Q2 2025 West Fraser Timber Co LTD Earnings Call

Operator: At this time, all lines are in a listen-only mode.

Operator: Following the presentation, we will conduct a question-and-answer session.

Operator: If anyone has any difficulties hearing the conference, please press star zero for operator assistance at any time.

Speaker: During this conference call, West Fraser's representatives will be making certain statements about West Fraser's future financial and operational performance, business outlook, and capital plans. These statements may constitute forward-looking information or forward-looking statements within the meaning of Canadian and United States security.

Good morning, ladies and gentlemen and welcome to West Fraser's, second quarter 2025 results conference call at this time. All lines are in a listen-only mode. Following the presentation, we will conduct a question and answer session. If anyone has any difficulties hearing the conference? Please press star zero for operator assistance at any time.

Speaker: Such statements involve certain risks, uncertainties, and assumptions, which may cause West Fraser's actual or future results and performance to be maturely different from those expressed or implied in these statements.

During this conference call West Fraser's Representatives will be making certain statements about West, freezers future financial and operational performance business Outlook, and capital plans. These statements May constitute forward-looking information or forward-looking statements within the meeting of Canadian and United States security schools.

Speaker: Additional information about these risk factors and assumptions is included both in the accompanying webcast presentation and in our 2024 annual MD&A and annual information form as updated in our quarterly MD&A, which can be accessed on West Fraser's website or through CedarPlus for Canadian investors and EDGAR for United States investors.

Speaker: I would now like to turn the conference call over to Sean McLaren, President and Chief Executive Officer. Please go ahead.

Such statements involve certain risks, uncertainties and assumptions which may cause West freezers actual, or future results and performance to be maturely different from those expressed or implied in these statements additional information about these risk factors. And assumptions is included, both in the accompanying, webcast presentation and in our 2024, annual mdna and annual information form as updated in our quarterly mdna which can be accessed on West, Fraser's website or through Cedar Plus or Canadian investors and Edgar or United States investors

I would not like to turn the conference call, Uber to shun McLaren president, and chief executive officer. Please go ahead.

Sean McLaren: Thank you, Jenny. Good morning, everyone.

Sean McLaren: And thank you for joining our second quarter 2025 earnings call. I am Sean McLaren, President and CEO of West Fraser.

Shun McLaren: Thank you, Jenny. Good morning, everyone.

Shun McLaren: Thank you for joining our second quarter 2025 earnings call.

Sean McLaren: And joining me on the call today are Chris Virostek, Senior Vice President and Chief Financial Officer, Matt Tobin, Senior Vice President of Sales and Marketing, and other members of our leadership team.

Sean McLaren: On the earnings call this morning, I will begin with a brief overview of West Fraser's Q2 2025 financial results and then pass the call to Chris for additional comments before I share some thoughts on our outlook and offer concluding remarks. West Fraser generated $84 million of adjusted EBITDA in the second quarter of 2025, representing an approximate 6% margin as we continue to operate within a cyclical downturn. After several months of relatively stable home building markets, new home construction has more recently taken a step lower, with annualized U.S. housing starts averaging just 1.32 million units on a seasonally adjusted basis in the second quarter, as relatively elevated mortgage and interest rates have continued to present headwinds to U.S.

Shun McLaren: I am Sean McLaren, president, CEO of West Fraser and joining me on the call. Today are Chris virastyuk senior vice president and Chief Financial Officer. Matt Tobin senior vice president of sales and marketing and other members of our leadership team.

Shun McLaren: On the earnings call this morning, I will begin with the brief overview of West Fraser's, Q2 20225 Financial results and then pass the call to Chris for additional comments. Before I share some thoughts on our Outlook and offer concluding remarks

Shun McLaren: West Fraser generated, 84 million of adjusted Ava in the second quarter of 2025 representing, an approximate 6% margin, as we continue to operate within a cyclical downturn.

Sean McLaren: housing demand and affordability. Repair and remodeling demand has also appeared to be impacted by these broader macro factors remaining somewhat subdued again this quarter.

Recently taken a step lower with annualized us housing starts averaging just 1.32 million units on a seasonally adjusted basis in the second quarter as relatively elevated mortgage and interest rates have continued to present headwinds to US housing, demand and affordability.

Sean McLaren: As an additional consideration, we continue to deal with the shifting landscape of terrace and their possible inflationary effects that have the potential to moderate future demand for our wood building products. We'll continue to watch these developments closely.

Shun McLaren: Repair and remodeling, demand has also appeared to be impacted by these broader macro factors remaining somewhat subdued. Again this quarter.

Sean McLaren: These factors notwithstanding, our balance sheet continues to demonstrate strength as we exited Q2 with nearly $1.7 billion of available liquidity and a strong cash position net of debts. A strong balance sheet and liquidity profile, along with our investment grade rating, remain key elements of our capital allocation strategy, which allow us to invest in our business counter-cyclically and take advantage of growth opportunities if and when they arise.

Shun McLaren: As an additional consideration, we continue to deal with the shifting landscape of tariffs and their possible inflationary effects that have the potential to moderate future Duran demand for our wood Building Products. We'll continue to watch these developments closely.

Christopher Virostek: With that brief overview, I'll now turn the call to Chris for additional detail and comments. Thank you, Sean. And a reminder that we report in U.S. dollars, and all my references are to U.S. dollar amounts, unless otherwise indicated. The lumber segment posted adjusted EBITDA of $15 million in the second quarter compared to $66 million adjusted EBITDA in the first quarter, with a sequential change driven largely by lower pricing, higher fiber costs, and inventory valuation adjustments required due to the drop in lumber pricing close to the end of the quarter. Our North America EWP segment generated $68 million of adjusted EBITDA in the second quarter, down from $125 million in the first quarter, with the sequential change driven largely by lower OSB pricing and inventory valuation adjustment.

Shun McLaren: These factors notwithstanding our balance sheet continues to demonstrate strength as we exited Q2, with nearly 1.7 billion of available liquidity and a strong cash position, net of debts, a strong balance sheet, and liquidity profile along with our investment. Grade rating will remain key elements of our Capital allocation strategy, which allow us to invest in our business, counter cyclically and take advantage of growth opportunities. If and when they arise

Chris: With that brief overview. I'll now turn the call to Chris for additional detail and comments.

