Q4 2020 West Fraser Timber Co Ltd and Norbord Inc Joint Earnings Call
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Yeah.
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Good morning, My name is Joanna and I will be your conference operator today.
At this time I would like to welcome everyone is for the giant West Fisher and all of our Q4, 'twenty and 'twenty results Conference call.
During this conference call West face sales representatives will be making certain statements about potential future developments.
These forward looking statements. It could include certain statements about west franchise for future financial and operational performance with <unk> business outlook, including demand for products and available supply and expectations confronting costs.
West Fraser gross 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 rates and related proceedings and.
The integration of Norbert and to the West Coast 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.
And the accuracy of these statements depend it depends on the 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 the number of factors that could affect the ability of the company to execute the business plans, including those matters described under risks and uncertainties and the company's annual management's discussion and analysis and supplemented by other risks and uncertainties of set out and the company's quarterly MD&A.
These filings can be accessed on the musk patients website or through SEDAR for Canadian and for investors and at Karr for 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.
For 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 thank.
Thank you Mr. Harris you may begin your conference.
Thank you Joanna.
Good morning to everyone and welcome to our joint West Fraser and Norbert Q for 2020 conference call.
Im joined today by Christopher <unk> CFO of the West Fraser, Chris Mckeever.
Senior VP of marketing and corporate development.
And as well as <unk>, President and CEO, Peter ROI, and Bergen, and Norberg, Chief Financial Officer, Rob and Lanford and several other west Fraser of executives.
And both Peter and Robin now are part of the West Fraser family.
This morning, I will make a few opening remarks, and now I'll pass the call to Peter and Robin for their comments about North Ward, Standalone and fourth quarter and full year 'twenty and 'twenty results.
We will then transition the call to Chris <unk> for his review of West Fraser Standalone fourth quarter and full year results before I make some concluding comments and we move to take questions.
I'll remind.
Everyone of Norbert and financial results referenced today will be and the U S dollars well those of West Fraser will be in Canadian dollars.
Just a general comment before we get into some of the materials.
And it's an exciting period.
B and the forest products industry.
Not just for West Fraser.
But the industry in general the B.
A meaningful part of an industry that provide sustainable and renewable building for our 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 and every day.
Manufacturing building materials from a sustainable and renewable force is.
One.
Very important part of the required solution for society to meet its climate change objectives.
And the industry that we are both privileged and proud to be part of.
2020 was an incredible year for West Fraser.
Fight a year of rapid change and uncertainty we managed to deliver strong results.
So by being agile and minimizing COVID-19 related business for sure disruptions. Thanks to our focus on the health and safety of our own.
Employees and communities.
We were able to do this while achieving the best safety record and the history of the company and.
And yet we know we can do much better.
And our journey to eliminate serious incidents and injuries and our workplace.
We also achieved gains and 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.
And in mid November November we announced the proposed acquisition of Norberg as 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.
And protect the order the finance and legal departments, who work tirelessly to close this transaction.
Which was announced on November the 19th 2020, and the middle of the pandemic and was seasonal and holiday challenges.
And to a smooth and successful closing on February one.
Well done to both Robin and Christmas 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, what base building products producers.
So with that I will pass the call over to Pierre.
Well, thank you Ray and good morning, everyone.
The past year was truly remarkable in many respects for Norbert OSB demand exceeded all expectations from the face of it.
Global from Denmark got caught me by surprise.
This demand strength led to Norbert <unk> best ever of financial results and Street delivered adjusted EBITDA well true.
384 million the rise doors in Q4, and 865 from Orange bars for the full year.
And North America U S home construction activity recovered strongly and the second half of the year of bouncing back from the weakness of southern Florida. During the early stages of the pandemic.
Brian and remodeling of the social robust.
The demand running on a record pace for much of the year.
The industrial demand has also continued to recover and has now normalized back to 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 and to align our production and weaker demand by implementing a flexible operating strategy.
This new approach.
Operating approach allowed us to cycle down and the second quarter, and then back up to meet the demand recovery and the second half of the year, all while efficiently managing cost.
