Q4 2020 West Fraser Timber Co Ltd and Norbord Inc Joint Earnings Call
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Good morning, My name is Joana and that would be of conference operator today.
At this time I would like to welcome everyone to the giant West Glacier and all of our Q4 'twenty 'twenty of his thoughts conference call.
During this conference call Westbury sales representatives will be making certain statements about potential future developments.
These forward looking statements at group includes certain statements about west franchise of future financial and operational performance was fascia as the business outlook, including demand for products and available supply and expectations confronting costs.
The phase <unk> capital plans, including the completion and ramp up of capital projects and the realization of the benefits of such plans and projects.
The softwood lumber dispute, including adjustments to Judy bikes and related proceedings, and the integration of Norbert and two west coast your business.
These statements include forward looking statements within the meaning of Canadian and United States Securities laws and are intended to provide reasonable guidance to investors the.
Accuracy of these statements depends it depends on a number of assumptions and are subject to various risks and uncertainties that may cause future events to differ materially from the events of implied by these statements.
Actual outcomes will depend on a number of factors that could affect the ability of the company to execute the business plans, including those matters described under risks and uncertainties in the Companys annual management's discussion and analysis of supplemented by other risks and uncertainties of set out in the company's quarterly M. Dnase.
These filings can be accessed on west Fraser's website or through SEDAR for Canadian the investors and Ed Carr from United States investors.
Accordingly listeners should exercise caution in relying upon forward looking statements.
All lines have been placed on mute to prevent any background noise.
After the Speakers' remarks, there will be a question and answer session. If you would like to ask a question. During this time simply press Star then the number one on your telephone keypad.
If you would like to withdraw your question. Please press star followed by two.
Mr. Harris you May begin your conference.
Thank you Joanna.
Good morning to everyone and welcome to our joint West Fraser and Norbert Q4, 2020 conference call.
Joining today by Christopher Istick.
<unk>, the West Fraser, Chris Mckeever.
Senior VP of marketing and corporate development.
As well as <unk>, President and CEO, Peter Ryan Bergan.
Nor Morris Chief Financial Officer, Robin Lampard, and several other west Fraser of executives.
Both Peter and Robin now are part of the West Fraser family.
This morning, I will make a few opening remarks, and then I'll pass the call to Peter and Robin for their comments about nor board Standalone fourth quarter and full year 2020 results.
We will then transition the call to Christopher <unk> for his review of West Fraser standard on fourth quarter and full year results before I make some concluding comments and we move to take questions.
I'll remind.
Everyone of <unk> financial results referenced today will be in the U S dollars, while those of West Fraser will be in Canadian dollars.
Just a general comment before we get into some of the materials.
It's an exciting period to be in the forest products industry.
Just for West Fraser.
But the industry in general to be a.
A meaningful part of an industry that provides sustainable and renewable building products required for a low carbon economy.
And we're able to do this simply by participating in the natural lifecycle of the force that we live and operate in every day.
Manufacturing building materials from a sustainable and renewable forest.
It is about one <unk>.
A very important part of the required solution for society to meet its climate change objectives.
It's an industry that we are both privileged and proud to be part of.
2020 was an incredible year for West Fraser.
Despite a year of rapid change and uncertainty we managed to deliver strong results.
We did so by being agile and minimizing COVID-19 related business disruptions. Thanks to our focus on the health and safety of our employees and communities.
We were able to do this while achieving the best safety record in the history of the company.
And yet we know we can do much better.
In our journey to eliminate serious incidents and injuries in our workplace.
We also achieved gains in other areas as a result of the capital and operating initiatives that we've invested in over the past several years, which are now.
Being realized.
I could not be more proud of what our teams have accomplished.
In mid November November we announced the proposed acquisition of Norbert the world's largest producer of OSB.
Which just closed on February one.
And I would be remiss, if I did not recognize the outstanding work of both project teams and.
In particular, the finance and legal departments, who work tirelessly to close this transaction.
