Q3 2025 Canfor Pulp Products Inc Earnings Call

November 6, 2025

All lines have been placed on mute to prevent any background noise.

Operator: All lines have been placed on mute to prevent any background noise. During this call, Canfor and Canfor Pulp's Chief Financial Officer will be referring to a slide presentation that is available in the investor relations section of the company's website. Also, the companies would like to point out that this call will include forward-looking statements. Please refer to the press releases for the associated risks of such statements. I would now like to turn the meeting over to Susan Yurkovich, Canfor Corporation's President and Chief Executive Officer. Please go ahead, Susan.

During this call can for, and can for pulp's. Chief Financial Officer will be referring to a slide presentation, that is available in the investor relations section of the company's website.

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

I would now like to turn the meeting over to Susan at your kovich can for your corporation's, president and chief executive officer. Please go ahead. Susan.

Susan Yurkovich: Thanks, Constantine, good morning, everybody. Thanks for joining the Canfor and Canfor Pulp Q3 2025 Results Conference Call. I'm gonna start off with a few comments before turning it over to Stephen Mackie, Canfor's Chief Operating Officer and CEO of Canfor Pulp, and Pat Elliott, Chief Financial Officer of Canfor Corporation and Canfor Pulp. Kevin Pankratz, our Senior Vice President of Sales and Marketing, would normally be with us as well, but he's traveling in the market today with customers, and so we will do our best to handle your lumber market questions, but of course, if there's any that need follow-up, we can do that after the call. However, we do have Brian Yuen, our Vice President of Sales and Marketing for Canfor Pulp with us, and he can take any questions related to the pulp market.

Thanks Constantine, and good morning everybody. Um, thanks for joining, the camp for and camp for pulp, Q3 2025 results conference call. I'm going to start off with a few comments before, turning it off, over to Stephen Mackey Camp. Force Chief Operating Officer and CEO of camp for pulp and Pad Elliott, Chief Financial Officer of camp for Corporation and can for pulp, Uh, Kevin Pankratz our senior vice president of sales and marketing would normally be with us as well, but he's traveling in the market today with customers. And so we will do our best to handle your Lumber Market questions. But of course, if there's any that need follow-up, we can do that after the call. Uh, however, we do have Brian you and our vice president of sales and marketing for can, for pulp with us and he can take any questions related to the pulp Market.

Susan Yurkovich: As we've indicated in previous calls, over the last several years, Canfor has taken significant actions to further diversify our portfolio, improve our underlying cost structure, and prepare for the challenging duty environment that our industry is facing. This has included making difficult decisions to permanently close some of our higher cost operating assets, including the recent closure of our Estill and Darlington sawmills in South Carolina this last quarter. At the same time, we've largely completed a significant modernization of our fleet in the US South and expanded our presence in Sweden with the acquisition of 3 additional sawmills from Karl Hedin, a transaction that closed in September. As a result, while global lumber markets conditions remain very challenging, we have better aligned our production capacity with market demand and significantly improved our cost competitiveness and leveraged our balance sheet strength to opportunistically acquire strategic assets.

As we've indicated in previous calls, over the last several years, can for has taken significant actions to S. Further diversify our portfolio improve our underlying cost structure and prepare for the challenging Duty environment that our industry is facing and this is included. Making difficult decisions to permanent permanently closed. Some of our higher cost operating assets, including the recent closure of our estol and Darlington Sawmills, and South Carolina. This last quarter

At the same time we've largely completed a significant modernization of our Fleet in the US, South and expanded our presence in Sweden with the AC acquisition of 3 additional Sawmills from Carl Haden a transaction that closed in September.

As a result. While Global Lumber markets conditions, remain very challenging. We have better aligned our production capacity with market demand and significantly, improved our cost competitiveness and leveraged, our balance sheet, strength to opportunistically acquire, a strategic assets.

Susan Yurkovich: This transformation has been hard work. However, we now have a diverse portfolio of assets that are better positioned to both serve our customers and withstand these difficult market conditions. With approximately 70% of our business located out of Canada, we are also able to mitigate some of the impacts of the punishing duty environment we are currently facing. While we expect the economic uncertainty is likely to persist in the near term, Canfor is well-positioned to navigate these turbulent times. Importantly, our balance sheet remains strong, with over CAD 1.2 billion of available liquidity, we have significant financial flexibility to withstand current market conditions while also pursuing opportunistic strategic investments at the bottom of the cycle. I'd now like to turn it over to Stephen to provide an overview of Canfor Pulp.

This trans transformation has been hard work. However, we now have a diverse portfolio of assets that are better positioned to both serve our customers and withstand these difficult market conditions and with approximately 70% of our business located out of Canada. We are also able to mitigate some of the impacts of the punishing Duty environment we are currently facing.

While we expect the economic uncertainty is likely to persist in the near term can for is well positioned to navigate these turbulent times. And importantly, our balance sheet remains strong, and with over 1.2 billion dollars of available liquidity, we have significant financial flexibility to withstand current market conditions. While also pursuing opportunistic, strategic Investments at the bottom of the cycle. I'd now like to turn it over to Stephen to provide an overview of cam for Paul.