And North America for all your production was on 80% of available capacity compared to 85% of of 2019.
The reduction due in part.
Impact of the pandemic on customer demand and 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 and maintenance.
And those downtime taken during the typically slower seasonal demand periods and the fourth quarter.
We took a 191 mill days of downtime in Q4 compared to 32 days from Q3.
And always be suppliers struggled to keep up with the stronger than expected recovery and OSB demand leading to the record high and benchmark price in the fourth quarter does have now carried into the first quarter of 'twenty or 'twenty one.
We come up for made the strong demand from our currently operating mills and sure. We made the decision in December to resume production of Schaumburg.
That's a restart this spring.
This mill will be part of our flexible flexible operating strategy and once fully ramped up after the typical startup curve share.
And on board is expected to be one of the lowest cost of already females.
And Europe, our adjusted EBITDA increased from $16 million from Q3 to $20 million of Q4 on the strength of the recovery and demand and improving European OSB pricing.
Full year, adjusted EBITDA, and Europe was 48 million.
We've made great progress on our Inverness mill and the fourth quarter, where the phase two expansion is now complete and the mill is ramping up for will continue its ramp up true works its new capacity of 945 million square feet per year.
This expansion will help us to continue the suppliers substitution substitution driven OSB demand growth and Europe for years to come.
As we move forward with the rest of Frasier as one organization I wanted to I wanted to acknowledge my nor board colleagues for older commitment and hard work, especially this past year.
And I look forward to continuing to work together.
And on top of engineered working out of the West Fraser.
Embark on 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 for me today as you update your West Fraser models like North of Arts Q4 results.
First in light of the steep increase in North American benchmark OSB prices that has continued into Q1 on.
I'll remind you of the inherent lag and our realized prices versus the benchmarks 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 and uses were negotiated prices don't move up or down with the commodity benchmarks.
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 and $124 million of taxes payable on its standalone and balance sheet at your items.
For those entities have large tax installments to pay and Q1 related to the strong profitability in fiscal 'twenty and 'twenty. So that will impact operating cash flow. This quarter and addition to the usual seasonal impacts we always see and 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 and October for West Fraser recovery, and lumber demand and driven a strong price reaction and wood products lifting lumber prices to all time highs.
And while these prices gave back some ground and the fourth quarter. They remained elevated versus historic norms.
And to continued demand strength from new home construction and 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 and.
And the fourth quarter, our consolidated adjusted EBITDA reached Canadian and $544 million down from the $605 million and the third quarter as lumber prices temporarily pulled back.
Our lumber segment, specifically adjusted EBITDA was $508 million and the fourth quarter versus $552 million and 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 and the fourth quarter as higher plywood pricing offset slightly lower shipments and fiber cost inflation.
Adjusted EBITDA and pulp declined and the fourth quarter as we took maintenance downtime at Hinton and Codell River pulp and the fourth quarter and more recently pulp markets are showing signs of recovery.
Turning more specifically the shipments and 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 and the second half of 2020, and we generated increased production due to capital improvements and improved reliability at our mills and the U S sales.
Cost of production were lower in 2020 than in 2019, due to changes and volumes reductions and log costs higher capacity utilization overall and improved <unk> productivity and recovery.
And overall, while price was clearly a significant impact in 2020, we're most pleased by the things that we can control and Thats. The progress we have made on costs and 2020 across all our segments.
Shifting to capital allocation and the balance sheet.
Capital expenditures were $241 million Canadian and 2020 slightly lower than our typical spending as we focused on realizing the benefits of the capital we have spent and the past few years.
Given the strong results our liquidity increased materially in 2020 exiting the year with available liquidity of $1 six $2 billion Canadian.
Debt levels remain modest with total debt of $730 million Canadian and net debt of just 71 million of exiting 2020.
And lastly, as you have seen.
Our board and maintain the dividend level at <unk> 20 per share for the quarter.
With that I'll turn the call back over to Ray for 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 Nora Board and on the other.
And look for 2021.
First I would like to officially welcome of the nor board team and the West Fraser.
