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, driven by higher shipments but offset by weaker sales mix, higher expenses, and increased duty rates.

• Net loss was $19.6 million in Q3 2024, compared to $17.4 million in Q3 2023, with ongoing macroeconomic headwinds impacting demand and pricing.

• For the first nine months of 2024, negative Adjusted EBITDA improved to $5.5 million from negative $28.7 million in the prior year, and net loss narrowed to $33.3 million from $55.8 million.

• U.S. Department of Commerce raised softwood lumber duty rates from 8% to 14.4%, effective 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

• Q3 2024 revenue was $241.7 million, up from $231.1 million in Q3 2023, driven by higher lumber and log shipments.

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

• Ended Q3 with liquidity of CAD 137 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.

• Cash provided by operating activities was $10.9 million in Q3 2024, compared to cash used of $14.1 million in Q3 2023, aided by a $22.6 million income tax refund.

Outlook and guidance

• 2024 total CapEx expected to be about CAD 35 million, with most spending on two new continuous dry kilns deferred to 2025.

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

• Anticipates 30 million board feet of lumber production curtailments in Q4, 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.