Thank you, Sean and a reminder that we report in US Dollars and all my references are to US dollar amounts unless otherwise indicated.

Chris: The lumber segment posted a just to EBA of 15 million in the second quarter compared to 66 million adjusted, EBA in the first quarter.

Chris: With the sequential change driven largely by lower pricing higher fiber costs and inventory valuation adjustments. Required due to the drop in lumber pricing close to the end of the quarter.

Christopher Virostek: The pulp and paper segment generated negative 1 million of adjusted EBITDA in the second quarter, compared to 7 million in the first quarter, with the sequential change again largely attributable to an inventory write-down. Conversely, our European business posted a $2 million of adjusted EBITDA in the second quarter versus negative $2 million in the first quarter, with a sequential improvement . . linked to higher OSB pricing and shipments in UK and European markets. In terms of our overall Q2 results, lower product prices for our lumber and North American OSB products and inventory valuation adjustments were the largest contributing detractors as compared to Q1.

Chris: Our North America ewp segment generated 68 million of adjusted Ava in the second quarter down from 125 million in the first quarter with the sequential change driven largely by lower OSB, pricing and inventory valuation adjustments.

Chris: The Pulp and Paper segment generated negative - 1 million of adjusted ebit on the second quarter compared to 7 million in the first quarter with the sequential change. Again, largely attributable to an inventory. Write down.

Chris: Conversely, our European business posted 2 million of adjusted ebit on the second quarter versus negative -2 million in the first quarter with the sequential Improvement.

Chris: Linked to higher OSB, pricing and shipments in the UK and European markets.

Christopher Virostek: While supply and demand experienced imbalances for a number of our key products in the second quarter, we were able to see some of the financial benefits of the portfolio optimization initiatives we've previously undertaken. This approach allowed us to shift select production from higher cost mills to a number of our lower cost operations, helping to mitigate some downside financial exposure. Cash flow from operations was $285 million in the second quarter, with our net cash balance at $310 million, up from $156 million in the prior quarter. The relative increase in our net cash balance reflects the large seasonal release of working capital offset in part by lower earnings, 78 million of capital expenditures, and nearly 60 million of cash deployed towards share buybacks and dividends.

Chris: In terms of our overall Q2 results, lower product, prices, for our lumber and North American OSB products and inventory. Valuation adjustments, were the largest contributing detractors as compared to q1.

Chris: While supply and demand experienced imbalances for a number of our key products. In the second quarter, we were able to see some of the financial benefits of the portfolio optimization initiatives. We've previously, undertaken,

Chris: This approach allowed us to shift select production from higher cost Mills to a number of our lower cost operations helping to mitigate some downside Financial exposure.

Chris: Cash flow from operations, was 285 million in the second quarter, with our net cash. Balance at 310, million up from 156 million in the prior quarter.

Christopher Virostek: I'm also pleased to note that in the second quarter, we successfully amended and extended our $1 billion credit facility and increased our and extended our $300 million term loan up from the prior $200 million.

Chris: the relative increase in our net cash balance, reflects the large seasonal, release of working capital offset in part by lower earnings 78 million of capital expenditures, and nearly 60 million of cash deployed towards share BuyBacks and dividends

Christopher Virostek: In terms of guidance for 2025, both our lumber and North American OSB segments continue to experience softer than expected demand levels, owing to ongoing challenges with housing affordability and repair and remodeling markets. As such, we are modifying our 2025 shipments guidance ranges for SPF, SYP, and North American OSB as per the updated ranges shown on slide 7. Further to these guidance revisions, if and as the U.S. administration's tariffs and other trade policies evolve, including the Section 232 investigation into U.S. lumber imports, we will revisit the impact of any tariffs on our operations. Consider whether any further revisions to our 2025 guidance forecasts are required.

Chris: I'm also pleased to note that in the second quarter, we successfully amended and extended our 1 billion dollar credit facility and increased our and extended. Our million dollar Term Loan up from the prior 200 million.

Chris: In terms of guidance, for 2025 both our lumber and North American OSB segments continue to experience softer than expected demand levels, owing to ongoing challenges with housing, affordability, and repair and remodeling markets.

Chris: As such we are modifying our 2025 shipments, guidance ranges for SPF syp and North American OSB as per the updated ranges shown on slide 7.

Chris: Further to these guidance revisions. If and as the US administration's tariffs and other trade policies evolve, including the section, 232 investigation into US, Lumber Imports, we will revisit the impact of any tariffs on our operations and consider whether any further revisions to our 2025 guidance. Forecasts are required.

Christopher Virostek: Regarding softwood lumber duties, on April 4, 2025, the U.S. Department of Commerce released preliminary CBD rates for Administrative Review Period 6, based on the year 2023. are preliminary. The ADD for AR-6 is 16.57%, combined with our preliminary ADD rate for AR-6 of 9.48%. Our preliminary combined rate for AR-6 is 26.05%, which is the lowest preliminary rate in the Canadian industry. Final rates are expected to be released in the coming days and weeks. If the AR-6 rates were to be confirmed, it would result in an expense of $65 million before the impact of interest for the period of review covered by AR-6.

Chris: Regarding softwood. Lumber duties on April 4th 2025 the US Department of Commerce. Released preliminary cvd rates for administrative review period 6 based on the year 2023.

Chris: For a AR6 is 16.57% combined with our preliminary add rate for AR6 of 9.48%. Our preliminary combined rate for AR6 is 26.05% which is the lowest preliminary rate in the Canadian industry.

Final rates are expected to be released in the coming days and weeks.

Sean McLaren: increasing the export duties payable recorded on our balance With that financial overview, I will pass the call back to Sean. Thank you, Chris. Looking forward, we continue to monitor shifting macroeconomic conditions that are being complicated by evolving trade policy. However, despite this backdrop, the company remains well positioned to navigate the dynamic business environment we face today. Our focus on controlling costs and optimizing our mill portfolio and production across different segments and geographies has been purposeful in an effort to create a more resilient company. You should expect us to continue to be flexible in our operating strategy, which will allow us to meet the needs of our customers while keeping our focus on a safe working environment for our employees, as well as operationalizing the benefits of our strategic capital to drive down costs.