Stephen Mackie: Thanks, Susan. Good morning, everyone. Canfor Pulp continues to be impacted by challenging global pulp markets with elevated inventories and weak demand weighing on our financial results in Q3. While our paper business continued to perform well, we also experienced subdued demand for bleached kraft paper. With challenging market fundamentals and current economic uncertainty, Canfor Pulp continues to focus on achieving targeted cost reductions and improving our operating performance. We've made progress on several operating initiatives in recent quarters, including sourcing additional fiber supply to support our current operating footprint, enhancing reliability and productivity, and improving our cost structure. Notwithstanding recent operational improvements, results in Q4 will continue to reflect the impact of weak global pulp markets, and results will also be impacted by a scheduled maintenance outage at Northwood.

Stephen Mackie: This outage was recently completed. The Northwood operation is currently in the process of restarting. As a management team, we remain focused on mitigating the impacts of global trade and economic uncertainty as we closely manage factors within our control. Given the challenging financial position of Canfor Pulp, management has introduced additional cost-saving measures, working capital reductions, and the deferral of some capital expenditures in 2026 as we continue managing our financial covenants, debt levels, and available liquidity. I'll now turn it over to Pat to provide an overview of our financial results.

Susan and good morning, everyone k for Paul continues to be impacted by challenging, Global, pulp markets with elevated inventories and weak demand, Weighing on our financial results in the third quarter. While our paper business continued to perform. Well, we also experienced subdued demand for bleached craft paper with challenging Market, fundamentals and current economic uncertainty camp for pulp continues to focus on achieving, targeted cost reductions and improving our operating performance. We've made progress on several operating initiatives and recent quarters including sourcing additional fiber Supply to support our current operating footprint and enhancing reliability and productivity and improving our cost structure notwithstanding recent operational improvements results in the fourth quarter will continue to reflect the impact of weak Global pulp markets and results will also be impacted by a scheduled maintenance outage at Northwood. This outage was recently completed, and the Northwood operation is currently in the process of restarting

As a management team, we remain focused on mitigating, the impacts of global trade and economic uncertainty. As we closely managed factors within our control. Given the challenging financial position of camp for pulp management, it is has introduced additional cost-saving measures working capital reductions and the deferral of some Capital, spend expenditures in 2026 as we continue managing our financial covenants, debt, levels and available liquidity. I will now turn it over to Pat to provide an overview of our financial results.

Pat Elliott: Thanks, Stephen. Good morning, everyone. In my comments this morning, I'll speak to our Q3 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 loss of CAD 2 million in Q3, which was CAD 70 million lower than the prior quarter. These results reflect weak lumber market conditions, particularly for Southern Yellow Pine, in addition to seasonal downtime in Europe in the quarter. Notwithstanding current market conditions and the impact of elevated duties and tariffs, we've seen a notable improvement in our underlying cost structure in recent quarters.

Thanks Stephen. Good morning everyone. In my comments this morning, I'll speak to our third quarter of financial highlights. The summary of which is included in our overview slide, presentation located in the investor relations section of can force website.

In the third quarter, which was seventy million dollars lower than the prior quarter.

These results reflect weak Lumber market conditions, particularly for southern yellow. Pine. In addition, seasonal downtime, in Europe in the quarter.

Notwithstanding current market conditions and the impact of elevated, duties and tariffs. We've seen a notable improvement in our underlying cost structure in recent orders.

Pat Elliott: While markets are expected to remain challenging in the near term, our lumber platform is well-positioned to navigate the current market dynamics, supported by a solid balance sheet and actions taken in recent years to transform our operating platform. As Susan mentioned, during Q3, we completed the acquisition of three sawmills in Sweden for a total consideration of CAD 171 million, which included CAD 22 million of cash and CAD 44 million of non-cash net working capital. With the completion of this acquisition, diversification of our portfolio, and optimized sales strategy, approximately 15% of our production capacity is currently exposed to duties and tariffs.

While markets are expected to range challenging in the near term. Our lumber platform is well, positioned to navigate the current market dynamics. So, supported by a solid balance sheet and actions taken in recent years to transform our operating platform as Susan mentioned. During the third quarter, we completed the acquisition of 3 saw mills in Sweden for total consideration of 171 million, which included 22 million of cash and 44 million of non-cash. Networking Capital with the completion of this acquisition diversification of our portfolio and optimize sales strategy. Approximately 15% of our production capacity is currently exposed to duties and tariffs

Pat Elliott: Turning to our pulp business, Canfor Pulp reported an adjusted EBITDA loss of CAD 2 million in the quarter, which was CAD 9 million lower than the prior quarter, reflecting the impact of lower pulp and paper sales realizations, which more than offset a modest reduction in pulp manufacturing costs and improved productivity. Canfor Pulp ended Q3 with net debt of CAD 89 million and CAD 64 million of available liquidity. While Canfor, excluding Canfor Pulp and the duty loan, which we completed in 2024, ended Q3 with net debt of approximately CAD 247 million and available liquidity of CAD 1.2 billion. On a consolidated basis, capital expenditures were approximately CAD 40 million in Q3, of which CAD 4 million was for Canfor Pulp.

turning to our pulp business camp for pulp reported and adjusted ebit to loss of million dollars in the quarter, which is $9 million lower than the prior quarter, reflecting the impact of lower Pulp and Paper sales realizations, which more than offset, a modest reduction in Pulp manufacturing costs and improved productivity.

