Q2 2024 Western Forest Products Inc Earnings Call
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Operator: All participants, thank you for standing by. The conference is ready to begin. Good morning, ladies and gentlemen.
Speaker Change: All participants, thank you for standing by. The conference is ready to begin. Good morning ladies and gentlemen. Welcome to Weston Forest Products second quarter 2024 Resolved Conference Call.
Operator: Welcome to Western Forest Products' second quarter 2024 Resolve conference call. During this conference call, Western's representative may make forward-looking statements within the meaning of applicable securities laws. These statements can be identified by words like anticipate, plan, estimate, will, and other references to future periods. Although these forward-looking statements reflect management's reasonable beliefs, expectations, and assumptions, they are subject to inherent uncertainties, and actual results may differ materially. There are many factors that could cause actual outcomes to be different, including those factors described under risks and uncertainties in the company's annual MDNA, which can be accessed on CDAR and is supplemented by the company's quarterly MDNA.
Operator: Good morning, ladies and gentlemen. Welcome to Western Forest Products, Second Quarter, 2024 Resolved Conference Call.
Operator: During this conference call, Western's representatives may make forward-looking statements within the meaning of applicable securities laws. These statements can be identified by awards like an anticipate, plan, estimate, will and other references to future periods. Although these forward-looking statements reflect management's reasonable beliefs, expectations, and assumptions, they are subject to inherent uncertainties, and actual results may differ materially.
During this conference call, Western's representative may make forward-looking statements within the meaning of applicable securities laws.
These statements can be identified by words like anticipate, plan, estimate, will, and other references to future periods.
Although these forward-looking statements reflect management's reasonable beliefs, expectations and assumptions, they are subject to inherent uncertainties and actual results may differ materially.
Operator: There are many factors that could cause actual outcomes to be different, including those factors described under risks and uncertainties in the company's annual MD&A, which can be accessed on SEDAR and is supplemented by the company's quarterly MD&A.
There are many factors that could cause...
actual outcomes to be different, including those factors described under risks and uncertainties in the company's annual MD&A, which can be accessed on CDAR and is supplemented by the company's quarterly MD&A.
Operator: Forward-looking statements are based only on information currently available to Western and speak only as of the date on which they are made. Except as required by the law, Western undertakes no obligation to update forward-looking statements. Accordingly, listeners should exercise caution in relying upon forward-looking statements.
Operator: Forward-looking statements are based only on information currently available to Western and speak only as of the date on which they are made. Except as required by law, Western undertakes no obligation to update forward-looking statements. Accordingly, listeners should exercise caution in relying upon such statements. I would now like to turn the meeting over to Mr. Stephen Hofer, President and CEO of Western Forest Products. Mr. Hofer, please go ahead.
Forward-looking statements are based only on information currently available to Western and speak only as of the date on which they are made. Except as required by law, Western undertakes no obligation to update forward-looking statements.
Accordingly, listeners should exercise caution in relying upon foreclicking statements.
Patrick: I would not like to start a meeting over to Mr. Stephen Hofer, President and CEO of Western Forest Products. Mr. Hofer, please go ahead.
Speaker Change: I would now like to turn the meeting over to Mr. Stephen Hofer, President and CEO of Western Forest Products. Mr. Hofer, please go ahead.
Stephen Hofer: Thank you, Patrick, and good morning, everyone. I would like to welcome you to Western Forest Products' 2024 second quarter conference call. Joining me on the call today are Glen Nontell, our new Chief Financial Officer; Steve Williams, our Executive Vice President; and Bruce Alexander, our Senior Vice President of Sales, Marketing, and Manufacturing. We issued our 2024 second quarter results yesterday, which included the announcement that Glen Nontell will be our next CFO. In deciding who should fill the role of CFO, we look both internally and externally.
Stephen Hofer: Thank you, Patrick, and good morning, everyone.
Stephen Hofer: I would like to welcome you to Western Forest Products, 2024, Second Quarter conference call. Joining me on the call today, Glenn Nantel, our new Chief Financial Officer. Steve Williams, our Executive Vice President, and Bruce Alexander, our Senior Vice President, Sales Marketing and Manufacturing.
Stephen Hofer: We wanted someone with the right mix of leadership, industry experience, and technical skills to help navigate near-term macroeconomic conditions and advance our strategic priorities. Glen's financial acumen, forward thinking, and laser focus on execution made him a clear choice from a number of strong candidates and speaks to the strength of the internal talent at Western. Steve Williams will remain in the role of Executive Vice President until his previously communicated retirement date of December 31st, 2024.
Stephen Hofer: Thank you, Patrick, and good morning, everyone.
Stephen Hofer: I would like to welcome you to Western Forest Products' 2024 second quarter conference call.
Speaker Change: Joining me on the call today, Glenn Nontel, our new Chief Financial Officer.
Speaker Change: Steve Williams, our Executive Vice President, and Bruce Alexander, our Senior Vice President, Sales, Marketing, and Manufacturing.
Stephen Hofer: We issued our 2024 second quarter results yesterday, which included the announcement that Glenn Nantel will be our next CFO. In deciding who should fill the role of CFO, we looked both internally and externally. We wanted someone with the right mix of leadership, industry experience, and technical skills to help navigate through near-term macroeconomic conditions and advance our strategic priorities. Glenn's financial acumen, forward-thinking, and laser focus on execution made him a clear choice from a number of strong candidates and speaks to the strength of the internal talent at Western.
