Q3 2021 West Fraser Timber Co Ltd Earnings Call
Good morning, ladies and gentlemen, and welcome to the West Fraser Q3, 2021 results conference call.
During this conference call West Fraser's Representatives will be making certain statements about potential future developments. These forward looking statements include certain statements about <unk> 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 products and available supply and expectations concerning costs.
Softwood lumber dispute, including adjustments to duty rates and related proceedings.
The integration of Norbert into the West Fraser business and expected synergies and recent developments, including the impact of wildfires. The recently announced acquisitions of the Lufkin, Texas Asswipe lumber mill, and the Allendale, South Carolina, OSB mill, and West Fraser's plans to restart the Allenby OSB mill.
These statements include forward looking statements within the meaning of Canadian and United States Securities laws and are intended to provide reasonable guidance to investors.
The accuracy of these statements depends on a number of assumptions and is subject to various risks and uncertainties that may cause future events to differ materially from the events 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 discussion and analysis supplemented by other risks and uncertainties as set out in the company's quarterly MD&A.
These filings can be accessed on west Fraser's website or through SEDAR for Canadian investors and Edgar for United States investors 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 one on your telephone keypad. If you would like to withdraw your question. Please press star followed by two.
Thank you I will now turn it over to Chris <unk> you May begin your conference.
Thank you Chris Good morning, everyone and thanks for joining our Q3 2021 earnings call today.
Chris <unk> CFO and I'm joined today in fact in our Vancouver office by Ray Ferris West Fraser's, President and CEO, Chris Mckeever, Senior Vice President marketing and corporate development and several members of our executive team.
This morning, I'll start with a brief recap of our Q3 financial results and then I'll pass the call to Ray who will provide an update on the business, including a discussion about some of west Fraser's recent activity.
The opportunities we see ahead for the company.
Followed by a few concluding remarks before we transition to Q&A.
In the third quarter, we experienced a significant product price reduction from levels in the first half of the year across lumber OSB and plywood.
In addition to softer demand in the third quarter, we face several other challenges, including a very active wildfire season, NBC, which affected our ability to access the land base and to ship our products.
Transportation availability constraints and raw material and other input cost price input price challenges.
We had three separate shutdowns in our pulp business, including an unscheduled outage at our caribou mill at an extended annual shot at Hinton pulp.
Higher power costs in the summer also negatively affected the pulp mill.
We also face disruptions from a log yard fire at our Chetwin BC lumber mill.
Throughout the period, we adjusted the pace of our operations across our business to respond to these challenges this.
This resulted in a lower level of shipments that we experienced in the first half of the year.
Despite these headwinds in our core markets the benefits of our product and geographic diversity of production, where a significant advantage in the quarter.
We had continued strong results in our AWP business.
Both in North America, and in Europe, where we reported a record quarter.
We're able to touch on this performance more in his comments.
Our MDF ldls in plywood businesses that are part of our fiber integration strategy in Western Canada, all performed well.
While our financial results declined from the pace of the first half.
Still recorded adjusted EBITDA of $786 million in the third quarter, which represents a margin of 33% of sales.
The majority of the change in adjusted EBITDA from the prior quarter is attributable to price with the volume reductions playing a small part.
Cost headwinds also moderating the results.
Cash flow from operations was $914 million and after repurchasing Canadian $1 billion of shares in our substantial issuer bid and continuing to execute on our normal course issuer bid.
Our cash balance net of debt declined only modestly to $1 6 billion.
With the recent announcements of the two acquisition transactions, we continue to play capital not only to shareholder returns, but also to attractive growth opportunities.
In November we expect the AAR to rates relating to the softwood lumber dispute to be finalized.
The new cash deposit rates for countervailing and antidumping duties for the Canadian softwood lumber industry.
We expect our rate for cash deposits to change from 897% to 11 three 8%.
Whereas the rate for all other non mandatory respondents in Canada will be $18 three 2%.
These rates will be in place until at least August of 2022.
