Q4 2024 Canfor Corp Canfor Pulp Products Inc Earnings Call

Yeah.

in all: Good morning, My name is in our in all of your conference operator today.

Ina: My name is Ina, and I will be your conference operator today.

Operator: Welcome to Canfor and Canfor Pulse's 4th Quarter Analyst Call. All lines have been placed on mute to prevent any background noise.

Speaker Change: Welcome to account for it and kind of football's fourth quarter analyst call.

in all: I mean based on mute to prevent any background noise.

Operator: During this call, Canfor and CanforPulse Chief Financial Officer will be referring to a slide presentation that is available in the Investor Relations section of the company's website.

in all: During this call Canfor and Canfor pulp Chief financial Officer will be referring to slide presentation that is available in the Investor Relations section of the company's website.

Operator: Also, the companies would like to point out that this call will include forward-looking statements, so please refer to the press releases for the associated risks of such statements.

in all: Also the companies would like to point out that this call will be include forward looking statements. So please refer to the press release says for the associated risks of such statements.

Susan Yurkovich: I would now like to turn the meeting over to Ms. Susan Yurkovich, Canfor Corporation's President and Chief Executive Officer. Please go ahead, Ms. Yurkovich. Thanks very much, operator. And good morning, everyone. Thanks for joining the Canfor and Canfor Pulp Q4 2024 results conference call.

in all: I would now like to turn the meeting over to MS. Susan Yurkovich.

in all: Corporations, President and Chief Executive Officer. Please go ahead Mr. Kovich.

Speaker Change: Thanks, very much operator, and good morning, everyone. Thanks for joining the Canfor and Canfor pulp Q4, 'twenty 'twenty four results conference call.

Susan Yurkovich: I'm going to make a few comments to start before I turn things over to Stephen Mackey, Canfor's Chief Operating Officer and Canfor Pulp CEO, and Pat Elliott, Chief Financial Officer of Canfor Corporation and Canfor Pulp.

I'm going to make a few comments are just start before I turn things over to Stephen Mackie can't first cheap operating and operating officer, and Canfor pulp CEO and Todd Elliott Chief Financial Officer of Canfor Corporation and kept for pulp. In addition, today, we're joined by Kevin Pankratz, Our senior Vice President of sales and marketing.

Susan Yurkovich: In addition, today, we're joined by Kevin Pankratz, our Senior Vice President of Sales and Marketing. While 2024 was an extremely challenging year, we did successfully execute several strategic priorities that, combined with our efforts over the last few years, have transformed the structure of our business and will help us navigate the waters ahead. As you'll know, we made some difficult but necessary decisions to close several high-cost assets in British Columbia, given the challenges accessing economically viable fibre in the province. In addition, we rationalized two high-cost mills in the U.S. South, replacing them with low-cost capacity following the completion of our second green-filled sawmill in Alabama and a major brownfield investment in Arkansas during the year.

Speaker Change: Future Priorities that, combined with our efforts over the last few years, have transformed the structure of our business and will help us navigate the waters ahead.

Speaker Change: and you'll know we made some difficult but necessary decisions to close several high-cost assets in the British Columbia given the challenges accessing economically viable fiber in the province.

Speaker Change: In addition, we rationalized two high-cost meals in the US South, replacing them with low-cost capacity, following the completion of our second Greenfield sawmill in Alabama and a major brown field investment in Arkansas during the year.

Susan Yurkovich: While it's going to take some time to ramp up these assets, we've already started to see the benefit of these investments in 2025 and are entering the year with an improved operating cost base, strong balance sheet, and enhanced geographic diversification with approximately 70% of our lumber business located outside of Canada. While 2025 will bring its own set of challenges largely associated with elevated duties and the implementation of tariffs, we have made changes to our operating platform and sales strategy to mitigate as much as possible the impacts of the ongoing trade disputes with only 20% of our sales duties or tariffs.

Speaker Change: Well, it's going to take some time to ramp up these assets.

Speaker Change: where we've already started to see the benefit of these investments in 2025 and are entering the year with an improved operating cost-based, strong balance sheet and enhanced geographic diversification with approximately 70% of our lumber business located outside of Canada.

Speaker Change: While 2025 will bring its own set of challenges largely associated with elevated duties and the implementation of tariffs, we have made changes to our operating platform and sales strategy to mitigate as much as possible the impacts of the ongoing trade disputes.

with only 20% of our sales agencies or tariffs.