Speaker Change: We issued our 2024 second quarter results yesterday, which included the announcement that Glen Montel will be our next CFO.
Speaker Change: In deciding who should fill the role of CFO, we looked both internally and externally. We wanted someone with the right mix of leadership,
industry experience, and technical skills to help navigate through near-term macroeconomic conditions and advance our strategic priorities.
Speaker Change: Glenn's financial acumen, forward-thinking, and laser focus on execution made him a clear choice from a number of strong candidates and speaks to the strength of the internal talent at Western.
Stephen Hofer: Steve Williams will remain in the role of Executive Vice President until his previously communicated retirement date of December 31, 2024. We look forward to benefiting from Steve's advice and judgment as he moves to the advisory role they're after.
Steve Williams will remain in the role of Executive Vice President until his previously communicated retirement date of December 31st, 2024.
Speaker Change: We look forward to benefiting from Steve's advice and judgment as he moves to an advisory role thereafter.
Stephen Hofer: Turning to our second quarter financial results. We successfully navigated through more challenging market conditions to return our business to positive EBIDA in the second quarter, generating $9.4 million. This was this was the result of a huge effort across all of our operating divisions and driven by a focused effort on execution and safety. In Timberlands, despite facing ongoing harvesting permitting delays, we continue to improve the stratification of our specialty log sorts, log sorts, such as pole and pure logs, to support incremental margin. Manufacturing our continued focus on operational uptime and reliability supported improved results despite tight log supply at certain facilities.
Stephen Hofer: We look forward to benefiting from Steve's advice and judgment as he moves to an advisory role thereafter. Now, turning to our second quarter financial results. We successfully navigated through more challenging market conditions to return our business to positive EBITDA in the second quarter, generating $9.4 million. This was the result of a huge effort across all of our operating divisions and driven by a focused effort on execution and safety. In Timberlands, despite facing ongoing harvesting permit delays, we continue to improve the stratification of our specialty log sorts, such as pole and peeler logs, to support incremental margins. In manufacturing, our continued focus on operational uptime and reliability supported improved results despite tight log supply at certain facilities. Sales and Marketing
Speaker Change: Turning to our second quarter financial results.
Speaker Change: We successfully navigated through more challenging market conditions to return our business to positive EBITDA in the second quarter, generating $9.4 million.
Speaker Change: This was this was the result of a huge effort across all of our operating divisions and driven by a focused effort on execution and safety.
Speaker Change: In Timberlands, despite facing ongoing harvesting permitting delays, we continue to improve the stratification of our specialty log sorts such as pole and peeler logs to support incremental margin.
Stephen Hofer: In manufacturing, our continued focus on operational uptime and reliability supported improved results despite tight log supply at certain facilities.
Stephen Hofer: In sales and marketing, we continue to make progress growing key strategic accounts while developing value-added products and programs targeted with the end user in mind. In engineered wood products, we delivered another quarter of positive EBIDA despite labor labor and lamb stock availability challenges. In addition, we remain focused on accelerating our transition to higher value products. Our new Saltair account dried 14.5 million board feet of lumber in the second quarter and is achieving our uptime production and value performance targets. We also continue to advance pre-engineering and permitting related to our two previously announced continuous killings. Each kill will have a capacity of approximately 70 million boardpeed and are expected to be completed in 2025.
Stephen Hofer: We continue to make progress growing key strategic accounts while developing value-added products and programs targeted with the end user in mind. In Engineered Wood Products, we delivered another quarter of positive EBITDA despite labor and lamb stock availability challenges. In addition, we remain focused on accelerating our transition to higher-value products. Our new salt air kiln dried 14.5 million board feet of lumber in the second quarter and is achieving our uptime, production, and value performance targets.
In sales and marketing, we continue to make progress growing key strategic accounts while developing value-added products and programs targeted with the end user in mind.
Speaker Change: In engineered wood products we delivered another quarter of positive EBITDA despite labor and lamb stock availability challenges.
Speaker Change: In addition, we remain focused on accelerating our transition to higher value products.
Our new salt air kiln dried 14.5 million board feet of lumber in the second quarter and is achieving our uptime, production, and value performance targets.
Stephen Hofer: We also continue to advance pre-engineering and permitting related to our two previously announced continuous kilns. Each film will have a capacity of approximately 70 million board feet and is expected to be completed in 2025. The continued focus on safety and maintaining a strong balance sheet while advancing our key strategic priorities remains our key focus in the near term. I will now turn it over to Glen to review our key financial results.
Speaker Change: We also continue to advance pre-engineering and permitting related to our two previously announced continuous kilns.
Speaker Change: Each kiln will have a capacity of approximately 70 million board feet and are expected to be completed in 2025.
Stephen Hofer: We continue to focus on safety and maintaining a strong balance sheet while advancing our key strategic priorities. Remains our key focus in the near term.
Stephen Hofer: The continued focus on safety and maintaining a strong balance sheet while advancing our key strategic priorities remains our key focus in the near term.