With that financial overview, I'll now pass the call to Ray.
Thank you Chris and.
Thanks to everyone for joining our call today.
I will be referring to a few specific slides in our deck during comments today.
As Chris has noted despite quite.
Quite challenging operating conditions in several regions I'm pleased to report that the third quarter 2021 was another strong quarter for West Fraser.
As our team remained resilient and agile working diligently to minimize COVID-19 related business disruptions.
In particular, our BC interior caribou lumber and plywood operations were the most heavily impacted in the quarter due to wildfire activity.
It is important to note that these operations are highly integrated and that we often extract both apply would log of the saw log from the same tree.
I'm proud of the agility of RBC team to manage the integrated wood.
Lie within lumber and MDF products business in a responsible manner.
And overall profitable.
Challenging times.
On February one of 2021, we acquired nor board and although we are just nine months removed. It is very exciting to see the benefits of the product and geographic diversity that acquisition has brought to us Frazier.
And although there are several areas that I could highlight I thought it would just pick a few.
So first product diversity.
Our OSB team experienced market and operational challenges as well in Q3. Despite these hurdles our results were strong driven in part by our continued growth in our specialty OSB business.
So as you can see on slide three.
Specialty business, which comprises sales of our OSB products into industrial and export markets has continued to expand.
And now accounts for approximately 30% of our North American shipments up from approximately 23% five years ago.
Looking at the numbers, you'll see that this ongoing and strategic shift to.
Specialty has reduced our relative exposure to commodity OSB by about 450 million square feet over that timeframe.
This interestingly approximates to one roughly one small scale OSB mill.
I think it's important to note that this growth, particularly in the last 12 months has been against the backdrop of record high commodity prices.
Our specialty industrial specialty and industrial team has continued to grow these markets and look for new opportunities.
We like the specialty business.
Which typically experiences less bulk less pricing volatility more stable margins and volumes that are commodity OSB business through the cycle and we expect to continue to grow this business and similar businesses.
Another area that I would like to highlight is geographic diversity.
So moving to slide four in Europe.
As Chris noted in Q3, it was a record quarter for our European AWP operations.
Where are we generated $90 million of adjusted EBITDA more than doubling our previous best quarter for that business.
It's two reflects the benefits of geographic diversification of our company today as our customer demand in Europe is typically delinked from North American markets.
We see continued demand growth for west Fraser's Wood based panel products in Europe with the opportunity for our domestically produced panels to continue to gain share over imported plywood.
In order to meet that demand growth, we expect to continue to ramp production and shipments from our phase two investment at our Inverness mill in Scotland.
Over that over the coming periods.
Our Europe business is well managed and executing at a high level and we are encouraged about potential future opportunities.
I want to now talk about some of our other activities during the period spin.
Specifically two transactions in our building products business that occurred subsequent to the period.
That being the acquisitions of the lumber mill at the end of our currently idled OSB mill.
Our optimism about the future of wood products demand is supported by a robust balance sheet and has allowed us to continue to allocate capital towards attractive M&A growth opportunities.
So on slide five.
Ill start with and the Angelina Forest products lumber mill, which is located near Lufkin, Texas.
We are very excited about this opportunity and are confident we will be able to obtain the necessary regulatory approvals required to close the transaction.
Although the headline price of approximately $300 million or 276. After tax attributes is a very healthy price to pay for this mill as it is we are quite pleased with the outcome.
Simply we expect this mill to be one of the company's lowest cost lumber mills when ramped up.
We see significant strategic value in the Angelina mill as a modern turnkey operation located in a low cost and abundant fiber basket near growing markets in the U S South.
We expect the mill to contribute to cash flows immediately after the deal closing shaving considerable time from what one would expect required to achieve similar.
Strong cash flows for similar Greenfield project.
We typically and still do take quite a conservative view in our analysis when calculating returns and our R. R.
Saying that given our views on North American lumber supply and demand. We believe this acquisition is not not only has strategic long term value for west Fraser has largely derisked as a greenfield alternatives.