Susan Yurkovich: While global lumber demand remains tepid, lumber prices have steadily increased over the last several months, which has supported improved profitability in our business, particularly in Western Canada. In the short term, we anticipate continued volatility and market uncertainty with both the threat and implementation of tariffs, but are positioned to manage this volatility and are supported by our strong balance sheet. Looking ahead, we continue to believe the mid- to longer-term lumber demand fundamentals remain strong and we're well positioned to capitalize on improved market dynamics going forward. As well, notwithstanding current market uncertainty, our balance sheet strength allows us to continue to evaluate strategic growth opportunities should the right opportunity present itself, although we will continue to be patient and disciplined in terms of the allocation of capital.

Speaker Change: One global number demand remains, Teffit, lumber prices have steadily increased over the last several months, which has supported improved profitability in our business, particularly in Western Canada.

Speaker Change: In the short term, we anticipate continued volatility and market uncertainty with both the threat and implementation of tariffs, but our position to manage this volatility and are supported by our strong balance sheet.

Speaker Change: Looking ahead, we continue to believe the mid to longer term lumber demand fundamentals remain strong, and we're well positioned to capitalize on improved market dynamics going forward.

Speaker Change: As well, notwithstanding current market uncertainty, our balance sheet strength allows us to continue to evaluate strategic growth opportunities should the right opportunity present itself, although we will continue to be patient and disciplined in terms of the allocation of capital.

Susan Yurkovich: This includes a more modest CapTex plan in 2025, aligned with our significantly improved asset base, and we also expect to opportunistically repurchase shares throughout the year under our normal course issuer bid.

Speaker Change: This includes the more modest CAPTICS plan in 2025 aligned with our significantly improved asset base, and we also expect to opportunistically repurchase shares throughout the year under our normal course issue or been. [inaudible]

Stephen Mackey: And now I'd like to turn it over to Stephen Mackey to provide an overview of the Canfor plan. Thank you, Susan, and good morning, everyone. Canfor Pulp generated solid financial results in the fourth quarter, largely supported by stable global pulp markets and strong performance in our paper business. Following the successful transition to a smaller operating footprint in recent months, our focus remains on optimizing the economically available fiber supply and improving our cost structure. While we have stabilized our operations and currently have adequate chip inventories, there remains uncertainty with respect to fiber supply in 2025 due to elevated softwood lumber duties and the potential for additional tariffs.

Thank you, Susan, and good morning everyone.

Stephen Mackey: Canfor pulp generated solid financial results in the fourth quarter, largely supported by stable global pulp markets and strong performance in our paper business. Following the successful transition to a smaller operating footprint in recent months, our focus remains on optimizing the economically available fiber supply and improving our cost structure.

Stephen Mackey: Well, we have stabilized our operations and currently have adequate chip inventories that remains uncertainty with respect to fiber supply in 2025 due to elevated softwood lumber duties and the potential for additional tariffs.

Stephen Mackey: Notwithstanding the ongoing uncertainty associated with the fiber supply, Canfor Pulp is currently benefiting from a weak Canadian dollar and is well positioned to minimize the impact of tariffs in the short term given our unique high-strength fiber characteristics, specialty product focus, and market diversification. As an organization, we will remain focused on operational excellence as we closely manage factors within our control.

Stephen Mackey: and also standing the ongoing uncertainty associated with the fiber supply. Canfor pulp is currently benefiting from weak Canadian dollar and is well positioned to minimize the impact of tariffs in the short term given our unique high-strength fiber characteristics, specialty product focus and market diversification.

Stephen Mackey: As an organization, we will remain focused on operational excellence as we closely manage factors within our control.

Stephen Mackey: I would like to thank our dedicated employees for their resilience as we restructured the pulp business through 2024 and their ongoing commitment as we navigate the challenges facing us in 2025.

Stephen Mackey: I would like to thank our dedicated employees for their resilience as we restructured the pulp business through 2024 and their ongoing commitment as we navigate the challenges facing us in 2025. I will now turn it over to Pat to provide an overview of our financial results.

Pat Elliott: I will now turn it over to Pat to provide an overview of our financial results. Thanks Stephen, good morning everyone. In my comments this morning I'll speak to our fourth quarter financial highlights, a summary of which is included in our overview slide presentation located in the investor relations section of Canfor's website. Our lumber business generated an adjusted EBITDA of $22 million in the quarter, $64 million from the third quarter. These results reflect the benefit of increased lumber prices in North America, continued steady earnings in Europe, and modest improvements to our cost structure.