Glenn Nantel: I will now turn it over to Glenn to review our key financial results. Thanks, Steven. Second quarter of just EBIDA was $9.4 million, as compared to negative $12 million in the same period last year. As compared to the prior year, results in the second quarter benefited from higher lumber shipments, higher domestic log prices and a stronger log sales mix, and lower stumpage and freight expenses. This was partially offset by a slightly weaker lumber specialty sales mix and higher timberlands and secondary processing costs. We closed the second quarter with approximately 75 million board feet of lumber inventory and 777,000 cubic meters of log inventory.
Speaker Change: I will now turn it over to Glenn to review our key financial results.
Glen Nontell: Thanks Stephen. Second quarter adjusted EBITDA was $9.4 million, as compared to negative $12 million in the same period last year. As compared to the prior year, results in the second quarter benefited from higher lumber shipment, higher domestic log prices and a stronger log sales mix and lower stumpage and freight expense. This was partially offset by a slightly weaker lumber specialty sales mix and higher timberland and secondary processing costs.
Glenn Nontel: Thanks, Stephen. Second quarter adjusted EBITDA was $9.4 million, as compared to negative $12 million in the same period last year.
Glenn Nontel: As compared to the prior year, results in the second quarter benefited from higher lumber shipments,
Glenn Nontel: higher domestic log prices and a stronger log sales mix, and lower stumpage and freight expenses. This was partially offset by a slightly weaker lumber specialty sales mix and higher timberlands and secondary processing costs.
Glen Nontell: We closed the second quarter with approximately 75 million board feet of lumber inventory and 777,000 cubic meters of log inventory. Turning to CapEx and cash flow, our revised 2024 total CapEx spending is now expected to be approximately $40 million. This reflects the expectation that the majority of the $35 million related to two new continuous kilns will be incurred in 2025. After the end of the second quarter, we received our income tax refund of approximately $23 million, which was utilized to reduce debt.
Speaker Change: We closed the second quarter with approximately 75 million board feet of lumber inventory and 777,000 cubic meters of log inventory.
Glenn Nantel: Turning to CAPEX in cashflow, our revised 2024 total CAPEX spending is now expected to be approximately $40 million. This reflects the expectation that the majority of the $35 million related to two new continuous killings will be incurred in 2025. After the end of the second quarter, we received our income tax refund of approximately $23 million, which was utilized to reduce debt. From a balance sheet perspective, we ended the second quarter with liquidity of approximately $142 million and a net debt to cap ratio of 30%.
Speaker Change: Turning to CapEx and cash flow, our revised 2024 total CapEx spending is now expected to be approximately 40 million dollars.
Speaker Change: This reflects the expectation that the majority of the 35 million dollars related to two new continuous kilns will be incurred in 2025.
Speaker Change: After the end of the second quarter, we received our income tax refund of approximately $23 million, which was utilized to reduce debt.
Glen Nontell: From a balance sheet perspective, we ended the second quarter with liquidity of approximately $142 million and a net debt to equity ratio of 13%. Last week, we amended and extended our credit facility to July 2026. At the end of June, we had approximately $236 million in duties on deposit, which equates to approximately $0.54 per share after tax.
Glenn Nantel: Last week, we amended and extended our credit facility to July 2026. At the end of June, we had approximately $236 million in duties on deposit, which equate to approximately $0.54 per share after tax.
Speaker Change: At the end of June, we had approximately $236 million in duties on deposit, which equates to approximately $0.54 per share after tax.
Glenn Nantel: Turning to third quarter seasonality, typical third quarter can be challenging operationally, as hot, dry weather can restrict logging activity, reduce harvest volumes, and impact cost. While we have yet to experience any significant force fires in our area of operation, hotter and drier conditions combined with harvest permit delays may impact harvest volumes through the summer. We will continue to manage our manufacturing operating schedules to match production to market demand and available loss supply.
Glen Nontell: Turning to third quarter seasonality, typical third quarters can be challenging operationally as hot, dry weather can restrict logging activity, reduce harvest volumes, and Impact Cost. While we have yet to experience any significant forest fires in our area of operation, hotter and drier conditions combined with harvest permit delays may impact harvest volumes through the summer. We will continue to manage our manufacturing operating schedules to match production to market demand and available log supply. Stephen, that concludes my remarks. Thanks.
Speaker Change: We will continue to manage our manufacturing operating schedules to match production to market demand and available log supply. Stephen, that concludes my remarks. Thanks, Glenn. Turning to our market outlook. Cedar demand and prices for timber and premium appearance products are expected to remain stable.
Glenn Nantel: Stephen, that concludes my remarks. Thanks one.
Stephen Hofer: Turning to our market outlook, cedar demand and prices for timber and premium appearance products are expected to remain stable, while demand and prices for cedar decking have firmed up. While cedar trim products are expected to remain soft for the balance of the year, in Japan, weakness in wooden home starts, well-stocked inventories, and the weaker Japanese yen to the U.S. dollar exchange rate are anticipated to impact lumber demand and prices in the near term.
Stephen Hofer: Turning to our market outlook. Seater demand and prices for timber and premium appearance products are expected to remain stable. Demand and price for cedar decking have firmed up, while cedar trim products are expected to remain stocked for the bounce of the year.
