Q1 2021 Canfor Corp Earnings Call
Okay.
[music].
Good morning, ladies and gentlemen, and welcome to care for and 10 for pulp first quarter analyst call and recording and transcript of the call will be available on can't force of website. During this call Canfor and Canfor pulp Chief financial officer will be referring to a slide presentation.
That is available in the Investor Relations section of the company's website.
Also the companies and we'd like to point out that this call will include forward looking statements. So please refer to the press releases for the associated risks of such statements and I would like to turn the meeting over to Mr. Don Kayne, Canfor and Canfor pulp Chief Executive Officer. Please go ahead Mr. Kayne.
Alright, Thank you operator, and good morning, everyone.
Thanks again for joining the cat four and cat for pulp Q1, 2020 One results conference call I'll make a few comments before I turn things over to Alan Nicholl, Our executive Vice President of Canfor pulp operations, and Chief Financial Officer of Canfor Corporation, and Canfor pulp Alan.
Alan will provide a more detailed overview of our performance in quarter one.
In addition to Alan and I, we are joined by Kevin Pankratz, Our senior Vice President of sales and marketing.
I'd like to begin by recognizing the hard work the resilience and dedication of all of our cat four and cat for pulp employees through everyone's exceptional efforts not only have we persevered through the challenges of the pandemic, but also advanced our strategy and several areas.
We are excited to be advancing our sustainability culture to the next level significantly increased our focus on ESG reporting and our and the process of developing a comprehensive sustainability strategy that is aligned with best in class ESG standards.
And as part of this process, we are undertaking goal setting and will be implementing action plans with meaningful targets to provide a pathway to achieving these goals.
This work will be outlined in our sustainability strategy that will be announced later this year we.
We see opportunities to capitalize on the low carbon economy, and the carbon and storing green attributes of wood products and construction and we are excited about the growing use of mass timber and non residential construction.
In addition, with more countries banning the use of single use plastics and increasing demand for renewable low carbon materials, we have a great opportunity to lead and the development of sustainable products that can replace fossil fuel based products with RBS biotech our expanded joint venture partnership with life seller.
The convert wood biomass into high value of Biofuels, we will support a reduction in greenhouse greenhouse gases from the transportation sector and will also contribute to a low carbon carbon economy.
We continue to make significant progress on our commitment to build of diverse workforce that represents the communities and which we live and work by 2030.
Due to the significant commitment to diversity and inclusion throughout the organization by our senior management and board, we are seeing results, including a solid increase and the hiring of women and indigenous people.
Turning to our financial results, our lumber business generated record high operating income and revenues of $607 million and one 7 billion, respectively and the first quarter.
Global lumber markets continue to benefit from sustained high levels of demand and excess of available supply led by strong U S housing activity and R&R demand.
U S housing activity, particularly for single family homes has increased sharply in recent quarters, reaching 15 year highs and March.
Elevated demand continues to reflect a number of trends that have emerged since the onset of the pandemic combined with an aging housing stock and low existing home inventories. Following a number of years of modest U S housing activity.
While the consumer spending habits of our likelihood of normalized when the COVID-19 pandemic and we believe favorable bulk demand fundamentals will continue to positively impact our industry going forward.
And Asia lumber demand was solid and the first quarter with improved pricing, particularly in Japan anticipated and the second quarter, reflecting strong demand and a lag and contract pricing.
Our European lumber business continues to perform well with record high earnings achieved in the first quarter.
While pricing in Europe has lagged North America due to the nature of overseas contract pricing market fundamentals and Europe remained strong with significantly higher sales realizations anticipated in the second quarter.
Turning to our pulp business Canfor pulp reported operating income of $5 million and the first quarter.
Global pulp pricing increased significantly during the quarter, reflecting improved demand, particularly from China combined with global transportation constraints.
Following the successful replacement of recovery boiler and number five at north of it and January Canfor pulp performed well and the quarter with the benefit of significantly higher pulp pricing anticipated to be fully realized and the second quarter during.
During the first quarter Canfor repaid its $225 million term debt with cash on hand, and borrowing major growth in recent years ended the quarter with only a small amount of net debt.
Supported by our improved balance sheet and strong market outlook, we anticipate increased capital spending in 2020, one and continue to assess various internal and external growth initiatives as we look to grow our business on a global basis at the same time, we are committed to remaining patient and being disciplined while we wait for the.