Pat: Thanks, Stephen. Good morning, everyone. In my comments this morning, I'll speak to our fourth-quarter financial highlights, a summary of which is included in our overview slide presentation located in the Investor Relations section of Canfor's website.

Pat: Our lumber business generated an adjusted EBITDA of $22 million in the quarter, $64 million from the third quarter. These results reflect the benefit of increased lumber prices in North America, continued steady earnings in Europe , and modest improvements to our cost structure.

Pat Elliott: Looking ahead to 2025, we anticipate further improvements to our underlying cost structure following the closure of several high-cost assets in North America and the ramp-up of low-cost capacity in the U.S.

Pat: Looking ahead to 2025, we anticipate further improvements to our underlying cost structure following the closure of several high-cost assets in North America and the ramp-up of low-cost capacity in the US South, as Susan has previously mentioned.

Pat Elliott: South, as Susan has previously mentioned. While our cash deposit rate will increase later this fall, as a company, we've been preparing for elevated duties for the last several years and have previously taken steps to reduce the impact on our business. In addition, we note the recently announced anti-dumping duty rate associated with the 6th Administrative Review was slightly below our internal estimate of 35%, with the impact already fully accrued in our 2023 results.

Pat: While our cash deposit rate will increase later this fall, as a company we've been preparing for elevated duties for the last several years and have previously taken steps to reduce the impact on our business.

Pat: In addition, we note the recently announced anti-dumping duty-rate associated with the sixth administrative review was slightly below our internal estimate of 35 percent with the impact already fully accrued in our 2023 results. As a result, we will expect to book a small recovery later in the year.

Pat Elliott: As a result, we will expect to book a small recovery later in the year.

Pat Elliott: Turning to our pulp business, Canfor Pulp generated adjusted EBITDA of $12 million in the fourth quarter, down $7 million from the prior quarter, largely reflecting a 22% reduction in shipments following the wind down of one production line at Northwood in August of last year. At the end of the fourth quarter, Canfor Pulp had net debt of $83 million and $71 million of available liquidity, while Canfor, excluding Canfor Pulp, and the duty loan ended the fourth quarter with net cash of approximately $115 million. On a consolidated basis, capital expenditures were approximately $137 million in the fourth quarter, including $6 million for Canfor Pulp.

Pat: Turning to our pulp business, Camphor pulp generated a just an EBITDA of $12 million in the fourth quarter, down $7 million from the prior quarter largely reflecting a 22% reduction in shipments following the wind down of one production line at Northwood in August of last year.

Pat: At the end of the fourth quarter, Canfor Pulp had net debt of $83 million and $71 million of available liquidity, while Canfor excluding Canfor Pulp and the duty loan ended the fourth quarter with that cash of approximately $115 million.

Pat: On a consolidate basis, capital expenditures were approximately $137 million in the fourth quarter, including $6 million for CAM4 pulp. Total capital spend in 2024 was $525 million, including $51 million for CAM4 pulp.

Pat Elliott: Total capital spend in 2024 was $525 million, including $51 million for Canfor Pulp.

Pat Elliott: Following completion of several major capital investments in recent years, we are anticipating significantly lower capital spend starting in 2025. With approximately $250 million of capital spend projected for our lumber business, including final payments associated with our Alabama greenfield, the planned investment at our recently acquired sawmill in El Dorado, and an ongoing brownfield planer investment in Sweden. For Canfor, Paul, we are currently forecasting capital spend of approximately $50 million in 2025, including capitalized. In addition, as Susan mentioned, we anticipate Canfor will allocate a modest amount of capital to opportunistically repurchase shares throughout the year.

Pat: Following completion of several major capital investments in recent years, we are anticipating significantly lower capital spend starting in 2025.

Pat: with approximately $250 million of capital spend projected for our lumber business, including final payments associated with our Alabama Greenfield, the planned investment at our recently acquired sawmill in El Dorado, and an ongoing brownfield planar investment in Sweden.

Pat: For Canfor Paul, we are currently forecasting capital spend of approximately $50 million in 2025 including capitalized

Pat: In addition, as Susan mentioned, we anticipate Canfor where allocated modest amount of capital to opportunistically repurchase shares throughout the year.

Ina: And with that, I'll turn it back to you, Ina, for questions from Adelaide. Thank you.

Speaker Change: And with that, I'll turn it back to you, Enif, for questions from analysts.