Moving to slide six.
Moving to our announced acquisition of Georgia, Pacific's OSB Mill near Allendale, South Carolina Silver.
Similar in many ways to the Angelina Mill acquisition, we are excited about the opportunity to close on the Allendale nil.
After we received the necessary regulatory approvals.
Like Angelina Allendale as close to a low cost abundant fiber and to growing end markets.
We estimate that we'll have to spend another $70 million to update and optimize the mill and preparation for restart, but what that investment is complete we anticipate allendale will be well positioned as the lowest cost OSB mills and it was one of the lowest cost OSB mills and in the company's portfolio.
Further as for Angelina and based on current market demand, we expect to be able to achieve.
<unk> production and cash flows much sooner for allendale than we would if we were to build a greenfield mill, which.
Which we estimate requires at least three years to get to that first panels and would require significantly more capital investment and would expose us to greater construction and execution risks.
Next I want to touch just briefly on our wood products and and sustainability.
I'm happy to share that we recently released our 2020 sustainability report.
And that over the summer at West Fraser Planet is 2 billion dollar tree is part of our reforestation program.
We believe a thoughtful ESG strategy as our foundation for building a company that has financial resilience for the long term.
Key to establishing the goals these goals must be a clear credible action plan and well defined metrics as part of an ongoing commitment to the environment and the sustainability of the communities in which we operate.
The wood products industry is a natural fit and the circular economy and will contribute to the collective goal of supporting carbon sequestration and global climate change.
Forest Wood and wood products have an important and vital role to play in the fight against climate change.
And as the world demands more sustainable and renewable building materials. So do we believe that new products and users of wood products will grow.
Further to that point and on slide eight I thought I would highlight in the area that has been experiencing growth in North America.
And just to caution first we're not planning on moving into mass timber production or <unk> at this time at West Fraser, but I thought it's important to kind of acknowledge the growth, but we are eager to supply.
Those needs and to meet those needs.
So according to the softwood lumber board in 2018, there were 74 of mass timber projects in North America. Just three short years later in 2021 that number has risen to more than 240 through the end of September.
Reflecting impressive early growth.
Further the softwood lumber board expects meaningful longer term future growth for mass timber with potential to add incremental lumber demand.
Somewhere between three to 6 billion board feet.
This represents the equivalent demand of approximately 300000 to nearly 600000 new housing starts.
Time will tell.
It's early days, but we are optimistic and believe this type of medium to longer term demand dynamic is in addition to conventional housing and repair and remodel demand.
And stands to provide important tailwind for the North American wood products industry for years to come.
In summary.
We are pleased with our results this quarter, despite a number of market and operational changes.
After repurchasing $1 billion Canadian worth of our shares and our substantial issuer bid and a further 100 U S million through our normal course issuer bid, we exited the quarter with strong liquidity.
We have continued to move forward with strategic capital projects will also pursuing acquisitive growth.
Providing even more resilience and durability to meet the needs of our customers and whatever the market challenges come next.
Looking forward, we expect a less eventful fourth quarter and we believe and we believe we are seeing the early signs of demand recovery. After a soft third quarter and we remain optimistic on the longer term fundamentals of the wood products space generally we.
We will continue to focus on operational excellence.
Operationalized, the benefits of strategic capital and executing on current growth projects at Dudley Shambolic, Inverness, while looking to close on the Angelina and Allendale acquisitions.
And we will continue.
To provide enhanced ESG disclosures as we look to defy our refined.
A credible and thoughtful ESG strategy that fuses are our aspirational goals with believable plans.
And we will take the time to get that right.
Finally.
I'd like to recognize or recognize Peter Weinberger, our president of engineered wood products that he will be retiring from west Frazier at the end of this year after a long and distinguished career.
Having joined what was then called around a four sales and 1987. Peter has spent his entire career in the OSB and wood products business and helped nor board helped build nor board into the world's largest OSB company.