Chris: If the AR6 rates were to be confirmed, it would result in an expense of 65 million before the impact of interest for the period of review, covered by AR6.

Chris: Increasing the export duties, payable recorded on our balance sheet.

Chris: with that Financial overview, I will pass the call back to Sean,

Thank you, Chris.

Chris: Looking forward, we continue to monitor shifting macroeconomic conditions that are being Complicated by evolving trade policies. However, despite this backdrop the company remains well positioned to navigate the dynamic business environment we face today.

Chris: Our focus on controlling costs and optimizing our milk portfolio and production across different segments, and geographies has been purposeful in an effort to create a more resilient company.

Sean McLaren: And we will do all this while sticking to a balanced capital allocation strategy that includes investment in positive NPV projects while maintaining sufficient liquidity to support the pursuit of opportunistic growth and return of capital to shareholders.

Chris: You should expect us to continue to be flexible in our operating strategy, which will allow us to meet the needs of our customers. While keeping our focus on a safe working environment for our employees, as well as operationalizing, the benefits of our strategic Capital to drive down costs,

Sean McLaren: Shifting now to Terra. As the Prime Minister has indicated publicly, the Government of Canada is presently engaged with the United States in discussions about bilateral trade broadly. West Fraser and the Canadian industry continue to work closely with our federal and provincial governments and are prepared to support these discussions when called upon, as they relate to softwood lumber. As we've said before, we continue to monitor the Canada-U.S. trade situation closely and remain agile and ready to respond as needed. Specifically, we remain policy current so that we can be well prepared for whatever outcomes unfold. We continue to actively scenario plan in preparation for a broad range of trade related and macroeconomic outcomes.

Chris: And we will do all this while sticking to a balanced Capital, allocation strategy, that includes investment in positive npv projects, while maintaining sufficient liquidity to support the pursuit of opportunistic growth and return of capital to shareholders.

Chris: Shifting now to terrorists.

As the Prime Minister has indicated publicly, the government of Canada is presently engaged with the United States in. Discussions about bilateral, trade, broadly,

Chris: West Fraser and the Canadian industry continue to work closely, with our federal and provincial governments and are prepared to support these discussions when called upon as they relate to softwood, Lumber

Chris: As we've said before we continue to monitor the Canada, US trade situation, closely and remain agile, and ready to respond as needed.

Chris: Specifically, we remain policy current so that we can be well prepared for whatever outcomes unfold.

Sean McLaren: We continue to prepare our business operations and operational plans to be quickly aligned to various scenarios, which includes our long maintained variable operating strategy to optimize how we meet our customers needs.

We continue to actively scenario plan in preparation for a broad range of trade, trade related and macroeconomic outcomes.

Sean McLaren: And finally, we continue to prepare and engage with our employees, our communities, and our customers for what may lie ahead. While we are unable to provide any kind of certainty to our stakeholders, we believe it's important to be as transparent as possible and to commit to regular communications should events warrant.

Chris: We continue to prepare our business operations and operational plans to be quickly aligned to various scenarios which includes our long maintained variable operating strategy to optimize how we meet our customers needs.

And finally, we continue to prepare and engage with our employees, our communities, and our customers for what may lie ahead.

Sean McLaren: In closing, at West Fraser we aim to deliver strong financial results through the business cycle. We achieve this by leveraging our product and geographic diversity, low-cost assets and the dedication of our people and culture rooted in cost discipline and a commitment to operate responsibly and sustainably. And we will be steadfast with this fundamental strategy, even in a world with significant uncertainty. Although our near-term outlook remains somewhat cloudy, given the broad implications of ongoing complexities in global trade, we are optimistic about the longer-term prospects for industry and for West Fraser, and we look forward to continue to build one of the world's leading sustainable building products companies.

Chris: While we are unable to provide any kind of certainty to our stakeholders, we believe that it's important to be as transparent as possible and to commit to regular Communications should a parent events warrant.

Chris: In closing.

Chris: At West Fraser, we aim to deliver strong financial results through the business cycle. We achieve this by leveraging, our product and Geographic diversity, low-cost assets and the dedication of our people, and culture rooted in cost, discipline and a commitment to operate, responsibly and sustainably.

Chris: and we will be steadfast with this fundamental strategy, even in a world with significant uncertainty,

Operator: Thank you, and with that, we'll turn the call back to the operator for questions. Thank you, ladies and gentlemen.

Chris: Although our near-term Outlook remains somewhat cloudy, given the broad implications of ongoing complexities and global trade. We are optimistic about the long longer term prospects for industry and for West Fraser and we look forward to continue to build 1 of the world's leading Sustainable Building Products companies.

Chris: Thank you. And with that, we'll turn the call back to the operator for questions.

Operator: We will now begin the question and answer session. Should you have a question, please press the star followed by the 1 on your touchtone phone. Should you wish to cancel your request, please press the star followed by the 2.

Chris: Thank you, ladies and gentlemen, we will now begin the question and answer session.

Operator: If you are using a speakerphone, please lift the handset before pressing any keys. Once again, that is star 1 should you wish to ask a question.

Chris: Any question, please press the star followed by the 1 and the Jewish to cancel your request. But please press the star, followed by the 2. If you are using a speaker-phone, please lift the handset. Before pressing any Keys once again, that is star 1. Should you wish to ask a question?

Benjamin Isaacson: And our first question is from Ben Isaacson from Scotiabank. Your line is now open. Thank you very much. And good morning, everyone. Just two quick ones for you, Sean, and then one for Chris. Sean, have you seen a pivot in the trend, or maybe I'll ask a different way. What have you learned, if anything, about the substitutability between SPF and SYP over the past two or three quarters? Have you seen a shift in the price elasticity of demand?