Operator: We will now take questions from financial analysts. If you have a question, please press star 1 on your telephone keypad. If you are using a speakerphone, please lift your receiver and then press star 1. If at any time you wish to cancel your question, please press star, then the number 2. Please press star 1 now if you have a question. There will be a brief pause while participants register for questions. Thank you for your patience. Thank you.

Thank you.

Speaker Change: We will now take questions from financial analysts. If you have a question, please press star 1 on your telephone keypad.

Speaker Change: If you are using a speaker phone, please leave your receiver and then press star 1. If at any time you wish to cancel your request, please press star then the number 2. Please press star 1 now if you have a question. Though a brief pause will participants register for questions. Thank you for your patience.

Ben Isaacson: And your first question comes from the line of Ben Isaacson from Scotiabank. Please go ahead. Thank you very much and good morning, everyone.

Speaker Change: Thank you, and your first question, concerned the line of Ben Isaacson from Skosha Bank, please go ahead.

Ben Isaacson: Thank you very much and good morning everyone. A couple questions. First one is on the Canadian portfolio. You have taken a lot of cost structure out of that portfolio over the last 12 to 18 months. Can you talk about the shape of the margin profile of the Canadian portfolio? In other words,

Ben Isaacson: A couple of questions. First one is on the Canadian portfolio. You have taken a lot of cost structure out of that portfolio over the last 12 to 18 months. Can you talk about the shape of the margin profile of the Canadian portfolio? In other words. What is the dispersion between the lowest and the highest margin miller? How flat is that profile? Thank you.

Ben Isaacson: What is the dispersion between the lowest and the highest margin miller? How flot is that profile? Thank you.

Stephen Mackey: Yeah, good morning, Ben. It's Stephen Mackey. You know, that's probably a level of detail, Ben, that we're not going to disclose. But I can tell you that we are encouraged with the improvement that we've seen in the Canadian business. The Alberta jurisdiction continues to perform quite strong for us and, and with the challenging decisions we made last year to take out some of those high costs, higher costs and fibre supply challenge mills in BC, we certainly improved the portfolio and we're performing well.

Speaker Change: Yeah, good morning, Ben. It's Stephen Mackie. You know, that's probably a level in detail, Ben, that we're not going to disclose, but I can tell you that we are encouraged with the improvement that we've seen in the Canadian business. The Alberta jurisdiction continues to perform quite strong for us and with the challenging decisions we made last year to take out some of those high cost, higher cost and fiber supply challenge, Mills and BC. We certainly improve the portfolio and we're performing well.

Ben Isaacson: Perfect. Okay, and then just two more quick ones. Can you talk about how much inventory you have positioned outside of what you would normally do in advance of these tariffs? Like have you been moving as much lumber as possible? Or do you just not have the logistics and infrastructure to do more than you would normally do?

Speaker Change: Perfect. Okay. And then just two more quick ones. Can you talk about how much inventory you have positioned outside of what you would normally do in advance of these tariffs? Like have you been moving as much lumber as possible or do you just not have the logistics and infrastructure to do more than you would normally do?

Kevin Pankratz: Hi, Ben, it's Kevin here. Yeah, I mean, the tariffs were actually announced quite, quite recently. And there wasn't really any kind of material shift of inventory in advance of that. I mean, there's some modest ones we do seasonally and with more more planned positions, but it's not it's not material.

Speaker Change: Ben Isaacson, Kevin here. The terrorists were actually announced quite recently and there wasn't really any kind of material shift of inventory in advance of that. There's some modest ones we do seasonally and with more plans, positions, but it's not material.

Ben Isaacson: Okay, and then my last question is... Are we seeing, is there a risk that we're going to have buyer in a month, two months, three months. Meaning, are you seeing some inventory building right now and some panic buying in advance of these tariffs that we'll have to pay back in a few months or is it steady state? I would say it's definitely not, no one's going long here. It's quite unnerving with the uncertainty that's in the marketplace. A lot of customers and buyers globally are just not quite as confident what's going to play out in the coming months.

Okay, and then, my last question is-

Speaker Change: Are we seeing, is there a risk that we're going to have buyer fatigue?

Speaker Change: in months, two months, three months. Meaning, are you seeing some inventory building right now in some panic buying in advance of these tariffs that will have to pay back in a few months, or is it steady state right now?

Speaker Change: I would say it's definitely not no one's going long here. It's quite unnerving with the uncertainty that's in the marketplace. A lot of customers and buyers globally are just not quite as confident what's going to play out in the coming months and so I would say it's a little closer. We are seeing a fact today a little pick up more inquiry but more in line with what we would see seasonality. [inaudible]

Ben Isaacson: And so I would say it's a little closer. We are seeing, in fact, today a little pickup, more inquiry, but more in line with what we would see seasonality.

