West Fraser Announces Fourth Quarter and 2021 Annual Results; Declares Dividend

West Fraser Timber Co. Ltd. (“West Fraser” or the “Company”) reported the fourth quarter and annual results of 2021. All dollar amounts in this news release are expressed in U.S. dollars unless noted otherwise.

The results of operations presented and discussed below include those of Norbord from February 1, 2021 and those of Angelina Forest Products from December 1, 2021.

Fourth Quarter Highlights

• Sales of $2.038 billion and earnings of $334 million, or $3.13 per diluted share
• Adjusted EBITDA1 of $615 million, representing 30% of sales
• Lumber segment Adjusted EBITDA1 of $240 million
• North America Engineered Wood Products (“NA EWP”) segment Adjusted EBITDA1 of $343 million
• Pulp & Paper segment Adjusted EBITDA1 of negative $14 million
• Europe Engineered Wood Products (“Europe EWP”) segment Adjusted EBITDA1 of $61 million

Annual Highlights

• Sales of $10.518 billion and earnings of $2.947 billion, or $27.03 per diluted share
• Adjusted EBITDA1 of $4.569 billion, representing 43% of sales
• Lumber segment Adjusted EBITDA1 of $1.973 billion
• NA EWP segment Adjusted EBITDA1 of $2.414 billion
• Pulp & Paper segment Adjusted EBITDA1 of $15 million
• Europe EWP segment Adjusted EBITDA1 of $201 million

1. Adjusted EBITDA is a non-GAAP financial measure. Refer to the “Non-GAAP and Other Specified Financial Measures” section of this document for more information on this measure.

“I am proud of the efforts of the West Fraser team, highlighted by the integration of two leading wood building products companies during the global COVID-19 pandemic,” said Ray Ferris, West Fraser’s President & CEO. “Despite a number of challenges, we posted record earnings in 2021 and another strong result in the fourth quarter. In particular, we managed the complexities of significant transportation and mill disruptions in the face of unprecedented flooding in the B.C. Interior and Vancouver Lower Mainland, which severely disrupted transportation and logistics and the flow to markets of our finished products from Western Canada. The benefits of our product and geographic diversification were evident in the fourth quarter as quarter-over-quarter Adjusted EBITDA1 improvement from our Lumber business helped to offset declines in our North America and Europe Engineered Wood Products segments.”

“Fundamentals for housing are favourable entering 2022 and we continue to see signs of resilience in repair and remodelling demand in both our North American and European markets. I expect our team to remain agile and creative to navigate the evolving needs of our customers.”

Results Summary

Fourth quarter sales were $2.038 billion, compared to $2.358 billion in the third quarter of 2021. Fourth quarter earnings were $334 million, or $3.13 per diluted share, compared to $460 million, or $4.20 per diluted share in the third quarter of 2021. Fourth quarter Adjusted EBITDA1 was $615 million compared to $786 million in the third quarter of 2021.

Full year sales were $10.518 billion, compared to $4.373 billion in 2020. Full year earnings were $2.947 billion, or $27.03 per diluted share, compared to $588 million, or $8.56 per diluted share in 2020. 2021 Adjusted EBITDA(1) was $4.569 billion compared to $1.043 billion in 2020.

Liquidity and Capital Allocation

Cash and short-term investments decreased to $1.568 billion at the end of the fourth quarter from $2.105 billion at the end of the third quarter.

Capital expenditures in the fourth quarter were $401 million, including $276 million for the asset acquisition of the idled oriented strand board (“OSB”) mill near Allendale, South Carolina. Full year capital expenditures were $635 million in 2021 and $180 million in 2020. In addition, we acquired a sawmill from Angelina Forest Products for $302 million, net of the acquired cash, during the fourth quarter.

We paid $21 million of dividends in the fourth quarter and $75 million of dividends in 2021.

In the fourth quarter of 2021, we repurchased approximately 1.2 million shares under our Normal Course Issuer Bid (“NCIB”) for aggregate consideration of $100 million. For the full year, we repurchased approximately 7.1 million shares under the NCIB for aggregate consideration of $527 million and an additional 10.3 million shares for consideration of CAD$1.0 billion under a substantial issuer bid. There were no shares repurchased in 2020.

Outlook

Markets

The most significant uses for our lumber and OSB products are residential construction, repair and remodelling, and industrial applications. Historically low mortgage rates, low volumes of homes available for resale and increased acceptance and practice of remote working appear to be positively influencing the demand for new home construction in North America. However, interest rates have been trending higher in early 2022 and should they continue to do so, housing affordability may be impacted, which could reduce demand for our wood building products. An aging housing stock and repair and renovation spending should also continue to support lumber, plywood and OSB demand. Over the medium to long term, growing market penetration of mass timber in
industrial and commercial applications is also expected to support demand growth for wood building products.