And our first question is from Ben isacson from Scotia Bank. Your line is now open

Ben Isacson: Have you seen the pivot in the trend or or maybe I'll ask a different way? What have you learned of anything about the substitutability between SPF and syp over the past 2 or 3 quarters? Have you seen a shift in the price elasticity of demand?

Sean McLaren: Yeah, good morning, Ben. You know, I'll make a few comments, then I'm going to ask Matt to fill in what I missed. You know, I think as we've seen, you know, over, you know, the last number of years, that the spreads between the products, the price spreads, you know, move around quite a bit. In a period of higher demand, they tend to close as people search for the products they need. In periods of lower demand, like we've seen the last, you know, the last year, those spreads have separated and they really become more, you know, supply demand driven within that species.

Matthew Tobin: So, in the South, where you have more supply and, you know, less currently are in our demand, we're new home building, which is more directed to SPF and, of course, lower supply in Western Canada, you know, really hard to kind of predict exactly what's happening there, but we think that's driving some of the spreads. And there is substitution when products are not available, but when they're available and customers have a preference and they're willing to pay that difference, then that spread persists.

Yeah, good morning been, um, you know, I'll make a few comments and then I'm going to ask Matt to, uh, to to fill in what I miss, you know. Um, you know, I think as we've seen, um, you know, over um, you know, the last, um, number of years, um, that the spreads between the products, the price spreads, you know, move around quite a bit. Um, in a period of of higher demand, they tend to close as uh, people search for the products, they need in periods of lower demand. Like we've seen in the last uh, you know, the last year. Um, those spreads have um, have have separated and they really become more, you know, Supply demand driven within that species. So in this in the South where you have more Supply and and uh, you know, less currently RNR demand, where New Home Building, which is more directed to SPF, and of course, lower Supply, and western Canada, you know, uh, you know, really hard to to kind of predict exactly what's happening.

Matthew Tobin: Matt, would you have anything to add to that? I don't. I think that's a good summary. And I'd say, like I say, it's really up to the customer preference as to which one of our products they're looking to apply to their end.

Ben Isacson: Happening there but we think that's driving some of the spreads and there is substitution when products are not available, but when they're available and customers have a preference and they're willing to pay that difference then that spread persists. Um Matt would you have anything to add to that?

Benjamin Isaacson: Great, thank you.

Uh no, I think that's a good summary. And I'd say like, say it's really up to the customer preferences to which 1 of our products they're looking to to apply to their own use.

Benjamin Isaacson: And my second question for you, Sean, is The media has been talking a lot about a possible lumber export quota. What are your general views on this and why was this frowned upon in the past? Yeah, I'll make a few comments here, Ben. Again, I think as you can imagine, with the complexity of the current trade discussions on many product fronts and all product fronts between Canada and the US, there's a lot of balls in the air. And I think the industry has really been standing ready to support the government when the opportunity presents itself for that dialogue.

Speaker Change: Great. Thank you. And my second question for you Sean is um,

Speaker Change: The media has been talking a lot about a possible, Lumber export quota, what are your general views on this and why was this frowned upon in the past?

Sean McLaren: We, and the government has been supportive and clear with us that softwood lumber will be part of those discussions. So as a result, I think, you know, all options are on the table for those discussions, and hard for us to speculate what that looks like. But we will be, you know, we'll be ready to support our government and the government in those discussions, as part of the broad industry coalition of what is best long term for the industry. And I think just as specific to West Fraser, you know, we have a long history of dealing with different border measures and lumber, long history of flexing our production and other products.

Speaker Change: Yeah. Um, you know, uh, um, uh, you know, I'll make a few comments here, uh, been again, you know, I think as you can imagine, you know, with the complexity of the current trade discussions on many product fronts and all product fronts between Canada and the US. Um, there's a lot of balls in the air and, uh, I think I think the, the industry has really been standing ready to support the government. When the opportunity presents itself for that dialogue, we uh, uh, we and the government has been, uh, supportive and clear with us that software. Lumber will be part of those discussions. So, as a result, I think, uh, you know, all options are on the table for

Sean McLaren: And whatever that border measure is, we think we're well positioned with the assets we have, our cost position, and finally our integrated model, which allows us to optimize within that system. You know, that's probably all I would make on that question, Ben.

Benjamin Isaacson: That's great.

Benjamin Isaacson: Thank you, Sean.

Speaker Change: Discussions and hard for us to speculate what that looks like. But we will be uh you know, will be ready to support our government. Uh and the governments in those discussions and as part of the broad industry Coalition of what is best long-term for the industry. And I think just as specific to West Fraser, you know, we have a long history of dealing with different border measures and lumber long history of flexing, our production and, and other products and whatever that border measure is, we think we're, well, positioned with the assets. We have our cost position and finally, our integrated model. What's a which allows us to optimize, uh, within that system? Um, you know, uh, that's probably all I would make on the on that. Uh, that question that

Christopher Virostek: And then just one for Chris. Chris, I'm not sure how comfortable you are talking about this. But can you just give a sense of magnitude of, are you cash flow positive right now in the North American lumber business at where pricing is right now?

Christopher Virostek: And then the same question for the North American olive Yeah, I think, you know, we're going to steer clear of talking about, you know, any one particular segment or business relative to sort of day to day pricing trends. I think, you know, if you look at how the business has performed through what's been a pretty tough lumber cycle going on 2 years, the diversity of our products being in, you know, not only OSB, but the other panel products, which have been important contributors. You know, the portfolio optimization work that we've done, you know, we think we've built a pretty strong business here that can weather what comes what comes at us here.

Speaker Change: That's great. Thank you Sean and then just 1 for Chris. Um Chris I'm not sure how comfortable you are talking about this but can you just give a sense of magnitude of are you cash flow positive right now in the North American Lumber business at where pricing is right now and then the same question for the North American OSB business.

Yeah, I think.

Christopher Virostek: And, you know, our counter cyclical investing, we've been continuing to spend capital to lower costs. We've been flexing production. We were early in the process in terms of mill closures and removing high cost production. So, you know, the way I would look at that is, look, we've been at this for a long time. It's in our DNA to deal with the cycles that we have and to drive cash flow, even in difficult markets, you know, obviously, there can reach points where it's very difficult from a pricing standpoint, you know, but, but those are, you know, we're doing everything we can to make sure those are transitory and short lived.

