Q2 2021 West Fraser Timber Co Ltd Earnings Call
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Yes.
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Good morning, ladies and gentlemen, and welcome.
To the West Fraser Q2, 2021 results conference call.
During this conference.
West Fraser's representatives will be making certain statements about potential future developments. These forward looking statements include certain statements about west.
Fraser's of future financial and operational performance, including the impact of foreign exchange rates credit ratings and mill maintenance shutdowns.
West Fraser's business outlook, including forecasted U S housing starts market conditions demand for product.
Products and available supply and expectations concerning costs.
West Fraser's capital plans, including the completion and ramp up of capital projects and the benefits of such projects.
The softwood lumber dispute, including adjustments to duty rates and related.
<unk> proceedings, the integration of nor board into the West Fraser business and expected synergies.
And recent developments, including the impact of wildfires on production and shipments and the completion of our substantial issuer bid.
These statements include forward looking states.
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 on a number of assumptions and is 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 its business plans, including those matters described under risks and uncertainties in the company's annual managements.
<unk> and analysis as supplemented by other risks and uncertainties as set out in the company's quarterly MD&A as.
These filings can be assessed on west Fraser's website or through SEDAR for Canadian investors and Edgar for United States of investors.
<unk>.
Accordingly listeners should exercise caution in relying upon forward looking statements.
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 1 on your telephone keypad.
If you would like to withdraw your question. Please press the star followed by <unk>.
Mr. Ferris you may begin your conference.
Thank you Michelle.
Thank you for that.
This disclaimer.
Listen good morning, everyone.
And welcome to our Q2.2021 conference call I'm joined today by Chris <unk>, Our Chief Financial Officer, and Chris Mckeever of Senior Vice President marketing and corporate development and several members of our executive team.
This morning, I'll make a few opening remarks, and then I'll pass the call.
All too Chris for Us for a review of the West Fraser of second quarter results before I make my concluding comments and then we'll take your questions.
I'd like to start with a couple of important housekeeping items today, we will limit the scope of our comments to those already provided in our Q2 disclosure.
And we will refrain from addressing any questions related to our company or market outlook beyond what has already been provided and those disclosures.
Further after this morning's earnings call and in the absence of any material developments.
That will require a news release, we do not intend to make any.
Any additional comments to investors or analysts until after our substantial issuer bid expires, which currently are at.
As intended to expire on August 17th 2021.
Finally, you will have noticed in our earnings release that we have announced the virtual investor and analyst event to be held on September <unk>.
Closure of 2 PM Eastern time, 11 Pacific We're planning.
For the event to be approximately 2 hours in duration and we will have further details at a later date.
With that out of the way, let's move on to our comments for this quarter.
Yeah.
It has been of captivating time for forest products.
<unk> being meaning being a meaningful part of an industry that provides sustainable and renewable building products required for a low carbon economy.
Simply by participating in the lifecycle of the force that we live and operating in.
Manufacturing building materials from a sustainable and renewable forest is but 1 very important part of the required.
The solution for our society to meet its climate change objectives.
On the topic of sustainability I'm pleased to share that this summer West Fraser will plant is to billions of tree as part of our reforestation program.
This is a proud and long start long standing.
And then to the sustainability and environment and the communities in which we operate.
We've been sustainably managing force in BC, British Columbia, and Alberta for more than 65 years.
For every tree, we harvest in the woodlands that we manage we plant 2 trees Tuesday at lids.
In its place.
This is a significant milestone for the company and we Couldnt have achieved it without the support of our employees contractors and community stakeholders and many others.
It's all part of a renewable resource management and contributes to the goals of support of global climate change and carbon.
Sequestration.
Now onto our Q2 results overview.
I'm pleased to report.
We had another strong quarter for West Fraser as we remained agile remained agile and continue to work diligently diligently at minimizing COVID-19 related business disruptions. Thanks to our focus on the health of safety of our of.
<unk> communities.
We remain proud of what we've accomplished so far.
The North America, we experienced continued strength in recovery and U S home construction activity spurring demand for wood building products.
Faq homes construction as measured by new home starts recently reached levels.
<unk> not seen since 2006.
Despite what appears to be of short term pullback and repair and remodeling activity. We expect this segment to remain relatively strong in the longer term supported by new home sales activity and an aging housing stock.