Each was announced on November 19th 2020 in the middle of the pandemic and seasonal holiday challenges.
Two of smooth and successful closing on February one.
Well done to both Robin and Chris's teams.
I am pleased to remind our listeners that this transaction positions West Fraser is one of the world's leading wood based panels, sorry wood based building products producers.
So with that I will pass the call over to Peter.
Yes.
Well, thank you Ray.
Good morning, everyone.
The past year was truly remarkable in many respects for Norbert OSB demand exceeded all expectations from the cash.
Of a global pandemic that caught me by surprise.
This demand strength led to <unk> best ever financial results speak to the live.
Adjusted EBITDA well true.
$384 million euro of doors in Q4 and $865 per the full year.
In North America U S from construction activity recovered strongly in the second half of the year of bouncing back from the weakening of southern Florida. During the early stages of the pandemic.
Repair and remodeling the social robust net.
The demand running out of record pace for much of the year.
The industrial demand has also continued to recover and has now normalized back to you and in some cases above the pre COVID-19 levels.
During the early stages of the pandemic, we took decisive.
The size of action.
Norbert to align our production the weaker demand by implementing a flexible operating strategy.
This new approach.
Operating approach allowed us through cycle down in the second quarter, and then back up to meet the demand recovery in the second half of the year, all while efficiently managing costs.
In North America of full year production was at 80% of available capacity compared to 85% of 2019.
With the reduction due in part to the <unk>.
Impact of the pandemic from customer demand in the second quarter.
Fourth quarter shipments were down 8% from the third quarter, but the increased 5% year over year.
The decrease from the third quarter was due to fewer fiscal days in the fourth quarter.
Some of those downtime taken during the typically slower seasonal demand periods in the fourth quarter.
The took a 191 mill days of downtime in Q4 compared to 32 day shipping.
True.
I always be suppliers struggled to keep up with the stronger than expected recovery in our period of demand leading to the record high benchmark price in the fourth quarter debt now carried into the first quarter of 2021.
We come up to meet the strong demand from our currently operating mills and sure. We made the decision in December to resume production of Schaumburg.
We started this spring.
This mill will be part of reflects the flexible operating strategy once fully ramped up.
After the typical startup curve share on board is expected to be one of the lowest cost of OSB mills.
In Europe, our adjusted EBITDA increased from $16 million from Q3 to $20 million of Q4 of the strength of the recovery of demand and improving European OSB pricing.
Full year adjusted EBITDA in Europe was $48 million.
We've made great progress of our Inverness mill in the fourth quarter, where the phase two expansion is now complete and the mill is ramping up we will continue its ramp up towards its new capacity of 945 million square feet per year.
This expansion will help us to continue the supplier substitution substitution driven OSB demand growth in Europe for years to come.
As we move forward with the rest Frasier as one organization.
I wanted to acknowledge my nor board colleagues for older commitments and hard work, especially this past year.
And I look forward to continuing to work together as president of the engineered wood in the West Fraser.
Barco in this new and very exciting next chapter in our company the story.
And with that I'll pass the call on to Robin.
Thanks, Peter and good morning, everyone. Just two quick reminders from me today as you update your West Fraser models with Novartis Q4 results.
First in light of the steep increase in North American benchmark OSB prices that has continued into Q1 of.
I'll remind you of the inherent lag in our realized prices versus the benchmark during periods of rapidly changing prices and of course, the same thing applies to lumber.
This language cuts both ways occurs because of the timing impact of our order files for commodity and value added products as well as the roughly 25% of North American OSB volume that goes into the specialty end uses were negotiated prices don't move up or down with the commodity benchmark.
Yeah.
The second you will have seen the U S $112 million of taxes payable on the Norbert balance sheet at year end and similarly, West Fraser had Canadian of $124 million of taxes payable on its stand alone balance sheet at year end.