Can for pulp ended the third quarter with net debt of 89 million and 64 million of available liquidity. While can for excluding can for pulp and the duty loan, which we completed. In 2024 ended the third quarter with net debt of approximately 247 million and available liquidity of 1.2 billion dollars.

On a Consolidated basis. Capital expenditures were approximately $0 million in the third quarter of which 4 million was forecasted for pulp.

Pat Elliott: We anticipate capital spend of approximately CAD 240 million in our lumber business for 2025, with approximately CAD 45 million remaining to be spent in the Q4. For Canfor Pulp, we anticipate capital spend, including capitalized maintenance, of approximately CAD 45 million in 2025. Of that, CAD 27 million remains in the Q4. As Stephen mentioned, given current pulp market conditions, operational downtime at Northwood due to its scheduled maintenance and remaining capital spend in the Q4, Canfor Pulp has implemented several cost saving measures to improve its financial position. We have noted in our financial statements the material uncertainty that exists in the current business, given the significant debt load, remaining capital spend for the year and market conditions. As we have disclosed, we are in active negotiations with our lenders around additional covenant relief.

We anticipate Capital spend of approximately 240 million in our lumber business. For 2025, with approximately 45 million remaining to be spent in the fourth quarter.

For camp for pulp, we anticipate Capital spend, including capitalized maintenance of approximately 45 million in 2025, of that 27 million remains in the fourth quarter. As Stephen mentioned given current pulse market conditions, operational downtime at Northwood due to its scheduled maintenance and remaining Capital spend in the fourth quarter camp for pulp is implemented several, cost-saving measures to improve its financial position.

We have noted in our financial statements, the material uncertainty that exists in the current business, given the significant debt load remaining Capital, spend for the year and market conditions. As we have disclosed, we are inactive negotiations with our lenders around the additional Covenant relief.

Pat Elliott: Looking ahead to 2026, we anticipate capital spend of approximately CAD 175 million in our lumber business and approximately CAD 35 million for Canfor Pulp, including capitalized maintenance. In addition, we anticipate Canfor will continue to allocate a modest amount of capital to opportunistically repurchase shares throughout the year under its Normal Course Issuer Bid. With that, Constantine, we're ready to take questions from analysts.

Looking ahead to 2026, we anticipate Capital, spend of approximately 175 million in our lumber business.

And approximately 35 million for can for a call including capitalized maintenance. In addition, we anticipate camper will continue to allocate a modest amount of capital to opportunistically repurchase shares throughout the year under its normal course issue bit.

Um, and with that Constantine, we're ready to take questions from Alan.

Thank you.

Operator: Thank you. We will now take questions from financial analysts. If you have a question, please press star one on your telephone keypad. If you are using a speakerphone, please lift your receiver and then press star one. If at any time you wish to cancel your question, please press star two. Please press star one now if you have a question. There will be a brief pause while participants register for questions. Your first question comes from the line of Ketan Mamtora from BMO. Please go ahead.

We will know take questions from Financial analysts. If you have a question, please press star 1 on your telephone keypad,

If you're using a speaker-phone, please lift your receiver and then press star 1.

If at any time you wish to cancel your question, please press star 2.

Please press star 1. Now, if you have a question, there will be a brief pause while participants register for questions.

Your first question comes from the line of K. Tim Moura from BMO. Please go ahead.

Ketan Mamtora: Thank you. Thanks for taking my question. Maybe to start with, can you talk a little bit about sort of European performance in Q3? If I'm reading this correctly, to me, it seemed like there was an EBITDA loss in Europe in Q3. Can you just talk about some of the sort of the big moving pieces there?

Uh, thank you and uh, thanks for taking my question. Uh, maybe to start with. Can you talk a little bit about um, sort of the European uh, performance in Q3? If I'm reading this correctly. To me, it seemed like there was an ibitta lost in in Europe, in Q3. Can you just talk about some of the sort of the big moving pieces there?

Pat Elliott: Sure, Ketan. It's Pat. Thanks for the question. Yeah, you're right. We've had, you know, great performance in Europe the whole time since we've owned them back in 2019, so it's a little surprising to see the situation. I would note that there's an inventory write-down in Vida, which is about CAD 9 of the CAD 10 million. It's the vast majority. Your point is correct. We're continuing to see log cost pressure in Europe. We think that's gonna moderate as we move into next year, but it has been significant over the last number of quarters. I think additionally, we've seen inventory levels in Europe building, and pricing as a result, has been, you know, depressed. I think the operating conditions in Europe are the most challenging we've seen since we've owned Vida.

Pat Elliott: You know, we continue to be encouraged by how well they perform on a relative basis. We think as we move into next year and we see some of the downtime that's happening start to take hold, we'll see better results. You're right, this is sort of a first of a kind since we've owned Vida.

Next year and we see some of that downtime that's happening. Start to take. Hold, we'll we'll see better results but but you're right. This is sort of a first of a kind since we've only been

Ketan Mamtora: That's right. I was looking at my model, and I don't think I've seen, like, a negative EBITDA, so got it. Okay. When do you expect sort of things to start getting better in Europe, Pat?