Acquisition opportunities to come along and we will the exercise judgment to pass on opportunities that do not align with our strategy for our over price due to today's high product prices.
Canfor and Canfor pulp will continue to deploy capital internally the target's strong rates of return consistent with our strategy and increasing focus on sustainability I will now turn it over to Alan to provide an overview of our financial results.
Thank you Don and good morning, everyone and accounted for and Canfor pulp quarterly results were released yesterday morning, and come together with our overview slide presentation, and the Investor Relations section of the respective company's websites and my.
The comments this morning, I'll briefly speak to quarterly financial highlights for summary of which is included in our overview slide presentation.
And as John highlighted our lumber segment reported record high operating income of $607 million for the first quarter of 2021 compared to $461 million for the previous quarter the cell.
And Q4, instead of the net Judy recovery of $95 million following the Finalization of CVD and ADT risks applicable to the first period of review.
Number of segment results continued to reflect extremely strong global market fundamentals with sustained high levels of demand exceeding available supply, resulting in new record prices during the quarter.
Unit sales realizations, and Western Canada, and the U S sites were up substantially reflecting the positive price fundamentals and significantly outweighing the impact of market related log cost increases and western Canada, and moderately lower shipments stemming from transportation constraints by way of note North American lumber prices have.
Continued to increase sharply early and the second quarter supported by strong order files.
Our European business continues to generate strong results and also recorded record high earnings and the first quarter buoyed by solid demand and favorable pricing in that region, while European pricing has lagged the increase as seen in North America pricing has continued to see significant increases early in the second quarter as Don headlines.
Our pulp business reported operating income of $5 million and the first quarter compared to an operating loss of $28 million in Q4.
Sales for the current quarter reflected improving global pulp market conditions combined with the 25% increase and pulp production. Following the successful rebuild of Northwood recovery boiler number five that was completed in mid January.
Pulp pricing rose sharply during the first quarter supported the increased demand, particularly from China as well as tight supply of rising from global supply chain challenges.
As highlighted during our last analyst call due to the lag between shipments and orders and the significant majority of these price increases will be realized in the second quarter.
Pulp unit manufacturing costs were moderately lower than the previous quarter as a benefit of a higher production more than offset seasonally higher energy costs fiber costs were slightly lower than those in Q4.
At the end of the first quarter Canfor, excluding canfor pulp had net debt of $25 million and available liquidity of approximately $1 2 billion.
The unprecedented cash flow levels in recent quarters supported the early repayment of Tam for $225 million term debt and Q1.
Canfor pulp ended the first quarter with net debt of $60 million and available liquidity of approximately $87 million.
And we anticipate higher capital spending of 2021 was approximately $300 million and the lumber segment and <unk>.
Most of the $70 million for Canfor pulp, excluding capitalized major maintenance costs.
While we are comfortable retaining and enhancing our existing liquidity until the attractive opportunities present themselves. We continue to assess various potential attractive and accretive organic and external growth and diversification opportunities and continue to look closely at the potential for restarting our share buyback program, but at the same.
Time, we are mindful of the need to adopt a thoughtful and disciplined approach and with that Don and I'll turn the call back over to you.
Alright, Thanks, Alan and the over to you operator, where we.
We will take questions now from from Atlas.
Thank you Mr Kane.
We will now take questions from financial line of list of stated if you have a question. Please press star one on you touched on the phone. If you are using a speaker phone. Please lift the receiver and then press star one and.
And if any time if at any time you wish to cancel please press star two please press star one now if you have a question there will be a brief pause while participants register for questions. Thank you for your patience.
And your first question will be from Sean Stewart at TD Securities. Please go ahead.
Thanks, Good morning.
Two questions and get through and good morning.
Let's start with the European operations, we were particularly impressed.
With the results there and couple of questions on that front first off.
And it looks like the production rate you've seen in Q1, and even going back the late last year.
It looks like Youre running more or less full out based on the the capacity you've given for Europe.
Any updates on how we should think about annual capacity with both beta and burns and on the mix and and organic.
Spansion and initiatives you're undertaking there how should we think about total capacity.
Yeah. Thanks, Sean.
The capacity there were basically running and planning to run around $1 5 billion board feet annually, including the Berge Mills.