Christopher Virostek: And, you know, I think our dedication to investing in the business and being durable with our capital allocation allows us pretty well to weather those short periods when those things can get dislocated.

Benjamin Isaacson: That's really helpful.

High cost production. So, um, you know, the way I would look at that is look, we've been at this for a long time. It's in our DNA, uh, to deal with the cycles that we have and to drive cash flow. Uh, even in in difficult markets, you know, obviously there can reach points where it's very difficult from a pricing standpoint. Um, you know, but but those are, you know, we're doing everything we can to make sure those are transitory and, and short-lived. And, uh, you know, I think our dedication to investing in the business and being uh, durable with our Capital. Allocation allows us pretty well to whether those short periods, when those things can get dislocated.

Benjamin Isaacson: I'll pass it on.

Operator: Thanks so much.

That's really helpful. I'll pass it on. Thanks so much.

Ketan Mamtora: And our next question is from Ketan Mamtora from BMO Capital Markets. Your line is now open. Good morning and thanks for taking my question.

Thank you, and our next question.

Speaker Change: For Kean Moura from BML Capital markets. Your line is now open.

Sean McLaren: Sean, just coming back to Ben's earlier question on quota, is it fair to say, Ben, that West Fraser is open to having a, you know, potential quota if that were to be the case? Is West Fraser open to that? Yeah, good morning, Ketan. You know, I think West Fraser, our position, along with the entire Canadian industry, is, as you can imagine in this moment, with so many trade issues between Canada and the U.S., and lumber consistently, historically, being off to the side and being separate, including lumber in a broader trade deal, is our focus and our priority in supporting the Canadian government in those discussions.

Kean Moura: Uh, good morning and thanks for taking my question. Um, Sean just coming back to Ben's earlier. Question on Cota. Is it fair to say then that West Fraser is open to having a a, you know, potential quarter of that? Got to be the case is is best way you're open to that.

Sean McLaren: And I think to give the Canadian government the ability to be able to navigate through that, you know, I don't think there's been anything that the industry has taken off the table. And we are aligned with the industry in supporting the federal government in those negotiations and inclusion of lumber. You have to see what all those details look like in the end, but that is where we're at today.

Speaker Change: Yeah, good morning. Uh Keaton. You know, I think I think West Fraser our position along with the entire Canadian industry is as you can imagine in this moment with with with so many trade issues between the 2, uh, between Canada and the US and lumber consistently historically, being off to the side and being separate, including Lumber in a broader trade deal, is, is our focus and our priority and supporting our, our supporting the Canadian government and those discussions. And I think to give the Canadian government, the ability to to be able to navigate through that, you know, I don't think there's been anything that uh that the industry has taken off the table. And we we are aligned with the industry in supporting the federal government in those negotiations. And in inclusion of lumber, we have to see what all those details look like in the end. But, uh, but that, that is our our where we're at today.

Sean McLaren: Now that's helpful. And then just one more, so far as trade is concerned, on Section 232 investigation, do you have any update, anything that you can, you know, share with us in terms of sort of timelines or any other information you've got, and whether OSP is also included in that investigation? We really don't, Ketan. We don't have any additional insight into the timing, the nature of it, what that might look like. This is really something that is controlled completely by the US administration on their timing and as part of their overall thought process around trade between various countries.

No, that's helpful. And then just 1 more uh, so far as trade is concerned on Section, 232 investigation. Um, we will have any update anything that you can, you know, share with us in terms of timelines or any other information. You you've got and, uh, whether OSP is also included in that, um, investigation.

Sean McLaren: And as you, I'm sure, are well aware, there is a number of 232 investigations currently underway that affect a lot of products. So, we don't have any other insight other than what you would have reading publicly on 232. And just to reinforce, we think whatever happens, whether it's lumber or OSV for a border measure, quality of our assets, our cost position and our integrated model, we think we're able to whatever that looks like. Now that's helpful.

You know, we really we really don't keeping. Um, we don't have any additional insight into the timing, the the nature of it, what that might look like. This is really something that is, um, you know, is controlled completely by the US Administration on their timing. And as part of their overall, thought process around around trade between various countries. And and as you, uh, I'm sure are well, aware there is a number of 232 investigations, uh, you know, currently underway, uh, that affect a lot of products. So, so we don't have any other Insight, uh, other than what you would have, uh, reading publicly on 232 and just to reinforce. We think whatever happens, whatever, whether it's Lumber or OSB for a border measure uh, quality of our assets, our cost position and our integrated model we think we're, we're able to compete whatever that looks like.

Christopher Virostek: And then maybe Chris... Would you be able to share with us operating rates in the second quarter for lumber and OSP? Yeah, I wouldn't have those necessarily, you know, to the decimal point off the top of my head, but I would say, you know, we haven't really made substantive changes to our capacity, which is in the AIF, you know, there on an annual basis. I think what we published in February is the current state of our capacity. And so, you know, that capacity is pretty ratable over the four quarters. There's no big sort of seasonal changes there.

Chris: Got it. Well, that's, uh, that's helpful and then um, maybe uh, maybe maybe Chris. Um,

Speaker Change: Would you be able to share with us sort of operating rates in the second quarter uh, for lumber and OSB?

Christopher Virostek: So I think when you take a look at our production in Q2 relative to those annual capacity numbers there, that's your best guide as to what our utilization rate was. I mean, it's fair to say, particularly in U.S., in lumber, you know, we're well below kind of the capacity that we would prefer to, or well below the utilization that we would prefer to run at, because we've been very diligent and thorough in terms of managing our schedules, controlling inventory, and meeting demand in the marketplace. Yeah, that's helpful.

