West Fraser Timber Co. Ltd. Q1 FY2025 earnings call

• West Fraser generated $195 million of adjusted EBITDA in Q1 2025 with a 13% margin, an improvement from the prior quarter. The Lumber segment had its best result in over two years due to better SPF demand and pricing.
• New home construction showed signs of stabilization but was challenged by mortgage/interest rates, and repair and remodeling demand was subdued. Tariffs and their potential inflationary effects on wooden building products demand were a concern.
• Over the trailing 12 months, adjusted EBITDA was $668 million with an 11% margin, sufficient to cover capital allocation priorities. The balance sheet had nearly $1.5 billion of available liquidity exiting Q1, with a strong balance sheet and investment-grade rating supporting capital allocation.
• Chris Virostek detailed segment EBITDA figures, cash flow from operations being negative $75 million in Q1, and guidance revisions due to transportation/weather issues and tariff impacts.

West Fraser's segments had the following financial performances in Q1 2025: The Lumber segment posted adjusted EBITDA of $66 million in Q1, compared to $21 million in Q4 2024. The North America EWP segment had adjusted EBITDA of $125 million in Q1, similar to $127 million in Q4 2024. The Pulp & Paper segment generated $7 million adjusted EBITDA in Q1, versus a $10 million loss in Q4 2024. The European business realized negative $2 million adjusted EBITDA in Q1, down from positive $2 million in Q4. Over the trailing 12 months, total adjusted EBITDA was $668 million with an 11% margin.

• Both Lumber and North American OSB segments had a slower start to 2025 due to transportation and weather challenges, leading to conservatively reducing the top end of 2025 shipments guidance for SPF, SYP, and OSB.
• Will revisit the impact of tariffs, including the Section 232 investigation on U.S. lumber imports, on 2025 guidance forecasts.

• Uncertainty of tariffs and their potential inflationary effects that could affect future demand for wooden building products.

Q: How are demand trends in lumber (repair and remodeling) and OSB (new residential) as we move into April?

A: Customer purchasing has been somewhat subdued and cautious, with no significant changes from recent years' demand drivers.

Q: What's the outlook for M&A pipeline and capital allocation between M&A and share repurchases?

A: West Fraser has a high bar for growth opportunities. M&A needs to meet quality standards, and capital allocation is durable with options including share buybacks, debt repayment, dividend, and investments. The M&A pipeline is selective, and tariff uncertainty makes pricing assets challenging.

Q: Any perspective on the Section 232 investigation and OSB substitution?

A: Uncertainty exists regarding the Section 232 investigation's timing and scope. No significant substitution of SPF with Southern Yellow Pine has been seen to date.

Q: How do log inventories look in SPF business in mid-Q2?

A: Weather in Western Canada affected log deliveries, similar to Q1, with some impact on SPF but not material overall.