West Fraser panels and lumber businesses soar in Q1

24 May 2021

North American timber products giant West Fraser, which acquired Norbord earlier this year, has reported adjusted earnings (EBITDA) of US$665m for Q1, 2021.

Its North American Engineered Wood Products division recorded adjusted EBITDA of US$353m for the period, while lumber operations generated adjusted EBITDA of US$646m. The Europe EWP business, consisting of panels mills in the UK and Belgium, posted adjusted EBITDA of US$11m.

The addition of OSB operations from the date of the Norbord acquisition, higher plywood pricing and robust plywood demand positively impacted the NA EWP operating earnings for the quarter. The Europe EWP segment’s operating earnings and adjusted EBITDA were decreased by a one-time charge of US$7m related to inventory fair value adjustments from purchase price accounting.

In the North America EWP segment, West Fraser expects to invest approximately US$30m at two of its OSB mills. Investments at the target mills will reduce fixed and variable manufacturing costs and improve mill productivity.

West Fraser’s outlook report was very positive. Low mortgage rates, low volumes of homes available for resale, favourable demographics, increasing acceptance of remote working and the underlying housing construction deficit due to several years of underbuilding appear to be positively influencing the demand for new housing in North America.

Economists are forecasting US housing starts for 2021 to be approximately 1.5 million units, an increase of nearly 9% over 2020.

“An aging housing stock and increased repair and renovation spending should also continue to drive strong lumber, plywood and OSB demand,” it said.

The company expects to maximize its capacity utilization in lumber, OSB and plywood operations subject to required maintenance downtime and assuming no unexpected disruptions from COVID-19 or other supply chain disruptions from weather, transportation, raw material availability or other factors.

Demand for its European products is expected to continue to be robust as demand for OSB as an alternative to plywood in Europe continues to grow.