Both entities of large tax installments to pay in Q1 related to the strong profitability in fiscal 2022 of that will impact operating cash flow. This quarter. In addition to the usual seasonal impacts we always see in Q1 from building log inventories in the north and paying out profit share and bonus accruals.
So with that said I'll hand, the call to Chris.
Thanks, Robin and good morning, everyone. When we last reported earnings in October for West Fraser recovery in lumber demand has driven a strong price reaction in wood products lifting lumber prices to all time highs.
And while these prices gave back some ground in the fourth quarter, they remained elevated versus historic norms.
Due to continued demand strength from new home construction renovation applications lean channel inventories and a limited supply response.
In terms of financial performance West Fraser generated consolidated adjusted EBITDA of $1 $46 billion Canadian for the full year in.
In the fourth quarter, our consolidated adjusted EBITDA reached Canadian $544 million down from the $605 million in the third quarter as lumber prices temporarily pulled back.
Our lumber segment, specifically adjusted EBITDA was $508 million in the fourth quarter versus $552 million in the third quarter.
We recorded of duty recovery of $124 million Canadian.
In respect of the 2017 and 2018 duty rates as final rates were released in November.
Our panel segment continued its strong performance in the fourth quarter as higher plywood pricing offset slightly lower shipments and fiber cost inflation.
Yes.
Adjusted EBITDA in pulp declined in the fourth quarter as we took maintenance downtime at Hinton and Codell River pulp in the fourth quarter.
More recently pulp markets are showing signs of recovery.
Turning more specifically the shipments in lumber 2020, SPF shipment volumes declined as compared to 2019 due to the impact of permanent mill closures and shift reductions implemented in 2019, which reduced our capacity and therefore are available production.
Conversely, syp's shipment volumes increased from the prior year as demand was strong in the second half of 2020, and we generated increased production due to capital improvements and improved reliability at our mills in the U S sales.
Cost of production were lower in 2020 than in 2019 due to changes in volumes reductions in log costs higher capacity utilization overall and improved <unk>.
Productivity and recovery.
And overall, while price was clearly a significant impact in 2020, we are most pleased by the things that we can control and Thats. The progress we have made on costs in 2020 across all of our segments.
Shifting to capital allocation of the balance sheet.
Capital expenditures were $241 million Canadian in 2020 slightly lower than our typical spending as we focused on realizing the benefits of the capital. We have spent in the past few years.
Given the strong results our liquidity increased materially in 2020 exiting the year with available liquidity of $162 billion Canadian.
Debt levels remain modest with total debt of $730 million Canadian dollars and net debt of just 71 million of exiting 2020.
And lastly, as you will have seen.
Our board maintained the dividend level at <unk> 20 per share for the quarter.
With that I'll turn the call back over to Ray for our outlook on 2021, and an update on some select projects.
Thank you Chris.
Let me start with a couple of general comments on the acquisition of nor board and on the outlook for 2021.
First I would like to officially welcome of the <unk> team the West Fraser.
And also welcome Marian Lawson and Colleen Mcmorrow as the new West Fraser of Board members of both having joined from nor words Board.
As we've talked about previously and the addition of Norbert of the West Fraser family gives us additional financial flexibility to pursue strategic growth opportunities.
And better positions the company to deliver value to shareholders through the cycle.
And while it's still early days, we are already seeing how <unk> people and assets will be a very strong complement to west Frazier and we remain very excited about the opportunities that lie ahead.
In terms of our end markets.
The record low mortgage rates the Oi.
Ongoing trend toward greater work from home options have created strong incentives for people to purchase new homes and undertake renovations and do it yourself projects.
Remote working when combined with the underlying housing formation deficit has continued to drive demand for single family homes.
That consumes more of our building products than multifamily.
While we recognize that there are many factors outside of our control that can temporarily influenced markets, including uncertainty around the long term economic implications of the effects of COVID-19.
We are optimistic about the favorable market fundamentals.
We're currently seeing and is further supported by the environmental benefits of building with wood, which had been never more clear and more accepted.