In that site, I was looking at my model and I don't think I've seen like a negative with that. So got it. Okay. Um, so

As when do you expect sort of things to start getting better? Um, in in Europe hat?

Pat Elliott: Well, I think it's a global story, right, Ketan? I mean, I think that we're definitely seeing some retrenchment in Europe, and the shipments into North America have, you know, declined somewhat, certainly since the peaks. I think they're trending kind of at 2.5 billion board feet. So it's really going to be a question of how quickly that inventory can be run down. I think as in North America, we're definitely hearing about lots of downtime, not so many kind of big announcements, but we definitely know that downtime is being taken. I think as we move into, you know, certainly we're more, like, into 2026 than in the Q4 here, you know, we think things will rebalance and we'll start to see improving conditions.

Pat Elliott: On the log side, we're definitely seeing that stop rising, which is an encouraging sign, and the trend is definitely down. Of course, that takes a number of months to work through our system.

Yeah, well I think it's a it's a it's a global story, right? Kate and I mean, I think that we're definitely seeing some retrenchment in Europe and and the shipments into North America have, you know, declined somewhat certainly since the Peaks I think they're trending kind of at 2 and a half billion board feet. Um and so it's really going to be a question of how quickly that inventory can be run down. And I think as in North America we're definitely hearing about lots of downtime, not so many kind of big announcements, but we definitely know that downtown is being taken. And so, I, I think as we move into, you know, certainly we're more like into 2026 than in the fourth quarter here. Um, you know, we think things will rebalance and we'll start to see improving conditions and on the log side. Um, we're definitely seeing that stopped Rising which is an encouraging sign and and the trend is definitely down, but of course that takes a number of months to work through our system.

Ketan Mamtora: Got it. Order of magnitude, what kind of log inflation are we talking about here in Europe, Pat?

Pocket and order of magnitude. What, what, what kind of log inflation. Are we talking about here in Europe that?

Pat Elliott: Well, over the course of the last number of quarters, it's been 30%, 40%. I mean, it's been significant. That's really not sustainable, and that's why we're starting to see it turn the other way.

Uh well over the course of the the last number of orders. It's been uh 30 40%. I mean it's been significant. Um and so that that's really not stable and that's why we're starting to see it turn the other way.

Ketan Mamtora: Understood. Just switching to North America, can you just give us sort of your approach to, you know, managing production here over the next, I don't know, couple of quarters? You know, one is of course the seasonal component in Q4, but just cyclically as well, things seem to be a little slow. Can you just talk about sort of what trends you are seeing here into October and your approach to managing production?

Understood. Um and then just switching to uh to North America. Can you just give us sort of your approach to um you know managing production here over the next. I don't know couple of quarters you know, 1 is of course the seasonal components uh in in Q4 but just technically as well, things seem to be a little slow. So can you just talk about sort of what trends you are seeing here into October and, and your approach to managing production?

Pat Elliott: Sure, Ketan, it's Stephen here. Yeah, with respect to the Q4 production levels, you know, our intent is to run our facilities. We have, as you know, we've made a number of difficult decisions and really worked hard to optimize our operating portfolio across North America over the last several years, including the recent closures of our Estill and Darlington facilities in South Carolina this past quarter, which removed about 350 million board feet. We're comfortable with where we are. We've got a solid asset base, competitive facilities, and our intent is to operate across North America. I think you can expect to see that through Q4 and into next year. Now, of course, we're always continuously assessing the situation relative to demand and pricing levels, but our intent is to run.

Sure, Kaden, it's Stephen here. Um, yeah, we're in with respect to the Q4 production levels, you know, our our intent is to run our facilities. We have as you know, we've made a number of uh difficult decisions and really worked hard to optimize our operating portfolio across North America over the last several years, including the recent closures of our S1 Darlington facilities and South Carolina, this past quarter which were moved about 350 million more feet. So we're comfortable with where we are. We've got a solid asset base, uh, competitive facilities. And our intent is to operate across, uh, across North America. So I think you

Expect to see that through Q4 and into next year. Now, of course we're always uh continuously assessing the situation relative to demand and pricing levels but our but our intent is to run.

Your next question comes from the line of Sean Stewart from TD Cowen. Please go ahead.

Operator: Your next question comes from the line of Sean Steuart from TD Cowen. Please go ahead.

Thanks. Hi everyone. Um, first question is on

Sean Steuart: Thanks. Hi, everyone. Good morning, everyone. First question on Canfor Pulp. If you don't get waivers from the lenders, can you give us the path forward for Canfor Pulp as a standalone entity? You know, how might this play out, I suppose, over the next few quarters?

Good, good. Good morning everyone. Um, first question on can for pulp if you don't get waivers from the lenders, can you give us?

The path forward for.

Stanford pulp as a standalone entity. Um, you know how might this play out? I suppose over the next few quarters.

Pat Elliott: Sean, that feels like a question for me. It's Pat. Certainly, hard to, you know, speculating here is a bit dangerous. What I would say is that Stephen mentioned, I mentioned we've got, you know, significant, cash and margin improvement program going inside the business. You know, we are certainly not in a place from a liquidity point of view that feels comfortable, but we are really working to do everything we can to kinda get through the near-term challenge that we're in, which is really the market conditions. You know, I think if we look at going forward, I'm not sure we have prices rocketing up, but certainly the trendline is for improving prices and with sort of some, you know, decent operational performance and improving prices, it puts us in a better position.

