VANCOUVER, BC—(Marketwired – July 21, 2016) – West Fraser Timber Co. Ltd. reported earnings of $98 million or $1.22 basic earnings per share on sales of $1,111 million in the second quarter of 2016. These results compare with previous periods as shown in the table below.
Adjusted EBITDA, Adjusted earnings and Adjusted basic EPS as described in this News Release reflect the adjustments described in the tables referred to in the section titled “Non–IFRS Measures” on page 12 of our 2016 second quarter Management's Discussion & Analysis.
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($ millions except earnings per
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2016
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2015 Â Â
share (“EPS”))
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Q2
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Q1
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YTD
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Q2
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YTD
Sales
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1,111
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1,077
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2,188
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1,029
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2,043
Adjusted EBITDA1
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138
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130
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268
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72
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245
Operating earnings
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120
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79
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199
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18
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143
Earnings
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98
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42
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140
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14
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63
Basic EPS ($)
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1.22
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0.51
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1.72
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0.17
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0.76
Adjusted Earnings1
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64
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49
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113
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12
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111
Adjusted basic EPS ($)1
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0.80
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0.60
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1.40
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0.15
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1.32
 1.
In this News Release, reference is made to Adjusted EBITDA, Adjusted earnings and Adjusted EPS (collectively “these measures”). We believe that, in addition to earnings, these measures are useful performance indicators. None of these measures is a generally accepted earnings measure under International Financial Reporting Standards (“IFRS”) and none has a standardized meaning prescribed by IFRS. Investors are cautioned that none of these measures should be considered as an alternative to earnings, EPS or cash flow, as determined in accordance with IFRS. As there is no standardized method of calculating any of these measures, our method of calculating each of them may differ from the methods used by other entities and, accordingly, our use of any of these measures may not be directly comparable to similarly titled measures used by other entities.
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Operational Results
In the quarter our lumber operations generated operating earnings of $78 million (Q1–16 – $63 million) and Adjusted EBITDA of $113 million (Q1–16 – $100 million). Increased U.S. lumber prices and strong sales partially offset by a stronger Canadian dollar contributed to the improvement in earnings. Greater sawmill efficiency after the completion of a number of capital improvements contributed to increased production at several of our operations.
The panel segment, which includes plywood, LVL and MDF, generated operating earnings in the quarter of $18 million (Q1–16 – $12 million) and Adjusted EBITDA of $21 million (Q1–16 – $15 million). Improving plywood prices and increased shipments were the primary contributors to the improved earnings.
Our pulp & paper operations generated an operating loss of $5 million (Q1–16 – earnings of $5 million) and Adjusted EBITDA of $4 million (Q1–16 – $14 million). A stronger Canadian dollar was the main contributor to the reduced earnings.
Outlook
Our second quarter operating results affirm our expectation that we should exceed our 2015 lumber production by over 400 MMfbm. We expect to see continued gradual improvement in lumber prices as U.S. new home construction returns to average historical levels.
In the event that a softwood lumber agreement is not reached by mid–October we are prepared for the potential that the U.S. industry will petition the U.S. government to initiate trade action against Canadian softwood lumber imports to the U.S. Ted Seraphim, our President and CEO, said “We expect that our geographic diversification and investment of capital to modernize and improve the efficiency of our mills should substantially mitigate any negative effect of any trade action.”
Management's Discussion & Analysis (“MD&A”)
The Company's MD&A is available on the Company's website: www.westfraser.com and on the System for Electronic Document Analysis and Retrieval at www.sedar.com under the Company's profile.
The Company
West Fraser is a diversified wood products company producing lumber, LVL, MDF, plywood, pulp, newsprint, wood chips and energy with facilities in western Canada and the southern United States.
Forward–Looking Statements
This Report contains historical information, descriptions of current circumstances and statements about potential future developments. The latter, which are forward–looking statements and are included under the heading “Outlook”, are presented to provide reasonable guidance to the reader but their accuracy depends on a number of assumptions and is subject to various risks and uncertainties. Actual outcomes and results will depend on a number of factors that could affect the ability of the Company to execute its business plans, including those matters described in the 2015 annual Management's Discussion & Analysis under “Risks and Uncertainties”, and may differ materially from those anticipated or projected. Accordingly, readers should exercise caution in relying upon forward–looking statements and the Company undertakes no obligation to publicly revise them to reflect subsequent events or circumstances, except as required by applicable securities laws.
Conference Call
Investors are invited to listen to the quarterly conference call on Friday, July 22, 2016 at 8:30 a.m. Pacific Time (11:30 a.m. Eastern Time) by dialing 1–866–225–0198 (toll– free North America). The call may also be accessed through West Fraser's website at www.westfraser.com.
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West Fraser Timber Co. Ltd.
Condensed Consolidated Balance Sheets
(in millions of Canadian dollars, except where indicated – unaudited)
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June 30
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December 31
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2016
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2015
Assets
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Current assets
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Cash and short–term investments
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$
27
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$
13
Receivables
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333
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298
Income taxes receivable
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13
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11
Inventories (note 3)
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541
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631
Prepaid expenses
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30
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18
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944
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971
Property, plant and equipment
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1,599
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1,609
Timber licences
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560
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570
Goodwill and other intangibles
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363
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369
Other assets
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13
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36
Deferred income tax assets
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58
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80
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$
3,537
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$
3,635
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Liabilities
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Current liabilities
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Cheques issued in excess of funds on deposit
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$
36
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$
29
Operating loans (note 4)
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144
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178
Payables and accrued liabilities
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316
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351
Reforestation and decommissioning obligations
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47
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48
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543
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606
Long–term debt (note 4)
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395
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423
Other liabilities (note 5)
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416
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269
Deferred income tax liabilities
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162
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190
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1,516
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1,488
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Shareholders' Equity
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Share capital (note 7)
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560
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579
Accumulated other comprehensive earnings
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129
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164
Retained earnings
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1,332
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1,404
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2,021
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2,147
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$
3,537
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$
3,635
Number of Common shares and Class B Common shares outstanding at July 21, 2016 was 79,832,726.
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West Fraser Timber Co. Ltd.
Condensed Consolidated Statements of Changes in Shareholders' Equity
(in millions of Canadian dollars, except where indicated – unaudited)
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April 1 to June 30
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January 1 to June 30
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2016
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2015
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2016
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2015
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Share capital
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Balance – beginning of period
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$
571
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$
587
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$
579
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$
587
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Common share repurchases
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(11
)
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–
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(19
)
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–
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Balance – end of period
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$
560
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$
587
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$
560
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$
587
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Accumulated other comprehensive earnings
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Balance – beginning of period
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$
132
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$
106
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$
164
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$
55
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Translation gain (loss) on foreign operations
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(3
)
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(8
)
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(35
)
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43
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Balance – end of period
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$
129
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$
98
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$
129
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$
98
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Retained earnings
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Balance – beginning of period
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$
1,338
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$
1,385
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$
1,404
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$
1,387
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Actuarial gain (loss) on post–retirement benefits
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(45
)
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54
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(105
)
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9
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Common share repurchases
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Â
(53
)
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Â
–
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Â
Â
(95
)
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–
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Earnings for the period
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98
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14
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140
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63
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