West Fraser Timber Co. Ltd. Q1 FY2026 earnings call

• Seasonal improvement in lumber market, especially Southern Yellow Pine, though OSB market was challenging but modest improvement at end of Q1. - Positive sequential turnaround in first quarter results led by stronger lumber pricing and operational progress, with underlying business generating $48 million after removing duty adjustments. - Continued high-grading portfolio: Completed production at high-level OSB mill in Alberta, four months into production ramp-up at Henderson lumber mill in Texas; U.S. lumber portfolio optimization with mill closures and modernizations. - Balance sheet strong with liquidity close to $900 million, ending quarter with log inventory buildup in Western Canada, expected to reduce in second and third quarters. - Advancing heat energy and dryer project at Bemidji, ramping up Henderson mill, resuming full operational capacity at Blue Ridge after fire, wind-down of high-level Alberta OSB mill.

Lumber segment: Adjusted EBITDA was negative $84 million in Q1, but removing duties impact was positive $30 million compared to negative $57 million in Q4, improvement of $87 million due to higher SYP and SPF pricing. North America EWP segment: Delivered $11 million of adjusted EBITDA in Q1, improvement from prior quarter's negative $24 million, $35 million improvement due to better OSB pricing. Europe segment: Generated $10 million of adjusted EBITDA in Q1, more than doubling the $4 million in Q4, with improved environment. Pulp and paper segment moved to other as it's less significant. Adjusted EBITDA for West Fraser was negative $66 million in Q1, but removing $114 million of prior period duty adjustments, underlying business generated $48 million with all segments contributing.

• No changes to shipment guidance across main products and capital expenditure range. - Transportation and resin costs influenced by geopolitical dynamics, expected to be more fully reflected in Q2 results but hard to quantify. - Anticipate preliminary duty rates to come down later this year by approximately 6% with proposed AR7 rates. - Focus on managing controllable costs, maintaining operational flexibility, and supporting customers as conditions evolve.

• Geopolitical dynamics affecting transportation and resin costs, impact hard to quantify. - Uncertainty in housing demand and macroeconomic conditions influencing lumber market. - Cost pressure from factors like resin and energy prices, difficult to predict magnitude. - Potential impact of trucking company bankruptcies and freight market tightness on shipments.

Q: Pull apart cost inflation piece, resin cost pressure and diesel impact.

A: Resin impact varies by region, hard to quantify for Q2. Diesel impact in Western Canada a Q3 issue, monitored in South.

Q: Chip offtake for sawmills.

A: Diverse portfolio provides optionality, long-term relationships in south, OSB business has offset with pulpwood purchase.

Q: Navigating resin cost, sensitivity.

A: Resin 25% of OSB cost, work with suppliers, assets positioned well.

Q: SYP vs SPF price change, Southern Yellow Pine share in new residential.

A: SYP price rise seasonal, no structural shift in demand.

Q: Share repurchase approach.

A: Prioritize liquidity, disciplined capital allocation, opportunistic repurchases when right conditions.

Q: SPF underperformance, SYP vs SPF.

A: SPF steady, seasonally normal spread change.

Q: Cost pressure magnitude, goalposts.

A: Hard to predict magnitude, assets positioned to navigate.

Q: OSB outlook North America vs Europe.

A: Europe best quarter since mid-2023, well-positioned; North America focusing on cost reduction and positioning.

Q: Lumber production in US South, R&R demand.

A: Hard to speculate on others' production, R&R demand mixed.

Q: Capital equipment costs, diesel impact on capacity.

A: Capital exposure less than last few years, freight market tight, working with vendors to ensure on-time shipments.