Yeah, I wouldn't have those necessarily uh, you know, to to the decimal point off the top of my heads. But, but I would say, you know, we haven't really made substantive changes to our capacity, uh, which is in the aif, uh, you know, there on an annual basis. I think what we published in, uh, in February is the current state of our capacity and so you know that capacity is pretty routable over the 4 quarters. There's no no big sort of seasonal changes there. So I think when you take a look at our production um in Q2 relative to those annual capacity numbers there, that's your best guide as to what our uh what our utilization uh rate was in Q2.

Speaker Change: The managing our schedules, controlling inventory and and meeting demand in the marketplace.

Christopher Virostek: Chris, just one last one from me and I'll turn it over. In the OSB business, what indicators, you talked about, you know, sort of having a flexible operating approach.

Christopher Virostek: What indicators that you all are looking at, whether it is demand, it is inventory, or anything else that you would, you know, point us to, in terms of sort of your approach to having that flexible operating schedule? Yeah, I mean, I think we're looking at all those factors. As you know, the biggest driver of OSB consumption is new housing construction. So, you know, we monitor the trends and developments in the new housing market pretty closely. We look at, you know, where that's trending in terms of starts and permits, you know, both globally and across North America, but also regionally in line with kind of where our productive capacity is and how that's shaking out.

Yeah, no, that's helpful. Uh, Chris just 1 last 1 for me and I'll turn it over on in the osc business. What indicators you you talked about, you know, sort of having a flexible operating um, approach what indicators that y'all are looking at whether it is demand, it is inventory, um, or anything else that you would, you know, point us to uh in terms of sort of your approach to having that flexible operating uh schedule.

Christopher Virostek: You know, our inventory levels in that we can hold in OSB are pretty limited because, you know, it has to be stored inside. So we don't we don't really, you know, build a lot of inventory and then and then, you know, sort of draw it down. So we have to react pretty quick in OSB and we tend to do that. And, you know, we look at all those sort of macro factors, principally around interest rate or housing and housing construction as indicators of how we need to be thinking about the ability to flex over the near term and medium term.

Speaker Change: Factors. As, you know, the biggest, the biggest driver of OSB consumption is is new housing construction. So, you know, we monitor the trends and developments in the new housing market. Um, pretty closely we look at, um, you know where that's trending in terms of starts and permits, um, you know, the in, you know, both globally and across North America but also regionally, uh, in line with kind of where our productive capacity is and and how that shaking out, um, you know, our inventory levels in that we can hold in OSB are pretty limited. Um, because, you know, it has to be stored inside. So we don't, we don't really, you know, build a lot of inventory and then and then, you know, sort of draw it down. So we have to react pretty quickly in OSB. Um, and we tend to do that and uh, you know, we look at all those sort of macro factors principally or

Ketan Mamtora: Thank you very much.

interest rate, or, um, housing and housing, construction, as indicators of how we need to be thinking about the ability to flex, uh, over the, the near-term, and, and medium-term

Ketan Mamtora: I'll jump back in the queue.

Ketan Mamtora: Good luck.

Speaker Change: Thank you very much. I'll jump back in the queue. Good luck.

Speaker Change: Thanks.

Hamir Patel: And our next question is from Hamir Patel from CIBC Capital Markets. Your line is now open. Hi, good morning.

Speaker Change: Thank you, thank you. And our next question is from hamir Patel from CIBC Capital markets. Your line is now open.

Sean McLaren: Sean, the European business has been kind of hovering around breakeven for the past two years. What do you need to do to fix that operation? And at what point would you consider putting that business up for sale and kind of focusing on what you do best in North America? Yeah, good morning, Amir. You know, I would say Europe is, you know, largely the same challenges as North America from a macro perspective. You know, end use demand has been difficult for some time. Saying that, you know, our assets are well positioned, you know, they operate well.

I uh, good morning.

Hamir Patel: Sean the European business has been kind of hovering around break, even for the past uh, 2 years. Uh, what do you what do you need to do to fix that uh that operation and you know at what point would you consider putting that business up for sale and and kind of focusing on what you do best in North America?

Sean McLaren: We have an excellent team over there. We've got, you know, kind of good, you know, strong relationships with our customers. We think we're really well positioned as Europe comes back. Again, that is, you know, that is really, I guess, the unknown part. Saying that, you know, sequentially, we've seen some improvement in our OSB business over there. Still modest, but moving in the right direction.

Yeah, good morning kamir um you know I I would say um yeah. Europe is um you know, largely the same challenges as North America from a macro perspective. You know and use demand has been has been difficult uh, for some time. Um, saying that uh, you know, our our assets are are well positioned, you know, they they operate well, we have an excellent team over there. Uh, we've got, you know, kind of good, you know, strong relationships with our customers. We think we're we're really well. Positioned as Europe comes back again. That is uh, um, you know, that is that is really, I guess the unknown part saying that

Sean McLaren: In terms of your other question, I think we're very pleased to have Europe as part of West Fraser. You know, again, we have to wait and see on the macro for Europe, but good assets, good people, well positioned in the cost structure, things will get better in Europe. And when they do, we're going to be in a good spot to participate in that.

Hamir Patel: So, that's all I would say about Europe. Okay, fair enough. Thanks, Sean.

Hamir Patel: You know, sequentially. We've seen some improvement in our OSB business over there, still still modest but but moving in the right direction. Um, in terms of rather question, um, I I think we're very pleased to have Europe as part of, uh, part of West Fraser. Um, you know, again, we we we have to wait and see on the macro for Europe, but good assets, good people. Well, positioned in the cost structure, things will get better in Europe and when they do uh we're going to be in a good spot to participate in that. So so that's all I would say about your

Hamir Patel: And I just want to follow up on a potential quota framework for lumber. You know, if we ever do end up with that as a solution, how would West Fraser like to see quotas allocated, you know, between the provinces? And then how would you like to see the provinces allocate quota to to the company? You know, that's a very detailed question there, Hamir. You know, I'm really not going to comment on what any of those details are. What I would, where could be or, you know, speculate on what that may or may not be. What I would say is that, you know, the federal government, the Canadian industry, good alignment on being, you know, inclusion of lumber, inclusion of wood products, open to discussion around what the framework and dialogue would be.