The slowing of the repair and remodeling market was more evident for lumber and plywood, which has a greater exposure than our balance of engineered wood products to repair and remodeling.
On the lumber side of the.
The new manufacturing complex in Dudley, Georgia became fully operational in the second quarter and the mill continues to make progress.
Yeah.
On the OSB side supply continued to struggle to keep up with the stronger than expected recovery in OSB demand experienced in recent quarters.
As you are aware in response to this increased customer demand.
And in the midst of the pandemic we.
We announced the safe.
<unk> restart of our Shamburg, Quebec mill, which began to produce and ship panels in late March.
Shamburg remains on track the ramp up towards its annual rate of capacity of 550 millions of square feet on the 3 agents basis.
And we're very pleased with the progress to date.
With that I'll.
Ramping the introduction I'll now pass the call over to Christopher <unk>.
X Ray and good morning, everyone and thank you for joining us.
As a reminder, our consolidated second quarter results include now a full 3 months of financial results from Norbert and as of January 1 of this year and for all comparative periods, we no longer exclude X.
Export duties in our calculation of adjusted EBITDA.
When we last reported earnings in early May the recovery in lumber and OSB demand was strong.
That demand strength continued through most of the second quarter.
Demand for new housing construction in particular was elevated versus historic norms.
In terms of financial performance West.
With the either generated consolidated adjusted EBITDA of 2.16 billion in the second quarter up from 1 billion last quarter largely due to the addition of <unk> financial results for a full 3 months as well as higher lumber and panel prices.
Recall that in the prior quarter results there was a 93 million dollar.
The EBITDA reduction, which was an acquisition related noncash purchase price accounting impact for the 1 time inventory adjustment the raised our cost of goods to the sold to their fair value upon closing of the Norbert acquisition.
Moving onto the segmented results our lumber segment reported adjusted EBITDA.
<unk> $994 million versus 646 million in the first quarter of 2021.
Given by higher pricing and higher shipments, partially offset by higher fiber costs.
In our North American E. W. P segment, adjusted EBITDA increased to 1.1 O of $6 billion from 300.
Third and $53 million in the prior quarter with gains primarily due to the addition of nor board results for a full 3 months as well as higher OSB and plywood pricing, which more than offset fiber in raw material cost inflation.
Adjusted EBITDA in the pulp and paper segment increased to 25 million in the second quarter from 11 million in the first quarter.
Calling tie higher pulp pricing.
And finally adjusted EBITDA in the European AWP segment was 39 million in the second quarter up from 11 million of in the prior quarter.
Continue to see recent market strength in Europe of demand for OSB continues to grow.
Shifting to capital allocation.
<unk> on the balance sheet capital expenditures were 66 million in the second quarter slightly higher than capital spending in the prior quarter.
Note that due to some lengthening lead times on projects currently underway.
We are now expecting our 2021 capital expenditures target to be in the range of approximately 400 of 450.
Versus our prior guidance of approximately $450 million.
We continue to view share buybacks as an appropriate use of excess cash when we believe our shares are trading below intrinsic value.
In the second quarter, we bought back $233 million worth of West Fraser of shares under our normal course issuer bid at an average price.
Price of Canadian $90.85.
We also amended our NCI b in the second quarter, allowing us to acquire an additional $3.5 4 million shares for an aggregate authorization of 925.8 million shares.
We also remain pleased with the level of U S trading liquidity, we've seen for west.
West Fraser shares with the addition of the New York Stock Exchange listing.
Our U S trading volume, which accounted for less than 10 per cent of our total trading volume on U S. The Canadian exchanges in February.
Now regularly reaches 35 per cent of our daily total trading volume.
Given the strong Q2 results.
Eventual liquidity increased materially exiting the quarter with $3.3 9 billion of available liquidity.
Up from 2.55 billion last quarter.
The leverage was modest exiting the quarter with total debt of.
$500 million of net cash of $1.7 billion.
In combination.
With the early redemption of the nor board 2023, and 2027 notes.
We have now retired an aggregate $665 million of high yield nor board of debt, which will ultimately reduce annual interest cost by approximately $40 million and help rationalize our capital structure.
With that I'll turn the call back over to Ray for an update.