Stephen Hofer: Demand and price for cedar decking have firmed up, while cedar trim products are expected to remain soft for the balance of the year.
Stephen Hofer: In Japan, weakness in wooden home starts, well-stocked inventories, and a weaker Japanese yen to the US dollar exchange rates. Our anticipated impact lumber demand and prices in the near term. Demand for our industrial products have generally expected to remain stable. For commodity lumber, North American demand and prices are expected to remain volatile. While in China, near term, lumber demand and prices are expected to be seasonally weaker. Overall, we currently have a third quarter order file of approximately 108 million board feet.
Stephen Hofer: Demand for our industrial products is generally expected to remain stable. However, commodity lumber, North American demand, and prices are expected to remain volatile, while in China, near-term lumber demand and prices are expected to be seasonally weak. Overall, we currently have a third quarter order file of approximately 108 million board fees. Looking ahead, we remain focused on building a profitable quarter while executing on our strategic priorities and maintaining a strong balance sheet. With that, operator, we can open the call up to questions.
Stephen Hofer: Demand for our industrial products is generally expected to remain stable.
Stephen: For commodity lumber, North American demand and prices are expected to remain volatile, while in China, near-term lumber demand and prices are expected to be seasonally weaker.
Stephen Hofer: Looking ahead, we remain focused on building our profitable quarter while executing on our strategic priorities and maintaining a strong balance sheet.
Operator: Without operator, we can open the call up to questions. Thank you. We'll now take questions from the telephone lines. If you have a question, please press star one on your device's keypad. You may answer your question at any time by pressing star two. Please press star one at this time. If you have a question, it will be a brief pause while the participants register for questions. Thank you for your patience.
Operator: Thank you. We'll now take questions from the telephone lines. If you have a question, please press star 1 on your device's keypad. You may answer your question at any time by pressing star 2. Please press star 1 at this time if you have a question. There will be a brief pause while the participants register for questions. Thank you for your patience. This question is from Ben Isaacson from Scotiabank. Please go ahead.
Ben Isaacson: This question is from Ben Isaacson from Scotia Bank. Please go ahead.
Stephen: The first question is from Ben Isaacson from Scotiabank. Please go ahead.
Ben Isaacson: Good morning, everyone, and thank you for taking my call. First, congratulations on seeing, or very good to see, the positive EBITDA this quarter. My first question is for Glen. Congratulations on the appointment to CFO. Can you talk a little bit about your vision for the role and any kind of wholesale changes that you want to make?
Ben Isaacson: Good morning, everyone. And thank you for taking my call. A first conglots to see or very good to see the positive EBITDA this quarter.
Ben Isaacson: Good morning everyone and thank you for taking my call. First, congrats to see or very good to see the positive.
Ben Isaacson: My first question is for Glenn. Congrats on the appointment to CFO. Can you talk a little bit about your vision for the role and any kind of wholesale time. Any wholesale changes that you want to make.
Ben Isaacson: EBITDA this quarter. My first question is for Glen. Congrats on the appointment to CFO. Can you talk a little bit about your vision for the role and any wholesale changes that you want to make?
Glenn Nantel: Thank you.
Glen Nontell: Thanks, Ben. I appreciate the comment.
Glenn Nantel: Thanks, Ben. I appreciate the comment. You know, I think what I'd say is, you know, from a strategy perspective, we have a very well-defined strategy. And none of that is changing for the company. Very high focus around, you know, operational execution, focus on our First Nation partnerships, continually growing the business, you know, when the balance sheet warrants. So there's definitely no change from a strategy perspective.
Glen: Thank you. All right.
Glen Nontell: Thanks Ben, I appreciate the comment. You know I think what I'd say is...
Glen Nontell: You know, I think what I'd say is... From a strategy perspective, we have a very well-defined strategy, and none of that is changing for the company. Very high focus on, you know, operational execution, focus on our First Nation partnerships, and continually growing the business when the balance sheet warrants it. So, there's definitely no change from a, you know, strategy perspective. You know, I think what I hope to bring to the role, and, you know, I know that I'm only one person in this broader organization that is important to the success of the business, but, you know, in my current or prior roles, and in my prior roles that I was at before Western, there was a very high degree of execution and expediting execution. So, you know, what I hope to bring to this is continued execution on our strategic priorities but bringing sort of a faster cadence of getting on with some of the priorities that we've set.
Glen Nontell: You know from a strategy perspective we have a very well-defined strategy and none of that is changing for the company very high focus around You know operational execution
Glen Nontell: Focus on our First Nation partnerships.
Speaker Change: continually growing the business, you know, when the balance sheet warrants.
Speaker Change: So there's definitely no change from a strategy perspective.
Glenn Nantel: You know, I think what I hope to bring to the role. And, you know, I know that I'm only one person in this broad organization that is important to the success of the business. But, you know, in my current, my prior rules and my prior rules that have been at before Western, there's been a very high degree on execution and expediting execution. So, you know, what I hope to bring to this is, you know, continued executing on our strategic priorities, but bringing sort of a faster cadence of getting on with some of the priorities that we set.
Ben Isaacson: That's great. And then, just as a follow-up question, can you guys just talk a little bit about where you are in terms of the overall capacity utilization rate and how we should think about that rate through the back path of 24 and into 25? Thank you.
