West Fraser Announces Indefinite Curtailment of Lake Butler Sawmill

Rhea-AI Summary

West Fraser Timber Co. (TSX and NYSE: WFG) has announced the indefinite curtailment of its sawmill in Lake Butler, Florida by the end of September 2024. This decision is due to high fiber costs and soft lumber markets. The curtailment will:

• Impact approximately 130 employees
• Reduce West Fraser's U.S. lumber capacity by 110 million board feet

The company plans to mitigate the impact on affected employees by providing work opportunities at other operations. West Fraser expects to take an impairment charge in the third quarter of 2024 associated with this announcement.

Positive

• Aligning U.S. lumber capacity with demand
• Offering work opportunities at other company operations for affected employees

Negative

• Indefinite curtailment of Lake Butler sawmill
• Reduction of U.S. lumber capacity by 110 million board feet
• Impact on approximately 130 employees
• Expected impairment charge in Q3 2024
• High fiber costs impacting profitability
• Soft lumber markets affecting operations

Insights

Financial Analyst

The indefinite curtailment of West Fraser's Lake Butler sawmill is a significant development for the company and the lumber industry. This decision, driven by high fiber costs and soft lumber markets, will reduce West Fraser's U.S. lumber capacity by 110 million board feet. The impact on the company's financials is noteworthy:

• Potential cost savings from reduced operations
• Expected impairment charge in Q3 2024, likely affecting the company's bottom line
• Possible market share implications in the U.S. lumber sector

Investors should closely monitor how this capacity reduction affects West Fraser's overall profitability and market position in the coming quarters. The move could potentially improve the company's financial health if lumber markets remain soft, but it also signals ongoing challenges in the industry.

Industry Analyst

This curtailment reflects broader challenges in the lumber industry. The combination of high input costs and soft demand is squeezing profit margins for many producers. Key points to consider:

• Supply-demand dynamics: Reduced capacity could help balance the market if demand remains low
• Regional impact: The closure may affect lumber supply in the southeastern U.S.
• Industry trend: Other producers might follow suit if market conditions persist

The move by West Fraser could be a leading indicator of further industry consolidation or capacity reductions. Investors should watch for similar announcements from other lumber companies, which could signal a broader industry restructuring in response to current market conditions.

Labor Market Specialist

The curtailment's impact on the local labor market is significant, affecting approximately 130 employees. However, West Fraser's approach to mitigating this impact is noteworthy:

• Offering work opportunities at other company operations
• Demonstrating corporate responsibility in workforce management
• Potential skills transfer and retention of experienced workers

This strategy could help West Fraser maintain its human capital while adapting to market conditions. For investors, it signals the company's commitment to its workforce, which can be important for long-term operational efficiency and corporate reputation. The success of this employee relocation effort will be an important factor to monitor in assessing the overall impact of the curtailment decision.

VANCOUVER, BC, Sept. 19, 2024 /PRNewswire/ - West Fraser Timber Co. Ltd. ("West Fraser" or the "Company") (TSX and NYSE: WFG) announced today that it will indefinitely curtail its sawmill in Lake Butler, Florida by the end of this month. Today's decision is the result of high fiber costs and soft lumber markets.

The indefinite curtailment of Lake Butler Sawmill will impact approximately 130 employees and reduce West Fraser's U.S. lumber capacity by approximately 110 million board feet. West Fraser expects to mitigate the impact on affected employees by providing work opportunities at other company operations.

High fiber costs at Lake Butler and the current low-price commodity environment have impaired the ability to profitably operate the mill. The indefinite curtailment of Lake Butler sawmill better aligns our U.S. lumber capacity with demand.

West Fraser anticipates taking an impairment charge in the third quarter of 2024 associated with the announcement.

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, which promotes sustainable forest practices in its operations. 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. For more information about West Fraser, visit: www.westfraser.com.

Forward-Looking Statements

This news release contains forward-looking information or forward-looking statements (collectively, "forward-looking statements") within the meaning of applicable securities laws, including those relating to the Company's indefinite curtailment of the Lake Butler sawmill and anticipated timing thereof, expected reduction of lumber capacity, anticipated impairment charge in the third quarter of 2024 as well as related workforce impact and our ability to mitigate the impact on affected employees and better align production capacity with demand. Any such forward-looking statements are based on information currently available to us and are based on assumptions and analyses made by us considering our experience and our perception of historical trends and current conditions, including our assessment of higher fiber supply costs, the low-price commodity environment and our ability to operate the Lake Butler sawmills profitably and are subject to inherent risks and uncertainties. Readers should also refer to the risk factors set forth in the Company's annual information form and management's discussion and analysis for the year ended December 31, 2023, each dated February 14, 2024, as updated in our management's discussion and analysis for the three and six months ended June 28, 2024, dated July 24, 2024, each available at SEDAR+ (www.sedarplus.ca) and EDGAR (www.sec.gov/edgar). There can be no assurance that the plans, intentions, or expectations upon which forward-looking statements are based will be realized. Actual results may differ, and the difference may be material and adverse to the Company and its shareholders. Except as may be required by law, the Company undertakes no obligation to publicly update or revise any forward-looking statements.

View original content:https://www.prnewswire.com/news-releases/west-fraser-announces-indefinite-curtailment-of-lake-butler-sawmill-302253645.html

SOURCE West Fraser Timber Co. Ltd.

FAQ

Why is West Fraser Timber (WFG) curtailing its Lake Butler sawmill?

West Fraser Timber is curtailing its Lake Butler sawmill due to high fiber costs and soft lumber markets, which have impaired the ability to profitably operate the mill.

How many employees will be affected by the Lake Butler sawmill curtailment?

Approximately 130 employees will be impacted by the indefinite curtailment of West Fraser's Lake Butler sawmill.

By how much will West Fraser's U.S. lumber capacity be reduced due to the Lake Butler curtailment?

The indefinite curtailment of the Lake Butler sawmill will reduce West Fraser's U.S. lumber capacity by approximately 110 million board feet.

When will West Fraser (WFG) take an impairment charge related to the Lake Butler sawmill curtailment?

West Fraser anticipates taking an impairment charge in the third quarter of 2024 associated with the Lake Butler sawmill curtailment announcement.