Our firewall kind of 2021 recent developments in capital allocation and on the Norbert integration.
Thanks, Chris in terms of our end markets, the low mortgage rates and the ongoing trend toward greater work from home continues to create strong incentives for people to purchase new single.
The family homes and undertake renovations in do it yourself projects.
The underlying housing formation deficit has continued to drive demand for single family homes, which consumes more would more of our wood building products than multifamily.
While we recognize 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 remain constructive and optimistic about market fundamentals.
That is underpinned.
By the environmental benefits of building with what which have never been more clear and.
More accepted.
However at the same time, it's important to recognize that wildfires and wildfire risks we're seeing in <unk>.
Western Canada as the result of extreme heat in dry conditions the pre.
Robinson of British Columbia has recently declared of provincial state of emergency and the wildfire.
The bars are affecting access to logging areas in some of our operating areas and are impacting transportation networks that we rely on to move our products.
This has resulted in temporary suspension of production due to raw material shortages evacuation orders the orders and difficulties as I discussed.
The about moving out of finished products by truck and rail.
In order to address the wildfire situation in Western Canada, its transportation challenges of log costs and availability.
Variable and short term demand and overall inventory levels, we may from time to time adjust our activity levels at our operations.
As previously done.
As a result, our production and shipments from the second half of 2021 may be impacted.
More importantly, keeping our employees and communities safe during these challenging times and focusing on servicing our customers needs remain our key priorities.
As we of quarters earnings call. We noted that the considerable cash accumulation, we were saying it was a relatively new trend now.
And then you could expect us to be thoughtful patient and balanced in our capital allocation strategy.
As you're also where we've taken a key step towards that commitment.
Mensing early this month.
Month with the substantial issuer bid, which we have offered to repurchase up to $1 billion Canadian of our common shares.
S. I b is by way of a modified Dutch auction with the tender price range of the 85 to $98 Canadian per share and is set to expire on August 17th 2000.
On line.
We look forward to sharing with you the results of this SIV tender process when those results become available.
In terms of the nor board integration and as noted previously our continued our team continues to work rapidly worked through synergies and how to make our company even better.
The level of engagement and the building of momentum remains impressive and high.
Now I'll only 5 to 6 months into it I remain confident that we are on track to achieve our targeted annual synergies of $61 million over the next 12 months to 18 months.
Safety.
He remains a key priority for the company, we know we can eliminate serious incidents and injuries.
Despite driving overall injury rates and severity to continued new lows throughout the company.
We continue to see incidence that tell us we have much more work to do.
Our employees.
We need to do the heavy lifting and delivering strong safety and operational results all while dealing with the obstacles and challenges of still ongoing pandemic as well as the evolving risk of western Canadian wildfires.
The strength and resiliency of our employees.
His impressive.
It is this dedication and perseverance of the many people across the company I'm, most thankful for and proud of.
Finally.
I'd like to recognize Brian Boswell, our vice President of Canadian Wood products, Who's retiring from West Fraser after a long and distinguished career.
1 of them acknowledged Brian.
Can just significant contributions.
He has made the the company, while helping to advance west Fraser and being a key driver and leader of the West Fraser of company culture over the last 35 years.
We have 1 thing that we tell our people in the company is that our job is to is to leave it better than you found it.
Ryan from move the ball.
Brian has done that Brian you'll be missed thank you and congratulations as you move on to your next adventure.
With that we'll turn the call back to the operator for questions.
Okay.
Thank you, ladies and gentlemen, as a reminder, if you would like to.
To ask a question. Please press the star followed by the 1 on your Touchtone phone.
Your first question comes from Mark Wilde of BMO. Please go ahead.
Morning.
And good morning, Chris.
Good morning, Mark.
I first of all I wanted to start by congratulating you on the good quarter and I also want of you know again kind of acknowledged that we're getting a much more detailed slide deck from your each quarter end and I think better disclosure in the MD&A and I appreciate that.
1 of them right at the start out.
Just be curious on your thoughts about sort of the speed and magnitude of the lumber price correction, although we've seen it may be sort of any color on how that's flowing over into the export side of your business.
Well anyway, good morning America and look the thanks for that and look when it comes to the slide.
Dirk in the detail I'd love to take you know, but that's really a.
That's the Chris and Robert debt or that are you know.