And of course, we're always looking at opportunities for upside there, particularly from the Burgh Mills, where we felt when we got into that that there was some upside opportunity and we are certainly seeing that those three of the mills that we bought through the three are doing extremely well we were really pleased with that overall.
And I guess on the.
Would've expected and maybe this is what you're getting around two a little bit of areas as habits of much bigger interruptions I guess due to COVID-19 and like all of our operations really across everywhere. We operate we really have not seen any really real significant reductions at all.
Due to COVID-19, we've lost a shift here and the shift there of course.
But it really hasn't had any any major.
And just presented any major challenges for us I think in terms of organic capital like we've talked about in the past I mean, we see opportunity and Sweden for sure for organic capital, where we're and the process right now are our president and CEO of Europe.
We're evaluating those opportunities are kind of as we speak they have been working on them for a while but certainly there are operations, including the bird operations.
And that no doubt and congestion by organic capital. So we're we're just working through that obviously you can appreciate it.
Try to prior rise all of that is.
As you know is a bit of work, but we're getting through that and and it'll just come down now to timing.
Oh that do the contractor availability and equipment and all of that right. So.
But so right now I would say about $1 5 billion and at this stage.
Okay, Thanks for that Dan and.
And it looks like the the price realizations and Europe.
And they exceeded our forecast and I know, there's byproducts and it's not just one part of sales.
But can you speak to how much of that volume is moving to North America, and how thats transitioned over the last few quarters and and I suppose potential further upside into the.
The exceptional north American pricing, we're seeing right now.
And for sure sure so maybe I'll get Kevin and he's doing a lot of work and he is of course responsible for all of that so maybe Kevin and you can maybe comment on all of that for Sean.
Sure Good morning, Sean, Yes, actually with our with our European operations, they've been fairly consistent in the markets. They operate and I would say that we haven't materially changed our north American presence, it's been consistent maybe a couple of points here and there by moving fairly disciplined in the other markets we serve like the UK.
The central Europe.
And we're starting to see fairly good.
Gains on pricing as they look at it in the quarter to quarter basis.
But not materially shifting of incremental volume to the U S market, but maintaining our disciplined strategy of diversified markets that they serve and support those core customers.
Okay. Thanks, Kevin and then and while I have you.
Can you give context on how your order files look in North America, right now and how that links has evolved over the last quarter.
Yes, no we continue to see pretty strong order files.
And obviously of the SPF order files are a little bit longer than the yellow pine ones, but.
We're well into Q2, which gives us confidence on the strength of Q2.
And for yellow pine and maybe just a couple of weeks later than that but order files are essentially.
The same is that a little bit stronger than the where in Q1.
The six weeks plus it is fair to say for yes, yes, yes.
Yes.
For for SPF, and maybe just a week of June Shire on the yellow pine.
Okay.
I'll get back in the queue. Thanks, very much guys.
Thank you next question will be from Mike Mark Wang of Bank of Montreal. Please go ahead.
Thanks for the is it possible.
We're thinking about the.
Use of capital and give us an update on the South Carolina Greenfield and then maybe you could just put some kind of priorities and some metrics around M&A that you might look at.
Yes. Thanks, Thanks, Mark I'll, maybe start on that one well first of all of South Carolina, We are really looking at anything there or sorry, the Georgia, George the short, yes, and Thats okay.
Problem.
Lasalle I wasn't telling me something about that.
[laughter], but sorry, yeah, and so in Georgia, and we were.
Maybe just M&A in general we haven't we're in the process. We've got some exciting things we're looking at there in terms of expansion.
On the potentially overall and of Greenfield front and organic wise overall, which we're we're looking at the right.
Right now and.
Well, we haven't made a decision yet in terms of.
And whether its Washington, or there's a couple of other potential locations that look good both the existing operations that we have but also potentially new ones.
But I guess shape the say right now we are looking at.
And thats been a huge part of our consideration here in terms of capital allocation at U S.
As to what we're going to do around that and where but we are we are close.
And they are a couple of more exciting but it.
We haven't made a decision yet in terms of whether it's washington or potentially another location.
Okay, and then just in terms of.
M&A can you just help us with some guidepost in terms of you know what.
And the priorities are.
Including kind of U S versus versus Europe.
