraser's president and CEO.
"The team at West Fraser has been actively improving the cost position across our portfolio of mills, and in particular we continue to make progress within our U.S. South lumber platform. We expect to continue working diligently to execute on our strategy of investing capital to modernize mills and lower costs, helping build a more resilient organization. We will also continue to return excess capital to shareholders when it is prudent to do so, maintaining our strong balance sheet that continues to allow West Fraser the financial flexibility to take advantage of opportunities that fit our long-term strategy."
Outlook
Several key trends that have served as positive drivers in recent years are expected to continue to support medium and longer-term demand for new home construction in North America.
The most significant uses for our North American lumber, OSB and engineered wood panel products are residential construction, repair and remodelling and industrial applications. Over the medium term, improved housing affordability from stabilization of inflation and interest rates, a large cohort of the population entering the typical home buying stage, and an aging U.S. housing stock are expected to drive new home construction and repair and renovation spending that supports lumber, plywood and OSB demand. Over the longer term, growing market penetration of mass timber in industrial and commercial applications is also expected to become a more significant source of demand growth for wood building products in North America.
The seasonally adjusted annualized rate of U.S. housing starts was 1.35 million units in September 2024, with permits issued of 1.43 million units, according to the U.S. Census Bureau. While there are near-term uncertainties for new home construction, owing in large part to the level and rate of change of mortgage rates and the resulting impact on housing affordability, unemployment remains relatively low in the U.S. and though central bankers across North America previously indicated that rates may be higher for longer, the most recent rate hiking cycle is now generally believed to be over as the U.S. central bank has begun to cut rates and Federal funds futures indicate prospects for near term future rate cuts. These developments notwithstanding, demand for new home construction and our wood building products may decline in the near term should the broader economy and employment slow or the trend in interest and mortgage rates negatively impact consumer sentiment and housing affordability.
In Europe and the U.K., we continue to experience slightly better demand for our OSB products in 2024 but relatively softer demand for MDF and particleboard panel products. We continue to expect demand for our European products will grow over the longer term as use of OSB as an alternative to plywood grows. Further, an aging housing stock supports long-term repair and renovation spending and additional demand for our wood building products. In the current environment, inflation appears to have stabilized and interest rates have begun to decline, which is directionally positive for housing demand. That said, ongoing geopolitical developments and the lagged impact of prior inflationary pressures may adversely impact near-term demand for our panel products in the U.K. and Europe. Despite these risk factors, we are confident that we will be able to navigate demand markets and capitalize on the long-term growth opportunities ahead.
With the dispositions of one UKP mill and two BCTMP mills earlier this year, offset in part by attaining sole control of CPP, we expect the financial impact of the Pulp & Paper segment to be less significant and to contribute much less variability to our consolidated results going forward.