Improving that net and we appreciate the feedback.
I'm going to kind of ask Chris Mckee ever to kind of maybe talk a little bit about of.
The question really around expertise.
Uh huh.
Good morning, Mark I'm, just just to kind of really you're speaking more on the lumber side than the OSB side or are you speaking generally about both actually about both the good okay sure sure. So.
Yeah, I mean, you know I think I'd be remiss, if I didn't say.
Day that we.
You know we are a bit surprised of how quickly the prices have come off but but that's you know that really is a reflection of how quickly. They went up. So we did expect the correction, we thought it might be a bit more muted and take a little bit more time or we're not.
Current market prices to the level of we've come to at this time in the short term because we actually fundamentally believe we went to line.
I think we're probably gone a little bit too low as well in the in the correction, but so.
So.
I think we're seeing a little more stability on the lumber side right now where you know where sales.
Those are picking up a bit OSB used a little bit behind them, you know that market hung in a bit better and quite frankly, we think the demand for panels is probably a little stronger at this time that is for for lumber. So you know we think it's got a bit more to go in and we're not seeing a lot of demand until we find some sort of bottom there, but we.
We believe we will end with regards to export.
It was very difficult to participate in export markets.
We are in this run up over the last year, they just couldnt keep up but saying that Japan actually got to levels of very similar to North America and the prices. There are still holding up we expect to see a bit of weakness there over.
Well, so that market looks pretty good.
China, we have we've reentered I'm not in a significant way, but we you know we're putting some more product over there are quite frankly, because some of the pricing is quite favorable. So we we never exited any of the export markets, we did reduce our volumes and.
And you know, we're picking those up a little bit now so.
Okay. That's helpful and then I wondered range.
If you can give us just some sense of.
How to where you would expect a b C fiber cost of moving as we go through the second half of the year and into.
Over the next day, the first ramp up next year.
Hum.
I know you've got some of this in your MD&A, but if you could just kind of walk us through each of those of US who are.
You know don't live this every day.
It's a fairly complicated.
Hum.
Adjustments that get made.
Overtime.
Well try to do that and it's I think it's pretty straightforward for the second half of this year I think you know it's it's publicly available that stumpage will rise on October the first you know.
Stumpage impacts can be different depending on the region that you're operating.
But you know there you know of did you.
You know, it's you know so everyone may see it somewhere of differently, but it's going to be a significant increase in you know somewhere in the $30 range of it but it could be more of less than that.
And so you know it's kind of have an impact so you've got 2 things that happened you know, we obviously purchase quote of logs, which.
Her directly tied with stumpage, and we but we purchase a lot of logs on the on the on the open market and you know the pricing of those 2 can be different. So you know it really comes down to how much purchase where do we go after how much quota wood that we bring in and and that's where it becomes a little bit more complicated and those.
And as conditions change Mark so it's very difficult to predict the other aspect of his policy and you know those things that you know despite whatever the economic part of it is is what's our ability to access the land base in certain areas in order to get the volumes that we require and so you know I think it's I think those are the things are.
Things are the well known in the industry, Mark and and but.
You know I would say you know our view is is that.
You know, it's it probably will be difficult. It was a difficult first half it'll probably be a difficult second half.
Okay, and finally do you have any sense right now.
But sort of where the cost position of the overall you see lumber and discrete is relative to kind of current market prices.
Probably the same as yours, Mark I, you know I think I think the cost of log song or pretty high for everyone and Oh I'm sorry.
So I mean.
We're pretty I think again I think everybody is different but.
I think we're all of the same area code and you know of.
We're you know we're probably in that are in that area code is what I'd say.
I can't give you any more direction of that.
Okay, Alright, and then I think it's actually 1 other question just.
Any sense from you.
Or maybe from Chris Mciver, but just where we stand in terms of the lumber inventories of both the mill level.
And the customer level and whether there's may be some variation maybe.
Maybe producers.
Who have been doing a lot of R&R or big box business versus you know people who are more tied to.
2 lots.
The new rents.
Just before I kind of get Chris to kind of maybe the way in there I'll just say 2 things 1.
It's important to remember that we run an integrated business from British Columbia.
So we run plywood M D F.
And of course, Oh of lumber.