Ben Isaacson: Okay, that's all my questions. Thanks so much, appreciate it. Thank you.

Okay, that's all my questions. Thanks so much. Appreciate it.

David Calabrigo, David Calabrigo,

Ketan Mamtora: And your next question comes from the line of Ketan Mamtora from BMO. Please go ahead. Good morning, and thanks for taking my question. Perhaps to start with, can you talk a little bit about what you are seeing in underlying demand trends? And I know, you know, obviously, trade is dominating a lot of discussions, but outside of that, kind of what you are seeing in activity levels, and if you can give us just some flavor in terms of how you are thinking about sort of shipments for the full year in 2025, you know, between SPF, FYP, and Europe.

Speaker Change: Thank you, and your next question, Constantine of Ketan Mamtora, from BMO, please go ahead.

Ketan Mamtora: Good morning and thanks for taking my question. Perhaps you start with, can you talk a little bit about what you are seeing in underlying demand trends and I know?

Ketan Mamtora: Obviously trade is dominating a lot of discussions, but outside of that, what you are seeing in activity levels, and if you can give us just some flavor in terms of how you are thinking about the shipments for the full year in 2025, you know, between SPF, SIT and Europe .

Ketan Mamtora: Sure, Ketan, I'll take a stab at that. So, underlying demand, I would say that we think it's going to be quite flat for the year, and I would even say that from a global basis. You know, speaking with some of our larger customers and regional customers, I think demand is just somewhat muted. Some of our bigger, like on the retail side, their outlook is more or less of a flat outlook, and I think some of you see the larger homebuilders, they're probably tempering down their outlook, but still having some growth. And then for the regional outlook for SBF, just from a volume perspective, we're going to be in that 1.6 billion board feet range and SYP in that 2 billion board foot range.

Ketan Mamtora: I think some of you see the larger home builders, they're probably tempering down their little bit, they're outlook by still having some growth.

Ketan Mamtora: And then for the regional outlook for SPF, just from a volume perspective, we're going to be in that 1.6 billion board-feet range and SYP in that 2 billion board-foot range, and then Europe is probably about 1.6.

Ketan Mamtora: And then Europe is probably about 1.6.

Ketan Mamtora: got it that helpful.

Ketan Mamtora: And then just one other question as it regards to tariff. So right now, is lumber part of that one-month-long pause, or the lumber that's coming in from Canada today, are y'all paying 25% duties today? I mean, David. Yeah. Sorry. Yes, it's been a busy week on the tariff file and lots of just changing news. But we of course, got the news as everyone did in the media yesterday. We have had an opportunity to consult with both our legal counsel and our custom brokers to understand whether we would be included in that pause and all of their indications are that we will and we are not being charged the 25% from our customs brokers at this understood.

Speaker Change: Got it, that's helpful. And then just one of the questions as it regards to tariffs.

Speaker Change: So right now, is lumber part of that one month long pause or the lumber that's coming in from Canada today, I y'all paying 25% duties today.

I mean that. Yeah. I'm sorry.

Speaker Change: Yeah, it's been a busy week on the tariff file and lots of just changing news but we of course got the news as everyone did in the media yesterday. We have had an opportunity to consult with both our legal counsel and our custom brokers to understand whether we would be included in that pause and all of their indications are that we will and we are not being charged the 25% from our customs brokers at this point.

Ketan Mamtora: Okay, that's helpful.

Ketan Mamtora: And then just one final question from my side. So as we think about 2025 CapEx, can you talk about sort of what are the key buckets of spending and how much within that is just pure maintenance and how much is kind of other things that you all are doing?

Speaker Change: Understood. Okay, that's helpful. And then just one final question from from my side. So as we think about 2025 capex, can you talk about sort of what are the key buckets of spending and how much within that is just pure maintenance and how much is kind of other things that that you all are doing?

Pat Elliott: Hey, Ketan, it's Pat. Yeah, as I said, we're guiding to $250,000 in lumber and $50,000 in pulp. And pulp, you know, over half of it is in the capitalized maintenance, of course. On the lumber side, we've got really three buckets of spend that is really not maintenance of business capital. And that's the Eldorado upgrade. And we're doing a portion of the $50 million that we spoke about when we bought the mills, the Beruja sawmill, and the remaining spend at Axis. So kind of round numbers, $175,000 to $200,000 is kind of that maintenance of business. And then the remainder is that strategic capital.

