West Fraser Timber (NYSE:WFG) released first-quarter financial results and hosted an earnings call on Thursday. Read the complete transcript below.
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The full earnings call is available at https://app.webinar.net/xqBRYkZrl6P
Summary
West Fraser Timber Co Ltd reported a negative $66 million adjusted EBITDA for Q1 2026, largely due to $114 million in non-cash duty adjustments; without these, the underlying business generated $48 million.
The company saw a significant improvement in financial performance from Q4 to Q1, with all segments contributing positively, particularly due to stronger lumber pricing and operational progress.
West Fraser Timber Co Ltd continues its strategic optimization of the US Lumber portfolio, closing five mills and modernizing others to reduce costs, with liquidity near $900 million providing financial flexibility.
Operational highlights include the ramp-up at the new Henderson Lumber mill in Texas and the completion of the OSB mill curtailment in Alberta, with ongoing improvements at other facilities to boost efficiency.
Management remains cautiously optimistic about future market conditions, focusing on cost controls and strategic investments to maintain competitiveness amid uncertain demand and cost pressures.
Full Transcript
OPERATOR
Good morning ladies and gentlemen and welcome to The West Fraser Q1 2026 results Conference Call at this time all lines are in listen only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press Star zero for the operator. This call is being recorded on Thursday, April 30, 2026. During this conference call, West Fraser Timber Co Ltd’s representatives will be making certain statements about West Fraser’s future financial and operational performance, business outlook and capital plans. These statements may constitute forward looking information or forward looking statements within the meaning of Canadian and United States securities laws. Such statements involve certain risks, uncertainties and assumptions which may cause West Fraser’s actual or future results and performance to be materially different from those expressed or implied in these statements. Additional information about these risk factors and assumptions is included both in accompanying webcast presentation and in our 2025 annual MD&A and Annual Information form as updated in our quarterly MDA which can be accessed on West Fraser’s website or through SEDAR for Canadian Investors and EDGAR for United States Investors. I would now like to turn the conference over to Sean McLaren. Please go ahead.
Sean McLaren (President and CEO)
Thank you and good morning everyone and thank you for joining our first quarter 2026 earnings call. I am Sean McLaren, President CEO of West Fraser and joining me on the call today are Chris Farostic, Executive Vice President and Chief Financial Officer, Matt Tobin, Senior Vice President of Sales and Marketing and other members of our leadership team. On the earnings call this morning, I will begin with a brief overview of West Fraser’s first quarter and then pass the call to Chris for additional comments before I share some thoughts on our outlook and offer concluding remarks. As we entered 2026, we saw seasonal improvement in the lumber market. Southern yellow pine in particular saw better balance between available supply and seasonal demand. While underlying demand for new residential construction and repair and remodel remained subdued, we experienced healthier market conditions compared with the second half of 2025. In OSB Q1, market conditions remained challenging, though modest signs of improvement began to appear toward the end of the quarter and as seasonal demand increased. Against this backdrop, West Fraser saw a positive sequential turnaround in first quarter results led by stronger lumber pricing and operational Progress. We generated negative 66 million of adjusted EBITDA, but this result includes 114 million of prior period duty adjustments which Chris will get into shortly. Removing the impact of these adjustments. The underlying business generated $48 million with all three of our segments Lumber, North American, Engineered Wood Products and Europe contributing to the positive results. This reflects a significant improvement from the 79 million loss in the fourth quarter representing a turnaround of over $120 million. We continued to upgrade our portfolio during the quarter. We have completed production activities at our high level OSB mill in Alberta and are four months into the production ramp up at our new Henderson Lumber mill in Texas. Our US Lumber portfolio optimization continues to lower our cost structure with five mill closures and two brownfield modernizations over the past five years. Our balance sheet remains strong providing us with the flexibility through the cycle and optionality for the future. We ended the quarter with liquidity close to 900 million. The change in Q1 reflects the normal seasonal buildup of log inventory in Western Canada which is consistent with our typical working capital cycle. We expect this inventory investment to reduce in the second and third quarters as as our mills work through their log inventories. We continue to operate with a strong balance sheet allowing us to execute our capital allocation strategy. Our financial position also provides optionality for value creating opportunities should they arise. As always, we will be disciplined on execution and returns with that high level overview. I’ll now turn the call to Chris for additional detail and comments.