Yes, good question and because it really does boil down to that it's between Europe, and yellow and the south south Eastern United States, and I would say that but the first of all between the two locations. It would be 50 50 in terms of the they're both solid we like obviously like Europe a lot.
But we also like and.
I believe in the southeast a lot. So it'll we've got opportunities from both places that we're looking at probably in Europe, and maybe a bit more.
Realistic I think in terms of in terms of multiples certainly and the U S southeast what we've found in the.
The fellows embolden the outcome from our company that are.
We're looking into that and.
We're finding real significant multiples more than what we are certainly prepared to pay and at this stage of the game.
And we don't see that probably changing for a while so that's why we've really focused hard here and we're going to increase our capital quite a bit as you may have made or may have seen and 2021 and on into 2022 around organic capital, particularly and potentially some other even additional.
The exciting projects that we're working on right now right. So M&A there might be something by the it comes around and North America, but I'm not counting on that and we're not counting on that.
Europe may be a bit maybe a bit better likelihood of that but but again similar approach there too with organic capital opportunities I mentioned on the earlier question from Sean and also like I said on potential new.
The new investment there.
Okay, and then final thought.
Could just on capital.
One more point I mean, this is really an extraordinary period not only in terms of the level of of lumber prices, but you know the duration of the run and compare those kind of what we saw for a flashback and 2018.
And I'm, just a little concerned about the ability of the.
The industry to reinvest all of this capital whether it's through M&A or for kind of new projects what would be your thought on just taking some of this windfall and just returning the cash to shareholders.
And not necessarily through repurchase maybe of special dividends of said look this is of one time of enormous windfall here, we can't possibly allocate all of this.
The back into the operation So the smart thing to do is just returning cash to shareholders.
Yes for sure Mark and I think.
As we've spoken before I think share.
Certainly that's a consideration and we've had a number of discussions on some of the auctions around that and.
But at the same time I mean, we do believe I mean, if you go back to.
2020, I mean, we cut our capital back significantly Ray we cut it back from probably $2 50 to 100 and that was a challenge to do 100, we've increased it to 300. This year and 2022 will be no question and it'll be up again share.
So we for sure.
And for US, we really believe and the growth opportunity that are that are kind of present themselves like I mentioned in Europe and in the south on organic and potentially.
Greenfield for lack of a better word and so those are those are things that we're looking at but I can tell you. This we are going to be ultra cautious on what we do and all of those regards and that's why we don't mind it all happen.
Cash a little extra cash around for sure considering what this industry goes through it seems on a regular basis and the cyclicality of it and all of the things that you are well aware of better than I am and.
And so we're taking a really cautious approach before we make any decisions at all extremely discipline like never before.
And how we're approaching that but certainly.
And what you mentioned, there and whether and whether you talk about share buyback share you talk about special dividends or all of those things I mean, those would be a part of it but honestly, we're really trying to focus hard now is to and like I.
We should get that 100 back to 300, and then looking at next year and what we may be able to do again and <unk>.
Europe, and and the show, particularly.
Although we do have a few projects that we might want out of you considering here are two of the west so.
Yeah.
So it's a lot of sellers are hitting the town with a lot of money in their pocket. So silly things can have the last question for me.
The BC lumber industry produce about 9 billion board feet last year realistically.
The number look like in better markets like this what can be see return to you.
And so you think is kind of the sustainable level over time.
Yes.
I think you know that.
It's probably the that's a good question I mean, we think there is probably going to be less and I think obviously the beetle the reduction is due to the beall are still occurring theres going to be more decisions made here going forward and western Canada, and British Columbia for share and so I think it'll be a smaller and smaller number than that and I think.
Excuse me and.
That's why we've seen including ourselves recently with the out here.
With the with the permanent shut of Isle Pierre.
We will see we will see more I think if you add to that.
Throw a number of there I think we still got another probably 1 billion feet I am not sure exactly.
And so variable views on that but but I think probably and that eight to 9 billion feet, probably is a realistic and.
And.
And we're and the benefit of that right. Now is we're seeing a lot less pressure on the on the purchased wood market because of some of the rationalization thats occurred so we're not seeing the escalation and the.
Purchased wood log market and British Columbia to the extent, we saw back in 2018, where there was.
A lot of.
A lot of aggressive purchase behavior on the on the purchase of wood market.
But that'd be that'd be my best guess at this stage.