Speaker Change: Hey, Ketan's Pat. Yeah, as I said, we're going to 250 in lumber and 50 in pulp and pulp, you know.

Speaker Change: over half of it is in the capitalized maintenance of course. On the lumber side we've got really three buckets of spend that is really not maintenance of business capital and that's the Al Dorado upgrade and we're doing a portion of the 50 million U.S. that we spoke about when we bought the mills, the Bruges saw mill and the remaining spend at axis. So kind of round numbers 175 to 200 is kind of that maintenance of business and then the remainder is that strategic capital.

Ketan Mamtora: Thanks Pat, that's very helpful. I'll turn it over. Good luck. Thank you.

Speaker Change: Thanks, Pat. That's very helpful. I'll turn it over. Good luck.

Thanks.

Sean Steuart: And your next question comes from the line of Sean Steuart from TD Securities. Please go ahead. Thank you. Good morning, everyone. A couple of questions. Susan, you mentioned that 20% of your sales would be exposed to tariffs and duties. Is that based on 2024 actuals or is that adjusted for all of the?

Speaker Change: Thank you, and your next question comes on the line of Sean Steuart, Cindy Securities, please go ahead.

Thank you. Good morning, everyone. A couple of questions.

Speaker Change: Susan, you mentioned that 20% of your sales would be exposed to tariffs and duties. Is that based on 2024 actuals or is that adjusted for all of the

Pat Elliott: capacity rationalization you guys have undertaken in BC over the last Hey, Sean, sorry, it's pal. I'll cut that one off from Susan. It's that's that's the that's a pro forma. You know, and as we move out into 2026, actually, that rate will come down somewhat, because as Kevin mentioned earlier, we're, we're forecasting 2 billion feet of SYP this year, but our pro forma is two and a half. So that that amount will decline over time.

Speaker Change: capacity rationalization you guys have undertaken in BC over the last year.

Speaker Change: Sean, sorry, it's pal. I'll cut that one off from Susan. That's a pro forma. And as we move out into 2026, actually that rate will come down somewhat, as Kevin mentioned earlier, we're forecasting two billion feet of SYP this year, but our pro forma is two and a half. So that that amount will decline over time, but that's a good number for this year.

Sean Steuart: But that that's a good number for this Great, thanks for that, Pat. And there was mention in the MD&A around... Actions you'll take, presuming I suppose tariffs go ahead in a month. Actions you can take to divert supply to Canada and offshore markets. Any context you can give on the magnitude of those volumes, what that might look like? These terrorists do go ahead.

Speaker Change: Great, thanks for that Pat. And there was mention in the MDNA around actions you'll take presuming as opposed to tariffs go ahead in a month. Actions you can take to divert supply to Canada and offshore markets.

Speaker Change: Any context you can give on the magnitude of those volumes, what that might look like, if these tourists you go ahead in a month?

Speaker Change: Yes, Sean. I'll answer that. It's Kevin. I would say that obviously we will leverage our global footprint and I mean, we're going to have to monitor that as opportunities and situations change. But we have done that in the past. And with the Swedish Mills, the US and our Canadian operations and it gives us that flexibility to pivot on those markets. So I know we'll just keep monitoring those opportunities and we've done some of that already.

Sean Steuart: Thanks for that, Kevin. One last one. You guys bought out another piece of VITA over in the fourth quarter. Can you remind me of what the mechanism is to potentially continue that process and buy out the partner there over time? Is there a path forward to you guys consolidating all of that?

Speaker Change: Thanks for that, Kevin. One last one, you guys bought out another piece of Vita in the fourth quarter.

Speaker Change: Can you remind me of what the mechanism is to potentially continue that process and buy out the partner there over time? Is there a path forward to you guys consolidating all of this?

Pat Elliott: Yeah, Sean's Pat again. So yeah, there's a series of puts that the former owners have between now and 2032. So, you know, and then Canfor has a call option at 2032. At this point, you know, we'll just let that play out. It's been a great relationship. You know, we've we've loved having them as partners, there's really no urgency to change where we sit today. But that's the way that it would work over the next seven years here.

Speaker Change: Hey, yeah, Sean's Pat again. So yeah, there is a series of puts that the former owners have between now and 2032. So, you know, and then Canfor has a call option at 2032. At this point, you know, we'll just let that play out. It's been a great relationship. You know, we've loved having them as partners. There's really no urgency to change where we set today, but that's the way that it would work over the next seven years here.