Peter let Norbert is as CEO since 2014 before joining west Frazier earlier this year.
Frankly, the success built by Peter and his OSB team was a key aspect of what led west Fraser to acquire the company earlier this year.
I'm.
Thankful and glad that Peter made the choice to join our company and help guide and support a smooth and successful integration into West Frazier.
It has gone better and faster than what we would've expected.
And Peter's leadership and involvement has been key to us.
Behalf of the company and myself personally.
I want to thank Peter for taking this on and helping us with the integration of Norbert into West Fraser.
His knowledge and passion for the business will be missed.
Later this year, we will be allocating peers roles and responsibilities within the organization and until that time, Peter will continue in his current role.
I have great confidence that our team.
Is.
Able to meet the challenge.
Going for it.
With that I will turn the call back to the operator for questions.
Thank you ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press star followed by one on your Touchtone phone, you'll hear three teleprompter acknowledging your request and your questions will be pulled in the order they are received.
Should you wish to decline from the polling process. Please press star followed by two.
You are using a speaker phone please lift the handset before pressing any keys.
Your first question comes from Mark Wilde BMO Mark. Please go ahead.
Thanks, Good morning, Ray Good morning, Chris.
Hey, Mark.
To start I Wonder Ray could you just give us a little perspective on the rally that we've seen in the wood products markets over the last.
Eight weeks.
Have your thoughts on where you see us going through the balance of the year.
Okay.
Well good morning America and.
Perspective, that's a good one so.
I'm going to ask Chris waited on that but I.
Go ahead, Chris.
Good morning, Mark.
Hi, Chris Yes.
Just.
There's a few things housing.
Slowed down.
Sort of in the second quarter late second quarter early third quarter.
But the really big change for us.
R&R and DIY.
And we've really seen both of those sectors come back very strongly as prices come back often both OSB and lumber.
And housing is still struggling a little bit I think with supply chain issues, but the underlying demand is there. So I think it's a combination of all of those.
I think the big Big factor for the drop in pricing, which by the way we fully expect at some time was that it was really the R&R and DIY not as much.
Family housing.
Hi, Bob.
Does it come back people.
Kind of re engaged.
Hum.
Pretty good rally into a spot where we think of that.
For the next little while we will see some sort of seasonal slowdown.
Next in the next month or two but.
And all of those sectors, we see the demand.
Future demand is pretty strong.
Okay. That's helpful.
The second question I had is.
For as long as I've dealt with west Fraser over many years.
The thing you've always talked about is the importance of being vertically integrated out in Western Canada, and I'm just curious whether your experience in the southern U S.
And in Europe, where youre not vertically integrated.
His is leading you to kind of rethink the strategy in Western Canada at all.
Well, thanks, Mark and.
You know.
Well I think we've said before I mean, it was we look.
Particularly in the U S, where I think there's a <unk>.
Some very significant differences between our western Canadian operations is that.
You know the <unk>.
Need to be vertically integrated in the U S South.
Europe.
There is frankly, a lot more markets and opportunities for chips residuals and those types of things and so when you think about it.
How the company started and how it's grown and how we were very much of BCE Western Canada centric.
With less.
You needed to control or be involved.
And have those outlets, it's less important in these other these other areas or regions or markets. So it hasnt been being key to our strategy and.
And and.
So as going forward I mean, you know our Canadian business remains to be integrated and and.
Yes.
We like that platform.
But in the U S and Europe.
It's just not that important and it's not part of our focus on being vertically integrated in those other regions.
Okay, Alright, and then the last one is.
One for Chris we're all stuck I wondered Chris if you could just talk about the.
Input cost pressures youre seeing because of the third quarter number I mean $50 million not insignificant but.
Given what's going on in transportation, you know given sort of the some of the upheavals we've seen in areas like resin I might've actually expected that number.
Would have been a bit bigger so can you give us just some perspective on the third quarter and what you're expecting in the fourth quarter.