Uh, Sean that feels a question for me. It's Pat. Um certainly, uh, hard to, you know. Speculating here is a bit dangerous. So, what I would say is that Stephen mentioned I mentioned, we're we've got, you know, significant, uh, cash and margin Improvement program, going inside the business. Um, you know, we are certainly not in a place from a liquidity point of view that feels comfortable, but we are really working to do everything we can to kind of get through. Um, the near-term challenge that we're in, which is really the market conditions. And, you know, I think if we look at going forward, I'm not sure we have prices rocketing up, but certainly, the trend line is for improving prices. And with sort of some, you know, decent operational performance and improving prices that puts us in a better position. So we're just we're tight.

Pat Elliott: We're tighter than we wanna be, and that's why we've kinda gotta go back and deal with our lenders here, particularly at the end of the year. I think that, you know, we'll just have to see how things play out because it'll be very dependent on how markets perform over the next number of quarters.

Than we want to be. And that's why we've kind of got to go back and deal with our lenders here, particularly at the end of the year. But, um, I think that, you know, we'll, we'll just have to see how things play out because it'll be very dependent on how markets performed over the next number of quarters.

Okay, understood

Sean Steuart: Okay. Understood. second question is on your North American lumber operations this quarter. your price realizations actually surprised to the upside versus what we were expecting, and I'm hoping you can sort of connect some dots. Your shipments skewed more heavily to the US South this quarter than they did in Q2, which all else equal I would think would hurt your price realizations. Any context you can give on mix this quarter, certain dimensions outperforming others? Can you explain that at all?

Um second question is on your your North American, Lumber operations, this quarter um the price realizations, actually surprised to the upside versus what we were expecting. And

Any context, you can give on mix this quarter. Um, certain Dimensions, outperforming others. Um, can you explain that at all?

Pat Elliott: Yeah. Like, I think, Sean. Without Kevin here, it's a bit dangerous for the finance guy to talk about marketing. We do have a broader, you know, sort of, go-to-market strategy that, you know, in how we ship to different jurisdictions and the widths that we produce. With the new, kind of, new and improved mills that we have, we have much more flexibility to be, I would say, a bit more dynamic about that, and we've been able to sort of optimize our profile. I think additionally, you know, some of the products that we produce, in BC and Alberta are maybe of a higher quality than some of the mills that were further north, that were more of a call it a standardized profile.

Um yeah, like I think Sean there's some and without Kevin here it's a bit dangerous for the finance guy to talk about marketing. But um, you know, the the the we do have a broader you know, sort of uh go to market strategy that, you know, and how we ship to different jurisdictions and the wits that we produce, um, with the new kind of new and improved Mills that we have, we have much more flexibility to be. I would say a bit more Dynamic about that and we've been able to serve optimize our profile. I think Additionally you know some of the products that we produce uh in BC and Alberta are maybe of a higher quality than some of the Mills that were further north um that were more of a Call of a standardized profile. So I think it's really

Pat Elliott: I think it's really a little bit of the fruition of all of the changes that we made in our production footprint over the last, you know, number of years, kinda coming together. Particularly in tougher markets, kind of the opportunity to outperform when you have some of that higher value or you're a little more dynamic is, I think, is pretty positive. I appreciate you noticing it 'cause it's certainly something we're working on. Obviously embedded in that is a bit of our own sort of formula to go to market that we'd sort of hesitate to get into beyond that.

A little bit of the fruition of all of the changes that we made in our in our production footprint, over the last, you know, number of years, uh, kind of coming together and particularly, in tougher markets, kind of the opportunity to outperform when you have some of that higher value, or you're a little more dynamic because I think is, is pretty positive. And so, I appreciate you noticing it because it's certainly something we're working on. But, but obviously embedded in that is a bit of our own, sort of, formula go to market, that we'd sort of hesitate to get into beyond that.

Operator: Ladies and gentlemen, we will be taking one question and one follow-up per participant. If you have any follow-up questions, please feel free to rejoin the queue. Your next question comes from the line of Ben Isaacson from Scotiabank. Please go ahead.

Ladies and gentlemen, we will be taking 1 question and 1 follow-up per participants. If you have any follow-up questions, please feel free to rejoin the cube.

Your next question comes from the line of Ben isacson from Scotia Bank. Please go ahead.

Ben Isaacson: Good morning, thank you very much for taking my questions. I just have two of them. Susan or Pat, I was hoping you could spend a little bit of time just talking about Canfor's portfolio diversification, particularly in Europe. You talked a little bit. Maybe I'll phrase it this way: How disconnected or interconnected is the European business from your North American portfolio? Is the weakness in Europe coincidental to the weakness in the US, or are these just global commodities and that's having an impact all over?