Sean Steuart: Okay, that's all I have for now. Thanks very much. Thank you.

David Calabrigo, David Calabrigo,

Speaker Change: Okay, that's all I have for now. Thanks very much everyone.

Thank you.

Matthew Mckellar: And your next question comes from the line of Matthew McKellar from RBC, please go ahead. Hi, good morning. Thanks for taking my questions.

Speaker Change: Hi, good morning, thanks for taking my questions. Could I ask how you think about the issue of substitution of SPF with SYP? If higher duties than also terrorists or what products mean of prices for SPF into the US need to be higher, what degree of substitution into SYP or other species would you expect to see and how wide you think the spread between the mother prices for SPF and SYP could be?

Matthew Mckellar: Maybe first, could I ask how you think about the issue of substitution of SPF with SYP? If higher duties and then also tariffs on wood products mean that prices for SPF into the U.S. need to move higher, what degree of substitution into SYP or other species would you expect to see? And how wide do you think the spread between delivered prices for SPF and SYP could be?

Kevin Pankratz: Hey Matt, it's Kevin here. Yeah, we've started to see some of the substitution going on in certain jurisdictions. It's not just all across the whole United States. But I think we, I mean, in early days, it's already started in the wide width lumber, like 2x10, 2x8, 2x12. And we're starting to see it in certain applications. I think the biggest segment that has substitution applications would be MSR, machine stress rated lumber for roost trusses that actually has a strength designation. And so that one there is probably well on its way. And then as far as the, you know, the construction framing kind of aspect there, I think it's still kind of early.

Speaker Change: Hey, Madden, so Kevin here. Yeah, we've started to see some of the substitution going on in certain jurisdiction. It's not just all across the whole United States, but I think we've, I mean, in 30 days, it's already started in the wide-width lumber, like, two-way.

Speaker Change: 10, 2 by 8, 2 by 12, and we're starting to see it in certain applications. I think the biggest

Speaker Change: Segment that has substitution applications would be MSR, machine-stress rated lumber for roof trusses that actually has a strength designation and so that one there is probably well on its way and then as far as the construction framing kind of aspect there, I think it's still kind of early for sure the conversation has picked up more and we're seeing a little bit more of it like in that Texas market that was a fairly big SPF hemlock dug.

Kevin Pankratz: For sure, the conversation has picked up more. And we're seeing a little bit more of it like in that Texas market that was a fairly big SPF, Hemlock Doug Fir market, and just a largely also given some of the spreads. And on the spreads there, we do think that SPF is going to strengthen our pricing and the spread to SYP just by the nature of the volume exposed, I would say my outlook would be that we would see that to continue.

for joining us today.

Matthew Mckellar: Great, that's helpful. Thanks for the color there.

Speaker Change: Great, that's helpful. Thanks for the color there. And then just shifting gears, it sounds like you're expecting some upper momentum in European lumber pricing. Can you maybe just provide a bit more color on the supply constraints you're seeing in that market in a broad sense? Then maybe specifically comments on the fiber costs and availability you're seeing for your own business in Sweden, please.

Matthew Mckellar: And then just shifting gears, it sounds like you're expecting some upward momentum in European lumber pricing. Can you maybe just provide a bit more color on the supply constraints you're seeing in that market in a broad sense, and then maybe specifically comment on the fiber costs and availability you're seeing for your own business in Sweden, please? Okay.

Kevin Pankratz: So, Matt, maybe I'll just talk to the market piece and I'll get Stephen to maybe comment on the cost. But for sure, you know, very much like North America, supply constraints are actually contributing more to the increase that we're seeing in pricing. I would say that's actually a trend that we're seeing in a lot of markets via Japan, Australia, and North America here that there's finally some traction. It always takes longer than you think when supply comes out of the system and then it gets realized in the marketplace. And so I think that is a big contributor to what we're seeing with improved pricing and expect that to continue into Q2.

Speaker Change: Very much like North America supply constraints are actually contributing more to the increase that we're seeing in pricing I would say that's actually a trend that we're seeing in a lot of markets via Japan, Australia.

Stephen Mackey: In North America here that there is that there's finally subtraction and it always takes longer than you think when supply comes out of the system and then it gets realized in the marketplace and so I think that is a big contributor to what we're seeing with that improved pricing and expect that to continue into into Q2, and then maybe Stephen if you want to comment on the costs, Yes sure Matt.