Sure, we'll try to give a bit more color on that I guess.
We operate in a number of different fiber baskets in the dynamics of how those fiber prices move as kind of different in each of those things and I think the other thing to remember is that in the case of the fiber procurement and in the regions that we operate in the north it's not a sort of linear procurement of fiber throughout.
A year or so.
As a big a big seasonal element.
Element to that so.
And a lot of those things are are linked to the commodity prices with with varying degrees of lag. So you know I think.
Where we're starting to see.
In some regions.
On the fiber cost some relief in other regions like D. C. It's going to be into the first quarter before we start to see that relief.
On the other on the other inputs like energy.
Transportation.
We have dealt with challenges there for for a while.
Just the order of magnitude of those transportation, it's been availability.
Has been has been a challenge there I think we're starting you know on power as we move into the winter, it's probably getting a little better.
But we got to manage through these things all the time right and.
Fiber being the biggest element we think.
Particularly in BC.
There's one more quarter before we turn the corner on RBC fiber is that's in the public domain in terms of the stumpage, but.
The others, we got a we got to work our way through that every every time.
Is it Chris is the energy issue over in Europe.
But big enough to cause any disruptions for you in the European operations.
It's been a cost pressure, it's not disrupted us are taking us off our kind of our operating.
I think recently they've started to ease.
But operationally no impact certainly an impact on cost.
But.
Hopefully that's an answer for it but it does look like things are easing somewhat but.
Energy prices are around the world are quite frankly.
You know.
An issue I think from a.
From a you know from a company point of view kind of how I think through that Mark is.
Oh, sometimes hard to predict you know.
What will happen, whether it's in China, or Europe, or Alberta, or U S. South on some of these types of things, but what I what.
What I do like is.
Is our diversity is that is that.
That platform and that portfolio will have allows us to kind of shift things around as needed to respond to the market and <unk> or mute the impact of those of those issues.
Yeah, Okay. That's helpful I'll turn it over thank you thanks Mark.
Thank you. Your next question comes from Sean Stewart TD Securities Shawn. Please go ahead.
Thanks, Good morning, guys.
If he's listening and congratulations to Peter on a on a really great run.
Couple of questions Europe was exceptional this quarter.
Very strong price momentum across your product portfolio there.
Can you give us a sense of how that trended into the fourth quarter. There was in the MD&A wording.
<unk>.
Strength continuing into Q4.
Should we read that as prices continuing to improve or leveling off it at really high levels, how should we think about the trajectory near term.
So good morning, Sean and so listen Peter sitting right here beside me so.
Thank you for that and with.
With respect to Europe and.
Things have softened a little bit in the fourth quarter, but you know.
I think thats.
Third quarter was exceptionally strong.
Maybe the markets have softened a little bit whether it's seasonal or other.
Leave that to others, but.
I think.
I think the message really is is that.
Our operations continue to strengthen there.
That we are well positioned to kind of execute on the opportunities that are there and.
No.
I think our view is is that.
No.
That is a strong business as we look forward to kind of into 2022.
We kind of expect that.
You know with reasonable markets to perform quite well.
And with the strength in Europe.
Has the M&A opportunity set there.
In light of how strong markets have been especially through the back part of this year.
I'm not sure I can answer that well, Sean I think.
I think any time, whether it's Europe or wherever you are I think strong pricing and good results.
Bringing stuff to the market so.
I can't say, whether it's changed or whether it's the same but I do think I.
I do think these are.
These sort of times do encourage probably more opportunities.
But im not sure Thats, a relative of change from quarter to quarter sort of thing.
Okay last question for me.
Allendale.
He was our impression that the current owner of the asset.
Part of the reason did to take.
The mill down was with labor issues in that region.
How do you guys assess the.
Labor availability in South Carolina, and does that inform the pace at which you expect to restart the asset any context on that issue.
So what I would say is that look I.
Where.
We're very excited.
This opportunity came up Tonight.
We think about.
