Q220 Earnings Presentation€¦ · Q2 Earnings Presentation July 2020. 2 General: This presentation...
Transcript of Q220 Earnings Presentation€¦ · Q2 Earnings Presentation July 2020. 2 General: This presentation...
Q2 Earnings
Presentation
July 2020
22
General: This presentation and comments associated with it contains
historical information, descriptions of current circumstances and
statements about potential future developments and anticipated financial
results. Readers are cautioned that this presentation is qualified in its
entirety by reference to, and must be read in conjunction with, the
information contained in West Fraser Timber Co. Ltd.’s (WFT’s)
management’s discussion and analysis for the annual and interim periods
ended December 31, 2019, (Annual MD&A) and for the interim period
ended June 30, 2020 (Q2 MD&A), and the company’s annual audited and
interim financial statements for such periods available on SEDAR
(www.sedar.com). A person is not entitled to rely on parts of the
information contained in this presentation to the exclusion of others.
Forward-looking Statements: This presentation contains “forward-
looking statements” (including those under the headings Supply
Conditions and Summary) within the meaning of applicable securities
laws. Forward-looking statements, 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. In some
cases, forward-looking statements can be identified by the use of forward-
looking terminology such as “plans”, “targets”, “expects” or “does not
expect”, “an opportunity exists”, “outlook”, “prospects”, “strategy”,
“intends”, “believes”, or variations of such words and phrases or state that
certain actions, events or results “may”, “could”, “would”, “might”, “will”,
“will be taken”, “occur” or “be achieved”. In addition, any statements that
refer to expectations, intentions, projections or other characterizations of
future events or circumstances contain forward-looking information.
Statements containing forward-looking information are not historical facts
but instead represent management’s expectations, estimates and
projections regarding future events or circumstances. By their nature,
forward-looking statements involve numerous assumptions, inherent risks
and uncertainties, both general and specific, which contribute to the
possibility that the predictions, forecasts and other forward-looking
statements will not occur. Actual outcomes and results of these
statements will depend on a number of factors including those matters
described under “Risks and Uncertainties”, in our Annual MD&A and in
our Q1 MD&A and may differ materially from those anticipated or
projected. Reference should be made to the other factors discussed in
public filings with securities regulatory authorities.
.
Accordingly, readers should exercise caution in relying upon forward-
looking- statements and WFT undertakes no obligation to publicly
update or revise any forward-looking statements, whether written or
oral, to reflect subsequent events or circumstances except as required
by applicable securities laws.
Non-IFRS Measures: This presentation makes reference to certain
non-IFRS measures, such as EBITDA, Adjusted EBITDA and net debt
to capital ratio. Non-IFRS measures do not have a standardized
meaning prescribed by IFRS and are therefore unlikely to be
comparable to similar measures presented by others. For further
information regarding the use of non-IFRS measures please refer to the
“Non-IFRS Measures” section in the MD&A External Information:
Where this presentation quotes any information or statistics from any
external source, it should not be interpreted that WFT has adopted or
endorsed such information or statistics as being accurate. Some of the
information presented herein is based on or derived from statements by
third parties and has not been independently verified by or on behalf by
WFT, and no representation or warranty, express or implied, is made as
to, and no reliance should be placed on, the fairness, accuracy,
completeness or correctness of this information or any other information
or opinions contained herein.
Currency: In this presentation, all amounts are in Canadian dollars,
unless otherwise indicated.
Terminology: References in this presentation to “MMfbm” or “mmfbm”
mean million board feet, “SPF” means spruce-pine-fir and “SYP” means
southern yellow pine. For any other technical terms used in this
presentation, please see the Glossary of Industry Terms found in our
most recent Annual Report.
33
* Adjusted EBITDA is defined as operating earnings plus amortization, equity-based compensation, and export duties.
Consolidated Financial Results
$ Millions
Adjusted EBITDA Q2-20 Q1-20
Lumber $ 156 $ 106
Panels 20 8
Pulp & Paper 10 11
Corporate/Other (2) 2
Total $ 184 $ 127
Adjusted EBITDA
margin
14.40% 10.06%
$ Millions
Q2-20 Q1-20
Sales $ 1,276 $ 1,195
Cost and Expenses 1,193 1,182
Operating earnings 83 13
Finance Expense (13) (16)
Other 9 12
Earnings before Tax $ 67 $ 9
Tax recovery (provision) (19) 3
Net earnings $ 48 $ 12
Improved pricing and volume in lumber segment
44Q2 EBITDA Reconciliations
Improved pricing and costs over Q1
$ millions
Lumber EBITDA Reconciliation
Consolidated EBITDA Reconciliation
55Q2-20 versus Q1-20
$ millions unless
otherwise indicatedQ2 2020 Q1 2020 Change
Lumber Production (MMfbm) 1,424 1,501 (77) Temporary curtailments offset by increased productivity
Lumber Shipments (MMfbm) 1,591 1,426 165 Catch up from Q1 delays, increased export shipments
Adjusted EBITDA $184 $127 $57 Lumber price and cost benefits, insurance claim gain in panels
Cash flow from operations $439 ($122) $561Improved earnings, seasonal working capital liquidation and
income tax refunds
Capital Expenditure $60 $59 $1 Major projects on track
Net Debt
Net Debt to Capital
$939
28%
$1,325
33%
($386)
(5%)Debt paid down from operating cash flow
Cumulative duties on deposit US$ $436 $407 $29 Rates set to adjust in Q4 2020
Earnings and cash flow improved despite uncertain conditions
66Liquidity
Available liquidity improved to $800 million
Cash consists of cash and short-term investments less cheques issued in excess of funds on deposit.