And also welcome Marian Lawson and Colleen Mcmorrow, as the new West Fraser and board members of both having joined from Norbert sport.
As we've talked about previously and the addition of Norbert and 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're already seeing how norbert and people and assets will be and very strong complement to west Frazier and we remain very excited about the opportunities that lie ahead.
In terms of our end markets.
Record low mortgage rates.
The 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 and implications of the effects of COVID-19.
We're optimistic about the favorable market fundamentals.
We're currently seeing and is further supported by the environmental benefits of building, which would which had been never more clear and more accepted.
Keeping our employees and community safe.
And focusing our attention to the servicing our customers' needs our priorities going forward.
Record high for record high pricing and 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 a few select projects, particularly those that relate to the U S South and our strategy there.
Our new manufacturing complex and Opelika, Alabama is of Great example of the opportunity that we see and the U S South.
And final upgrades were completed in 2020, and we are seeing a significant uplift and all of our key metrics safety productivity and and cost reduction and.
And we see further upside as we reach our operating expectations.
Perhaps most importantly is our people strategy and <unk>.
Moving the work environment, while creating fewer but higher value jobs is key and reducing turnover and and improving our ability to recruit and retain.
The people need us to be able to execute.
On our strategy.
Turnover has reduced substantially which we believe is key to achieving our expectations.
And the construction of our new complex and Dudley, Georgia is on track and we anticipate starting up the planer before the end of the month.
In fact, it's and 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 and are strategically located close to key lumber consuming markets in the U S.
Similar to Opelika, we expect growth and production cost reduction and a further execution of our overall people strategy.
It is important to note both from a cost and the sustainability perspective that is a result of our continued capital investment and 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're encouraged by the projects that we have been able to bring to completion and 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 and this past year.
And in doing so have improved our overall ability to tackle whatever challenge comes next.
And 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, and we will now begin the question and answer session should you have the question. Please press the star followed by one on your Touchtone phone you will hear with free Tom from acknowledging your request if.
If you are on a speaker phone please lift the handset before pressing any Keith.
The first question comes from Mike <unk> at BMO. Please go ahead.
Good morning, Ray Good morning, Chris Good morning, Peter and Robin.
Yeah.
Good morning, Mark and good morning, yes.
I wonder if to start out at it sounds Ray and Chris like your tone around kind of capturing returns on some of the southern the Capex projects is more positive than what I heard maybe six months ago can you just talk about that a little bit.
Well I'll try and Mark.
And if it sounds different types of.
Apologize for that it's on.
And I think it's.
I think our view Hasnt changed I think as we actually start to realize and the achieve them I think we probably get more excited and you hear that tone, but I don't think our expectations or any different for sure.
For a really starting to realize those today.
And and way what would be the.
Runway that would be left in terms of improving productivity and improving yields you talked about that 10% increase and yields you've had across the south of the seven how much remains on 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 the two prong question. I mean, we're always investing you know even and R. R and R Mills.
<unk> fairly well capitalized to continue to kind of improve that platform. So I mean, not to me and kind of goes on.
Regardless with respect to strategic capital and 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 the baseball analogy and where are we in the and the baseball game and.
We've got quite a bit of runway left still and so.
And as far as capturing.
Giving you a number I think the leaves out to later, but I think as you as you are aware I mean, we've we still see.
And kind of say, where it kind of in the the <unk>.
<unk> or the top of the fifth.
Or I'm, sorry of top of the six are a bottom of the sales sort of thing as far as what we see is runway to continue to deploy you know of.
Strategic capital and the U S sales to fundamentally kind of move recur.
The recovery and those remaining mills and lower our costs and frankly achieve better margins with the.
And from our product strength so.
And quite of bit of work to do and.
And that Mark is why frankly, we're quite excited about our runway.
Yeah, Okay, right and I wondered if we could then just turned the kind of capital allocation and I guess, the you know the kind of the top question within that is the dividend because nor board had this variable dividend structure and it just seems like it and 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 that.
Dividend strategy. It is as you said right now and then also sort of how you'd prioritize other uses for our core capital, including perhaps just you know building our cash position right now and the kind.