And maybe Pat can get more specific with you on that later in terms of.
And that number of we think is a bit less.
Okay. That's really helpful. Thanks, Dan and I will turn it over okay. Thanks Mark.
Thank you. Your next question will be from EMEA of hotel at CIBC capital markets. Please go ahead.
Hi, good morning.
Don and we've seen the BC government recently.
Allude to some major changes coming to the provinces.
The tenure allocation.
Can you speak to what potential impacts.
Think of that might have for some canceled.
Yeah, well, I think youre and others.
We're focused on right now of course is that the.
Prince George of TSA and.
And of course, we don't know the answer to that yeah. We don't we haven't heard how that's going to shake out I think it's safe to say there'll be there'll be some.
Recent changes service for share due to the particularly due to the mountain pine beetle and so we are.
We're waiting for that and we're also waiting on the intentions of paper that the the premier alluded to at the Kobe Conference.
We were encouraged frankly by some of the some of his comments for sure.
But we.
And frankly, we're really right now.
Waiting to hear about the paper and what that's going to include and also on the USA decision, but safe to say that we will probably see a reduction thereof.
Good.
I think I would say, though that we are obviously following it extremely closely because it is going to have it's going to have implications right and not just for us but for.
All of the folks and that PGE TSA area of the operate right depending on what that ends up being right, so but I don't.
As expected there the government very careful in terms of traffic signal of what that might be and so we don't have any idea at this point.
Okay, great. Thanks, Don and just Kevin a question for Kevin and Kyu.
And what Youre seeing now and the the R&R channel.
How do you think volumes there are going to fare and in 'twenty, one versus 2020 and any changes you might expect as the year unfolds.
Sure, Yes, great question, there and here.
I would say like for Q1, we were actually ahead of Q1 of 2020 and of course that was prior to COVID-19 hitting some of them probably no surprises there and we're just into early Q2 and seen.
Some delineation from the pace the extreme pace, we saw last year.
However, when you look at it compared to 2019, we're well ahead and in line with forecast. So I think thats still going to play out like of this post COVID-19 environment, and People's discretionary money, where theyre going to spend it but we're still seeing a healthy business in that segment and maybe the realization do you expect the exact same.
Energy and pace of consumption might be a bit tough to replicate but.
Starting to see it not materialized to the same degree, but well ahead of 2019 and in line with our forecast and expected good steady year for for this year.
Fair enough, thanks, Kevin and that sets all of that.
Thanks for thanks.
Thank you next question will be from Paul Quinn RBC capital. Please go ahead.
Okay, great. Thanks, very much good morning, guys.
Hey, John and a high level just wondering how you look at the sustainability of the current lumber cycle.
And what factors of what things are you looking at specifically that would bring it into the party.
Okay.
Good couple of good questions and I think that I think of fair to say that the first of all we think there's some good sustainability for this year and probably on it and next year I mean, some of the fundamental changes that we're seeing at a high level.
We think.
You never know for sure because there's a lot of can't really rely on history of anymore. We're looking at when you look at the future and some of the changes that are occurring.
Number one I think I do believe that of the after years of work as an industry and messaging the advantages of the.
And that our products can play and a low carbon economy and the green building operating attributes of our products I think thats, all finally, hitting home and and and the reason I feel a bit better about that and I know, Kevin and I talked about this a lot is the sum of all.
All of the customer base ultimately of shifting to some of these are world class Fortune 500 companies like Microsoft and Google and you've heard about some of those projects. So thats I think that gives us some confidence that that is really we're starting to see a big shift there, which is which is hard to predict how that could end up but it'll be it's positive for sure the whole suburbia from urban centers move.
We are seeing and the impact on single family dwellings, I think it's been obviously to start with its been exaggerated, but I think that that's probably going to continue going forward, which will serve us well and our industry for sure.
And that will probably be followed hereby and some multifamily as well the mass timber side.
You talk about that yourself, a lot and we tend to agree for sure with some of the work you've done.
Around that and it's the opportunity here is we think is large for sure we see and Europe. It's growing the commercial application will continue to growth. So we're all of those things should bode pretty well supply we don't.
The overall is going to going to increase share.
Currently at all so the big concerns that we got probably number one is the affordability and to what degree is.
And that affordability.
Challenge going to accelerate here going forward clearly.