Ben Isaacson: That's great.
Ben Isaacson: And then, just as a follow-up question, can you guys just talk a little bit about where you are in terms of the overall capacity utilization rate? And how should we think about that rate through the back half of 24 and into 25? Thank you.
Stephen Hofer: Yeah, I can maybe comment on that, Ben. You know, currently what we're doing is being very disciplined in matching our operating rates relative to demand across all of our global markets. And that's overlaid against overall log supply. As you know, we have kind of three categories of fiber: you know, small diameter chip and saw, kind of the medium size gang log, and then the large diameter head rig log. And so each of those sorts of different challenges when it comes to cutting permits and a couple locks, but we'll be pretty disciplined, just like we've shown over the last year and a half around making sure that, you know, our inventory levels are in balance overall.
Unknown Executive: Yeah, I can maybe comment on that, Ben. You know, currently, what we're doing is being very disciplined in matching our operating rates relative to demand across all of our global markets. And that's overlaid against overall log supply. As you know, we have kind of three categories of fiber: small diameter chip and saw, the medium size gang log, and then the large diameter head rig log. And so each of those sorts has different challenges when it comes to cutting permits and cut blocks, but we'll be pretty steady for a year and a half around making sure that our inventory levels are in balance, overall a match of capacity relative to lumber demand. So don't expect much material change here for the balance of the year relative to what we've been focused on for the first half. That makes sense. Thank you.
Speaker Change: I can maybe comment on that, Ben. You know, currently what we're doing is being very disciplined in matching our operating rates relative to demand.
Ben Isaacson: That makes sense. Thank you very much.
Ben Isaacson: across all of our global markets and that's overlaid against overall log supply. As you know we have kind of three categories of fiber
Ben: small diameter chip and saw, the medium size gang log, and then the large diameter head rig log.
Speaker Change: And so each of those sorts have different challenges when it comes to cutting permits and cut blocks, but we'll be pretty disciplined, just like we've shown over the last
Ben Isaacson: making sure that, you know, our inventory levels are in balance overall.
Stephen Hofer: Match of capacity relative to lumber demand, so don't expect much material change here for the balance of the year relative to what we've been focused on for the first half.
Ben Isaacson: a match of capacity relative to lumber demand. So, don't expect much material change here for the balance of the year relative to what we've been focused on for the first half.
Ben Isaacson: That makes sense.
Ben Isaacson: Thank you very much. Thanks, Ben.
Speaker Change: That makes sense. Thank you very much.
Operator: Thank you.
Operator: Thank you. The next question is from Sean Steuart. Please go ahead.
Sean Stewart: Next question from Sean Stewart, please go ahead. Thanks for morning, everyone. One follow-on question from Ben. It seems like a big part of the success story in the second quarter was you guys were able to draw down your finish good inventories by quite a bit.
Ben Isaacson: Thanks, Ben.
Speaker Change: Thank you. The next question is from Sean Stewart. Please go ahead.
Sean Steuart: Thanks. Good morning, everyone.
Sean Steuart: Thanks. Good morning, everyone. One follow-on question from Ben. It seems like a big part of the success story in the second quarter was you guys were able to draw down your finished good inventories by quite a bit.
Sean Steuart: One follow-on question from Ben: It seems like a big part of the success story in the second quarter was that you guys were able to draw down your finished goods inventories by quite a bit. And that's been the trend for most of the past couple of years, I guess, in terms of gauging the sustainability of this momentum. Can you comment on further room to lower finished good inventories at this point? Are you tapped out on that?
Sean Stewart: And that's been the trend for most of the past couple of years, I guess in terms of gauging sustainability of this momentum can comment on further room to lower finish good inventories at this point where you tapped out on that front.
Sean Steuart: And that's been the trend for most of the past couple of years. I guess in terms of gauging sustainability of this momentum, can you comment on further room to lower finished good inventories at this point? Or are you tapped out on that front?
Stephen Hofer: Well, Sean, thanks for the question. You know, our focus is really around ensuring that we have an order file that matches production. So, you know, I come from a bit of a background of everything that you make every day you want to sell every day, and you kind of have 30 to 45 days' worth of inventory at the max. And so we've had some challenges historically on overall because of the lack of kiln dried capacity, having to take a lot of our volume outside that needs to be kiln dried and, by definition, that provides a bit more complexity as well as having to hold a bit higher levels of inventory.
Glen Nontell: Well, Sean, thanks for the question. You know, our focus is really around ensuring that we have an order file that matches production. So, you know, I come from a bit of a background where everything that you make every day, you want to sell every day, and, you know, kind of have 30 to, you know, 45 days' worth of inventory at the max. And so we've had some challenges historically overall because of the lack of kiln-dried capacity, having to take a lot of our volume outside that needs to be kiln-dried. And by definition, that provides a bit more complexity as well as having to hold a bit higher levels of inventory.
Speaker Change: Well, Sean, thanks for the question. You know, our focus is really around ensuring that we have an order file that matches production. So, you know, I come from a bit of a background of
Speaker Change: Everything that you make every day, you want to sell every day. And you kind of have 30 to 45 days worth of inventory at the max.