Good morning and thank you very much for taking my questions. I just have 2 of them. Um, Susan or Pat. I was hoping you could spend a little bit of time just talking about can force portfolio diversification particularly in Europe. Why is the Outlook? I mean you you you talked a little bit um or maybe I'll phrase it this way, how disconnected or interconnected is the European business from your North American portfolio. Um I is the weakness in Europe coincidental to the weakness in the US or are these just Global Commodities and and that's having an impact all over

Pat Elliott: Thanks, Ben. I mean, we see weaknesses in markets across the globe. I think there's a lot of uncertainty. I don't have to sort of tell you that. It's a very volatile environment right now, we're seeing that in North America and also in Europe. I think the, you know, for us, the European piece is a business. That business has a lot of market optionality. Of course, we operate in Sweden, but we have access to many, many markets in Europe, Middle East, North Africa, and Australia. We've got a lot of options for our products. When, you know, one market is tough, we can move to other markets. There's a lot of optionality and flexibility. We've got very high-quality fiber there.

Susan Yurkovich: Thanks, Ben. I mean, we see weaknesses in markets across the globe. I think there's a lot of uncertainty. I don't have to sort of tell you that. It's a very volatile environment right now, we're seeing that in North America and also in Europe. I think the, you know, for us, the European piece is a business. That business has a lot of market optionality. Of course, we operate in Sweden, but we have access to many, many markets in Europe, Middle East, North Africa, and Australia. We've got a lot of options for our products. When, you know, one market is tough, we can move to other markets. There's a lot of optionality and flexibility. We've got very high-quality fiber there.

So, thanks Ben. I'm I mean there, there is. We see weaknesses in markets across the globe. I think there's a lot of uncertainty. Uh, I don't have to start it up to tell you that there. It's a, it's a very volatile environment right now. And so we're seeing that in North America and also in Europe I think the, you know, for us the European piece is uh, a kind. It's a business that business has a lot of market optionality. So, of course, we operate in Sweden, but we have access to many many markets in Europe, Middle East, North Africa, and Australia. So we've got a lot of

Pat Elliott: We have, we've had a very good business. I mean, you know, we've talked about the fact that this is an anomaly.

Susan Yurkovich: We have, we've had a very good business. I mean, you know, we've talked about the fact that this is an anomaly.

Susan Yurkovich: Normally the European business has been very, very steady and we expect it to come back into that place. That's why we have added to our portfolio with the Hedin assets and was at the new mills a few weeks ago, five weeks ago, I guess now. Those are really good assets to add to our portfolio. We like the fiber quality is phenomenal, and we've acquired some really capable operators there that share a very similar culture to Vida. We're very happy with that and happy to be able to have that in our portfolio.

Option, uh, options for our products. So when, you know 1 market is tough, we can we can move to other, uh, markets. And so, there's a lot of optionality and flexibility. We've got very high quality fiber there, um, and that. And we have, um, we've had a very good business. I mean, you know, we've talked about the fact that, um, this is an anomaly. Uh, normally the European business has been very, very steady and we expect it to come back into that place. It's why we have added to our Port portfolio with the hide assets and was that the the new Mills a few weeks ago, 5 weeks ago, I guess. Now, um, those are really good assets to add to our portfolio. Uh we like the fiber quality is phenomenal and uh we've got really good. We've acquired some really capable operators there that share a very similar culture to VA. So we're very happy with that and happy to be able to have that in our portfolio.

Ben Isaacson: Great. Thank you, Susan. Then just a follow-up question for you, and perhaps you can think out loud on this, and it's not related to Canfor or any company at all. It, it's clear to me that all management teams are controlling their controllables as best they can, but obviously external market forces are still a meaningful overhang. In your view, does the industry need to see meaningful sector consolidation? Is it possible that lumber pricing power can be taken back or at least improved, even if this is a 5, 10-year process? In other words, philosophically speaking, is an industry consolidation path inevitable? Thank you.

Great. Thank you Susan and then just just to follow up question for you. Um and perhaps you can think out loud on this and it it's not related to camp for or any company at all. But it it's it's clear to me that all management teams are controlling their controllables as best they can. But obviously external Market forces are still a meaningful overhang

So in your view, does the industry need to see meaningful Vector consolidation and and is it possible that lumber pricing power can be taken back, or at least improved even if this is a 5 10 year process, in other words philosophically speaking is an industry consolidation path. Inevitable

well, that's a very

Susan Yurkovich: Well, that's a very big question, Ben. Yes, there's a lot of operators in our space, and, you know, I have my own views about what should or shouldn't happen, but I think what you hit the nail on the head, we are focusing on the things that we can control. We're looking at our own portfolio. We want to have, we are working to a place where we have very strong assets that are able to withstand all kinds of market volatility. I think you're seeing, you know, that's been a change that's been occurring over a number of years, but I think you're starting to see that play out. What it, you know, can we consolidate to the place where we can have more impact on price?

Susan Yurkovich: Perhaps, but that's a long journey. I don't know how many operate lumber manufacturers there are in the US, but I bet there's 500 plus. That would be a very long journey. I think, you know, what we are really focused on is our portfolio, where we want to position ourselves and the growth opportunities that we see.

Volatility. And I think you're seeing, um, you know, that's that's been a change. That's been occurring over a number of years, but I think you're starting to see that play out. Um, what did you know, can we consolidate to the place where we can have more impact on price perhaps? But that's a long journey. I don't know how many operate Lumber manufacturers there are in the US, but I bet there's 500 plus. Um, so that would be a very long journey. Um, so I think, you know what we are really focused. On is our portfolio where we, where we see want to um, position ourselves and uh, the growth opportunities that we see,

Operator: Your next question is from the line of Hamir Patel from CIBC. Please go ahead.

