Western Forest Products (WEF) Q3 2024 earnings summary

Executive summary

• Adjusted EBITDA was negative $10.7 million in Q3 2024, improving from negative $11.6 million year-over-year, aided by higher shipments but offset by weaker sales mix, higher expenses, and increased duty rates.

• Reported a net loss of $19.6 million in Q3 2024, compared to $17.4 million in Q3 2023 and $5.7 million in Q2 2024.

• Revenue increased to $241.7 million, up from $231.1 million in Q3 2023 but down from $309.5 million in Q2 2024.

• U.S. Department of Commerce raised combined softwood lumber duty rates from 8% to 14.4%, effective August 19, 2024, until the next review in late 2025.

• Inventory at quarter-end included 71 million board feet of lumber and 793,000 cubic meters of logs.

Financial highlights

• Adjusted EBITDA margin was -4% in Q3 2024, compared to -5% in Q3 2023 and 3% in Q2 2024.

• Operating loss prior to restructuring was $24.4 million, compared to $25.8 million in Q3 2023.

• Loss per share, diluted, was $(0.06) in Q3 2024, compared to $(0.05) in Q3 2023.

• Ended Q3 with liquidity of CAD 137 million (USD $137.3 million) and a net debt-to-capitalization ratio of 13%.

• Export tax recovery was $1 million in Q3, down from $4.3 million in the same period last year.

Outlook and guidance

• 2024 capital expenditure is expected to be about CAD 35 million.

• Fourth quarter typically sees lower lumber consumption and higher harvest costs due to winter seasonality.

• Lumber production in BC sawmills to be reduced by 30 million board feet in Q4 2024, following a similar reduction in Q3, with ongoing alignment of production to market demand.

• Cedar demand and prices expected to remain stable; decking demand slowing seasonally; repair and renovation spending to improve gradually in 2025 but remain below recent peaks.

• Japan market faces weak demand and pricing due to housing starts and currency headwinds; China shows slight price improvement on lower inventories.