Glen Nontell: And so, you know, we've had some challenges historically on overall because of the lack of kiln-dried capacity.
Glen Nontell: having to take a lot of our volume outside that needs to be kiln-dried and by definition that provides a bit more complexity as well as having to hold a bit higher levels of inventory.
Glen Nontell: But our focus is really to continue to draw that down, and we have some pretty aggressive targets here in Q3 that we continue to be focused on. So we're not done yet.
Stephen Hofer: But, you know, our focus is really to continue to draw that down and, you know, we have some pretty aggressive targets here in Q through in Q three that we continue to be focused on.
Speaker Change: But you know our focus is really to continue to draw that down and you know we have some pretty aggressive targets here in in Q3 that we continue to be focused on so We're not done yet
Sean Stewart: So we're not done yet. Okay, that's good to hear.
Stephen Hofer: Okay, that's good to hear. Stephen, any comments you can give with respect to negotiations with the union towards a new contract? Sure, I'll make a few general comments.
Stephen Hofer: It's even any comment you can give with respect to negotiations with the union towards a new contract. Sure. I'll make a few general comments. We commence negotiations in April, and most continue today. The current agreement expired in mid-June, so the prior collective agreement continues to apply as negotiations continue. We're committed to delivering a fair and balanced agreement that recognizes our employees' contributions while also ensuring our long-term competitiveness as a company. USW members represent about 1,000 of our team members, as well as additional members within our Timberline contractors. There's ongoing discussions today, both on the manufacturing side and on the Timberline side, and I continue to be optimistic.
Stephen Hofer: That's good to hear. Stephen, any comments you can give with respect to negotiations with the union towards a new contract?
Stephen Hofer: We commenced negotiations in April, and those continue today. The current agreement expired in mid-June, so the prior collective agreement continues to apply as negotiations continue. We're, you know, committed to delivering a fair and balanced agreement that recognizes our employees' contributions while also ensuring our long-term competitiveness as a company. USW members represent about 1000 of our team members, as well as additional members within our Timberline contract.
Stephen Hofer: USW members represent about 1,000 of our team members as well as additional members within our timberline contractors.
Stephen Hofer: So there's ongoing discussions today, both on the manufacturing side and on the timberland side, and I continue to be optimistic. We've committed to these discussions, and they're being led by Jennifer, and so far, I think we're making good progress, and we'll keep everyone posted on those discussions. Thanks for that detail. One last one, Stephen.
Stephen Hofer: So there's ongoing discussions today, both on the manufacturing side and on the timberland side, and I continue to be optimistic. We've committed to...
Stephen Hofer: We've committed to these discussions, and they're being led by Jennifer, and so far I think we're making good progress, and we'll keep everyone posted on those discussions. Thanks for that detail.
these discussions and and they're being led by by Jennifer and you know so far I think we're we're making good progress and we'll keep everyone posted on those discussions.
Sean Stewart: One last one, Stephen, a bigger picture question. You guys are underperformed comps, both from a share price and valuation perspective in the last couple of years.
Sean Steuart: A bigger picture question, you guys have underperformed comps, both from a share price and valuation perspective, the last couple of years. You know, aside from the discretionary CapEx plan and restructuring initiatives, if you were the board, consider bigger picture strategic initiatives to narrow the valuation gap. How much of your headspace does that occupy really, I guess, is the question.
Stephen Hofer: Thanks for that detail. One last one, Stephen.
Speaker Change: Bigger picture question, you guys have underperformed comps both from a share price and valuation perspective the last couple of years.
Stephen Hofer: Aside from the discretionary CAPX plan and restructuring initiatives, if you were the board, consider bigger picture strategic initiatives to narrow the valuation gap. How much does that occupy your head space, really, I guess, with the question? Yeah, it's a significant component of what I focus on every day and the discussions that I have with our board. Our view is that we have a very clear, concise strategic plan. It has five key strategic priorities, and I think we've communicated those publicly in previous calls, and we can certainly do that directly with you, Sean, as well on a subsequent call.
Sean Steuart: Aside from the discretionary CapEx plan and restructuring initiatives, have you or the board considered bigger picture strategic initiatives to narrow the valuation gap?
Speaker Change: How much does that occupy of your headspace, really, I guess, is the question.
Stephen Hofer: Yeah, it's a significant component of what I focus on every day and the discussions that I have with our board. You know, our view is that we have a very clear, concise, strategic plan. It has five key strategic priorities, and I think we've communicated those publicly on previous calls. And we can certainly do that directly with you, Sean, on a subsequent call.
Stephen Hofer: Our view is that we have a very clear, concise strategic plan. It has five key strategic priorities, and I think we've communicated those publicly in previous calls, and we can certainly do that.
Stephen Hofer: But, you know, we remain optimistic about our ability to execute the strategic plan. And that involves, you know, getting our business that we currently have running better, from overall reliability and uptime. It involves, you know, monetization of some of the tenures, and we've shown that we can execute on those, and we're going to continue to focus on those areas. You know, we talked a bit about growth in the engineered wood business and we're making some Progress Organically with the Calvert acquisition. With the Calvert acquisition, we're very careful about what we're prepared to bite off, though, for tuck-in acquisitions relative to the balance sheet.
Stephen Hofer: directly with you, Sean, as well on a subsequent call.
