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West Fraser closing five mills for one week

West Fraser will be shutting down five mills in the Interior for one week.

The affected mills are in Chetwynd, Quesnel, Williams Lake, Smithers and Fraser Lake.

The decision to implement this temporary reduction is due to sustained weak pricing in global lumber markets and high log costs, according to a statement posted on the company’s website.

Lumber production is anticipated to be reduced by approximately 30 million board feet, it said. Over the previous six months including this most recent announcement, West Fraser has implemented temporary and permanent capacity curtailments of approximately 125 million and 300 million board feet respectively.

In February West Fraser reported it had earnings of $810 million on sales of $6.1 billion in 2018, an increase of 19 per cent over 2017.

“The fourth quarter was challenging on a number of fronts including soft lumber markets, difficult weather conditions in the U.S. South, production curtailments in British Columbia as well as planned and unplanned downtime,” said Ted Seraphim, CEO of West Fraser, in a statement in February. “In spite of these challenges, in 2018 we reported the highest level of EBITDA (earnings before interest, taxes, depreciation, and amortization) in company history, continued deploying capital to our mills with a number of high return projects completed and maintained our balanced capital allocation strategy. We increased our dividend twice and executed $675 million of share buybacks while maintaining significant financial flexibility. Lumber markets have begun to recover in the first quarter of 2019 and we remain encouraged by the long-term outlook for lumber as we focus on the activities that generate the best outcomes for all our stakeholders.”

Fourth Quarter

  • Sales of $1.274 billion
  • SPF US dollar #2 & Better 2×4 benchmark price decreased by 32%
  • SYP US dollar #2 West 2×4 benchmark price decreased 11%, wider dimensions decreased more significantly
  • Earnings of $29 million, basic EPS of $0.42
  • Adjusted earnings of $43 million, Adjusted basic EPS of $0.63
  • Adjusted EBITDA of $120 million or 9% of sales
  • Quarterly cash dividend of $0.20 declared
  • Repurchased 1,750,436 Common shares for $119 million at an average price of $67.89 per share

2018

  • Sales of $6.118 billion, $984 million or 19% higher than 2017
  • Earnings of $810 million, basic EPS of $10.88 per share
  • Adjusted earnings of $945 million, Adjusted basic EPS of $12.70
  • Adjusted EBITDA increased year-over-year by $378 million to $1.538 billion, 25% of sales
  • Cash provided by operating activities of $909 million
  • Reinvested $370 million through capital expenditure
  • Returned $712 million of capital to shareholders through share buybacks and dividends
  • Year-end liquidity strong with $491 million of available bank lines and $160 million of cash, net debt to capital ratio healthy at 17%

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