The demand for our European products is expected to remain robust as demand for OSB as an alternative to plywood in Europe continues to grow. An aging European housing stock is also expected to drive repair and renovation spending, supporting growing demand for our wood building products.

While infrastructure repairs to rail and truck routes resulting from the severe weather and flooding in late 2021 in B.C. are progressing, our ability to ship products in a timely manner remains challenged. Availability of rail service, adverse weather conditions, operator shortages and the backlog from disruptions in the fourth quarter have all negatively impacted our ability to ship our products. For the month of January 2022 our western Canadian sprucepine-fir (“SPF”) lumber and plywood shipments declined by approximately 20% compared to the prior year, and while our overall OSB shipments are trending in line with the prior year, we have been forced to take unscheduled downtime due to transportation constraints. In addition, our pulp shipments for the same period declined by approximately 30% compared to the prior year. Though we continue to seek out and utilize alternative transportation routes and methods to the extent they are available to continue servicing customers, the magnitude and duration of the impact from these multiple disruptions remains uncertain. The situation has also resulted in significant delays in shipments of orders. In light of these challenges, further reduction of operating schedules across our manufacturing network in order to manage inventory levels, raw material supplies and our integrated fibre supply chain may be required. At the current time, it is not possible to estimate when full transportation services will be available or when the backlogs resulting from the interruptions will be cleared and we will be able to return to operating a full schedule or clearing the backlog of delayed shipments.

Operations

The Company is providing the following operational guidance for 2022:

• SPF shipments are expected to be approximately 3.0 to 3.2 billion board feet
• Southern yellow pine (“SYP”) shipments are expected to be approximately 3.0 to 3.2 billion board feet
• NA OSB shipments are expected to be approximately 6.1 to 6.4 billion square feet (3/8-inch basis)
• Pulp & Paper segment shipments are not expected to increase from 2021 levels
• Europe OSB shipments are expected to be approximately 1.1 to 1.3 billion square feet (3/8-inch basis)
• Inflationary cost pressures and availability constraints for labour, transportation, raw materials such as resins and chemicals, and energy are expected to remain elevated
• Capital expenditures2 are expected to be approximately $500 to $600 million

2. Expected capital expenditure is a supplementary financial measure. Refer to the “Non-GAAP and Other Specified Financial Measures”
section of this document for more information on this measure.

Dividend Declared

The Board of Directors of the Company has declared a dividend of $0.25 per share on the Common shares and the Class B Common shares in the capital of the Company, payable on April 5, 2022 to shareholders of record on March 18, 2022. Dividends are designated to be eligible dividends pursuant to subsection 89(14) of the Income Tax Act (Canada) and any applicable provincial legislation pertaining to eligible dividends. Dividends are declared and payable in U.S. dollars. Shareholders may elect to receive their dividends in Canadian dollars. Details regarding the
election procedure are available on our website at www.westfraser.com in the “Investors/Stock Information/Dividends” section.

MD&A

Our 2021 MD&A and annual audited consolidated financial statements and the related notes are available on our website at www.westfraser.com and the System for Electronic Document Analysis and Retrieval (“SEDAR”) at www.sedar.com and the Electronic Data Gathering, Analysis and Retrieval System (“EDGAR”) website at www.sec.gov/edgar.shtml under the Company’s profile.

Financial Information Related to the Norbord and Angelina Acquisitions

We have accounted for the Norbord and Angelina Forest Products acquisitions as business combinations and attributed $1,339 million and $78 million to goodwill, respectively. Note 3 to our annual audited consolidated financial statements provides details on these purchase price allocations. For additional information, refer to the section titled “Norbord Acquisition” and “Angelina Acquisition” in our 2021 MD&A.

Sustainability Report

West Fraser’s full Sustainability Report is available on the Company’s website at www.westfraser.com. This report reviews the Company’s key Environmental, Social, and Governance (ESG) topics, opportunities and performance and includes information aligned with the Sustainable Accounting Standards Board (SASB), Global Reporting Initiative (GRI), and the recommendations of the Task Force on Climate-Related Disclosures (TFCD).

Risks and Uncertainties

Risk and uncertainty disclosures are included in our 2021 annual MD&A as well as in our public filings with securities regulatory authorities.

For the complete press release, click here.

About West Fraser

West Fraser is a diversified wood products company with more than 60 facilities in Canada, the United States, the United Kingdom, and Europe. From responsibly sourced and sustainably managed forest resources, the Company produces lumber, engineered wood products (OSB, LVL, MDF, plywood, and particleboard), pulp, newsprint, wood chips, other residuals and renewable energy. West Fraser’s products are used in home construction, repair and remodelling, industrial applications, papers, tissue, and box materials.

Contact:

Robert B. Winslow – Director, Investor Relations & Corporate Development – shareholder@westfraser.com – (416) 777-4426

Source: West Fraser Timber Co. Ltd.