NBC and of course, we of other integrated models of the company. So it's important to recognize that.
Many of our other businesses are holding up quite well and you know what you know I when I look at the M. D. N. A I you know I think it's important to note. When you look at the first half production and shipments pretty balanced.
Lumber I think people knew where we entered the year and I think it probably gives you a pretty good description of where we are currently so I'm gonna, but I'm going to let Chris kind of talk of answer that.
Yeah, Hi, Mark.
Yeah, I think I think you're asking the right question of is a story of 2 different markets right now DIY or R&R.
Has dropped off a lot and there's a few reasons for that I mean, I think people are doing different things in fixing the decks in houses right now so we've seen block store programs slowed tremendously.
And their inventories were relatively I, you know that business started slowing of couple of months ago.
And we think that you know it the.
Inventories are getting in better shape, and we expect by the fall of they'll be back you know of doing some buying.
Whereas the new housing is very busy there you know they don't have enough and they can't quite keep up and inventories for those who are of supply in that business. We think are relatively low so.
Overall, not in the bad position, but you know we need the R&R folks to come back.
Which we think they will in the fall so.
Okay. It sounds kind of I'll turn it over thank you. Thanks Mark.
Yeah.
Okay.
Your next question comes from the Hemisphere Pet channel.
<unk> of CIBC. Please go ahead.
Hi, good morning.
Ray the the non fiber cost inflation that the the the press release pointed to a 2 in the south of you know is that labor turnover or does that reflect a you know maybe some more permanent wage cost inflation.
To absorb this year.
Well good morning here, a good question and and.
At I would say the bulk of it would be non wage inflation.
Well, sorry actually the wage inflation is obviously a part of that.
However, when we invest in wages we.
We typically see the ER will be rewarded on outside of turnover actually is remains very similar to previous years. So that's really really not yet, but most of them where you're seeing cost pressure.
Outside of wages and really everything from transportation.
Patients are you know you know through the supply chain there was an impact so.
Okay. Thanks for and you know the press release pointed to some element of market downtime in the back half of June.
Anyway could you quantify how much that was and.
At least backward looking in July so far how much of you taken no. We haven't put a number on the mirroring what what I would say is it's not inconsistent with how we've.
Operated in the past, which is you know we're going to adjust our operations.
Based on the number of factors logs or 1 aspect.
Expect of it whether our inventory levels, and and and and market conditions. So so I mean I you know I think it's kind of just honestly, it's really a status quo, we're gonna have room to run our business.
To to meet those challenges and so but no I wouldn't put a number on it.
The great. Thanks, the range of sort of last question from me you know it seems like the weakness on the R&R side.
Largely is on the DIY component and the contractor side at least for other building products appears strong I'm. Just curious if you guys have any work about you know what percent of R&R I think the slide deck.
41% is R&R, but what portion of that is DIY.
Versus.
You know contractors.
No American Tech you know I'm sure there's somebody out there that does a pretty good job of breaking that down, but we really haven't dissected that I think I think the the mountain the important part is is.
<unk> showed.
You know, whether it's sticker shock or people ahead of the beach, a you know a temporary pullback you know of certainly but the the driver really around the single family houses I mean, everything else looks good the fundamentals remain strong DIY decks fences.
The the other things you know.
You know, we're pretty confident that are.
You know listen of growth had the slow a little bit from the spike that we saw in 2020, but but our everything that we see would indicate that our continued growth in R&R on a quarter.
The corridor basis, maybe not but but but over the next year or 2 absolutely.
Fair enough. Thanks, very much that's all I think of humor.
Your next question comes from Paul Quinn of.
B C capital markets. Please go ahead.
Yeah, Thanks, very much more of the Ray and that the 2 Christmas.
Good morning, Paul.
Hey, Yeah, Great results guys that are just just wonder why capex. This year is so back end weighted I mean, if I take a look at sort of the 5 year average of your you know it's slightly back end weighted sort of of 55 per.
The set in the back half of 45 in the front, but this year. It looks you know if I take the midpoint of your guide it's kind of a 30 per cent in the front of 70 per cent of the back why is that.
Well I'll, probably get myself in trouble, but here's what I would say is that look like.
We may have been pretty focused on completing a pretty major acquisition.