Kind of hedging yourself in terms of the where the market is going to go.
Sure Mark I'll 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.
And theres been a bit of a difference in terms of the manner in which it's executed, but we both believe and and investing in and being having the leading low cost manufacturing platform that hasnt changed.
Having financial flexibility to weather disruption and and approach growth opportunities when they exist and providing returns to shareholders and 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 and the first quarter and.
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 of the last four of five months and has healed balance sheets from what's been a fairly difficult 19 and early 'twenty on the dividend.
And specifically you know.
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, Yeah, 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 makes the most sense to me and has the potential of that at the most valuable over time. So I wish you luck on those so I will turn it all the great. Thanks Mark.
Thank you Mark Thank you.
The next question comes from Hemiacetal at CIBC Capital markets. Please go ahead hi, good.
Morning.
Ray when you first announced the of the Norbert deal and in November you pointed to I believe it was 61 million U S of synergies within the first two years and have you been able to refine your your expectations. There as you move through closing.
And good morning him here.
You know what I'd say is.
And I have to remind ourselves it's day Tien thanks for indoor.
And so.
What I'd say is no we really haven't further refine those and we will certainly.
Uh huh.
Date people.
From time to time on our on our progress on synergies you know we were pretty conservative on our synergies I think we still have a view that that it is conservative but.
You know, we're and the process of assembling our teams and actively.
And 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 project can.
Can you speak to what other rebuilds are you might have underway over the next a year or two.
Good question.
And I won't go into it and detail Henry here, but.
We're on.
And 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.
Good.
Say that both nor board and West Fraser I think we've got a pretty decent track record debt. When we invest this capital that we achieved pretty good returns and that's a pretty good use of AR and so I would say.
No I would just expect more of that.
But at this point not kind of kind of give the specific communities that were going on.
We're moving forward until we're ready to announce that.
Sure Fair enough and then just the final question I had for <unk> for Peter.
Peter a couple of years ago, nor board had looked at potentially entering the siding market and it was.
I think of a variety of reasons at the time that didn't make sense given the change of ownership and yes.
Some of the industry developments.
And area that you are you see as the potential growth areas for the combined entity.
Yeah.
Alright, good morning Amir.
I think.
We're still sort of a premium today that we have opportunities.
Providers metric, that's my brother and a risk adjusted returns.
So we will continue to focus on our hours be growth of the business industrial part of the dust.
Industrial and.
Personal sector.
Obviously, we will continue to evaluate how these things go.
And I'd like to remind everyone that you know.
We have a law.
Lot of OSB capacity, and the Aspen region, Richard and I think there's more.
Most suited to.
To shot and.
Production, but right now we're our strategy remains unchanged.
Yeah.
Great. Thanks, Peter that's that's all I had.
Okay. Thanks, 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.
And just wonder revisit capital allocation and appreciating you are only a couple of weeks and here, but as you wrap your arms around the transaction.
Any thoughts on.
How long you think the integration will take and.
And.
When you might be comfortable or the board might be comfortable and and revisiting and.
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.
And you don't really Corporately finance.
Counting on it.
And Chris and Rob and that's happening very quickly and ni.
You know I think of that.
And all the.
That transition and of course, there is multiple phases to it right, but a lot of that will occur over the next few months and and some.
So I have got a fair amount of confidence that our that there won't be significant disruption from that because quite frankly, you know we're.
Really looking at taking too great a.
Finance teams and building quite frankly.
Even more capacity as they go for it and so and I think Chris.
Chris and Robert are already demonstrating that so.
You know on the other integration and I remind everybody.
We bought a world class.
Organization that has.
Fantastic assets, and even better people and so.
Today, I kind of go theres not a lot of stuff that we're losing a lot of sleep about having the integrate because we're.
And we're just building on best practices. So it really frankly doesn't take us very far off of our.
The game plan and so you know.
And I'm not going to speak for the board, but I think we've always looked at this as something that was going to make the company stronger out of the gate.
I believe that's still to be true.
And frankly, I'm 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 the.
And as needed.
Okay. Thanks for that right at the <unk>.