Stephen Hofer: We remain optimistic around our ability to execute the strategic plan, and that involves getting our business that we currently have running better from overall reliability and uptime. It involves monetization of some of the tenures, and we've shown that we can execute on those, and we're going to continue to focus on those areas. We talked a bit about growth in the engineered wood business, and we're making some progress organically with the Calvert acquisition. We're very careful on what we're prepared to bite off, though, for tucking acquisitions, relative to the balance sheet. We have the new credit agreement that Steve and Glenn were successful in putting in place, and we just want to be mindful that, you know, that that's an important piece of our business is the overall integrity of that balance sheet.
Stephen Hofer: We remain optimistic around our ability to execute the strategic plan and that involves
Speaker Change: You know, getting our business that we currently have running better, you know, from a overall reliability and uptime. It involves, you know, monetization of...
Stephen Hofer: of some of the tenures and we've shown that we can execute on those and we're going to continue to focus on those areas. We talked a bit about growth in the engineered wood business and we're making some...
Stephen Hofer: We have the new credit agreement that Steve and Glen were successful in putting in place, and we just want to be mindful that, you know, that's an important piece of our business, the overall integrity of that balance sheet. So I'm, you know, I continue to be focused on those strategic priorities. And, you know, our team is very much focused on the operational execution piece of the business every day. That's what I would say about that. That's great. Thanks very much for those responses and congratulations, Glen.
Glen Nontell: progress organically with the Calvert
Stephen Hofer: with the Calvert acquisition.
Speaker Change: We're very careful on what we're prepared to bite off though for tuck-in acquisitions just relative to the
Stephen Hofer: The balance sheet, we have the new credit agreement that
Speaker Change: Steve and Glenn were successful in putting it in place and we just want to be mindful that
Stephen Hofer: That's an important piece of our business is the overall integrity of that balance sheet. I continue to be focused on those strategic priorities and our team is very much focused on the operational and execution piece of the business every day.
Stephen Hofer: So I'm, you know, I'm I continue to be focused on those strategic priorities, and, you know, our team is is very much focused on the operational execution piece of the business every day. So that's what I would say about that.
Sean Stewart: That's great.
Stephen Hofer: That's what I would say about that.
Sean Stewart: Thanks very much for those responses, and congrats, Glenn. Well, that's.
Speaker Change: That's great. Thanks very much for those responses and congrats, Glenn. Well-deserved.
Stephen Hofer: Thank you.
Glen Nontell: Thanks John
Matthew Mckellar: The next question from Matthew McKellar. Please go ahead.
Operator: The next question is from Matthew McKellar. Please go ahead.
Matthew Mckellar: Thank you.
Operator: The next question is from Matthew McKellar, please go ahead.
Matthew Mckellar: Hi, good morning. Thanks for taking my questions.
Matthew Mckellar: Hi, good morning. Thanks for taking my questions. You called out tight log supplies as a factor in Q2. And with that, I was wondering if you could provide just a bit more color on the warm weather and the impact on harvest levels you spoke about earlier in the call. Do you need to catch up to the balance of the quarter based on harvest volumes over the last couple of months to maintain production at the level you'd like, or are you more concerned about whether there's a risk factor as the summer progresses?
Matthew Mckellar: You called out tight long supplies, the fact you're in key to. And with that, as long as you could provide just a bit more color on that warm weather and the impact on harvest levels, you spoke to earlier in the call. If you need to catch up to the balance of the quarter based on harvest volumes of the last couple of months to maintain production, the level you'd like, or you're more calling out to whether there's a risk factors and some of the progresses. Thanks, Matt. Appreciate the question. I would say that, you know, when we look at our Q3 forecast, we will have an increase in our log volume in Q3 here.
Matthew Mckellar: Hi, good morning. Thanks for taking my questions. You called out tight log supplies as a factor in Q2.
Matthew Mckellar: And with that, I was wondering if you could provide just a bit more colour on the warm weather and the impact on harvest levels you spoke to earlier on the call. Do you need to catch up to the balance of the quarter based on harvest volumes over the last couple of months to maintain production at the level you'd like? Or are you more calling out whether there's a risk factor as the summer progresses?
Stephen Hofer: Thanks, Matt. I appreciate the question. I would say that... You know, when we look at our Q3 forecast, we will have an increase in our log volume in Q3. Here. You know, I'm not even though we ended the quarter at 770,000 cubic meters. I'm not overly concerned about that level.
Speaker Change: Thanks, Matt. I appreciate the question.
Stephen Hofer: I would say that
Stephen Hofer: When we look at our Q3 forecast, we will have an increase in our log volume in Q3 here.
Stephen Hofer: And you know, I'm not even though we're we ended the quarter at 770,000 cubic meters. You know, I'm not overly concerned about that level. I think our team is also showing to ourselves that, you know, the days of having, you know, 1.5 to 2 million cubic meters of log inventory are probably not needed. And you know, when you look at the operating platform, we have our ability to execute on the timber line inside very, very effectively. You know, I don't anticipate us going back to the era of, you know, million cubic meters of log inventory.
Stephen Hofer: You know, I'm not even though we're we ended the quarter at 770,000 cubic meters
Stephen Hofer: You know, I'm not overly concerned about that level.