77
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
$250
$260
$270
$280
$290
$300
$310
$320
$330
$340
Q117 Q217 Q317 Q417 Q118 Q218 Q318 Q418 Q119 Q219 Q319 Q419 Q120 Q220
Expenditures % change
Demand conditions
0
20
40
60
80
100
120
140
J F M A M J J A S O N D
M S
tart
s
U.S. Housing Starts (not seasonally adjusted)
2018 2019 2020
Seasonally adjusted:
2018: 1,250
2019: 1,290
Leading indicator of Remodeling Activity
$B
4 Q
tr M
ovin
g I
mpro
vem
ents
and R
epairs
4 Q
tr M
ovin
g r
ate
of
Change
Source: US Census Bureau Source: Harvard Joint Centre for Housing Studies
Source: Statistics Canada, US Census Source: PPPC
4.0
4.5
5.0
5.5
6.0
6.5
J F M A M J J A S O N D
MM
to
nn
es
World Chemical Pulp Shipments
2018 2019 2020
2018: 61.1
2019: 63.5
2020: 25.9 YTD0
100
200
300
400
500
600
J F M A M J J A S O N D
MM
fbm
North America Offshore Exports
2018 2019 2020
2018: 5,967
2019: 4,968
2020: 1,655 YTD
88U.S. Housing Situation
Supply deficit, aging stock
0
500
1,000
1,500
2,000
2,500
1959 1964 1969 1974 1979 1984 1989 1994 1999 2004 2009 2014 2019
Mill
ions
Source: U.S. Census, FEA and https://www.census.gov/construction/nrc/historical_data/index.html
1982 is the only year before 2008 with
fewer units than 1.2 million units
Supply of new U.S. housing (1968-2019)
27 27 29 29 30 31 31 32 34 35 37 39 40
20
30
40
50
1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017
Ye
ars
in
ag
e
US Housing Stock Age
A deficit in housing has accumulated over
the last 10+ years
Low levels of new construction has led to an
aging housing stock
99Favourable Demographics
-
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
1 6 11 16 21 26 31 36 41 46 51 56 61 66 71 76 81 86 91 96
MIL
LIO
NS
US Population by Age (at July 1, 2020)
Source: FEA and https://www.census.gov/data/tables/time-series/demo/popest/2010s-national-detail.html
29-30 year-olds are the
largest age groups in 2020
1010Supply conditions
Source: FEA
Lumber supply constraints
Source: Statistics Canada, US Census, FEA
0
50
100
150
200
250
300
350
400
450
500
Q1-18 Q2-18 Q3-18 Q4-18 Q1-19 Q2-19 Q3-19 Q4-19 Q1-20 Q2-20
MM
fbm
North America Offshore Imports
2018: 1,5482019: 1,508
0
1
2
3
4
5
6
0
5
10
15
20
Q1-18 Q2-18 Q3-18 Q4-18 Q1-19 Q2-19 Q3-19 Q4-19 Q1-20 Q2-20
Bill
ion B
oard
Fe
et
Bill
ion B
oard
Fe
et
North America Lumber Supply (Production)
North America BC US South US West Coast East of Rockies
R-axis
1111McDavid, Florida Update
Project Cost: $23 million USD
Project Scope: Replace the existing primary
breakdown line with new
technology capable of operating
50% faster than the previous
system with a reduced
headcount and improved
recovery and grade mix.
Project Timeline: The project was commissioned
in Q4 2019 with a month of
downtime required to integrate
the new equipment into the
existing mill. The project was
completed on time and on
budget.
1212McDavid, Florida Production (mfbm / hour)
- Achieved targeted production per hour
- Continuing to improve recovery
- Premium grade improved 64%,
2&btr % continues to rise
63% increase
Manufacturing Costs ($/mfbm)
- Per Unit Costs continue to decline with
improved production
- Startup costs have been spent
Human Resources (hourly headcount)
- Achieved headcount reduction
- Productivity improvement of 60%
- Improved working conditions
19% decrease
10% decrease
1313Summary
✓ Lumber and panel markets came
back faster than expected
✓ Supply chain inventory position
taking time to rebuild
✓ Liquidity substantially
improved, leverage reduced
✕ Lower printing and writing paper
demand for pulp creating
pressure on pulp markets
✓ Continue to operationalize the
benefits of prior year capital
✓ Preserve and manage liquidity
conservatively
✓ Complete Dudley and Opelika
projects
Q2 2020 Recap Balance of Year Focus