Of the completing a couple of we hadn't quite of bit of capital going on last year, as you're aware and probably a ray of probably said, let's just take a you know so you know really where we've been going gangbusters. So it's only a it's the only backend weighted just because that's the flow.
Uh huh.
Of what's happened and so but you know we you know it it's just the timing issue and maybe a bit of of unintended.
Unintended you know Oh, I don't want to say lack of focus because that would put a hanger.
I'm the problem, but yeah, 2 startups in the first half of major.
In addition, our foot is intended to be on the gas pedal, it's not unusual to see our capital program be a bit lumpy, it's not an even flow type of business.
Yeah.
Okay Fair enough and then your MD&A referenced are you of southern yellow pine logs increased cost I'm just wondering if that's of regional.
The 1 thing or are you seeing that broadly distributed across the U S up.
Well the answer is both so I would say generally most of our issues have been regional.
And whether it's weather or other environmental factors or you know just increased competition, but I'd say, it's mostly regional and in those.
Those areas. We've seen this from time to time to see those log costs come down as of as the weather impacts subside.
But there has been some cost inflation across most of the some of the regions.
Alright, that's all I had the best of luck.
Thank you Paul Thanks, Paul.
Okay.
Your next question comes from Sean Stewart of TD Securities. Please go ahead.
Yeah.
Thanks, Good morning, guys.
Okay, a couple of questions.
Chris for <unk>.
As.
Mark it's moderate here and we get a sense of where.
Start to normalize for the company from an earnings and cash flow perspective.
Do you have any updated thoughts on what an optimal capital structure looks like for the company.
I guess, the general senses, you want to keep.
Ongoing strong liquidity on the balance sheet, but are there any metrics.
Things you guys are focusing on over the long run is something you're targeting.
Yeah. Thanks, Sean I. Appreciate the question you know what I think of as the businesses are coming together and we sort of maybe get a bit of this volatility in the rearview mirror. We're looking at all of those things I think rightly as you indicate the investment grade rating we.
Think of as important to us as it enables us to weather tough times like we had in early 2020 in 2019, where the measure of where the measure of measure of confidence and you know what.
To do things like we did in 2019 to continue on with our capital program and maintain our dividend in early.
Tricks plenty when when things were tough. So you know I think what we're what we're looking at you know among those things as well you know we got 2 new startups, we got an ambitious capital program, we'd want to be able to return capital to shareholders. You know, but we got to be able to manage volatility when it occurs which can be unpredictable at times.
So you know I guess, what I would say as you know more of more to come on that here over the next probably several quarters as we as we kind of work through that and get you there.
A bit more in the rearview mirror of post acquisition and see things, but you.
You know I think the the guidance would be we're going to remain conservative.
Conservative imbalanced.
We're in a volatile industry, where cash flows can change materially in the short term and we don't want that to you know to put the company of risk in any way.
Thanks for that detail and then.
Sort of further to that question is.
Nor aboard the integrated in.
Thoughts can.
Turned back to potential M&A.
Yeah.
I think that the bias in the investment community is the assumptions that you know what the U S of saw mills and.
And maybe growth in Europe as well.
When stuff like cross laminated timber be of interest to you guys potentially there's.
Obviously, 1 significant bankruptcy, that's that's just happened there but.
More niche focused engineered wood products is that something that would potentially be of interest.
Well anyway, Sean Oh, I'll try and field that when I look at 1 thing I want to say as I you know I.
I think as we said.
As we went into the OSB and the integration of I mean are you know I really believe in it and I think we're seeing that are weak.
We feel we've built more capacity in the company to take on our projects and opportunities.
You know and and I think our.
Gesture is going very well. So you know, it's just fundamentally in our in our DNA. It really comes down to you know what makes the company stronger and better and then the and so it's it's hard to say no to anything I think we're going to look at anything and everything that we think enhances value for our shareholders I think of.
You know the primary targets of the ones that you mentioned.
You know our you know the the OSB a team I think are you know we have you know.
The engineered wood portfolio is quite strong now I think that gives us the opportunity to.
Uh huh.
And and think about growing in other areas. So I wouldn't take anything off the list. It's interesting to us our primary focus today would be a we've been the big supporters of the softwood lumber board and and the support of C. L T and the growing of that market, we continue to do that and.