Keeping our employees and community safe.
And focusing our attention to of servicing our customers' needs our priorities going forward.
Record high record high pricing in the past few months has led to strong results.
But it is still a relatively new trend.
And with that in mind.
Including our memory of markets, just 12 months ago.
We will be both thoughtful and patient with our capital allocation strategy.
Now I'd like to share a few updates regarding to select projects, particularly those that relate to the U S sales and our strategy there.
Our new manufacturing complex in Opelika, Alabama is of Great example of the opportunity that we see in the U S South.
Final upgrades were completed in 2020, and we are seeing a significant uplift in all of our key metrics safety productivity and cost reduction and.
And we see further upside as we reach our operating expectations.
Perhaps most importantly is our people strategy and.
Improving the work environment, while creating fewer but higher value jobs is key and reducing turnover.
And in improving our ability to recruit and retain.
The people needed to be able to execute.
On our strategy.
Turnover has reduced substantially which we believe is key to achieving our expectations.
The construction of our new complex in Dudley, Georgia is on track and we anticipate starting up the planer before the end of the month.
In fact, it's in the early stages as we speak with the rest of the site coming online later in the second quarter.
The area of benefits from a good fiber supply in the strategically located close to key lumber consuming markets in the U S Senate.
Similar to <unk>, we expect growth in production cost reduction and a further execution of our overall people strategy.
It's important to note both from a cost and of sustainability perspective debt as a result of our continued capital investment in our southern operating platform. We now extract 10% more of lumber from the same log that we would add the 2007.
Producing more of lumber without having to consume more timber is good for the planet and it's good for our business.
We are encouraged by the projects that we have been able to bring to completion of the USO and look forward to continuing to operationalize them in 2020.
And we remain committed to deploying capital prudently to support our low cost of operating platform.
Finally, I want to remind everyone that it is our employees that have taken on the burden of transition this past year.
And in doing so have improved our overall ability to tackle whatever challenge comes next the.
Of the dedication and perseverance of our people across the company is what I am most thankful for and proud of.
Thank you and with that I will turn the call back of the operator for questions.
Thank you Les.
Ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press the star followed by one on your Touchtone phone you will hear with Rachel <unk> of <unk>.
<unk> your request if.
If you are on the speaker phone please lift the handset before pressing any Keith.
First question comes from Mike <unk> at BMO. Please go ahead.
Good morning, Ray Good morning, Chris Good morning, Peter and Robin.
Good morning, Marc Good morning, Yes.
I wondered to start out at it sounds ray and Chris like your tone around kind of capturing returns on some of the southern.
Capex projects is more positive than what I heard maybe six months ago can you just talk about that a little bit.
Okay.
Well I'll try and Mark.
If it sounds different type of.
I apologize for that.
I think it's I think our view Hasnt changed I think as we actually start to realize the achieve them I think we'd probably get more excited and you hear that tone, but I don't think our expectations or any different for sure.
It's just we're really starting to realize those today.
And what would be the <unk>.
Runway that would be left in terms of.
Proving productivity improving yields you talked about that 10% increase in yields you've had across the south of the seven how much remains in can you help us think about what the financial impact of that might be.
So well I think it's going to answer that with a two pronged question I mean, we're always investing even in our in our mills that are fairly well capitalized to continue to kind of improve that platform. So I mean that to me kind of goes on.
Regardless with respect to strategic capital in all of the large and I think I pretty much get this question.
And it's a fair question every quarter and I think I've used that baseball analogy where are we in the baseball game.
We've got quite a bit of runway left still and so.
As far as capturing.
Giving you a number I think we'll leave that to later, but.
Thank you.
As you are aware I mean, we still see.
I would kind of say, we're kind of in the the.
The sixth inning or the top of the fifth.
Our survey of top of the six or bottom of the sales sort of thing as far as what we see is runway to continue to deploy.
The strategic capital in the U S south to fundamentally kind of move.