Second question for for Chris and or Robin.
Robin you mentioned, the the Q1 working cap requirements.
And.
Specifically I'd like to get some context on western Canadian log inventories, especially in D. C and I know there was a 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 and Q1.
On the inventory side relative to what we would normally expect in the quarter were you able to get ahead of it and Q4 I guess just 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 were able to execute and we do our best and kind of manage the changes and stumpage and how we haul but weather is the big impact of that has a big impact on that is does the availability of contractors. So.
I would say if you think about the two bought the variables of of volume and price.
Don't think that there's you know.
The 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 and the stumpage on on the inbound that of affected things year over year and so.
With higher stumpage on the same on the similar volume.
You're clearly going to have more working capital build and and than in prior years. So.
And 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 the the log inventory that is economically justified for us in order to operate through the coming season.
Yes, Chris the only thing I would just add I guess for some context for historical context on the OSV side of the business as you know historically.
The Norbert entity and experience anywhere from a share if you do 100 million dollar working capital build in the first operating working capital build and and the first quarter and gender bias and they said the debt build and log inventories in the north.
And also the payout of things like profit share of cool so.
And do you look for this year, obviously profit share based on last year will be higher than it has historically been.
But that certainty and the range a order of magnitude range that we've experienced.
Thanks, Robyn and one last quick one.
The new Nols stand do you of any ability to shield cash taxes going forward.
I can I can take that youll see and our disclosure Sean we've pretty much used up all of our Nols at this point and 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.
The next question comes from Paul Quinn of RBC. Please go ahead.
Yeah, Thanks, very much good morning.
Everybody I guess and.
I'll start to start on the lumber side.
Just trying to understand that the mix shift or the shipments shifts really that you experienced from 2020 for them.
Shipping down to the states as opposed to shipping in Asia, and and given where prices are and 21 here do you expect debt that sort of shift to continue.
Yeah, Paul I'm going to let our Mr. Mckeever speak to the good morning, Paul.
Yeah, I would say.
We have shifted our business and 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.
Saying that we have reduced significantly our total volumes and the markets and we will probably hold them similar to where they've been in the last quarter.
Now, depending and demand is much stronger and Japan.
Coming into 2021 from last year.
And Tim and China remains kind of as it has been.
Alright, and then maybe I had always be question of Peter Peter How should we think about the the ramp up of Sham board of how much volume and in 'twenty, one and as you know.
Yeah.
Sort of.
Parts of it out by quarters that'd be great.
Yeah.
Morning, Paul.
Well first and I'm sure, it's so and we were making.
And really good progress towards our objective to kind of.
Production of happening here.
At the end of the quarter four and the beginning of the spring.
And despite the person.
Hampered significantly by the small corporates saturation on the Lockdown mode, and we're working our way of true.
And I'm sure very pleased with the progress, we're making a motion of the works of music predominant the plant is complete and.
We are in terms of.
Making sure everything works and Mr. <unk>.
And properly.
The stage.
We've been able to sort of comp.
A very strong relationship with the union from the core.
And so we're making good progress on getting people on board.
When I think about our startup of and our female.
Typically.
We would to the.
Well I would be.
Based on past experience and therefore after about a year's worth of we were at about 700 per sound the capacity.
I'm not sure of me, what we would of build our planet and we have built our plan around so that means on average for the first year for something north of 50% of some of your available capacity.
And Oh, and you kind of sort of imagine of all of the share adult doesn't all come on the first quarter.
But that's the sort of a ramp up debt.
You should expect very much like what we saw.
Alabama and on.
Jefferson.
The start of doors and I was like for the past.
Okay, Yeah, that's helpful and Peter while I got you and you've been hearing of any rumors about other OSB mills ferrying up and in North America here.
Although on the ramps of you reported on the I have.
<unk> heard of on the other line.
Okay. So we're both rate and maybe the last question you array.
Just on the 21 out of luck here and you've got M. D. S. K up 11, 5% year over year.
And there was the production this year.
And I suspect and it's always set a high bar and and they are.
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 I'll, just remind you that we had a pretty.
Significant.