Speaker Change: Okay, fair enough. Uh thanks Sean. And I just want to follow up on a potential quota framework for lumber, you know, if we ever do end up with that as a solution, how how would West Fraser like to see quotas, um, allocated, you know, between the provinces and then how would you like to see the provinces allocate uh, quota to, uh, to the companies?

Speaker Change: You know that's that's a very uh detailed question there here. Um you know I I'm really not going to come in on on what any of those details are, what I would what could be or you know speculate on what that may or may not be. What what I would say is that um

Hamir Patel: I think the most important part in the immediate term is inclusion of wood products, inclusion of lumber, and supporting the industry staying aligned, and supporting our government, and having open dialogues on what's best long term. You know, all those other details are hypothetical, and really, we're just not in a position to comment on any. Fair enough.

Speaker Change: You know, the federal government, the Canadian industry, uh, good alignment on, uh, on on being, you know, inclusion of lumber inclusion of wood products, uh open to discussion around what the framework and dialogue would be. I think the most important part in the, in the immediate term is inclusion of what products inclusion of lumber and supporting the industry staying aligned and supporting our government and having open dialogues on what's best long term. You know, all those other details are hypothetical and and really, uh, uh, we're just not not in a position to comment on any of that.

Hamir Patel: That's all I had. I'll turn it over. Thanks.

Speaker Change: Thank you.

Matthew Mckellar: Thank you and our next question is from Matthew McKellar from RBC Capital Markets. Your line is now open. Hi, good morning. Thanks for taking my questions. First for me, just like to ask, do you get the sense that we're seeing any pre-buying or inventory accumulation of SDF in the U.S. ahead of those higher duty rates taking effect?

Speaker Change: Thank you. And our next question is from Matthew McCullough from RBC Capital markets, your line is now open.

Matthew McCullough: Hi, good morning. Thanks for taking my questions. Uh, first for me.

Sean McLaren: And if not, I guess, when do you really expect that to start? Good morning, Matthew.

Matthew McCullough: Just like to ask, do you get the sense that we're seeing any pre- buying or inventory? Accumulation of SDS in the US ahead of those higher Duty rates taking effect and if not I guess when do you really expect that to start?

Matthew Mckellar: I might turn this one over to Matt just to talk a little bit about current binding patterns. I would say, you know, we haven't seen a noticeable change in customer purchasing patterns to date, and generally, I think, in uncertain economic outlooks, you know, we generally don't see an increase in purchasing patterns. Okay, thanks.

Speaker Change: Good morning. Matt you, I might turn this 1 over to, uh, to Matt just to to talk a little bit about current current buying patterns

Matthew McCullough: Yeah, good morning. Um, I I would say, you know, we haven't seen a, a, a noticeable change in customer purchasing patterns, uh, to date. And, and generally, I think, in uncertain economic, uh, outlooks. You know, we, we generally don't see an increase in purchasing patterns,

Matthew Mckellar: And I mean, do we need to see the final kind of results there for that accumulation start to occur? Or were in your mind, you're likely to see some buying in the market, just kind of ramp up here over the next couple weeks? How are you thinking about how that plays out? I think it's hard to speculate how our customers will react to the new duties, but I would say they're really focused on having enough inventory to meet their demand and how to navigate the uncertainty ahead of time. Okay, thanks. That's very helpful.

Speaker Change: okay, thanks and I I mean we need to see the final kind of results there for for that accumulation start to occur or, or in your mind, um, you know, are we likely to see

Some buying in the markets uh just kind of ramp up here over the next couple weeks. How how are you thinking about how that plays out?

Speaker Change: I think hard to speculate how our customers will react to to the, uh,

the new duties. But, uh, but you know, I would say they're really focused on uh, on having enough inventory to meet meet their demand and uh, and how to navigate the uncertainty ahead of them.

Matthew Mckellar: I'll turn it back. Thank you.

Speaker Change: Okay. Thanks that's very helpful. I'll turn it back.

Sean Stewart: Once again, please press star 1 should you wish to ask a question. And your next question is from Sean Stewart from TD Cowen. Your line is now open. Thanks. Good morning, everyone. A couple questions.

Speaker Change: Thank you once again please press star. 1 should you wish to ask a question?

Speaker Change: And your next question is from Sean Stewart from TD Cowen, your line is now open.

Sean Stewart: Sean, I'll ask one more on the lumber trade stuff. I guess I'm just curious on, you know, as this comes to a head seemingly in the short term, and a lot of changes get made to potential terms in a short period of time, how is the federal government or the provinces going to deal with that? Sure. Thank you. Corresponding directly with industry to get input along the way. Are you guys being consulted constantly to provide input on potential structure? Or just more curious on the logistics of how the government involves industry?

Sean Stewart: Thanks, good morning everyone. Um, a couple questions, Sean. I'll I'll ask 1 more on the the lumber trade stuff. Um I guess I'm just curious on, you know, is this comes to a head seemingly in this short term and a lot of

Speaker Change: changes kit made to potential terms in a short period of time.

Speaker Change: How?

Speaker Change: Is the federal government or the province?

Speaker Change: Is corresponding directly with industry to get input along the way. Are you guys being consulted constantly to provide input on potential structure or just more Curious on the the logistics of of how the government involves industry in this?

Sean McLaren: Yeah, good morning, Sean. You know, I think, frankly, for the, you know, for the past, you know, you know, year, like a lengthy period of time, the industry has been collaborating. There's been, you know, a lot of discussion along the way with with both federal and provincial governments. So, awareness, you know, awareness of the current situation, alignment with the industry and that open dialogue, all of that pre work, you know, has been done and our, you know, our relationships, the industry's relationships are open, they're collaborative and the lines of communication. communication are in place when the moment comes, when, if the moment comes for that.

Speaker Change: Yeah, good. Good morning Sean. Um, you know, I I think frankly for the, you know, for the past, you know, you know, a year like a, a lengthy period of time. The the industry has been collaborating. There's been, you know, a lot of discussion along the way, uh uh with, with both Federal and provincial cover, uh, governments. So awareness. Um, um, you know, awareness of the current situation alignment with, with the industry and that open dialogue, all of that pre-work, uh, you know, has been done and our um, you know, our relationships, the industry's relationships are open, they're collaborative. Um, and the lines of

Sean Stewart: Okay, thank you for that.