Recovery in those remaining mills, and lower our costs and frankly achieve better margins with the.
Uh huh.
From our product stream so.
Still quite of bit of work to do.
The net Mark is why frankly, we are quite excited about our runway.
Yes, Okay right I wondered if we could then just turned the kind of capital allocation and I guess the.
One of the top question within that is.
Is the dividend because nor aboard Ed this variable dividend structure and it just seems like it in light of the markets that we're in right. Now. This is exactly the kind of situations, where you might consider of variable dividend. So can you just can you talk about day.
The dividend strategy.
As you said right now and then also sort of how you'd prioritize other uses for our core capital, including perhaps just building a net cash position right now in the kind.
Kind of hedging yourself in terms of the where the market's going to go.
Sure Mark I'll take that.
I think in terms of capital allocation. The hierarchy is the same right I think it's something for US that's been durable rig.
Regardless of market conditions, and and in fact, I think for both companies the approach to capital allocation has been similar.
There's been a bit of a difference in terms of the manner in which it's executed but we both believe in investing in being the having the leading low cost manufacturing platform that hasnt changed.
Having financial flexibility to weather disruption in an approach growth opportunities when they exist and providing returns to shareholders and striking a balance across all of those.
I think as we said now is the time I think more than anything to be patient today's market is not necessarily the new norm.
We're into peak working capital and cash consumption in the first quarter.
And we have to work to optimize the capital structure here coming out of this and we're really kind of only two weeks post completion. So this cash accumulation of this order of magnitude, it's really a phenomenon in the last four or five months and has healed balance sheets from what's been a fairly difficult 19 in early 'twenty on the dividend.
And specifically what I would say Mark is is our approach historically has been to pay of sustainable fixed dividend and have done so consistently over a long period of time.
We didn't need to adjust our dividend in early 2020, even when markets were difficult.
And we will continue to appropriately evaluate the appropriateness of that strategy over the long term.
Okay fair enough.
I do want to just close by saying in my 30 years of covering the sector. I think this is one of the transactions that are now.
That makes the most sense to me and close the potential debt at the most value over time. So I wish you luck on most of the I'll turn it over.
Thanks, Mark Thank you Maher thank you.
The next question comes from Hemiacetal at CIBC capital markets. Please go ahead.
Hi, good morning.
Ray when you first announced the <unk> the normal deal in November you pointed to I believe it was the 61 million U S of synergies within the first two years.
Have you been able to refine your your expectations here as you move through closing.
And good morning here.
You know what I'd say is that.
I have to remind ourselves.
Hey, Tien I think we're in tour and so.
What I'd say is no we really havent further refine those and we will certainly.
Update people.
From time to time on our on our progress on synergies we were pretty conservative on our synergies I think we still have a view that that it is conservative but.
You know we're in the process of assembling our teams and actively.
Building action plans to further refine and execute on the Australia synergies, but it's going to take us a little while to get up and running without him here.
And I already touched on the the Dudley.
Jack.
You speak to what other rebuilds you might have underway over the next year or two.
Okay.
Good question.
I won't go into it in detail Hemminger, but.
We're.
Just kind of say that we do have a runway in front of us.
I think as we announce and kind of bring forward our capital programs.
And I would.
Say that both nor board and West Fraser I think we've got a pretty decent track record debt. When we invest this capital debt, we achieved pretty good returns and that's a pretty good use of <unk>.
And so I would say.
I would just expect more of that.
But at this point not going to kind of give the specific communities that were going to.
Of that we're moving forward until we're ready to announce that.
Sure Fair enough and then just the final question I had for Peter.
Peter a couple of years ago, nor aboard had looked at potentially entering the siding market.
I think of a variety of reasons at the time that didn't make sense.
Given the change of ownership.
The industry developments is that an area that you are you see other potential growth areas for the combined entity.
Okay.
Good morning Amir.
I think.
We're still sort of a premium today that we have opportunities.
Provide us with significantly better risk adjusted returns.