Chris Farostic (Executive Vice President and Chief Financial Officer)
Thank you Sean and good morning everyone. A reminder that we report in US dollars and all my references are to US dollar amounts unless otherwise indicated. In Q1 we generated negative $66 million of adjusted EBITDA. As Sean discussed, we had two large softwood lumber duty related adjustments in Q1 totaling $114 million. Both adjustments are non cash in nature. The first is based on preliminary rates released by the US Department of Commerce for the 2024 calendar year and the second due to a change in our estimate of amounts recoverable and payable as a result of the liquidation process covering the last half of 2017.
Chris Farostic (Executive Vice President and Chief Financial Officer)
I would point you to our news release of April 16th and our first quarter MDA and financials for further detail. The lumber segment posted adjusted EBITDA of negative 84 million in the first quarter, but removing the duties impact results in positive 30 million compared to negative 57 million in the fourth quarter, an improvement of 87 million. This improvement is largely a result of higher SYP and SPF pricing. North America EWP segment delivered 11 million of adjusted EBITDA in the first quarter, an improvement from the prior quarter’s negative 24 million.
Chris Farostic (Executive Vice President and Chief Financial Officer)
This 35 million improvement is due largely to better OSB pricing in the quarter. In Europe we generated 10 million of adjusted EBITDA in the first quarter, more than doubling the 4 million we generated in the fourth quarter and we’ve seen an improvement improved environment in Europe with better demand and higher prices. This marks the highest level of adjusted EBITDA in Europe since the second quarter of 2023. We have moved our previously named pulp and paper segment to other in the first quarter as the business has become a less significant part of our total operations and will no longer be specifically addressing the results of that segment.
Chris Farostic (Executive Vice President and Chief Financial Officer)
Bridging Our results from Q4 to Q1. A majority of the improvement came from higher prices in lumber in North American ewp. In addition, higher volumes in US Lumber in Europe and a favorable inventory adjustment represented the biggest variances. Costs were Flat relative to Q4. Lower SIP costs were offset by repair costs due to the fire at Blue Ridge and in North America and OSB we saw higher costs from resin and energy related inputs. Resin plays a significant role in our panel cost structure and the recent rise in methanol based resin pricing is a factor we anticipate will be more visible in our Q2 results. Our US lumber business continues to show improved operating efficiency stemming from the actions we have taken. The US south total cost per thousand board feet have reduced by approximately 6% in the last two years. During this period we have closed five lumber mills, completed a full brownfield modernization and successfully completed a number of smaller but significant capital projects and cost reduction initiatives. This better enables us to react to changes in the external environment and improves our ability to compete more effectively and help provide low cost supply to our customers.
Chris Farostic (Executive Vice President and Chief Financial Officer)
In Q1, our SYP shipments were 4% higher than Q4 on better operating efficiencies including the impact of the downtime at Blue Ridge. In Q1 our overall shipment volumes remained consistent with expectations. We saw higher shipments in both OSB and in both North American OSB and European osb. North American volumes increased due to the normal seasonal patterns and in Europe we increased shipments to meet higher demand. Cash flow from operations was impacted by the seasonal build in working capital resulting in negative $170 million in the first quarter and a net debt position of 457 million.
Chris Farostic (Executive Vice President and Chief Financial Officer)
We expect this working capital position to reverse in the second and third quarters. Net debt was influenced by two dividend payments made during the quarter which occurred as a result of our fiscal quarter ending on April 3rd rather than March 31st. Our net debt to capital ratio remains in single digits and our balance sheet is robust with respect to share repurchases. We did not repurchase shares in the first quarter. As we prioritize liquidity through the cycle, our commitment to returning capital to shareholders through a combination of both dividends and tactical share repurchases has not changed.
Chris Farostic (Executive Vice President and Chief Financial Officer)
Regarding our operational outlook for 2026, we have made no changes to our shipment guidance across our main products as well as our capital expenditure range. Transportation and resin costs have been influenced by evolving geopolitical dynamics, and we expect these factors to be more fully reflected in our second quarter results as we manage through the current environment. Due to the fluidity of the situation, it is hard to quantify what that impact may be, but we are actively managing where we can.
Chris Farostic (Executive Vice President and Chief Financial Officer)
With that overview, I’ll pass the call back to Sean.
Sean McLaren (President and CEO)
Thank you Chris. I’ll now …
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