And and and and support the direction of C. L. T. I I'd say today, our primary of focus is to make sure that we are the C. L. T guys continue to grow and hopefully we can sell lumber and other products to them and and but other engineered wood products like C. L. T or are things of interest that will will explore over time.
Laura Thanks for the detailed range, that's all I have thanks, guys. Thanks, Sean.
Your next question comes from Mark Wilde.
M O capital markets. Please go ahead.
All right I'd like to just come back on some capacity issues.
The first of all of you.
You mentioned in the MD&A that the.
Ramp up of Dudley.
He was likely a multi year process and that's just like where you've already got it like a train of Labor Force can you just help us from thinking about how long you would expect a ramp up of a new facility. The typically take and what the curve might look like.
Well no a great question, Mark and I and you know we've got a fair amount of experience of of a major capital and startups. So you know they're not all of the same you know we think it's an inherent advantage to start with a base of a oh.
The long term loyal employees are certainly can be done in greenfield as well.
But you know typically we're thinking that you know to get to close to capacity, where it's a 2 year project.
And you know I would say our recent startups I had been better than our you know I think we believe we're.
As I read this but it takes a tremendous amount of energy people and and the focus but I. Just it's just I would say 2 years and it's really you.
No I'm you know there are always engineering issues to work through as you add 2 of that or Mrs and and end of retraining and a lot.
A lot of new technology that does take people time to to kind of get up the speed and to work the kinks out of 2 years.
Okay and then the other thing on the sawmill side of I noticed this announcement, just a week or 2 ago of of 400 million board foot sawmill in North Carolina, which.
There's a bunch.
The larger than.
Any of the other projects I've seen announced over the last few years.
Do you have any perspective on this is this a sign that maybe sort of the whole step up in scale for our southern sawmill. As you know is likely to take a big leg up here or would there be something that could be.
The particular to that situation because typically there may be 250 to 300 million board feet seems to be what people are building. This 1 as you know probably half again as large.
Yeah, No I don't think I can speculate on that look I mean, I think if you look across North America, there's small mills that can be.
Extremely profitable in the large mills that can be extremely profitable I think it's specific to that location or a drain or opportunity.
Perhaps around timber supplies.
And so I think each situation is unique.
Let the average sort of middle size speak for itself, but I think look we've.
We've got small mills that that have great margins and we've got larger mills that.
I have great margins and everything in between so I think it's I think it's 1 of my personal opinion would be it should you build the mill that you think is appropriate for that location and that's what we do I can't speculate how they came with their decision but.
Leave that.
Got it.
Okay, the lessening of on supplies in.
In the slide deck. This morning, you've got something kind of showing the ability.
The ability to always be industry kind of tapping out at about a million of half starts on the existing supply base from our west Fraser standpoint, if you.
You worried as you get deeper and deeper into OSB. If you were thinking about adding further capacity beyond the restart of share them Board.
The thoughts about how you would do that I mean would you.
Could you debottleneck or add second lines of existing mill or would you want to think about sort of an entirely new mill and the new location.
So you know hard to.
Say no to either of those the Mark. So you know I think if you look of what we've done including what was announced in December and what we announced I think back in June about a de bottlenecking capacity and value round of you know we've invested continue.
To invest in OSB.
We think we have more projects to bring forward like that I think our capital allocation history is pretty straightforward you know, we we like to reinvest in what we have and make it better and then look for those opportunities too.
To expand our.
And those areas, so say aye.
I'd say the you know both of those of beyond the table, but you know first it's going to be how do we make what we have better and again, if you look of what we've kind of commit.
Committed to since the December it's not insignificant.
Okay sounds good legs for a good luck in the third quarter. Thanks.
Thanks Mark.
There are no further questions at this time I will turn the conference back over to Mr. Ferris. Please go ahead.
Well look thanks, everyone for joining the call. This morning. Thank you Michele as always Chris RASK and I are available to respond to further questions as is Robert Winslow.
So our director of Investor Relations corporate development.
The book stays safe and we'll look forward to reporting out on the next on our progress of the next quarter. Thanks, everyone.
Ladies and gentlemen, this concludes your conference call for today, we thank you for participating and ask that you. Please disconnect.
Have a great day.
Okay.
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Your line.
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Okay.
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So from that.
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