So we will continue to focus our OSB growth of the business from.
Industrial part of it.
Just the industrial.
Real sector.
Obviously, we will continue to evaluate how do these things.
Grow and I'd like to remind everyone. The.
We have.
A lot of OSB capacity in the Aspen region, Rich, which I think.
As most suited to.
Sure.
Two.
Starting production.
Now it's true.
<unk> remains unchanged.
Okay.
Great. Thanks, Peter that's that's all I had.
Okay. Thanks Amir.
The next question comes from Sean Stewart at TD. Please go ahead.
Thanks, Good morning, everyone and congratulations on closing the deal.
Thanks, Tom.
A few questions.
That range I'm, just wondering visit capital allocation.
I appreciate the you're only a couple of weeks in here, but as you wrap your arms around the transaction.
Any thoughts on.
How long you think the integration will take.
And.
When you might be comfortable or the board might be comfortable and revisiting Emma.
The M&A.
As you look for ways to put the balance sheet to work.
Well I'll, maybe start and then Chris can rescue me if necessary but.
No.
With respect to integration.
<unk>.
It's just not.
Really corporately finance accounting.
Chris and Robin.
That's happening very quickly.
Right.
I think that.
And all of that transition of course, there is multiple phases to it right, but a lot of that will occur over the next few months and.
And.
So I've got a fair amount of confidence that there won't be significant disruption from that because quite frankly.
Really looking at taking too great.
Finance teams and building quite frankly, even more capacity as the go forward, so and I think of Crystal.
Christian Robert are already demonstrating that so.
On the other integration remind everybody.
We bought a world class.
Organization that has.
Fantastic assets, and even better people and so.
Today I kind of go there is non lot of stuff that we're losing a lot of sleep about having the integrated because.
We're just building on best practices. So it really frankly doesn't take us very far off of our.
The game plan.
So.
I'm not going to speak for the board, but I think we've always looked at this.
As as.
Something that was going to make the company stronger out of the gate.
I believe that's still to be true and frankly, not take us off.
Any of our other strategies you might have around opportunities that might come our way and so.
I think we're ready to move forward as.
As needed.
Okay, Thanks for that rate.
Second question for Chris <unk> Robin.
Robin you mentioned, the Q1 working cap requirement.
And the.
I'd like to get some context.
Western Canadian log inventories, especially in BC.
I know there was the rush to build log decks ahead of the stumpage hike in January.
Can you give us a sense of what the working cap build for the combined company might look like in Q1.
On the inventory side relative to what we would normally expect from the quarter were you able to get ahead of it in Q4 I guess that's for the question.
I mean I can I can start on that and then and then Robin can add some color on the western Canadian OSB business.
I think there's always lots of factors that affect how you are able to execute and we do our best to kind of manage the changes in it of stumpage in how we haul but.
Weather is the big impact of the has a big.
Impact on that as does the availability of contractors so.
I would I would say if you think about the two of the variables of volume and price I don't think that there is.
Major differences in terms of of volume of kind of where we were we would typically be on a seasonal basis.
But you've got differences in the stumpage on on the inbound that of effective things year over year and so.
That.
With higher stumpage on the same on the similar volume.
Clearly going to have more working capital build than in than in prior years. So.
I don't know that we can kind of go any further than that on the.
On.
On it right now, but we are working hard to make sure that we've got that the log inventory debt is economically justified for us in order to operate through the coming season.
Yeah, Chris the only thing I would just add I guess for some context for historical context on the OSB side of the business as you know historically the no.
All of our board entity is the experience anywhere from 50 to 100 million dollar working capital build in the first operating working capital build in the first quarter.
The gender bias they said the debt build in log inventories in the north.
And also of the payout of things like profit share of cool so.
As you look to this year, obviously profit share based on last year will be higher than it has historically been.
But that certainly the range order of magnitude range that we've experienced.
Thanks, Robin and then one last quick one.
The new Nols, Dan do you of any ability to shield cash taxes going forward.