The market related downtime and the caribou lost share.
Around the pandemic and chips so.
I would say from a production standpoint, I think we look at our MBS K as.
Frankly.
But achievable just 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 and your production history I don't see anything up in the $5 15 level going back. So is there any material change in the and the AR and the mills themselves and that gives you more confidence now.
And well I'm, not we're not planning any market related downtime and.
2021, like we had in 2020.
And the second part of that is that you know.
As we talked about and Q3, we did have a difficult.
Shutdown at Hinton with the tragic incident and debt.
And that impacted that but I have to tell you that the.
The.
For the nine or 10 months of 2020, we saw the best pulp product other than the market downtime and take care of the weird.
And pleased with with how are our pulp group performed.
And notwithstanding uplift and the fourth quarter.
Alright, and so that's all I had the best of luck going forward here, yes, Thank you Paul and Paul.
Yeah.
The next question is a follow up from Mike <unk> at BMO. Please go ahead.
Yes, I wondered if we could just talk about.
Well the consumer responses to these record high prices for lumber and OSB, you know whether you might see.
<unk> is taking place and 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 the story and the trades a couple of weeks ago about the OSB.
And the Gulf Coast from Europe, So I wondered if you guys could talk about.
The supply responses and both OSB and lumber.
Yes.
And Chris are going to take the first part of that for sure and Mark.
Good morning, Mark and then maybe one on gross Peter on on the supply side, but yes just.
It's really interesting.
All of our customers and and as you know as I am.
We're all getting more.
Integrated and listening to a lot of the OSB side for the story is very similar to the lumber side.
Our consumers would like to pull away.
Our customers.
Tried a couple of times they tried in the fourth quarter, particularly on the lumber side.
There their demand is so large and they just they just really can't afford to not be and and and the market every day and and the biggest.
Customers are in every day and.
And and Theyre, just restock and their yards.
And do it yourself market.
While not.
As active on a percentage increase as it was last year is still very very busy and so the box stores are busy.
And.
And they're pushing all of their trading partners and.
And all of their suppliers to get more and more products. So.
The other thing and we're seeing is that these high and we don't expect these prices and the last forever, but for what we are seeing is.
As a bit of and acceptance that maybe maybe going forward and the and I would say maybe debt.
And that <unk>.
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 on the lumber side right now and so theyre not that incentive to come over so with that and maybe I'll pass over to Peter on the OSB.
Yeah, I think share.
And then.
Perspective, I would say.
For up Mark.
Yes, Gary of some imports of always be coming from Europe, and North America the credit limit.
The European Mills are not capable to redress the bulk of the market demands of North America for technical reasons.
Sort of the limit of the aspect of the market will take time for you then.
And at the same time European OSB demand.
We've been growing on price of our improvement areas, where I'll share of you combine those two thanks.
The volume of this flooring and so far anyway.
Yes, I would share largely and material.
Okay, Alright, that's helpful and then over on the pulp side, where.
And where we've had this amazing rally over the last probably 60 to 75 days and you just help us and thinking about how that would roll through for for West Fraser I think you have more.
Asia and business than say some of the companies that are more skewed down into the southern U S. So I'm thinking that it should roll through a little more quickly for you, but if you can just help us with debt that would be great.
Yes, Mark maybe all of it's Chris I'll try and take a stab at that.
A few things 160 to 75 days is probably a bit longer than we've seen it.
It's a fairly recent phenomenon for us.
Yeah, we certainly are seeing very improved pricing.
It's going to take us a little while to get through the order file to.
And 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.
And by what we're seeing and the markets and <unk>.
Certainly Asia is picking up which puts pressure on both Europe and <unk>.
And North America so.
We see things looking.
And 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 outage days up the one element of cost and the fourth quarter.
I don't have.
Have a number that I could really put that would be helpful.
Sorry about that Mark.
That's okay, right and I, just wanted to check and I'll turn it over.
Yeah.
Yeah.
Thank you there are no further questions at this time you May proceed.
Well, thank everyone for joining our call and and for your continued support and we look forward to talking to you in Q2 and thank you very much everyone.
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