Stephen Mackey: And then maybe, Stephen, if you want to comment on the cost. Yeah, sure, Matt. Maybe just what I'd add on the cost side is, as you know, I think we've talked about before, we're pleased with how the European market sort of log costs generally align well with market conditions. And we are experiencing some upward pressure on price and some constraints on fiber supply in our European operations. But generally, I think, as Kevin commented on the market, we're hoping for a little bit of a reset there with respect to a stronger correlation between log costs and market price.

Stephen Mackey: Maybe just what I'd add on the cost side is as you know I think we've talked about before we're pleased with how the European market sort of log cost generally align well with market conditions and we are experiencing some upward pressure on price and some constraints on fiber supply in our in our European operations, but by generally think as Kevin commented on the Mark.

Stephen Mackey: We're hoping for a little bit of a reset there with respect to.

Stephen Mackey: Stronger correlation between log cost and market price.

Matthew Mckellar: We have announced a little bit of capacity reduction over the short term in VITA as well to try to reset that. Thanks very much. I'll turn it back.

Stephen Mackey: <unk> announced a little bit of capacity reduction a third over the short term in beta as well to try to reset that.

Stephen Mackey: Thanks, very much I'll turn it back.

Matthew Mckellar: Thank you.

Speaker Change: Thank you and we have a follow up question from Keaton Montara from BMO. Please go ahead.

Ketan Mamtora: And we have a follow-up question from Ketan Mamtora from BMO. Please go ahead. Thank you. Hey, I'm just curious, you know, with the preliminary duty is just announced, and given the trade dynamics, I'm curious if there is, you know, kind of more discussion going on around the softwood lumber agreement in terms of just discussion. Yeah, I mean, it's obviously been a very busy week with respect to duties and tariffs, and of course, we have our normal process that have been in play, and we had our preliminary AR-6 dumping rates announced this week. All the weeks blend together this week and then of course follow up to CVD.

Speaker Change: Thank you.

Ketan Mamtora: I'm just curious with the <unk>.

Speaker Change: Eliminate duty is just announce time.

Speaker Change: And given the trade dynamic I'm curious if there is kind of more discussion going on around the around the softwood lumber agreement.

Speaker Change: In terms of just discussions.

Speaker Change: Yeah, I mean, we there's it's obviously been a very busy week with respect to.

Speaker Change: Duties and tariffs and of course, we have our normal process that have been in play and we had our preliminary ethics dumping rates.

Speaker Change: Ounce. This week this week, although weeks blend together.

Speaker Change: This weekend and then of course follow up to CBD I think it's a very.

Susan Yurkovich: I think it's a very challenging time to sort of have those discussions. Of course, there's lots of activity in the U.S. It seems to be a very busy time for the U.S. administration. In addition, Canada, we have some changes coming up at the federal side, so, you know, I don't see a line of sight to that currently. It doesn't mean that it doesn't come in the future, but at this point, we're really just trying to manage the duties and tariff announcements and don't see any discussions at this point. Okay, that's helpful, Susan.

Speaker Change: Challenging time to sort of have those discussions of course theres lots of activity in the U S and it seems to be a very busy time for the U S and administration. In addition, Canada, we have some changes coming up at the federal side. So you know I don't see a line of sight to that currently it doesn't mean that it doesn't come in the future but.

Speaker Change: At this point, we're really just trying to manage the.

Speaker Change: Duties and tariffs announcements and don't see I don't see any discussions at this point.

Speaker Change: Okay. That's helpful.

Operator: I'll turn it over. Thank you. Once again, that is star and one to ask a question.

Speaker Change: I'll turn it over thank you.

Speaker Change: Thank you once again that is star one to ask a question.

Operator: Thank you, and there are no further questions.

Speaker Change: Thank you.

Speaker Change: There are no further questions I will now turn it over to MS. Susan Yurkovich for closing comments go ahead Mr. Kovich.

Susan Yurkovich: I'll now turn it over to Mrs. Yurkovich for closing comments. Go ahead, Mrs. Yurkovich. Thanks very much for joining us today and we'll look forward to talking to you next quarter. Thanks, operator. Thank you.

Speaker Change: Thanks, very much for joining us today, and we'll look forward to talking to you next quarter.

Speaker Change: Thanks, operator.

Operator: And this concludes today's call. Thank you for participating.

Speaker Change: Thank you and this concludes today's call. Thank you for participating you may all disconnect.

Operator: You may all disconnect.

Speaker Change: Okay.