Yes.
I can take that Youll see in our disclosure, Sean we've pretty much used up all of our Nols at this point in time, we have a few that are a bit restricted but.
But pretty much all out of Nols right now.
Got it.
Okay. Thanks, very much guys.
Thanks, Sean.
Okay.
The next question comes from Paul Quinn of RBC. Please go ahead.
Yes, thanks very much good morning.
Everybody I guess.
I'll start to certain of the lumber side.
Just trying to understand that the mix shift or shipments shipped really the.
That you experienced from 2020 Gram.
Shipping down to the states as opposed to shipping in Asia in debt.
Given where prices are in 'twenty. One here do you expect debt that sort of shift to continue.
Yeah, Paul I'm going to let.
Mr Mckeever speak to the good morning, Paul.
Yes, I would say.
We have shifted our business and I think it's important to remember Canada remains of a pretty critical market for us as well and has been a very good 2020 and count on the lumber side.
Yeah, just like on the OSB side, we're not we're not in these markets for the short term.
We're going to continue to have a meaningful presence in both Japan and China.
Where as you know prices are challenged compared to North America right now, but this will swing.
I would say that we have reduced significantly our total volumes in the markets and we will probably hold them similar to where they've been in the last quarter.
Now depending on demand is much stronger in Japan.
Coming into 2021% from last year.
And in.
And China remains kind of as it has been zone.
Alright, and then maybe.
The question of Peter just Peter how should we think about the the ramp up of the Sham board, how much volume and in 'twenty one.
If you could sort of.
Parts of it out by quarters that'd be great.
Okay.
Morning, Paul Good morning, Paul first of all.
We're making really good progress to return objective.
Production happening here at the.
And of the quarter or in the beginning of the spring.
Despite the per.
Okay.
<unk> significantly by the small cohorts.
The ratio of under Lockdown with we're working our way of true.
Very pleased with the progress, we're making the emotions or the work that day was the predominant the plant is complete.
We are in terms of.
Making sure everything works.
<unk> properly.
The stage.
We've been able to sort of comp.
A very strong relationship with the union from the core.
Im sure were making good progress on getting people on board.
When I think about the startup of our female.
Typically we would.
Well it would be.
Based on past experience after about a years worth we were at about 700 per sound the capacity.
Im not sure if any of what we would of build our plan, but we have built our plan around so that means on average of the first year something north of 50% of your available capacity.
The new kind of sort of imagine of all of the share, though the oil come in the first quarter.
Without some sort of the ramp up debt.
You should expect very much like what we saw.
Alabama, Jeff.
Jefferson.
I'll start with Doris miles up of the possible.
Okay.
That's helpful. Peter while I got you you've been hearing any rumors about other OSB mills ferrying up in North America here.
Although when the lumps of you reported on the I haven't heard of it on the other arm.
Okay. So we're both rate maybe the last question you array.
Just on the 'twenty one outlook here.
You've got MBS, K up 11, 5% year over year.
In terms of production.
The second always set a high bar.
Struggled to deliver just wondering what gives you the confidence to be able to get that this year.
Yeah.
No. Thanks, Paul well I think just.
We remind you that we had a pretty.
The significant.
Market related downtime and the caribou lost share.
The pandemic and chips so.
I would say from a production standpoint, I think we look at our MBS K is.
Frankly.
Quite achievable.
When we look at our.
Look I look going forward.
And what was the second part of that question Paul.
Well it was it was it was just on that I mean, if I look back in your production history I don't see anything up at the $5 15 level going back. So is there any material change in the in the.
In the mills themselves. It gives you with more confidence now.
Well I'm not we're not planning any market related downtime in 2021 like we had in 2020.
And the second part of that is that.
As we talked about in Q3, we did have a difficult.
Shutdown at Hinton with the tragic incident in debt.
Of that impacted that but I have to tell you that the.
The.
The four nine or 10 months of 2020, we saw the best pulp product other than the market downtime, we took care of the <unk>.