Prices and pretty much every every all of the goods are have gone up a lot.
And.
And at what point does that when do we start to see more inflation and interest rates start to move up I mean rate those areas are critical.
And concerning for us as we look forward and something that we're very very mindful of it and try to.
The integrated into our thinking and our forecasting the other area that I think we really are concerned about again longer term here and short term too is just supply chain logistics and supply chain performance with all of the modes of transportation not just rail the rail truck and and also container and vessel.
Traffic so and.
That seems to be really challenged globally, not just for us, but everywhere and it's impacting us. So I think theres a lot of work as we go forward that has to be that should be thought through there around how do we modernize the supply chain digitize the supply chain all of things that we're working on.
At our company and and probably as an industry so that'd be the.
But the.
And this would be probably the main the ones that I think the.
Certainly that we take for sure.
Okay, and then just the.
Pilots earlier this week.
And the CEO there Eric mentioned that he doesn't think U S log prices will pick up materially for free.
For years to five years is that pretty consistent with what youre seeing and your geographies that you're operating in the USF.
Yes, we don't we.
We see a little bit here and there, but if you go back the last four of five years has been minimal for sure and going forward, Yes, we see some increases for sure here here and there, but overall, it's not material.
Okay and then.
Maybe just getting off the weyerhaeuser call.
They were mentioned net the potential of the.
U S infrastructure spend could good results and an incremental 1 billion to of $1 billion for.
And our feet of lumber demand is that consistent with what you would see and given that and given your sort of rosier outlook.
For the sustainability of the number of second and just wondering why youre, so considerable amount of capital allocation.
Well first of all on the.
On the 115.
I think it's going to be.
It's going to have a positive impact for sure and you don't have to go back to for her to conclude that and you go back for the last recession with China really made a big commitment to.
Infrastructure and the impact of that had at that time for our industry I mean, it was obviously.
Very positive when you go through and infrastructure spend like the.
The China spoke about and out of the U S is.
Contemplating as well so yes, we would say that it's definitely a positive.
And again on the on.
And the capital piece.
I think that Youre alluding to is where are we.
And why are we not spend of more there of the cash that we do and we'll likely to have on the bank going forward and again I.
And just reiterate again that we are despite.
Despite the fact that things are very good right now we are never going to lose sight of the fact that we're in a cyclical business and.
And we we want to be in a position, where we do have extra cash for sure when things do change again and they will eventually here and we want to be ready and we want to have cash available and and without extending ourselves.
Any farther than we need to and so.
And we do have as I mentioned at the outset, a little bit we do have some of it opportunities that are in front of us that we're working on over and above the $300 million or so that that al and.
As the identified they were going to spend.
And 2021 this year.
But again, we're going to greenlee disciplined and very very careful and how we deploy the capital so and again and we are looking at some other alternatives to as I mentioned on the on and.
The IV et cetera, but but that's still kind of under consideration so.
Alright fair enough and look forward to the Q2 the results. Thanks, Yeah. Thanks, Paul share.
Next is a follow up from Mark Wilde of Bank of Montreal. Please go ahead.
Please go ahead, Marc Thanks, Dan and I'm here I'm here I'm just curious.
Whether.
You are seeing any sign of customers pulling back and response to these high lumber prices.
Whether the do it yourself channel, perhaps is starting to see some easing just the color on demand destruction of demand deferral.
Yeah, Kevin what have you.
Sure, Yes, Mark I think the the one segment that we've seen a little bit of retraction would be in the multifamily segment and you can sort of see that in the results with the U S census, non housing starts and and those projects tend to have longer cycles, and and price commitments. So I think thats one area, but maybe they just don't get canceled and just get posed.
The <unk>, which will maybe fulfill longer term of demand and keep it consistent and as of the and.
With respect to like the <unk>.
New home construction, so far the prices appear to be passing on and we're obviously and these new hyper price.
And right now and so maybe that's the area, where Don mentioned around affordability when will that impacted a little bit, but so far we haven't seen the resistance that you would expect and keep in mind other products that we would compete with.
And are also experiencing inflation such as steel. So I think we are in the space, where there is a lots of inflation going on but we do worry about that longer term.
With respect to inflation and and.
Potential impact on demand destruction, but so far we haven't seen that resistance.