Stephen Hofer: I think our team is also showing to ourselves that the days of having 1.5 to 2 million cubic meters of log inventory are probably not needed. When you look at the operating platform we have, our ability to execute on the timber line side very effectively, I don't anticipate us going back to the era of 1 million cubic meters of log inventory.
Stephen Hofer: I think our team is also showing to ourselves that
Stephen Hofer: The days of having 1.5 to 2 million cubic meters of log inventory are probably not needed.
Stephen Hofer: And, you know, when you look at the operating platform we have, our ability to execute on the timberland side very, very effectively, you know, I don't anticipate us going back to the era of, you know, a million cubic meters of log inventory. So...
Stephen Hofer: So, you know, is 777 a little light, maybe on a couple of sorts. But you can kind of see the results of the focus on timber lands with respect to stratification of different log sorts as well. You know, we're really focused on the margin opportunity on, you know, what what log sort should we do on every couple of lock that is going to generate the highest margin for Western and our new financial partners on some of the partnerships that we have in place. So, that's, that's what I would share as far as our bill forward log inventory strategy.
Matthew Mckellar: Maybe on a couple of sorts, but you can kind of see the results of the focus on timberland with respect to stratification of different log sorts as well. We're really focused on the margin opportunity. What log sort should we do on every cup block that is going to generate the highest margin for Western and our new financial partners on some of the partnerships that we have in place? So that's what I would do. And I'd share as far as our go forward log inventory strategy.
Matthew Mckellar: You know, is 777 a little light? Maybe on a couple of sorts.
Speaker Change: But you can kind of see the results of the focus on timberlands with respect to stratification of different log sorts as well.
Matthew Mckellar: We're really focused on the margin opportunity, on what log sort should we do on every cup block that is going to generate the highest margin for Western and our new financial partners on some of the partnerships that we have in place.
Matthew Mckellar: So, that's what I would share as far as our Go Forward Log Inventory Strategy.
Matthew Mckellar: Okay, thanks. Thanks very much.
Stephen Hofer: Okay, thanks. Thanks very much. Next, recognizing the apportionment hasn't been completed yet, do you expect any impact on your business from a recent reduction to AAC in the North Island timber supply area, and how should we think about the range of outcomes here?
Stephen Hofer: Next, recognizing the apportionment has been completed yet. Do you expect any impact your business from a recent reduction to AC and the North Island timber supply area, and how should we think about the range of outcomes here? Yeah, I don't think you'll see any material change. You know, those numbers are really catching up to, you know, the current reality that we've been operating under for the last number of years. So, you won't see any material change in the actual volume that we're harvesting. Those are kind of indicative of what we've been facing.
Speaker Change: Okay, thanks very much. Next, recognizing the apportionment hasn't been completed yet, do you expect any impact to your business from a recent reduction to AAC in the North Island timber supply area and how should we think about the range of outcomes here?
Stephen Hofer: Yeah, I don't think you'll see any material change. Those numbers are really catching up to the current reality that we've been operating under for the last number of years. So you won't see any material change in the actual bullion that we're harvesting. Those are kind of indicative of what we've been faced with.
Stephen Hofer: Yeah, I don't think you'll see any material change. Those numbers are really catching up to the current reality that we've been operating under for the last number of years.
Speaker Change: So, you won't see any material change in the actual bullion that we're harvesting. Those are kind of indicative of what we've been faced with.
Matthew Mckellar: Okay, thanks very much.
Matthew Mckellar: Thanks very much. And just one last clarifying question on that. Well, really, to follow up on Sean's question about the union. Are you able to arrive at a resolution with USW Union as a company independently, or do you need a broader resolution that includes more of the coastal forest products industry?
Matthew Mckellar: And just one last clarifying question. I'm not really to follow up on Sean's question around the union.
Matthew Mckellar: Okay, thanks very much and just one last clarifying question on what really the follow-up on Sean's question around the Union
Stephen Hofer: Are you able to arrive at a resolution with the USW union as a company independently, or do you need a broader resolution that includes more of the coastal forest products industry? No, this is a specific negotiation between Western and the USW. Thanks very much.
Matthew Mckellar: Are you able to arrive at a resolution with USW Union as a company independently, or do you need a broader resolution that includes more of the coastal forest products industry?
Stephen Hofer: No, this is a specific negotiation between Western and the USW.
Speaker Change: No, this is a specific negotiation between Western and the USW.
Matthew Mckellar: Great, thanks very much. I'll turn it back.
Matthew Mckellar: I'll turn it back. Thank you.
Matthew Mckellar: Great. Thanks very much. I'll turn it back.
Operator: Thank you, the owner, for the questions. At this time, I would like to turn the meeting back over to Mr. Holford.
Stephen Hofer: They all know for the questions that this time I would like to turn them in back over to Mr. Holfer. Okay, well, thanks everyone for joining our call today. We appreciate your interest in our company and look forward to our next call in November. Thank you.
Speaker Change: Thank you, the owner, for the questions. At this time I would like to turn the meeting back over to Mr. Hofer.
Stephen Hofer: Okay, well, thanks everyone for joining our call today. We appreciate it.
Operator: The conference has now ended. Please disconnect your lines at this time, and thank you for your part.