Speaker Change: Communication are in place. Uh, when the moment comes out, when if the moment comes for that discussion,

Christopher Virostek: And then a question for Chris. Optimization, ongoing optimization of the wood product portfolio in North America. This year will still be a busy CapEx year for you guys, but maybe less than we've seen the last few with Henderson wrapping up. Can you give perspective on the pipeline of discretionary CapEx projects you guys have in the hopper and any constraints on contract or labor equipment availability? I'm just trying to get a sense of how things could trend into 2026 and beyond. Yeah, thanks, Sean. I think, you know, as we've noted, we've had a lot of major projects underway here.

Speaker Change: Uh, thank you for that. And then a question for for Chris.

Speaker Change: Optimization ongoing optimization of the the wood product portfolio and in North America. Um, this year

We'll still be a busy capex year for you guys, but maybe less than we've seen the last few. Uh, with with Henderson wrapping up, can you give perspective on the pipeline of discretionary capex projects? You guys have in the hopper and any constraints on contractor. Labor equipment, availability, just trying to get a sense of how things could Trend into 2020.

Speaker Change: 26 and Beyond.

Christopher Virostek: And one of the things we've been been proud of is our ability to position ourselves to invest counter-cyclically, you know, to take the downtime to do these capital projects in a weak market is the best time to do them from our perspective and to make investments when possibly others aren't, you know, is beneficial from the standpoint of being able to get access to contractors and equipment. You know, I think anecdotally we understand that, you know, contractor backlogs are shrinking, you know, probably not unsurprising in the lumber environment that we've been in that there's just fewer projects going on and there's a, you know, a little bit better availability there on some front.

Sean McLaren: But what I would say is, I would say is this, right, like as Sean's mentioned, there's a ton of uncertainty out there right now. We have, I think, probably a lot of great projects in the pipeline that we could do over the next several years. Our focus in the near term is going to be on wrapping up the stuff that we have underway, operationalizing that, getting the benefits of that, continuing to work the cost position down through operationalizing those projects. And then probably in all likelihood, you know, seeking a little bit of greater clarity about the macro conditions and the trade environment.

Sean McLaren: Before, you know, making major decisions on the next, you know, whatever those next round of projects would be for us. So, you know, I think that's how I'd frame it up. Sean, I don't know if you want to, you know, add anything to that.

Christopher Virostek: No, I think that that was perfect, Chris. Thank you.

Speaker Change: Um, they're on some front. Um, but what I would say is I would say is this right? Like as as Sean's mentioned, there's a ton of uncertainty out there right now. Um we have, I think probably a lot of great projects in the pipeline that we could do over the next several years. Our focus in the near term is going to be on wrapping up the stuff that we have underway operationalizing, that getting the benefits of that, continuing to work, the cost position down through through operationalizing those projects and then probably, in all likelihood, um, you know, seeking a little bit of Greater clarity about the macro conditions and the trade environment before, you know, making major decisions on the next. Uh, you know, whatever those next round of uh, of projects would be for us. So so uh, you know, I think that's how I I'd frame it up. I Sean, I don't know if you want to, you know, add anything to that.

No, I think that uh, that was perfect. Chris, thank you.

Christopher Virostek: Maybe just one follow on as we're in this extended trough for wood product markets. Whether you guys are interested right now or not, can you speak to what the M&A opportunity set looks like for bolt-ons as more potential sellers? coming to the market as this trough is extended here. I think our track record in particular over the last several years has been that we're ready and able to be an acquirer of quality assets, should those quality assets come available. We've made fairly selective additions to the portfolio that, in our view, have made the portfolio better.

Speaker Change: Maybe just 1 follow on as as we're in this extended trough for for what product markets, you know whether you guys are interested right now or not. Can you speak to what the m&a opportunity set looks like for for bolt-ons? Uh, have more potential sellers?

Come into the market as, as this, trough is extended here.

Christopher Virostek: I think there's a tremendous amount of uncertainty out there right now in the marketplace. If that creates distress, does that create opportunities? That's a lot of speculation as to what that's going to mean, but what I would say is we've got the financial capacity to grow. I think we've got the ability to execute when those things happen. We've got a strong track record of integrating acquisitions, both large and small. We have the balance sheet to do things that make sense, but it's all going to be through a lens of quality, of things where it makes us better very quickly or there's a very clear path to strong synergies and improvement of the franchise on an overall basis.

Speaker Change: I can. Yeah, go ahead. That'd be, that'd be great. Chris what know why don't you take that 1 Chris-Craft.

Christopher Virostek: We're not looking to buy assets just because they're available. Got it.

Speaker Change: Both large and small. We have the balance sheet to do things that, that make sense, but it's all going to be through a lens of, uh, of quality of things where there's, you know, it. It it makes us better, uh, very quickly or there's a very clear path to, uh, you know, to strong synergies and and Improvement of the franchise on an overall basis. Um, you know, we're not looking to buy assets just because they're available.

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

Speaker Change: Got it. Okay. Uh, that's all I have for now. Thank you very much.

Sean Stewart: Thanks, Sean.

Operator: Thank you. There are no further questions at this time. Please proceed. Thank you, Jenny.

Thank you. There are no further questions at this time. Please proceed.

Sean McLaren: As always, Chris and I are available to respond to further questions, as is Robert Winslow, our Director of Industrial Relations and Corporate Development.

Sean McLaren: Thank you for your participation today, stay well, and we look forward to reporting on our progress next quarter. Thank you.

Thank you, Jenny, as always Chris and I are available to respond. Further questions, as is Robert Winslow, our director of investor relations and corporate development.

Thank you for your participation today. Stay well, and we look forward to reporting in our progress next quarter.

Operator: Ladies and gentlemen, the conference has now ended. Thank you all for joining.

Operator: You may all disconnect your lines.

Sean Stewart: Test now and ended. Thank you all for joining. You may all disconnect your lines.