<unk> pleased with with how are our pulp group performed.
Now notwithstanding a blip in the fourth quarter.
Alright, simple I had the best of luck going forward here, yes. Thank you Paul.
The next question is a follow up from Mike <unk> at BMO. Please go ahead.
Yes, I wondered if we could just talk about.
The consumer responses to these record high prices for lumber and OSB.
Other you might see deferrals, taking place in some types of construction activity, maybe like the do it yourself market for docs or things like that and then also.
Supplier of responses Peter I saw a story of the trades. The couple of weeks ago about the OSB hitting the Gulf coast from Europe. So I wondered if you guys could talk about.
Supply of responses in both OSB and lumber.
Yes.
Chris is going to take the first part of that for sure Mark.
Good morning, Mark and then maybe.
Peter on the supply side, but yes just.
It's really interesting.
All of our customers in the NFS.
As we're all getting more.
Integrated listened to a lot of the OSB side, where the story is very similar to the lumber side.
Our consumers would like to pull away.
Our customers.
<unk> tried a couple of times they tried in the fourth quarter, particularly on the lumber side.
There their demand is so large that they just they just really can't afford to not the yen and the market every day and the biggest customers are in every day.
And Theyre just restock in their yards.
It yourself market.
While not.
As active on a percentage increase as it was last year, it's still very very busy and so the box stores of our busy.
And they are pushing all of their trading partners.
And all of their suppliers to get more and more products. So.
The other thing that we're seeing is that these high that we don't expect these prices the last forever, but but what we are seeing is.
As a bit of an acceptance that maybe maybe going forward and I would say maybe debt debt.
Price level may be different than it has been in the past a bit but we'll see if that comes to fruition.
And on supply.
You did speak to lumber.
We're seeing we're seeing would come in from Europe, as we have but European markets are very good in the lumber side right now so theyre not that incentive to come over so with that maybe I'll pass over to Peter on the OSP.
Yes.
Shane.
Perspective.
Okay.
Mark the yes, there is some imports of always be coming from Europe to North America, the credit limit.
The European Mills are not capable to address sort of the bulk of the market. The math of North America for technical reasons, So that's sort of a.
The limited aspect of the market hopefully kind of competing.
And at the same time European OSB demand.
We have been growing them caution of our improving terms were all share of you combine those two thanks.
The volume of this flowing in so far anyways.
I would share largely of material.
Okay, Alright, that's helpful and then over on the pulp side.
We've had this amazing rally over the last probably 60 to 75 day can you just help us in thinking about how that would roll through for four of West Fraser I think you have more Asian business than say some of the companies that are more skewed down into the southern U S. So I'm thinking that it should.
Rolled through a little more quickly for you, but if you can just help us with debt that would be great.
Yeah, Mark maybe all of it's Chris I'll try to take a stab at that I think of few things 160 to 75 days is probably a bit longer than we've seen it.
It's a fairly recent phenomenon for us.
Yes, we certainly are seeing very improved pricing.
It's going to take us a little while to get through the order file.
To see that pricing no different than what Robin said earlier around taken a bit of of lag before you see the improvement so that's going to take a little while.
But we're very encouraged by the.
By what we're seeing in the markets in the.
Certainly Asia is picking up which puts pressure on both Europe and <unk>.
In North America so.
We see things looking much better on the pricing side for at least the first half of this year.
Okay. That's that's helpful. And then finally is there any of any way to kind of quantify what those the outage.
Outage days up but one element of cost in the fourth quarter.
I don't have I don't have a number that I could really put debt would be helpful.
Sorry about that Mark.
That's okay I just wanted to check I will turn it over.
Okay.
Thank you there are no further questions at this time you May proceed.
Well, thank everyone for joining our call and for your continued support and we look forward to talking to you in Q2. Thank you very much everyone.
Okay.
Ladies and gentlemen, this concludes the conference call for today, we thank you for participating.
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