WFG

• Overall Quarter Performance

  • The company delivered Q2 2026 consolidated sales of ~$1.4 billion and adjusted EBITDA of $59 million, with a 4% adjusted EBITDA margin, including a $13 million favorable softwood lumber duty adjustment.
  • All three core operating segments contributed positive adjusted EBITDA, and the company ended the quarter with ~$1 billion in total liquidity and a 5% net debt to capital ratio, maintaining strong financial flexibility.
  • The company generated $192 million in cash from operating activities, repaid $148 million in operating borrowings, and reduced net debt by $140 million during the quarter.

• Operational Progress

  • In U.S. lumber, Southern Yellow Pine production matched first half 2025 levels despite operating one fewer mill, reflecting productivity gains; the new Henderson Mill ramp-up exceeded expectations, with production doubling in Q2 compared to Q1 and regularly outperforming the old mill's output.
  • In Canada, SPF lumber production increased 13% quarter-over-quarter, and shipments rose 18% quarter-over-quarter following the mid-March restart of the Blue Ridge Alberta facility.
  • The company completed an on-time, under-budget safe wind-down of the high-cost Alberta High Level OSB mill, aligning production capacity with customer demand and improving overall operational efficiency.
  • Unit costs for the U.S. lumber portfolio declined 4% year-over-year in the first half of 2026, with further reductions expected as the Henderson Mill ramps up.
  • Wildfires in British Columbia and Alberta have not impacted operations as of the call, with all facilities remaining safe.

• Shipment guidance for all main products and the full-year 2026 capital expenditure guidance range of $300 to $350 million are maintained, with no revisions from prior guidance.
  • Further production gains and lower unit costs are expected for the U.S. lumber segment as the Henderson Mill completes its ramp-up through the remainder of 2026.
  • Management expects limited pressure on fiber input costs for Canadian lumber operations, as overall Canadian lumber supply has been shrinking in recent periods.
  • Softwood lumber duty rates are confirmed to drop later in 2026 following the AR7 review, and the impact of this change on margins will depend on ongoing market supply-demand dynamics.
  • The company expects to continue lowering its overall cost base, managing production levels, and optimizing working capital across all segments through the remainder of 2026.

1. Lumber Segment: Generated $41 million of adjusted EBITDA in Q2 2026, improving from an adjusted EBITDA loss of $84 million in Q1 2026. It contributed 69.5% of total positive segment adjusted EBITDA for the quarter. Results benefited from higher mill net prices and higher shipment volumes, partially offset by seasonal Canadian logging cost timing and net realizable value (NRV) adjustments tied to quarter-end pricing. 2. North America EWP (Engineered Wood Products) Segment: Generated $13 million of adjusted EBITDA in Q2 2026, a slight improvement from $11 million in Q1 2026. It contributed 22% of total positive segment adjusted EBITDA. Performance was impacted by OSB pricing dynamics and resin inflation, partially offset by stable controllable costs and an NRV adjustment tied to quarter-end prices. 3. Europe Segment: Generated $13 million of adjusted EBITDA in Q2 2026, up from $10 million in Q1 2026. It contributed 22% of total positive segment adjusted EBITDA. Results benefited from improved market demand, and the segment achieved its strongest first half results since 2023, with management successfully offsetting higher resin and freight costs via strategic pricing. 4. Other Operating Segment: Reported an $8 million adjusted EBITDA loss in Q2 2026, primarily driven by a planned maintenance shutdown at the Caribou facility.

• Elevated mortgage rates and ongoing consumer housing affordability concerns continue to create a challenging overall demand environment for lumber and engineered wood products.
  • New 50% U.S. tariffs under Section 338 apply to approximately 3% of the company's Canadian plywood shipments and 20% of its Canadian LVL shipments; the company is still assessing potential indirect impacts on downstream customers and end markets for its non-tariffed MDF shipments (which represent half of total MDF shipments).
  • Transportation constraints and cost volatility in the U.S. South have impacted shipping operations, though most freight cost increases have been passed through to end customers.
  • Resin and wax costs are exposed to crude oil price volatility, with a $10 per barrel change in crude prices estimated to impact annual resin and wax costs by $15 million; resin costs increased by $13 million quarter-over-quarter in Q2 2026.
  • Logging and fiber costs are exposed to diesel price volatility, with fuel adjustment clauses in contractor contracts passing through some price changes to the company.
  • Pulp industry closures create a headwind for lumber residual revenue realizations in the U.S. South, though they also increase regional pulpwood availability and lower fiber costs for OSB operations.

Q: What is the nature of ongoing transportation constraints, and are conditions improving? / A: Constraints are multi-layered: trucking supply shrank after widespread trucking company bankruptcies in Q4 2025, and the problem was compounded by a fuel price spike and seasonal tightness from increased produce shipping in the U.S. South in early Q2. Conditions have eased recently, with more product shifting to rail and seasonal demand pressure abating.

Q: With improving leverage and ample liquidity, what metrics or conditions would trigger the restart of share buybacks? / A: The company is pleased with its operational progress across all segments, but maintaining financial flexibility to preserve optionality across all potential capital uses remains the top priority. Management will evaluate all options including organic investment, inorganic acquisitions, and share buybacks, and will deploy capital to whichever option delivers the most long-term shareholder value, with no specific fixed metrics required to restart buybacks.

Q: With European OSB rebounding, will the company pursue expansion in Europe or acquire distressed assets as they come to market? / A: The company is pleased with its current progress in Europe and has a strong management team and competitive cost position there. Current focus remains on operationalizing and capturing value from the large portfolio investments the company has already made over the past several years, rather than pursuing new large expansion or acquisition opportunities at this time. The only major active project is the Bemidji asset rehabilitation, which will ramp up in early 2027.

Q: What is driving stable North American EWP unit costs, between lower pulpwood costs and the High Level mill closure? / A: Cost stability is the result of multiple factors: the company has proactively pursued company-wide cost reduction initiatives, and flexes its asset portfolio to match fluctuating demand. The full cost benefit of the High Level closure has not yet been realized, but recent capital investments at the Allendale and Chambord OSB mills are already operating above expectations and driving cost reductions. Lower pulpwood prices from U.S. South pulp mill restructuring have also provided a measurable tailwind to fiber costs.