Your next question is from the line of hamir. Patel from cidc, please go ahead.

Hamir Patel: Hi, good morning. Susan, I imagine your Alberta operations are always in the black. Just given the large, you know, extended losses sawmills are experiencing here in BC and the greater duty headwinds, Canfor is contending with, how do you think about whether you'd be better off just shutting all your BC mills until, you know, prices move above break even?

Hi, good morning, Susan. I imagine your Alberto operations are are always in the black but just given the large, you know, extended losses, Sawmills or or experiencing here in BC and and the greater Duty headwinds

Uh, can force contending with how do you think about whether you'd be better off? Just shutting all your BC Mills until, you know, prices move above break, even

Susan Yurkovich: Well, Look, as you know, we've made a lot of changes to our BC portfolio. You know, those are really tough changes for us. We are a BC-based company. We've got a long history here, and we've made a dramatic change here to try and optimize our portfolio. What we have in our portfolio now, we like. We've got, you know, we're in the Kootenays, largely. We've, of course, got our Prince George sawmill, which is really useful in supporting our pulp business, and is a good facility. We also have our mills in the Kootenays, which has a different fiber mix and allows us to make a number of products that our customers are looking for.

Uh, well we look, we've as you know, we've made a lot of changes to our BC portfolio and you know, those are really tough changes for us. We are a BC based company, we've got long. Uh, we've got a long history here and we've made a lot of. We've made a dramatic change here to try and optimize our portfolio. What we have in our portfolio. Now, we

Susan Yurkovich: We have greater kind of optionality and flexibility there as well. We like Alberta. We've made changes. We like the portfolio we have right now. We don't have any intention to make further changes at this time.

Like, um, we've got, you know, the we're in the cuties largely with, of course, got our printer Sawmill, um, which is really, uh, useful in supporting our pulp business. Um, and, and is a good facility, but we also have our Mills in the Cuties, which has a different fiber mix and allows us to make a number of products that our customers, uh, are looking for. And so we have uh, greater kind of optionality and flexibility there as well. Uh, we like Alberta we've made changes, um, and we like the portfolio. We have right now, so we don't have uh, any intention to to make further changes at this time.

Hamir Patel: Okay. Fair enough. Pat, are you able to kind of comment on maybe how your operating rates have been faring this year, Alberta versus BC?

Okay, fair enough. And how are you able to kind of comment on maybe how the your operating rates have been fairing this year, Alberta versus BC?

Susan Yurkovich: You wanna-

Stephen Mackie: Oh, yeah.

Susan Yurkovich: Do you wanna go ahead?

Stephen Mackie: Yeah. Hey. Hi, Amir and Stephen. The all of the mills across our operations, actually, I would say broadly across North America, we're pleased with the progress. Susan referenced the modernization capital that we've done down in the US South. Our facilities are running well down in the US. I know your questions about BC and Alberta, and we're running well in a Canadian context as well. The mills are doing a great job. The teams out there, our folks are controlling what they can control, and we're happy with the operating performance across our suite of assets.

Stephen Mackie: Yeah. Hey. Hi, Hamir and Stephen. The all of the mills across our operations, actually, I would say broadly across North America, we're pleased with the progress. Susan referenced the modernization capital that we've done down in the US South. Our facilities are running well down in the US. I know your questions about BC and Alberta, and we're running well in a Canadian context as well. The mills are doing a great job. The teams out there, our folks are controlling what they can control, and we're happy with the operating performance across our suite of assets.

Stephen Mackie: Again, we feel pretty good about, not about the market conditions and obviously the challenges that we're facing from a financial perspective, but the teams are performing well, and we know how tough it is out there for us and how tough it will be out there for others as well, given our current operating rates and how well our teams are performing.

Oh yeah, just want to go ahead. Yeah. Hey, hey. Um, Amir, it's Stephen. Yeah, the, uh, all of the Mills across our operations, actually, I would say broadly across North America. Where, again, we're pleased with the progress. Susan referenced the modernization capital that we've done down in the US, South, our facilities are running. Well, down in the US and I know your questions about BC and Alberta and and we're running well in a Canadian context as well. The Mills are doing a great job, the teams out, there are folks are controlling what they can control and we're happy with the per operating performance across our suite of assets. So again, we feel pretty good about uh not about the market conditions and obviously the challenges that we're facing from a financial perspective but the teams

They're performing well and uh, we know how tough it is out there for us and, and how tough it will be out there for others as well. Given our current operating rates and how well our teams are performing.

Operator: Ladies and gentlemen, as a reminder, if you would like to ask a question, please press star then the number 1 on your touch tone phone. If you are using a speaker phone, please make sure to lift your handset before pressing any case. Your next question comes from the line of Matthew McKellar from RBC Capital Markets. Please go ahead.

Ladies and gentlemen is a reminder. If you would like to ask a question, please press star. Then the number 1 on your touchtone phone. If you are using a speaker-phone please make sure to lift your handset before pressing any case.

Your next question comes from the line of Matthew McCullough from RBC Capital markets, please go ahead.