The locate while a the quality of the asset notwithstanding theres. Some debottlenecking that we need to do and we're going to invest to Peter and his team are.
I think they've got their arms around that and we're confident on our plan.
You know the fiber basket proximity to markets.
You know.
Proximity to our other businesses those types of things.
We feel very strong about.
Labor markets are different difficult everywhere and so I you know.
Whether it's throughout the U S south.
Northern.
Canada. These are challenges I think.
<unk>.
What I'm most of you know I think we've talked about this the critical mass that we have and particularly in the U S South.
Thank you.
Our people.
Are well suited to kind of take on the challenge of overcoming a difficult labor market. So I think the same thats part of our our underlying strategy too.
Two.
Sure.
Quite frankly achieve our expectations and in the USA.
I wouldn't draw a circle around Allendale, I'd say say that that's a challenge that we have in every one of our operations and I think I think the team has done a very good job demonstrating that they are up to that challenge.
That's that's useful detail. Thanks, very much that's all I have.
Thank you, ladies and gentlemen, as a reminder, should you have a question. Please press star one on your Touchtone phone. Your next question comes from Paul Quinn RBC. Paul. Please go ahead.
Yeah, Thanks, very much morning, guys good.
Good morning, Paul.
Interesting quarter, you you did a lot lower in lumber than I anticipated, but a lot better in.
In OSB, but.
Just to start on the lumber side.
You were you were down like over 90% sequentially versus our competitors got a less favorable geographic footprint, while that was down in North America only 76% is there is there something that happened within your lumber operations in the quarter that.
That was a that was problematic.
Well that's a good that's a good question Paul and Anne.
And I'll try and address it here I'd say.
<unk>.
BC wildfires activity was heavily concentrated in the areas, which we operate and we were pretty significantly.
Significantly impacted.
And.
So.
We're saying that we did continue to ship at some of our operations, even though our saw mills were down but.
With a lot of our mills down and.
That increases costs significantly, even though we were still able to ship out of some of these regions and kind of bringing our inventories down the.
The other part of it is that.
I think if you recall the record high pricing that we saw on our lumber markets a few months ago.
You know when we think about and we think about what the stoppage that was being paid in Alberta, which was.
Very very high a lot of those costs were still.
In our Alberta operations, even though markets had dropped so theres a couple of things that they think that we think are very short term.
So we would expect as we go into Q4 and Q1 of next year that.
Shouldn't replicate but but it's a little bit of the lag in Alberta and.
Quite frankly.
The significant impact West Fraser saw in British Columbia around wildfires, and and what happened there.
Okay. That's.
That's really helpful. Maybe just discussing <unk>.
Acquisition I mean, it's an expensive acquisition on your Investor Day, you highlighted Dudley, which was this idea of building a new sawmill adjacent to existing and then it sounded like you had a runway of those opportunities what what why do you pick Angelina as opposed to a deadly like a do over.
It's not one or the other.
Both sides say.
No. We do have other projects like the Dudley project, where we're eager to continue on that path.
The opportunity for Angelina came up and and so.
We don't dictate when those things come available and but it's not one or the other it's really both and so.
And I think we should those similar opportunity come up in the next year, where you know we.
We do want to do another donlin.
Oh gosh, if there was another Angelina I hope we'd be there doing doing both of them again.
Okay, and then moving over to OSB I'd like to offer my congratulations to Peter for the making it to retirement and just maybe a question for them because the.
On the Allendale facility to 70 million you guys are spending there what what is the issue with that mill and you know everybody in the industry Wonder why it hasn't been brought up in the last number of years, but.
The majority of the $70 million is there a big bucket item that needs to be replaced or fixed.
In that.
Good morning, Paul.
Well I think this mill is.
Very solid press on finishing lines.
Forming pressing finishing.
It is our view overly complex feeding.
Feeding into that part of the process.
Show this 70 millions ours.
Really has two intentions one as you go through this mill has been idle for a number of years on a bunch of maintenance.