Yeah, Yeah have you seen anything from the let's say treated lumber and the U S. South. So you got a guy who is the do it yourself for and it.
He looks at the price of doing the deck.
<unk> this year versus what it would've been a year or two ago and says well, maybe I'll wait a little while yeah yeah.
And maybe there's elements of that because we are definitely not at the same pace. As we were this time last year and the treated at site, but we don't do too by the supply and traders, but the demand has been steady and consistent.
Does that not at that pace that we saw so far last year.
Yes, Okay and then another question can you guys give us some expectation of what you would expect for lumber imports into the North America, particularly from Europe. This year I'm, just I'm trying to kind of balance out the is really high prices and the U S. With the fact that you've got a market that seems quite strong over in Europe and <unk>.
And wondering whether that will.
Reduce the amount of flow that we might have seen in the North America.
Kevin you can go ahead and comment on that if you'd like or share, yes, I think the logical to expect to see.
More come over there Mark and I bet, you heard from our comments, we're going to be fairly consistent and stable, but I think there is that we are seeing that which is in turn driving shortages and the European market and it's going to support further strength in those in the coming quarters with respect of demand as their inventories become less and less.
Sales so.
We are expecting to see a little bit more and factored that into our analysis.
Just one thing.
Maybe I can just add Kevin and if it's okay.
And I think you will know this but.
If you think about our business in Europe, and and one of the things that impressed us when we purchased beta and why are we were we were so.
Pleased to be successful there is they have they are focused on customer market and customer diversification and like we have for many many years and they have and exceptionally strong customer base customer base and not unlike what we have here they sell direct very little intervention longer term contracts.
And they live by them and then you think about the long term like we do we are focused on next week or next month right. There in Europe, even more so but similar though theyre looking outwards and you look at the customer base that they have and from North Africa to the U K to Australia to domestic rate and within Sweden, Denmark.
Central Europe.
They have and extremely strong.
The customer base, and so even with prices where the route I think Kevin.
Then of difficult to get them over that 14 and 15% number.
So I think that there is.
And that have been opportunistic in terms of the North American market, particularly as a result of the beetle issue and central Europe and they they had not.
And not very high quality logs. So they made a lot of lower grades and of course that was able to be shipped into the southeastern U S, but but that's come into it and as well and so.
To Kevin's point, and it'll be up for sure, but I don't think it will be anywhere near the way. It was when you go back I don't know 15 to 20 years. When there was a lot more kind of in this way.
Okay and the last one I was curious about the dawn and just how much of an impact you think.
Transportation and logistics are contributing to kind of of.
The market situation at the moment I mean I've heard about some.
The rail issues coming out of the Pacific Northwest and out of Western Canada.
And then of course, the trucking scarcity and the south has gotten a lot of attention as well. So maybe just a few thoughts on how the sort of that's playing into the market backdrop at the moment.
Yeah, Kevin you're living with that every day, and maybe talk about that a little bit and maybe the new self expression.
Yes, no mark.
No doubt that there has been some impact, especially in the U S. South with trucking I think it's wait and noted that.
The truck shortages are adding some challenges in that space, there and we've had our challenges with the.
And western Canada to get product, there, but not a real like we're not really building inventory as a result, but.
But I think with with the our new sales operations or our trucking fleet down there that's been a real positive for us because we've been able to utilize that fleet to execute our order file and the little less exposed.
And just the open trucks situation, but theres no doubt, but I think the underlying impact there Mark is that there was only like that whole working inventory lumber in the supply chain and it never fully recovered. So I think that's the real big fundamental driver Thats supporting pricing and whenever transportation challenges we're facing.
For sure there's going to be some added component to it but I think we still haven't fully recovered from the depletion of the inventory from about.
At this time last year.
Yeah, Okay. That's very very helpful listen guys. Good luck in the second quarter and take good care of the cash.
Absolutely Mark appreciate it and we will comment on it.
Thank you.
There are no further questions I'll now turn it over to Mr. Dan Kane for closing comments.
Alright.
Thanks, everyone for joining the call and thanks to all of the employees that are listening as well and we appreciate all your efforts this past year and all of the support from our shareholders and <unk>.
And investors. So thanks, very much and we look forward to talking to you again at the end of Q2. Thank you very much have a good day.
Thank you, Sir ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending and at this time, we do ask that you. Please disconnect your lines.
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