Susan Yurkovich: Good morning. Thanks for taking my questions. First, it sounds like you're still quite positive on the European opportunity. Do you see further growth in Sweden as the Nordic countries more broadly over the medium term as continuing to be attractive here? If so, could you maybe remind us what your checklist would be for any further acquisitions? Thanks. Yeah. I mean, we like Europe, we are continuing to look. I would say that right now we are razor-focused on integrating the assets that we just acquired from Karl Hedin, we've got lots of work underway to do that. We're always looking around, whether it's in Sweden or elsewhere in the Nordic countries, we will continue to do that.

Matthew McKellar: Good morning. Thanks for taking my questions. First, it sounds like you're still quite positive on the European opportunity. Do you see further growth in Sweden as the Nordic countries more broadly over the medium term as continuing to be attractive here? If so, could you maybe remind us what your checklist would be for any further acquisitions? Thanks.

Good morning. Thanks for taking my question. Uh first it sounds like there's still quite positive on the European opportunity. Uh do you see further growth in Sweden of the Nordic countries more broadly over the medium term is continuing to be attractive here and if so could you maybe remind us what your checklist would be uh for any further Acquisitions. Thanks.

Susan Yurkovich: Yeah. I mean, we like Europe, we are continuing to look. I would say that right now we are razor-focused on integrating the assets that we just acquired from Karl Hedin, we've got lots of work underway to do that. We're always looking around, whether it's in Sweden or elsewhere in the Nordic countries, we will continue to do that.

Susan Yurkovich: Well, as we do in North America, and we're fortunate to be able to do that given the strength of our balance sheet.

Uh, yeah, I mean, we, we like, uh, Europe and we are continuing to, to look. Um, I would say that right now. We are, uh, razor focused on integrating the, the assets that we've just acquired from Carl Haden and we've got lots of work underway to do that. Um, we're always looking around, um, whether it's in, uh, Sweden or elsewhere in the in the Nordic countries, um, and we will continue to do that and, and fortunately, well as we do in North America and and we're fortunate to be able to do that given the strength of our balance sheet.

Thanks very much. And that just 1 high level question market conditions in Pulp.

Matthew McKellar: Thanks very much. Just one high level question on market conditions in pulp. In your view, what is the pathway from here to a healthier pulp market look like, either the near term or the medium term? How do you think about how conditions improve from here? Thanks very much.

In your view. What is the pathway from here to a healthier pulse markets? Look like um either the near-term or the medium-term, how do you think about how conditions improve from here? Thanks very much.

Brian Yuen: Good morning, Matthew. Thank you. It's Brian here. Well, as Stephen highlighted earlier, we see markets to remain challenged for the balance of the year. Having just returned from overseas, seeing our customers, at the end of the day, given all the economic uncertainty, the situation right now, for the remainder of the year, we see will remain unchanged. At the end of the day, there's just simply too much capacity, supply in the system. We all know at current price levels, they are not sustainable. We need to see, I guess, material reduction on the supply side to see a change in the market conditions.

Customers at the end of the day, given all the economic uncertainty, the the situation right now uh, for the remainder of the year we see will remain um, unchanged at the end of the day, there's just simply too much capacity uh Supply in in the system. Um and we all know at current price levels, they are not sustainable. So uh we need to see um I guess material reduction on the supply side to to see a change in the market conditions.

Matthew McKellar: Okay, thanks. Do you have a sense of the magnitude of response you'd be looking for compared to where we are today that would maybe catalyze that stronger environment?

Okay, thanks. And do you have a sense of the the magnitude of response to be looking for compared to where we are today? It would maybe catalyze that stronger environment.

Brian Yuen: Yeah, for sure. I mean, if we look at the stats right now, rough and dirty in terms of producer stocks on the softwood side, we guesstimate there's roughly about half a million tons of excess inventory in the system. If you add on top of that some of the, I guess, data that we're picking up out of China, the domestic ramp up of softwood kraft, anywhere between a million to a million and a half tons, I'd have to say you're looking at a million and a half tons out of the system. Unless there's a material uptick in demand, there needs to be a million, a million and a half tons of supply that has to be taken out of the system.

Yeah, for sure. I mean if we look at the stats right now rough and dirty in terms of producer stocks on the softwood side we guesstimate there's roughly about half a million tons of excess inventory in the system if you if you add on top of that. Some of the I guess um data that that we're picking up by the China, the domestic ramp up of softwood Kraft anywhere between a million to a million and a half tons, I'd have to say you're looking at a million and a half tons out of the system for, unless there's a material uptick in demand, there needs to be a million, a million and a half, tons of Supply that has to be taken out of the system.

Thanks very much. I'll turn it back.

Matthew McKellar: Thanks very much. I'll turn it back.

Operator: Thank you. There are no further questions at this time. I will now turn the call over back to Susan Yurkovich for closing comments. Please go ahead.

Thank you. There are no further questions at this time. I will now turn the call over back to Susan, your cage for closing comments. Please go ahead.

Susan Yurkovich: Thanks so much for joining us. We look forward to hearing from you next quarter. Thank you, operator.

Thanks so much for joining us, um, and we look forward to hearing from you next quarter.

Thank you, operator.

Operator: Ladies and gentlemen, this concludes today's conference call. Thank you very much for your participation. You may now disconnect.

Ladies and gentlemen, is this concludes today's conference call. Thank you very much for your participation. You may now disconnect

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