But more importantly, we would like to take the complexity out of the system. So that the mill is smart easily operated both.
So the worst.
And.
That also will help us recover earlier question around <unk>.
Great people to operate the mill.
<unk> tons.
Peter and Kevin have.
Convinced us and the rest of the team.
Convinces but in a world class back end and.
And I think Peter and the team have.
Very good idea of well not a very good idea and know exactly what we're going to do in order to kind of fix the front end and transform this mill so.
But it is front end versus back end.
Great. That's helpful. Thanks, guys best of luck.
Thank you thank.
Thank you. Your next question comes from Mark Wilde BMO Mark. Please go ahead.
Thanks.
Just toggling to your other acquisitions the Angelina.
Possibly get a sense of like why it would take three or four years to get a mill that's already been running for almost two years I would take that long to get it ramped up to full production.
Mark I'm agreeing with you I think that's too long.
And so I think you're bang on I think.
I would say that look weak.
Believe it or not we're pretty conservative in how we do analysis and kind of and how we how we look at it.
Some of this stuff and that's probably too conservative.
Our expectations would be do it much quicker than that but it's kind of.
To me, that's too long, but that's kind of how we looked at it when we were assessing the opportunity.
Okay. I wanted to also just talk a little bit about kind of southern fiber prices, which have been really really low for the last 12 or 14 years.
I am picking up some some stuff from large land managers, but we are starting to see some pockets of.
Bob.
Acceleration, maybe central Alabama, and some other places where there's a lot of new demand come into the market.
First I am curious are you seeing any of that and then secondly.
When you look at deals across the south lumber.
Have you been underwriting kind of not even close to kind of current log price levels going forward.
So just.
I need help on the second one here, but on the first one on <unk>.
Fiber prices.
Look yes, we've seen I don't know if it's different than years past, but but we've certainly seen pockets where there has been significant.
You know.
Short term.
<unk> price spikes.
It's much less about kind.
Kind of supply and demand, it's more about weather and its become more around contractors.
A number of contractors the amount of supply.
And when you have extreme weather events.
<unk>.
Which we saw in kind of that Florida, Georgia region for an extended period of time the industry can't respond with.
The logs are out there, but cannot can often have a difficult time responding to.
I'll get back to.
Inventory levels, so so, but I'd say, primarily driven by wet weather and then once weather returns.
Because the logs are there and.
Generally.
We typically see the prices come back, but there's no question, we're seeing pockets of issues, but weather and then and then.
The second part of it as constraints on an on suppliers contractors and labor.
On the on the second question Mark I think you know.
When we do these valuations, it's very specific to the regions and I think we have pretty good insights in the regions that we operate in the regions that we looked at around <unk>.
Long term fiber availability.
And security right and that's part of the calculus that we do it's I think as as both of you have framed it it's very region specific and we take those region specific considerations.
Into into consideration when we're looking at whether it's M&A or whether it's organic capital.
Region specific fiber availability that's.
<unk> was part of the calculus.
Okay Alright.
Last one for me just a possible to get an update.
The on the ramp up of Gymboree.
Okay.
Sure So mark.
I think we're well.
We're ahead of our startup schedule.
And.
Peter May want to jump in here, but we've been certified across pretty much all of our key products and thicknesses and.
From a from an HPA point of view.
But.
But we're on track or ahead of track of what what our forecast was yeah. So it's proceeding well and I'm not sure. That's a great answer to your question but.
The startup has gone well to this point.
Okay, well, let me just add my congratulations to the other folks to the theater.
It's really been a great thing to see it kind of the transformation.
Nor board over the last several years and then the.
Combination with West Fraser.
Thank you.
Thank you.
There are no further questions at this time. Please proceed.
Well look thank you everyone for joining us today, and we look forward to talking to you are in a in the fourth quarter.
Thanks, everyone.
Thank you ladies and gentlemen. This concludes your conference call for today, we thank you for participating and ask that you. Please disconnect your lines.